Rethink Sales Podcast: The Performance Review Review

The Performance Review (Review)

Mark Donnolo
Welcome to the Rethink Sales Podcast I’m Mark Donnolo.

Michelle Seger
And I’m Michelle Seger.

Mark Donnolo
And today, Michelle, we’re going to be talking about some current events and news items that are just near and dear to our hearts and emotions and minds.

Michelle Seger
Oh, yeah, we’re gonna be talking about coming back to work. And the performance review is back.

Mark Donnolo
Yeah, so what’s this coming back to work? Like I I never left, actually. I think I’m living in alternative reality.

Michelle Seger
Well, this is gonna be a good one, I’m sure a little spicy too.

Michelle Seger
All right. So, Mark, over the past few weeks, I’ve noticed some trends in the content of C suite strategies, which is something that I love to read in The Wall Street Journal. Yeah. And the one that caught my eye was around the performance review. And for those of you that are out there, it basically the title of it is “The Performance Review is Back.”

Mark Donnolo
It kind of jumps out at you doesn’t it. You can’t not read that.

Michelle Seger
No, the font, I think the font says it all. But you know, there’s a lot of reasons I believe wh, other than people have been, you know, working from home. And what we know is that over the past two years, with the pandemic, companies have kind of put the performance review aside. But now it’s back but with a vengeance, if you will.

Mark Donnolo
Yeah, yeah, I mean, we haven’t had any, it’s been like, softie street for a couple of years here and being easy. And don’t worry, just, you know, just maybe come back to work. And now it’s like, okay, we need to actually do something to make sure that people are developing and, and people are growing, and we’re kind of getting back to normal, I won’t use the word new, but back to normal a little bit. Okay, so So here’s one theory, before we get into this article, which is, we were saying, oh, you know, everybody can work remote, you can do whatever you want, you know, productivity is going up. I’ve been arguing this for two years, I don’t believe productivity is going up, we’ll tell ya. But what happens when things starting to tighten up? Fear of recession, we have massive inflation, wages are going up. We’ll talk about that, too. And all of a sudden, things start getting tough. Companies start laying people off, what’s the immediate reaction that companies have, it’s like, hey, I want everybody close by I want to see what people are doing. I want to have them engaged. And I want to, I want to know what’s going on. So we can work together as a team, right? Performance Review, that’s one method, right of connecting back with people for development, but also to make sure we know what’s going on.

Michelle Seger
That’s exactly right. It’s the same thing. I mean, the same reason that they want people back in the office, and, you know, companies, we are talking them every day, they’re just asking for two days, maybe three back in the office, but there is a lot of resistance there with back to the office and the performance review.

Mark Donnolo
Yeah I’m hearing three a lot with with companies and some of the big tech companies three days a week, you can pick them you have to be back in one of our offices, our facilities, not in like some you know, WeWork, you know, location or something like that, or some off site thing, you have to be back in one of our offices three days a week, you pick the days, and then you get something like maybe two weeks of kind of wildcat remote work time that you can do anywhere you want, right.

Michelle Seger
Yeah we have been hearing that too.

Mark Donnolo
And we’re seeing that across multiple companies, and people are now starting to grovel about that. You mean, I have to actually, you know, have some accountability, well, go ahead I didn’t mean to interrupt.

Michelle Seger
Okay but you have, and I suspect we’re gonna get a lot of your opinion in this podcast. So what I really wanted to talk about is like, why, and, you know, one of the things that we do know is that there was a lot of, you know, companies just relaxing a lot of protocol, there was a lot of information that was coming out around increased productivity, but the numbers are out, Mark,

Mark Donnolo
You know where we’re getting increased productivity? We’re getting everybody’s going on more productive when I’m at home. That’s that was our measure of increased productivity. Now that we have real, you know, output divided by hours measurements, we can see it’s not happening across the board.

