Frank Cespedes, senior lecturer at Harvard Business School, discusses his latest book, Sales Management That Works: How to Sell in a World that Never Stops Changing (Harvard Business Press, 2021) in this Q&A with RAIN Group.
Why did you write Sales Management That Works?
Sales is very context-specific. Selling software is different than selling capital goods or professional services and so on. Selling in North America differs from selling in South America, Europe, China, or the Middle East.
Yet people regularly make huge generalizations about selling based on little to no data. They’ll say, “When I sold for X, we did it this way and so should you.” After 20 years doing research about the topic and 10 running a business, I wanted to write a book that outlines what research can tell us about this core business activity.
It’s a good time for such a book. Digital media and the data revolution are changing buying and selling. But typical sources about those topics misunderstand their impact on business development. And the pandemic has raised the stakes for separating fact from hype for sellers, senior executives, and investors.
How has selling changed over the years?
The most important thing about selling is buying, and technology is reshaping buying in consumer and B2B markets. Most sales models and nearly every CRM system assume a sequential, linear process of moving a prospect from Awareness to Interest to Desire to Action. The AIDA formula and its many variants are the often-unconscious basis for sales organizations and the “pipeline” or “funnel” metrics that dominate talk in sales books, blogs, and training initiatives.
But prospects now are on- and offline simultaneously throughout buying journeys. This does not mean the salesperson is as disintermediated as many say. For example, e-commerce as a percentage of U.S. retail sales was 11.4% at the start of 2020, increased to 15.7% in Q2 of 2020 (maximum pandemic lockdown conditions so far), and has trended down every quarter since then. The number of professionals listed as salespeople by the Bureau of Labor Statistics (BLS) has increased in this century, even as online media have grown in bandwidth and options. BLS data undercount the reality: many business developers are often not called “salespeople,” but selling is what they do.
It’s not a digital-eats-physical world. But it is an omnichannel buying world, and that affects selling in areas ranging from people and process to pricing, channel partners, and drivers of sales productivity. My book discusses the implications with data, examples, diagnostics, and actionable recommendations.
Let’s talk about people: what are the key issues and problems with typical sales hiring practices?
There are inherent challenges in sales hiring. For one thing, there is no natural talent pool or educational priors for sales positions. For an engineer, you can go to a school and find students of electrical engineering, chemical engineering, and so on. For an accountant, finance person, or software developer, you can find majors in those subjects. But few schools have sales programs or even a sales course. Most salespeople start with little preparation and must learn on the job. That’s why training is so important. With any sales hire, you’re trying to judge future performance in a changing market environment.
Typical hiring practices make a tough job needlessly tougher. One difficulty is an over-reliance on interviews. Fifty years of research indicates that most managers overrate their ability to predict someone’s performance and fit-for-job tasks based on interviews. The correlations between interview predictions and on-the-job success are less than the 50% rate of guessing a coin flip.
Second, many sales managers simply divide potential hires into “Hunters” (new business developers) and “Farmers” (account managers). But most sales roles are more diverse than that dichotomy. These terms are, in my experience, usually used by managers as post-hoc rationalizations for their choices, not ex-ante hiring criteria. Managers need relevant criteria before they make an offer.
Third, differences in individual sales performance are very wide. In most firms, the stars are usually a lot better than even the average rep. However, stardom is tied to firm-specific resources—e.g., brand, team chemistry, and so on—and individual capabilities. Consider the corporation that hires a star Sales VP from a competitor, and she doesn’t perform the way she performed there. Similarly, startups who hire an experienced big-company rep may flounder in an early-stage firm. Those people didn’t suddenly get stupid. In business, there is only performance in each context—here, not there—and much of selling depends upon the relationships, knowledge, and mutual trust that reps establish with others in their company.
If you look at the money most firms spend annually on sales hiring, training and development and the opportunity cost inherent in getting a new hire to productivity, that number is often bigger than the firm’s cap-ex decisions. But sales hiring rarely gets the same rigorous attention as software purchasing does.
You write that performance appraisals are often seen as “time-consuming, demotivating, inaccurate, biased, and unfair.” Should firms do away with them?
Some firms have done away with performance ratings. I believe that’s a mistake. Sales outcomes are a lagging indicator and research indicates that, in the absence of formal appraisals, managers use ‘ghost’ ratings to make decisions about retention, promotions, or pay raises. When a pandemic forces choice, it’s the poorly rated ghosts who get laid off and legitimately feel aggrieved.
In the absence of feedback, many people assume that no news is good news and create priorities that have a hit-and-miss relationship to the firm’s. And if you agree that people seek recognition and meaning as well as money in their jobs, the absence of feedback also inhibits that.
Appraisals need rethinking. As sales jobs become more intertwined with other functional activities, there are fewer immediate sources of feedback about whether you’re doing the right things. Performance feedback is more important, and managers must manage.
You also say that “Improving selling activities is not only a financial and growth issue but a key social responsibility of business leaders.” Explain.
The slowdown in growth and productivity in many economies for years before the pandemic is well-documented. The biggest causes seem to be demographics (lower birth rates) and the shift from manufacturing to services. Economist Benjamin Friedman has written about the moral consequences of economic growth for tolerance of diversity, social mobility, commitment to fairness, correcting inequalities, and democratic values.
About 8% of the U.S. workforce is in manufacturing, while millions more work in the core service occupation of sales. Thirty years ago, Peter Drucker used sales to argue that, “The most pressing social challenge developed countries face will be to raise the productivity of service work. Unless this challenge is met, the developed world will face increasing social tensions, increasing polarization, increasing radicalization, possibly even class war.” He was right.
CEOs who talk about “stakeholders” should first look homeward. Finding ways to help their organizations sell better is not only about shareholder value; it affects growth, civic discourse, the lives of millions of people, and is a social responsibility of management. Yet, as the data in my book indicates, there’s a growing gap in many firms between the C-Suite and their customer-facing colleagues. Fewer people than ever have made it there with prolonged prior experience with customers, and that’s a problem in formulating and executing a market-relevant strategy.
If you're looking to build a great sales team, create an optimal sales strategy, and steer clear of hype and fads, grab your copy of Sales Management That Works: How to Sell in a World that Never Stops Changing.
About the Author
Frank Cespedes teaches at Harvard Business School. For 12 years, he was Managing Partner at a professional services firm. He has worked with many companies on go-to-market and strategy issues and has been a board member at consumer goods, industrial products, and services firms. He has written for numerous publications, including Harvard Business Review, European Business Review, Organization Science, and The Wall Street Journal, and is the author of six books, including Aligning Strategy and Sales, which was cited as “the best sales book of the year” (Strategy & Business), “a must-read” (Gartner), and “perhaps the best sales book ever” (Forbes). His newest book is Sales Management That Works: How to Sell in a World that Never Stops Changing (Harvard Business Review Press, 2021).