Leadership in lock step with talent management has seemingly become the primary focus of this millennium’s business consultants, authors, and associations – and, for good reason; people are the only long-term competitive advantage we can develop!

1. The total quality management (TQM) “revolution” of the ‘60’s, and its evolution through Six Sigma, ISO standards, and other efficiency and quality methods, has essentially eliminated a competitive edge through better product quality, for any serious business competitor. All have excellent quality.

2. Ubiquitous global access to raw materials, components, and even labor and recently, more advanced professional services made available through supply chain management, digitally based communication, and access to information have tended to standardize costs across those same serious business competitors. Another competitive strategy defused!

3. And finally, The speed of change in product life cycles, the rise of new competitors, as well as emerging new productivity, communication and distribution systems lessen the old long-term advantages of size, capital investment, and even real estate. Even new product development excellence that creates unique innovative offerings has been mitigated by reverse engineering and differing global standards for the protection of intellectual capital.

So what’s left? People! That is, having better people, because they innately have more ability, can be deployed to their best utilization, are receptive to training and development to maximize their capabilities, and can be nurtured and supported to maintain their, and therefore our, sustainable competitive advantage. The World Class Sales Research Benchmarking Project (continuing since 1992 (insert link)) demonstrates, quite powerfully, that even sales growth has less to do with quality, price, marketing, than the effectiveness of the (human) salesperson interfacing with the customer.

That brings us to leadership – the art and science of organizing, directing, and motivating people is the sole domain of a leader. And while the most critical skills will differ by the type of organization, e.g., public or private, big or small, fairly stable or rapidly changing, the common thread is what we call Leadership.

We had never applied TQM to people, not to mention Six Sigma or ISO … so we are still operating primarily through tribal wisdom, personal experience, or collections of anecdotes to help us figure out what to aim for, whom we should use, and how to channel their efforts toward these goals. Most recently, there is a movement toward the same kind of “analytics” used in other business functions.

Chally has been compiling analytical research applying the principles of TQM to the human side of organizations with the surprising, but irrefutable, evidence that our old “star” mentality of attempting to select the right people, motivating them with exceptional rewards, and supporting them with all the other non-stars just doesn’t work for long in most public organizations bigger than one.

TQM research in organizations teaches us that business stars are exciting, praise worthy, and often great authors. However, these stars are usually over-rated as business resources. Jim Collins has documented the flaws of the well-positioned, flamboyant types, who are indeed very good, but out-performed by those who are less flashy and often invisible outside their own organizations. Jack Welch, for example, led GE from $26.8 billion (the year before he assumed leadership) to over $150 billion the year before he retired. However, under the leaders he put in place, GE lost over $300 billion in the next 10 years. In contrast, companies reported by Collins such as Walgreens, with a much less visible leader have continued to grow through leadership succession.

Chally Worldwide and its partners believe it’s time to move past research for “marketing value” to research that can advance our organizational effectiveness. We are focused on three differentiators from the typical annually published corporate Olympics ranking of leaders and companies through a panel of experts as if this were figure skating or diving competitions.

• First, we have assembled a broad team of both academic and business experts … to design the data collection … and analyze the data collected. This does not remove all the problems of self-report data, but does insure that the data is provided by individuals who have first-hand knowledge versus outsiders who may or may not have intimate knowledge of the companies involved.
• Second, this research project will become an ongoing progression of data and analysis with each year building further insights on the previous years’ findings, and tracking changes and trends in leadership development techniques.
• Third, we’ll develop categories or levels of leadership development effectiveness since the economic indicators suggest that there are little to no effective differences between companies within the same quartile.

Phase one research results are available here

Brief Findings:

Top-ranked companies for developing leaders produce substantially better financial performance than bottom-ranked companies.

• Top-ranked companies had a 10-year growth of market cap of 17% while bottom-ranked companies lost 2%.
• Top-ranked companies produced 5% total returns to shareholders, while the bottom-ranked companies lost 39%.

The required competencies for different “C-level” positions are substantially different.

• Only CEOs are seen as having responsibility for strategy.
• Only COOs had as many as two of the four most important competencies in common with the CEO; Finance CFOs who are most likely to rise to CEO, had only one. This suggests that job rotation may be invaluable for understanding the business, but less helpful in preparing high potentials in planning strategy for the future.The most frequent sources of succession failure or “leadership risk factors” are related to people skills.
• This failure was amplified if the promotions were internal.
• The primary cause of leader failure was reported as “failure to adapt to the culture.”

The data is insufficient, but there are strong indicators supporting real differences in required competencies in Asia and the Far East.