Michelle Seger
Right. So what I really wanted to talk about Mark is why. So why is it that in the Wall Street, it was a, you know, just a couple weeks back, so just call it and then q3, that there was you know, an image of a man crossing his arms and it was, bosses are saying it’s back to the office or else and now, the performance review is back with a vengeance. And I think it’s because part of it is because companies weren’t taking a real strong position, as you said earlier on, about what the expectations were, people have been pushing back. But unlike all this, that we’re hearing about increased productivity, we’re finally starting to see statistics on white collar workers. And what we know is that productivity is going down. And we know that wages in the same period are going up.

Mark Donnolo
Yeah, yeah, and we’ve been hinting at this for quite a while. And I think the initial productivity readings we would get were from people that were saying, Well, I’m more productive, and I’m at home. And that’s all we had for metrics. And now we’re starting to see the real metrics. And like a lot of things that happen in organizations in big populations, we tend to swing hard one direction, and we swing hard the other direction, kind of overcorrect.

Michelle Seger
Yeah, which is kind of a shame. I’d like to kind of find this middle ground. So as we get into this, as we get into this discussion around the performance review, I want to end up tying it back to the sales organization, and what we see out there as well. So what we know is what we’re hearing on the performance review, is we’ve got companies like Google, we’ve got Meta that are saying things like, you know, the ones that were real proponents of working at home, I remember are saying they’ve got to, here we go identify and report, low performers and workers thought to be coasting within the company, that came from Meta platforms.

Mark Donnolo
That doesn’t sound like 1984 does it Michelle? identify and report?

Michelle Seger
Oh my god. Well, it might to me a little bit. I don’t know.

Mark Donnolo
Some irony there, I remember a commercial from a certain fruit flavored computer company back in 1984. So now we’re getting identify and report now all over again. And they were for the going against the status quo. But now, you know, we are the status quo. So identify and report. But yeah, it’s the hard swing, right? It’s what we heard from Mark Zuckerberg, it was, you know,
I need you to look at your people and find out basically, I’m paraphrasing, but find out, you know, which of them should not be on the team or should not be with us any longer. I mean, I’m kind of mixing some of what he said. But yeah, that general idea. And when things start getting tight, and the economy starts getting tough, you know, we want to start pulling things tighter, we want to know what’s going on. And we want to make sure everybody’s performing. So you can see this reaction to performance reviews, like that’s the tool that we we’ve known about, we’ve had for years, that’s what we’re comfortable with. Let’s go back to performance reviews.

Michelle Seger
So let’s talk about what I think could be this is my opinion, when we talk about the sales organization, what we really, really want to understand there, as you know, whether they are a very valuable asset, most expensive, you know, the cost of sales is very high. So when you look at what are we really looking for, I think what we’re looking for is what the return on the sales investment really is. So what’s my cost of sales? And what’s my productivity? And so is there a way outside of the traditional performance review that we should be looking at? Because I think that we both believe that there could be in that there is looking at the sales organization and understanding what it how are we getting what we’re paying for?

Mark Donnolo
Right, yeah I think the good news about sales, fortunately, is we have a lot of measurement. And it’s very performance based, right. So it’s probably a little clearer to understand that than it is a lot of other jobs where it’s hard to identify metrics that apply directly to that person. So here’s one of the interesting equations, when you put it together, I can call it that, which is with this whole war for talent, which is happening in sales as well. If we’re increasing what we’re paying people, we’re increasing salaries we’re increasing target compensation, one of three things has to happen, right? Either you increase productivity, to cover that increase in compensation, or you increase prices, to cover that increase in cost. Or you find other cost cutting in other places. And if you don’t do one of those three things, you’re going to have lower profitability. So there’s a connection point here, right? And so that’s directly within the sales organization. So we’re going to increase costs, we’ve got to do one of those three things, or else we’re going to be losing profitability. And then you look at it in a macro sense for the entire country or the entire world. It’s like the war for talent, everybody’s getting paid more, right, but what’s happening, costs are increasing, right? That’s one of the drivers of inflation and include and others, like driving too much money into the money supply into the market. But yeah, there’s no free lunch here, it’s like you don’t just get to, you know, give out or have more compensation without some some payback for it. So, so companies are going to have to do those things within the sales organization. So you have to look at your sales team and say, Okay, what am I going to do? I am I going to increase quotas, what am I going to do?