• Non-Western companies are more likely to share strategic reasonability across several “C-Suite” leaders.
• Less personal, profit-driven economies, such as China, seem to have dramatically different leadership requirements.

The extent of the CEOs personal involvement in the Leadership Development Process is a critical key to the program’s overall effectiveness.

Putting the right sales people in the right sales jobs using measurable, predictable, and actionable productivity analytics technology.

Six Sigma, the data-driven methodology commonly used to eliminate defects based on standards, measurements, and repeatable systems and processes, has provided undeniable cost reductions for organizations around the world by eliminating waste and improving productivity. So why hasn’t this TQM (Total Quality Management) concept of measurable and predictable error reduction been applied to Sales Force Management?TQM requires a system of precise measures objective and accurate enough for statistical analysis. By contrast, the measurement of sales force performance typically involves subjective and overly-general data that proves to be too fallible to support the level of accuracy that TQM requires.

TQM EVEN HELPED HOLLYWOOD

Imagine using 80/20 as it now applies to the Hollywood mantra of hit-driven economics: the top 20% of films will make virtually all the profit, subsidizing the loss-making bottom 80%.

In other words, if you could only know ahead of time which films would be hits, the economically rational decision would be to make just 20% as many of them. And, indeed, this is largely what DVD rental and video downloads companies do; since they do know which films were hits in the box office, they mainly stock and push just those. As a result, theatrical hits from the past year make up 90% of the transactions.

But now, a measurable and quantifiable Six Sigma-like process has been defined and documented to help address these error-prone, human aspects of sales management.

The initial requirement is an accurate measure of any individual’s skills, competencies, motivational drivers, work habits, and potential for developing future competencies. The assessment technology must be criterion validated to be predicatively accurate. It must provide the actuarial data and analysis of sales success and failure, and identify productivity improvements and/or reduction in “unwanted” turnover well beyond the 25-65% accuracy most commonly reported. Research suggests that only a Six Sigma or TQM approach can accomplish the necessary level of quality improvement in the management of intellectual capital. Using a TQM for sales or Total Quality Sales Management (TQSalesM) requires focusing primarily on identifying the “causes of failure” of otherwise qualified sales and service people. This is a counter opposite approach to the more common identification of the criteria for success as typically seen in job analyses and competency studies. A TQSM approach is capable of establishing a single process that can measure all of the relevant competencies with an accuracy level robust enough to support substantial quality gains in the management of a company’s most valuable “Human” assets.

The result is a TQM Sales Audit system – an information repository where organizations have a complete inventory of strengths and weaknesses for all employees in every key position. This relational database can distinguish the job performance potentials for key talent located anywhere in the organization.

The causes of failed Talent Management Systems are many. An effective Six Sigma and TQSalesM approach can dramatically reduce most of these cause and help maximize the most common measures for sales force effectiveness:

Increasing sales goals
Achieving sales goals
Reducing unwanted turnover
Motivating top performers
Putting the right sales in the right sales job
Maximizing your training investment

We’ll present how in future “Science of Sales” segments.

The Fallacy of Setting Unrealistic Productivity Improvement Expectations

Kryptonite is a term often used synonymously with the Achilles’ heel, referring to the one weakness of an otherwise invulnerable hero or heroine – in its original case, this was Superman. Superman flourishes and displays superhuman strength and ability in the absence of Kryptonite. However, in its presence, Superman’s otherwise powerful self is reduced to a mere mortal. In similar vein, mediocre data that are used in an applied research project like a criterion validation study means death to an otherwise strong process.

A validation study is essentially a look at the relationship between two things. A good real-world example of a validation study is examining the relationship between smoking and lung cancer. To do that, you would need a sample of smokers and non-smokers, and a sample of people who have lung cancer as well as no lung cancer. Ultimately, we would expect the results to demonstrate that people who smoked had stronger instances of lung cancer than those who did not.

A validation study for the workplace is a similar process where a test or assessment is used to evaluate relationship between scores on the instrument and performance on the job. For this, we need to assess those who are currently performing in the job and get a clear understanding of how people are performing on the job. Seems pretty simple, right? Not so fast. Believe it or not, just getting the right people assessed is often incredibly challenging. Even further, many companies haven’t a clue how their own employees are performing! Much like Superman, even the strongest test or assessment means little in the absence of good criteria, and can be reduced to totally worthless by “Kryptonite criteria.”

The Faces of Kryptonite: GIGO!

To help showcase some of the challenges applied work researchers face and must overcome, here are examples.

So, what do you do for a living? A recent study for a multinational corporation revealed that the client had no means to identify whether many of their own employees were Key Account Managers, National Account Managers, or Business Development Managers. In fact, one group listed as Key Account Managers were really Distributor Account Managers, not even direct employees. Their business was all indirect rather than direct sales. Research has long proven that different sales roles require different selling skills and this is a great example of how critical it is to have a lens on the right group of comparison people. Trying to evaluate people for the wrong job would have wasted time and money for our client.

Lawyers and HR and Works Councils, Oh My! Legal uncertainty is rampant in the pre-employment testing arena – and rightfully so. There are roughly 2600 assessment companies just in the United States, as there is also no barrier to entry. This means any ex- baseball player or air conditioning salesperson can start an assessment company. Unfortunately, it is because of many of these companies with poor practices that lead lawyers get concerned, which instantly makes Human Resources people nervous. And if you are dealing with unions or multinational projects with foreign Works Councils then processes must be strictly managed, adding about twice the time that it normally takes to get a research project completed.

Once this kind of bureaucracy and politics arises, transparency and constant communication will be critical. In fact, while wishful thinking corporate function may want a deliverable is due no later than six weeks, it will often 12 weeks just to manage local Works Councils.

Hit this moving target! Often a client will ask to verify that the new hires were generating greater % profit than the longer tenured salespeople. But equally often too many things have changed or weren’t tracked. For example, Salespeople were reassigned to different territories, assigned new product to sell, or even transferred to different divisions in reorganization. So, we really couldn’t tell who is old, who is new, or even whether % profit was a metric that we were able to match to incumbent assessment data.

We cannot provide you with any data…now tell us if this test works, will you? Customers routinely ask to demonstrate ROI to prove that an assessment tool is working. ROI is great: (a) it helps retain a customer and (b) helps to create stories and marketing opportunities. Quality providers can prove it’s not snake oil, but rather a solid product or service.

But, Mr. and Ms. Client, you have to give some to get some back! One cannot assess retention without hire and termination data. One cannot assess productivity without production numbers or quality sales data. Typical problems:

• Country or division differences in types of sales roles, or
• Different ERP systems such as SAP, versus individual home-grown systems, or
• Focused on different data in each market: i.e., some salespeople were bonused on total team performance, others were strictly individual, or
• Manager ratings where everyone is rated at 80% or higher

Conclusions, Recommendations and Best Practices

So, now that we have had some fun, let’s get more pragmatic. A quality applied research project requires quality planning, commitment, resources and time. Here are some suggestions to smooth the process.

• Work with other leaders in your company to determine what you are really trying to accomplish and what you need to focus on in order to get there (e.g., is it selection, training design, reducing turnover?).
• Obtain buy-in from multiple stakeholders to secure commitment. This keeps the focus on what is really important to the organization, rather than what is important to just one person. This helps immensely when a new player (e.g., Sales VP) comes in and wants to change things up.
• Notify Human Resources and Legal (and Works Councils/Unions if necessary) during the vendor vetting process to help speed things up once the project is kicked-off. There is nothing more frustrating than starting a process and then being told by the HR team to stop.
• Work with Human Resources and IT early in the process to determine how accurate available performance metrics are, how fast you can get them and how easy it is to get them exported on a routine basis. If you are running SAP or Taleo or some other applicant tracking system, confirm that everyone you want to assess and measure is actually in that system. If they are not, work with your vendor to devise the best solution.
• Get a good, clear communication strategy put together to ensure managers, and managers, of other managers know about the project before it is communicated to the masses. This helps with buy-in. Be honest about the program/project and why it is being used. Communicate seven different times and seven different ways to ensure coverage.
• Be patient. Real results take time. A few cycles of hiring and terming must occur in order to see if the performance distribution is shifted upward. Work with your vendor to share data. Validation should be viewed as a process – not a single event in time. If the assessment is doing its job, then adjustments or calibrations should be routinely made in order to continue raising the bar for your workforce. But as with most investments, it is difficult to view ROI in too short a period of time.

The concept is often applied to sales. It assumes that 80% of your sales will come from 20% of your best salespeople. Based on their anecdotal experience, most sales execs would agree with you. The actual ratio (based on Chally’s analysis of 900+ B2B sales forces across different industries) reveals that 52% of sales come from the top performers. Still an impressive effort and they are compensated handsomely for it.

Most sales execs would love to get more of these superstars…but they don’t exist. So, many sales gurus and consultants suggest we study (for several hundred thousand dollars) how these superstars sell and then train everybody else to use the same techniques. Sounds good so far…and trials of the approach do show some improvement in sales from the average performers…for awhile. But the average performers, no matter how many new sales techniques they learn, never produce even half as much as the superstars.