Michelle Seger
So I thought it would be really good for us to bring it home to the sales organization a little bit today, and talk about what of those three things let’s talk about what companies can do and how they can look at those three areas that you talked about? We could start talking about, we could start with the productivity piece. So what we know is that companies are saying, Gosh, Mark, do you remember we just talked to a technology company very recently, and the sales leader said, I know that people are just not working, which is a very big statement. And this person was making it about the sales organization. I can’t believe they’re not doing anything. But that’s was the exact words out of this person’s mouth, right?

Mark Donnolo
Yeah, I thought that was something because in sales you did, there’s accountability on the other side. So if they’re not working, they’re not going to be hitting their goals, or if they’re hitting their goals, then we should probably be okay with whatever they’re doing to get to those goals. So I’m wondering when that person said that if if maybe they didn’t have any real accountability in their comp plan, or their performance management to ensure that was happening?

Michelle Seger
Well, that could be. So let’s talk about how we talk, how we work with our clients, because this is a good practical takeaway on how they can look at their organization, and identify where they need to improve productivity or where the opportunities are to what we like to call decontaminate the sales role to increase productivity.

Mark Donnolo
Yeah, I think that’s one of the biggest ones is sales role decontamination. So we know sales organizations are spending on average about 52% of their time selling. Yeah, so you got a whole lot of opportunity there to to increase your sales capacity or productivity. So by first of all understanding what they’re doing, and and periodically tracking that through some time sampling, then you can start to make some shifts. So your options there are going to be either to, you know, eliminate certain activities. So if a salesperson is spending time on service activities, or operational things, or putting out fires, wherever they might be, how do we eliminate those? Or how do we do what we call shift and lift? So how do we shift those to another lower cost resource to be able to lift the salesperson up to what we want them to do? Or how do we automate? So they might be spending time on things like pricing or areas that might be better done by software AI? Or do we do something else to remove that activity from that person, but that that’s an immediate sales capacity return?

Michelle Seger
Another big one is that whole issue resolution, we find that salespeople spend a lot of time there, too.

Mark Donnolo
Yeah, yeah. So that’s an easy one. You know, I think the trap there is, when you talk about, well, how does your sales organization spend its time? The classic thing we hear is Oh, yeah, you know, we did a time study last year. And so we know and I’m like, Okay, well, did you like, you know, take your blood pressure last year? I got a checkup last year or five years ago, I think that’s okay. I mean, how do you how do you live on something that’s a year old in terms of inflammation, but everybody recognizes the importance of it, but but it’s not done? I think well enough in organizations to actually improve productivity. So that’s a big opportunity there.

Michelle Seger
So it’s doing a time study. One of the other things that, you know, if you’re trying to solve for that, we asked leaders to answer the question, which is, what do you want your salespeople doing? Where do you want them spending their time? And always they’re like, Well, I want them to spend more time selling. Yeah, we know that they don’t. Yeah, we know, it’s only 50%. Yeah, we know that they have to prepare all their own, you know, business intelligence, and whatever it is, they need to go in front of their clients. So, you know, what we like to do is look at the time study results, and bucket them, right, like where people are spending their time. And then we you we like to engage the sales organization, because we lay out the sales process too, and kind of get some validation around that, but just kind of validate where people are spending their time and on what activities and then that can help inform what you can decontaminate if you will.

Mark Donnolo
Yeah. And that’s when the ironic things about doing doing, what you’re describing is, you hear a lot, you know, we talked about 1984 before. But you hear a lot about, well, it’s like a big brother exercise, and salespeople aren’t gonna want to tell anybody what they’re doing.

Michelle Seger
But it’s not true. They love it.

Mark Donnolo
It’s a communication tool. It’s it’s like counterintuitive that when we do these things, we get a lot of great information from the sales organization, because they want to communicate all the things that they’re doing that they don’t want to be doing that they want to get off their plate. Right. So they’re usually pretty, pretty good about that. And it’s usually pretty accurate.