So what’s going on?

Research by Arun Sharma at the University of Miami (Fla.) has exposed a flaw in the consultants’ logic. Having studied broader differences in the behaviors of sales superstars across many industry segments, he found that their sales techniques with customers were neither unusual nor unique. Their competitive difference was largely based on their ability to manipulate their own company’s resources more effectively to “prioritize” their customers. In fact, they typically managed to consume a significant percent of their company’s internal resources.

Most sales execs do recognize that their top reps are expert at bending and stretching their companies’ processes to take care of customers…and they’re often difficult to manage as a result, but who will really fire a top salesperson when there are quotas to meet and targets to hit?

In reality, we may really be paying these superstars twice. We pay once in allowing them greater resources than the other salespeople, and then again with much higher variable compensation when they consume these resources to win sales.

We certainly don’t suggest that anybody fire these superstars especially when they have figured out how to take better care of customers than their companies manage to do without them.

There is a lesson

Fix our sales and customer support processes with more flexible systems and easy to understand and learn access to internal resources.

Establish a true “cost of sales” measurement system to account for the (apparently extra) support that may be necessary to win and keep top customers. This, in turn, may establish a more realistic and ultimately higher selling price that customers will be willing to pay.

Provide routine training to teach all the sales forces how to delight their customers with top service, exceptional responsiveness, and the knowledge that someone is really taking care of them.

About 10 years ago I had a chance encounter that led me to change the way I approach consulting my clients. Sitting at a bar a fellow struck up a conversation and shared his story. He indicated that, prior to his retirement, he was an internal consultant for an energy corporation. He was fortunate enough to have taken an early retirement with a seven-figure pension, and chose to travel and play golf. However, within four months he grew tired of his newfound country club lifestyle and went back to work at the same company as an independent contractor. But he indicated that something had very much changed. He was financially stable. He did not report to anyone. And he had some very real ideas about improving the way the business ran. And so in the absence of pressure regarding paychecks or politics, he actually consulted people and told them what he really thought they should do. It was at that point that I realized we should all do what we think is the right thing.Everyone should take the initiative to do what is in the best interests of his or her constituents. We may not all have the financial security of our seven-figure friend (above), but if there is one thing I have learned over the years, it is that our action, or lack of action, truly defines us. If we take the initiative to do the right things in our business and our lives, our reputations will not suffer. Indeed, they will prosper. But counterproductive to this fact is that many people in our places of work have succumbed to the “comfort zone.” You will recognize this in covert or overt tactics for resisting change – “that’s not the way we do it here,” and the like. General (Ret.) Colin Powell has indicated that this is a quick path to mediocrity. Building a high performance culture means one must break molds and challenge the status quo, and avoid procrastinating on difficult choices.

TAKES INITIATIVE IN A BUSINESS UNIT – Takes the lead on specific, targeted business issues requiring change even if others do not understand or approve.Sales force transformation is a big movement these days. When the economy dipped in 2009, hiring came to a standstill, but companies still needed to know their talent. This was particularly the case with companies in M&A situations or RIFs. I am reminded of a client who was director of talent management for the sales division and needed to reorganize the sales team (breaking out hunting and farming roles, etc.). His superiors felt that assessing the existing sales talent was a waste of money because the incumbents’ managers should be able to shed light on their capabilities. However, the director stood his ground, telling the executive committee that “we are going to do this.” The result: A resounding appreciation from the executive committee over the richness of the conversations and appropriateness of the decisions that were made.Dr. Killian currently serves as Chief Psychologist and Director of Consulting Operations at Chally. If you have any real-life examples of how Chally competencies have played out in your careers or observations and would like to share them, please email your story to him at jameskillian@chally.com.

Tests and assessments based on personality, interest, type and styles have long been the controversial basis for many human resource decisions. Over 50 years of using tools based on these theories for employee selection, development and alignment have only contributed to an enduring increase in employee turnover ^{Footnote 1}. This means the tests are leading us to hire the wrong people, put them in the wrong jobs, or not helping us keep the right people in the jobs. Personality tests frequently lead to the following results:

1. Hiring people who don’t succeed. 2. Promoting the best salespeople into management or another sales position where they subsequently fail. Similarly, re-assigning executives from a role they are performing adequately in because we are incorrectly told they have the “right personality” for a second role, but who then consequently fail. 3. Because we have moved good performers into roles for which they are poorly suited based on erroneous personality test results, they consequently leave the organization, increasing rather than lessening turnover. 4. Because personality tests are so easy to fakethey have led to the distrust of assessment techniques in general, including the predictive analytic technologies that are effective. The fatal flaws exposed. 5. The scientific evidence demonstrates that assessment effectiveness is in the details. Broad, generalized theories (like personality, Five Factor models, and others) are too crude for the precise measurement needed to measure the critical work competencies and fail over time because their scores represent the average behavior across a wide range of situations and contexts as a whole, not how one specifically acts in employment situations or toward specific goals. ^{Footnote 2}
 
2. Personnel decisions are not concerned with the general behavior of individuals in all facets of their lives at home, with family, or in social situations (which these tests were designed to measure), but how individuals will perform in a very specific and narrow range of work situations, which the assessments cannot measure. 3. Total Quality Management (TQM), Six Sigma and other modern quality control practices have elevated every other business function except Employee selection and placement, particularly as it applies to sales force and management decisions. 4. Benchmarking, Top Grading, and classifying salespeople and managers into “Types” are the subprime approach to employment decisions. Although these practices may look like a silver bullet at first, their effects are often smaller than a placebo , and create problems that will surface at a later date. While they often seem intuitive, feel right, and are invariably easily explained, they usually consume critical resources, and divert us from less exciting but statistically and scientifically proven approaches that are often not simple, intuitive, and contrary to our emotional inclinations. Strategies that make an organization successful in the long run are rarely quick and easy, and by definition, are not the most popular.Good science is the path to success. 5. When Predictive Analytics replaces personality theory turnover is reduced by 30% or more. 6. Identifying the sources of failure, and applying those standards to selection, increases productivity by over 35%.3. Independent research has documented that empirically-keyed predictive technology increases sales productivity by more than $60,000 per B2B salesperson hired.Footnote 1 Owen, L. “History of Labor Turnover in the U.S.”: EH.Net Encyclopedia, edited by Robert Whaples. April 29, 2004.Fleeson, W., “Toward a Structure- and Process-integrated view of personality: Traits as density distributions of states. Journal of Personality and Social Psychology, 2001, Vol. 80, No. (6), pp. 1011-1027.

1. Business buyers select a vendor more on the skills of the salesperson (39%) than price, quality, or service features.
2. Customers rate sales forces that sell commodities as the only consistent “world class” sales performers.
3. As a “talent” based versus a learned skill, exceptional sales effectiveness is usually inversely correlated with “academic” interest.
4. Psychological theory can’t predict sales success.
5. Sales excellence can be “coached” but not trained.
6. The most commonly trained sales skills seldom influence customers to buy.
7. The more salespeople achieve success in one market, the more likely they are to fail in a different market.
8. Compensation levels of salespeople in different markets are not necessarily related to the level of talent needed to succeed.

1. The 39% impact of the salesperson Annual “World Class”

Sales force benchmarking projects conducted by Chally have collected data from over 100,000 business decision-makers. Correlating the quantitative ratings against actual purchase decisions makes it possible to measure the impact of a variety of factors on the customer’s decision to buy.
Typical Chally research results have been published as cover stories in Selling Power Magazine.

2. Commodity salespeople have to be “stars”

When the customer knows your offer has the same features as the competition, equal quality standards, and even similar price, the added value the salesperson brings to the table is the only differentiation. There is no “better mousetrap,” “new and improved,” or even “special offer” that the competition can’t or won’t match…almost instantly. Since 1994, almost all of the customers’ 25 top-rated or “World Class” sales forces have been selling products that would be described as commodities, (See chart below) and only three companies (selling materials, supplies, or paper) have been named more than once.

3. Sales talent seldom shines in the classroom

Unfortunately, many companies recruiting for sales positions set minimum academic grade requirements. The evidence indicates, however, that school grades tend to be inversely correlated to later success in many sales positions. The explanation is straightforward. School is a written media, reading is the critical study skill, and writing drives the main testing and grading process. Selling, however, is primarily an oral skill, dependent on listening and communicating. A facetious example may make the point humorously. Suppose there were two candidates for a sales job. One was a Summa cum Laude graduate of MIT with a major in physical chemistry, 4.0 GPA, finished in 3½ years. The second candidate barely squeaked through a local community college, 1.999 (rounded to a 2.0) GPA, worked part-time, and took almost five years to graduate after changing majors three times.

Even before we meet with these two candidates we could guess about a couple of major points. The first candidate is obvious¬ly studious; so much so we can guess he probably only knows a couple of people well. One would be a roommate and the other a lab partner. We know he hasn’t had time to spend socializing. He has spent little time with the more “personal” problems that occupy most students. He may not even pay much attention to world affairs or current events.