Michelle Seger
Well, the other thing that I found is that we will often have leaders come to us and say something like this, I would like to put in place an inside sales team to help our field team, right. So we think that there’s an opportunity there, maybe for transactional sales. This is an actual situation that we solve for. But when went through and actually did the time study. And we also got some voice of the customer to understand what their clients wanted. That wasn’t it at all. And in fact, we didn’t recommend inside sales. It was a complete business intelligence function to provide information to their clients that they’re not getting today. So I think that it also just helps inform assumptions that you’ve made around what you need to do in looking at your sales organization, but validate it by understanding where people are spending their time and what your process really looks like with salespeople, providing some input. Yeah. So that’s just one way that you can increase productivity.

Mark Donnolo
Well, let’s talk about one other productivity booster here, which is workload, right?

Michelle Seger
Yes, big one.

Mark Donnolo
So the, the sales capacity is going to be determined by the amount of available time you have, which we’ve been talking about. So the more time you have available, more capacity you have, divided by the workload or number of hours, it takes you to do something like sell a new account or manage an account. So you can sell or manage more accounts if it takes less workload. And so one of the things you can do on sales productivity, is understand what people are doing in terms of the workload, to close an account. And in particular, one obvious one is how many deals they’re carrying in their their funnel, what I call funnel fodder. So basically, we get really comfy, it’s kind of like it’s like, like winter, we get really comfy with lots of fat around the belly.

Michelle Seger
You know I don’t like the word comfy. I don’t like that word, I don’t know why.

Mark Donnolo
Well, salespeople instead of like getting comfy, like with all sorts of kind of fat around their belly in the winter, they get comfy every all year round with a really fat funnel, right? The more stuff I have to talk about that I’m working on, the better I feel about myself as a salesperson. And the more I can talk to my sales manager about all the stuff I’m working on, even if all that stuff isn’t high probability, right? So what we need to do is we need to get lean, and we need to shred the funnel, right. So think like a bodybuilder, right? So I don’t want to be bulked up anymore. What I want to do is I want to shred so I want to get rid of all this stuff that’s, you know, of a certain age, over 60 days or 90 days, whatever it might be stuff that is below a certain probability stuff that we can validate that there’s, you know, a quality buyer or decision maker there. And by doing that, you’re spending less time working all those deals that are super low probability or old. And then that increases or lowers your workload, which can increase productivity.

Michelle Seger
Mark, what you talked about there were three points, right, the three things that could happen. And I want to talk about the second one now. So we talked about, you got to either increase productivity, increase price, and increase price means that your darn customers are going to pay more.

Mark Donnolo
Yeah. Number two, increasing price. Okay. So you will have lower profit unless you use maybe the increasing price option. So we’re seeing we’re seeing that, you know, inflation is at its highest, highest rate. We talked about no free lunch. So yeah, price of labor increases, price of goods increase. And, you know, we can all see it in our day to day lives. So what does that mean for for sales? Well, I think what it means is that either A, you’re going to be keeping pace somewhere around where the markets going. So everybody’s going to be increasing price and the customer has to accept that because there’s not an alternative or be your competitors are not increasing price. They’re choosing to do something else, like take lower profits. So you increase price, which means your salespeople have to come up with a better value proposition, right? It’s a new conversation, right? And you but you can’t just be an increased price. It has to be implementing our annual price increase. I’ve heard that one. In fact, I ordered something the other day and then I had to get back it was a vendor and they said By the time I got back, well, we’ve had an increased price increase on this. And I had no alternative at that point. They kind of pass it along like it’s so perfunctory thing and you kind of grovel a little bit, you’re like, Okay, well, my cost of going and finding, finding it somewhere else is actually higher. So how do you pass along a price increase that’s not aligned with all your competitors? If you’re a salesperson?

Michelle Seger
Yeah. I mean, that’s a big one. Yeah. And I think you’ve got to figure out, I mean, if I’m thinking about that it can’t just be a spin, it means that the salesperson is going to have to really be thinking about how they’re going to differentiate what they’re providing to their clients to their customers, right. So maybe it’s time to think about all of the companies out there doing a little voice a customer, because look, you already talked about earlier, we discussed that companies, right, there, there may be two days in the office, I have to believe in what we’re hearing, too, is that information is even more valued than it was before so of your salesperson may be he or she differentiates with their customers by providing more information about the industry about what’s going on. But something has to happen to cause preference if you’re increasing your price.