Our second candidate, however, will have a very different bio. He is likely to know everybody on campus, more importantly everybody knows him…he spent heavy time at jobs, social events, and possibly even fraternities. The student union is a home away from home, where all of the popular issues of the day are debated. Most importantly, he has learned to “answer objections” and “close” through repeated attempts to convince professors to upgrade a “D” to a “C” or even an occasional “F” to a “D.” These challenges can prepare the bright and “sales talented” well.

4. Psychological theory can describe, but not predict, sales success

Chally was created as a result of a U.S. Justice Department grant to develop a le¬gally defensible selection test in response to Supreme Court rulings about employee selection. Psychologists were hired to identify or develop the selection instruments or psychological tests best suited to predict future on-the-job perfor¬mance. Unfortunately, none worked well in predicting on-the-job success. Today, “pop” psychology is still driving the sales of popular books. Theories such as “Maslow’s hierarchy of needs” are still taught many places, even though they were discounted years ago. We should have recognized that many theories are really part of a local culture, and that the WWII Kamikazes for example, didn’t believe that personal survival was the most basic drive.
There is an effective approach based not on psychological theory but actuarial science. The same predictive statistics the insurance industry uses turned out to be very effective. Today, Chally’s actuarially validated selection assessments predict future performance with great effectiveness.

5. Sales talent can be sharpened but not created

“You can’t train a person for a job they can’t do!” This is an old “saw” but typically forgotten in the rush to fill open territories, or cover critical positions. The key is distinguishing between “talent-based” skills and those that can be learned. The most frequently identified talent positions include: Sports, Military Leadership, Political “Electability,” Entrepreneurism, certain Creative Writing, Computer Programming, Design, Mathematical, and Artistic Skills…and most Sales Skills. This doesn’t imply you can’t teach anybody how to write programs, run for office, or play golf, but all the training in the world won’t make most of us into the next Jack Nicklaus or Tiger Woods.

6. Customers expect more than just “sales training” in the people who call on them

We are all familiar with typical sales training. Some focus on the basics and some more advanced. They are necessary but not sufficient. Research in two catego¬ries sheds critical light on the sales skills that make a difference in the customer’s decision to buy. The first comes from correlating a customer’s rating of salespeople against the volume, margin, and repeat purchases they made. Only three sales skills made a difference:

• Personally managing the total customer relationship
• Understanding the customer’s business
• Acting as a customer advocate to correct any and all problems

The second source of research analysis focuses on why customers defect. The number one complaint? “Didn’t try to understand my business.”
The most powerful training focuses on learning the customer’s business and being able to manipulate your own systems efficiently.

7. Top performing salespeople specialize and do not sell in all markets

It would be convenient to have a simple philosophy like “just learn the skills and apply yourself and you can sell to anybody.” Unfortunately, customers are too different for one-size-fits-all. Some customers need a “High-Tech” solution. Some need “High-Touch.” Some want neither and some want both. Just like professionals in other talent-based careers, the “Jack of all trades” is master of none. The most unique or specialized skills include new business development (hunters or rainmakers), Strategic Account Managers, and outbound telesales personnel. Job descriptions that include equal emphasis on criteria such as: penetrate existing accounts, develop new business, and expand to multiple contact levels within certain key accounts, cannot be filled by 99% of even the best of salespeople. Even if such a rare superstar were found, the compensation level would be way out of range. And of course, finding enough superstars to populate the whole sales force…

8. Compensation levels vary so greatly that weaker performers in some markets may earn more than the stars in other markets

The message is critical to understand when considering hiring experienced personnel from other business segments. In general, compensation increases as the margin for a product or service increases. When the cost to produce a product or service is a small percentage of the selling price variable compensation can be extreme. Likewise, when the product or service being sold is a “discretionary” or infrequent purchase, bill¬ing margins and the accompanying compensation can also be high. This proves to be most frustrating to companies hiring high-tech salespeople from a glamorous former position with expectations based on their previous earnings. They usually end up as an expensive mis-hire.

SHL, in the SHL Customer Styles Contact manual allege that averaging percentiles is unacceptable psychometric practice. But no citation was provided. Their argument seems to be arcane, at best.

Through a review of several well known psychometric textbooks, very few even mentioned the issue. For example, Murphy and Davidshofer (1997), perhaps the most highly regarded Psychometrics textbook in Industrial & Organizational Psychology, does not mention this issue. Based on an analysis of other books which discuss the possible use of stens, the issue is so arcane; it is not widely accepted or even discussed among Psychometricians. In addition, it addresses scoring algorithm issues which are of a proprietary nature. In summary, SHL makes assumptions in regards to things they simply do not have information about, and are in fact false. In short, their argument is arcane and incorrect.

SHL and the 16PF use Sten scores, which are unusual. Although textbooks discuss Stanine scores, we could not locate one which explains Sten scores. Nor does SHL provide a citation justifying sten scores. While we will not say they are never appropriate, we can explain the real disadvantage to their use. They are far less interpretable, and have real limitations in practice.

Percentile scores are far more useful than sten scores. SHL acknowledges this, “However, percentiles also have the advantage that they are easily understood and can be very useful when giving feedback of results or discussing results with line managers etc.” (SHL, p.24). T

The Educational Testing Service uses percentiles when reporting the SAT (college entrance exam), GRE (graduate school entrance exam), MCAT (Medical school entrance exam), LSAT (Law School Admissions Test), etc. Chally as well as the majority of other psychometricians prefers that the test information be usable rather than focus clients on arcane statistical procedures.

Sten scores have a real disadvantage in usability. Most hiring decisions are made near the cut-off or “passing” scores. It is not difficult to determine if the very top or very low scores should be hired. However, people around the cut-scores or near the average can be difficult decisions. These are the scores you are most concerned with.

The table (see below) based on data presented in the SHL manual demonstrates how difficult it is to make distinctions near the average when using sten scores. If a person receives a sten score of 5, they are somewhere in the range of the 32nd to 50^th percentile. Thus, you don’t know if they are exactly average, or in the bottom third of scores. Managers want to know where exactly they fall. Someone average on one scale can be a good employee if they are above average on other scales. With effective scoring categories (like Chally and others), you have 18 levels of differentiation within their 1 band of scores.

Just as awkwardly for SHL, if someone receives a sten score of 6, they are somewhere between the 51^st and 69^th percentile, or just barely average to the top third of scores. I think managers what more detail when making a hiring decision. SHL simply can’t provide it. SHL’s tests make such coarse distinctions that their usefulness is limited. SHL says they want to guide “the user not to over-interpret small difference between scores.” (SHL, p. 26)

What they are admitting is their measure cannot reliably differentiate people in the bottom third from someone exactly average, or that average person from someone in the top third. Even more problematic: 37% of their test scores get either a 5 or 6 sten score.

They say they have 10 sten categories, but in fact, they can’t even partition the scores into 10 categories as “raw-score values were not found to correspond to every sten-score value.”. They actually only have 8 categories of test scores.

One more thing about the 16pf, they have separate norms for men and women. In many countries this “discriminatory” test results are illegal and forbidden for employment or work applications including the United States under the Civil Rights Act of 1991. Using the 16pf exposes an organization to legal action in the U.S.

References

• Conn, S., & Rieke, M. (1994). 16pf, 5^th Ed., Technical Manual. Institute for Personality and Ability Testing: Champaign, Illinois.
• Murphy, K. R., & Davidshofer, C. O. (1998). Psychological Testing: Principles and Applications, 4^th ed. Prentice Hall: upper Saddle River New Jersey.
• SHL (1997). Customer Styles Contact Questionnaire. SHL Group plc: Princeton, NJ.

Principle 1: Repeat sales from existing loyal customers offer significantly more volume and profit.

Raising customer retention rates by only 5% increases sales by 25-85%. The Harvard Business Review reported data from a variety of industries as early as 1990¹. The sales increase rates for several market segments include:

1. Software 35%
2. Industrial distribution 45%
3. Credit cards 75%
4. Advertising 95%
 
The message is clear—building customer loyalty is dramatically more critical than many other business priorities. Yet, customer satisfaction and the resulting customer loyalty are not the principal sales or marketing priorities for most businesses. Executives feel there are no precise or accurate metrics to track customer loyalty in real time. Instead, executives in the business-to-business market are more likely to focus on new products, acquisitions, and special advertising or incentives programs to build sales. These approaches are considerably easier to track, but they are more expensive.

Some innovative and aggressive companies, however, are currently using “customer audit” data to track precise changes at the individual customer and salesperson level … in real time. Chally interviews business-to-business decision-makers at all levels of responsibility and documents over 100,000 competitive ratings of US and international sales forces every year.

Principle 2: 95% of business buyers are not loyal to their present supplier.

Research on customer satisfaction indicates that 80% of all vendor deserters rated their previous vendor as “good” to “very good.” However, customers who rated their vendor as “very good to excellent” were 42% more likely to remain loyal². On most customer-driven rating evaluations, a “very good to excellent” rating would require a score of 90% or better, rarely accomplished in business-to-business sales.