Mark Donnolo
Yes, I think the first thing you have to do as a sales organization understand what your competitors are doing. Yes. So if everybody the tide is rising everywhere, then then you’re probably okay. And then as you said,

Michelle Seger
That’s it. You’re just done you’re okay?

Mark Donnolo
Well, I don’t know, just everybody’s equally aggravated, right? Everybody’s equally aggravated. We’re all in this together. Yeah, that lasts for so long. So everybody’s equally aggravated. And so you’re just kind of rising with competitors. But if you’re not, you’ve got to definitely come up with a better value proposition. And then what does it mean for quotas?

Michelle Seger
Right. I mean, that’s my big question is, now you’ve got a tough sales environment. And we all know that. And you’ve got salespeople that are saying, Gosh, they’re still trying to figure out how to even connect, because we know there are some events are back, but a lot of events are not, they’re not able to connect as well face to face. So now you’re going to increase their quota. And they’re going to be questioning that.

Mark Donnolo
Yeah, well, if you if you have a price increase quota is going to go up with that price increase. If you aren’t going to have a price increase, and we talked about productivity, you know, your quotas are gonna go up? Yeah, potentially with the increase in productivity as well. But quotas are going to be affected either way.

Michelle Seger
Right. So let’s talk about decreasing price in other areas. I want to tell you something I just got back from New York, as you know. And I went into three different stores like major retailers, and then one grocery store. Do you know that the only checkouts that were open was the automated checkout, they had no one like no one. And I walked into a Super Target, I think they must have 18 or 20. Registers know how they’re doubled up to there was not one person. And the line. I’m not kidding. There were at least 30 Or maybe more people in line. It was like Christmas, I walked out because I only needed two things. And I ended up going to CVS down the street and picked up the thing I needed for my dad and went home.

Mark Donnolo
Well you probably paid more for it.

Michelle SegerMark Donnolo
But they’re decreasing costs and other areas. So you’re gonna have higher labor costs, you’re gonna automate and decrease costs and other areas.

Michelle Seger
That’s funny. Do you want me to tell you what I was buying? I don’t know if people be interested in this. I was buying him packs of lifesavers, like in the bags. I’m not kidding. So it was maybe 329. It’s funny. You mentioned the increased price. It was 329 at Target. I picked him up a few. It was 389, 89! At the drugstore.

Mark Donnolo
Wow. Yeah. But you’re willing to pay that. Well, I got there. You’re not gonna go back. Right.

Michelle Seger
Yeah. But anyway, I just thought that was really interesting. So there you go increase price to the consumer increased cost, and it can be a real cost, like in that product. But to me, that was like, an increased cost in my time. Yeah, I mean, it cost me in another way. It’s costing customer service is lowered.

Mark Donnolo
How are they how are they lowering the cost in other areas? They’re automating? And then they’re making you their employee, right? So then you end up doing the checkout, or what is it? Is it one of those pizza chains now says, Well, if you come pick up the pizza, you’ll save three bucks. Well, you know, that’s they’re paying you three bucks for your time. So your time is probably a little bit more valuable than the boring all the way down to the place and back and then you have to dodge the lawn sprinklers and stuff like the guy does on the TV commercial for three bucks.

Michelle Seger
So I’m not so sure that increasing the price, right? It, which is why, for example, Target, I think I mean, you can say that it’s because people weren’t available to work, but I’m not so sure. I think it’s because they’re trying to manage their costs overall, and not pass the end, you know, the consumer, maybe the product price, but I did pay in terms of my time, and having a stand in that big line. And I chose to leave. So, you know, it doesn’t seem very, it seems a little grim the conversation we’re having right now. So what’s the good news? Let’s talk about some of the good news on the horizon.

Mark Donnolo
The good news is it builds character and strength, Michelle.

Michelle Seger
Oh boy.

Mark Donnolo
Because not everybody gets a participation trophy here. We have to actually work and bust it to get one. No, but truly, I mean, we become better as we as we deal with these things. Right. Right. Yeah. I mean, a lot of companies I’m thinking that that started in, in tougher economic times. They learned to think about the deer in my in my backyard. And during the winter, you know, and there’s no vegetation, they eat tree bark. And so it’s like, if you start the business, or you learn the tree bark phase, then when when all the nice juicy green sprouts throughout life is so much easier, right? So I’m concerned about the people that learned in the juicy green sprout phase, and now they’re traveling to eat tree bark. So this builds character builds strength, and you actually build capability.

Michelle Seger
Yeah, let’s hope everybody sees it that way, Mark, but I don’t disagree with you. Anyway, this has been a really great conversation.

Mark Donnolo
Yeah, I’m motivated. But um, yeah, I think I think some of the takeaways are that, with all of this change that we’ve been through, points of accountability are starting to come back. They are that point on the headline about the performance reviews. And so companies are trying to reconnect with how do we get an understanding of the situation? How do we connect more with our people? And how do we make sure we’re developing our team and in getting the growth and productivity that we need as things are uncertain.

Michelle Seger
So again, bringing it back to sales, though, what the things that we believe that companies can do is just in, in lieu of just the standard performance review, what we say is build a true pay for performance plan, right incentive compensation plan. We know that a lot of companies during the pandemic, and some even before that a portion of pay would be based off a corporate bonus, or maybe a team plan. But I think the pay for performance and individual performance pay would be just motivating to people as well.

Mark Donnolo
Oh and we know from the recent survey we did of the 600 companies that the measures are shifting from the team measures to more individual measures, we will know that’s a definite shift globally. And I think part of it is because companies are getting a better understanding of what’s going on. I think their their ability to set goals a little bit better than it was during the pandemic. And I think, you know, to the points we’ve been talking about, they want to drive individual accountability and individual productivity. And, you know, true salespeople, true sales organizations, welcome that they want to be measured for what they can accomplish what they can, what can they what they can impact.

Michelle Seger
Yes. And, you know, Mark, I would like to have people think about, as we, we have the conversations around coming back to work. Now, we learned a lot of salespeople, we do know that many of them weren’t going into an office five days a week anyway. But whether you’re in sales or not, when we think about people coming back to the office, we have said, you know, be really clear, I think that’s part of why the companies are putting their foot down, because companies weren’t clear to begin with. I was just talking to a global company today, a global transportation company. And they said that their CEO had said we really want people to come back one day a week. And then it was okay management team, we want people in two days a week, people weren’t even coming in one. And they were kind of like, okay, if you’re comfortable, we want you coming in. While now it was exactly like that article, I read a mandate came down and said you will be in the office three days a week, or you need to start looking for someone else to work, because it was really soft at the beginning. So here’s what I’d like to leave our listeners with is something that we’ve also challenged ourselves with is when people come in, how do we use this as a great opportunity to have people really love and enjoy and get something out of the time that they’re in the office. So I even challenged our team and I said instead of saying, you know, Geez, it’s Tuesday. I gotta come in. I want them saying I can’t wait until tomorrow because here’s the expectation. Here’s what we’re gonna do.

Mark Donnolo
Yeah, T G I T.

Michelle Seger
T G I T. There you go, thank God, it’s Tuesday and Thursday because those are our days. But really, I do want them to be thinking about how can you reframe this and make it a little different because this isn’t about, you know, attendance. It’s really about learning, collaboration, and having something really meaningful to talk to each other about to share with each other to develop, right, you brought that up.

Mark Donnolo
There’s a reason we’re humans. Yeah, we’re not androids. We want to be together. We want to learn, we want to collaborate. We want to build culture, and we want to develop.

Michelle Seger
Yep. All right. Well, it’s been a lively conversation. Thank you, Mark, for spending your time with me today. Thank you, Michelle. It’s been a joy, and you know, talking about the great performance review. So we’ll see you the next time.