Ongoing research conducted and first reported by Chally in the January ’99 issue of Selling Power verifies that less than 5% of all major sales forces were rated as very good or better and viewed by customers as effective enough to maintain customer loyalty. Applying typical Total Quality Management (TQM) techniques to sales is likely to be the next major competitive challenge. Now that so many sellers face competitors who can offer essentially the same products, features, service packages, and even price, the point of competition will often become the added values the salesperson can bring to the table.

¹HBR Sept/Oct ’90

²HBR Nov/Dec ’95

Principle 3: World Class sales and service performance now depends on selecting and refocusing the 21^st century salesperson.

The primary role of the business-to-business or high value added consumer salesperson has evolved. In the past, salespeople were usually responsible for day-to-day purchases, administrative management, technical support, and customer service. Today’s salesperson must also be a “customer business consultant.” In this new role as consultant, salespeople must learn and understand their customers’ businesses, elevate their relationship beyond the traditional purchasing, technical, and administrative function, and add value to the customers’ business results.

To support this broader consultant role, additional specialized sales support roles are emerging rapidly (i.e., technical support, logistics, project management). The goal is to focus the salesperson on the customers’ business needs and use other roles to support this relationship.

As price continues to diminish as the major criteria for selecting a vendor, it becomes increasingly more important to employ a sales force willing and able to meet the changing needs of customers and to provide the added value needed to sustain their loyalty.

Chally’s joint research with the Strategic Account Management Association (SAMA) has statistically validated the critical “consultive skills” that distinguish top performers from less effective salespeople. Our national/ strategic account profile is 85+% accurate in identifying high potential candidates.

So to attract new business most marketers believe we have to be able to prove it. A three year P & L accounting of a customer’s return on their investment in this wonderful product or service could do the trick…

Except they’re expensive and difficult if not impossible to track, and too boring, and too complex for most to read…Let’s face it. Even if we could get them, P & Ls are not “sexy” enough to attract attention in the market clutter of claims, clamor and clever hype!We need pictures, graphics (charts and bar graphs are great) and human interest. The Ideal solution: the Case Study. If the headline is compelling, and the story plausible it will be accepted as real. There are so many (everybody has them, including Chally) that they are accepted at face value. The fact that the GREAT majority is trivial, irrelevant or actually misrepresentations gets forgotten.The problem:
Most don’t pass the legitimate “smell test” of a truly analytic or statistical analysis.

The most obvious flaws:

1. Even terrible products or services are liable to work sometimes and with some customers, so let’s pick the best of these and present them as typical!

2. Most case studies typically fail to exceed the now well recognized “placebo effect” the short term benefit that can produce 20-60% improvements just from the customer believing this solution is logical and bound to work. This is especially true when the “sample or example” is small scale (less than several thousand), and the tracking lasts for only a short period of time (less than 2-3 years). By the way, how many case studies have you seen reporting results across multiple customers and over long periods of time?

Seth Godinmay have put it best: “We don’t like to admit that we tell stories, that we’re in the placebo business… Of course, we need to persuade ourselves that it’s morally and ethically and financially okay to participate in something as immeasurable as the placebo effect. The effect is controversial and it goes largely unspoken. “Sadly this manipulation and misrepresentation, has gotten so acceptable and pervasive there is even a company: Mega Placebos Plus ™, that promises to bring the “awesome power of placebos to you in dozens of new ways.” They claim “Absolutely nothing works as well as the multi-purpose placebos and placebo services we offer”. They guarantee it. Because “every product from Mega Placebos Plus ™ is so easy to use–there’s really nothing to it! And there’s nothing to worry about!”

3. Statistical word games are also big. For example, in one of our core businesses, assessing individuals to identify the best candidates for hire and the best areas for development for incumbents, the proof of effectiveness is accuracy in predicting the level of future performance of the candidate or incumbent. The statistical measure is a “validity study” or predictive analytics that confirm that higher assessment scores predict better performance. However, many competitors substitute reliability of their assessment (which simply says that an individual who takes the test twice will get the same score. i.e. if he gets a good score but fails to perform…the next time he will likely get a high score again (and probably fail to perform again.)

The second trick, typical with personality tests, type indicators, and style tests is to show the validity scores for the assessment measuring what its scales are labeled instead of future performance. In selection we really shouldn’t care if a candidate is extroverted we should only care if he/she will succeed in the job regardless if he/she is extroverted or not. Why? Because the real research has demonstrated that even in sales many of the best salespeople are extroverted…and many are not!

Bottom line: “Lies…damn lies…and statistics” (if you don’t understand the statistical tricks) is True and we haven’t even talked about the marketing tools of “operant conditioning”

Or the more controversial persuasion techniques