Valuing Top Performers

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Employee Engagement
Employee Engagement
Book Excerpt

"For many businesses, improving the service and sales ability of the Frontline-the team members that face your customers-usually provides the opportunity for the biggest upside impact for the organization," writes Ziad Khoury in Frontline Profit Machine: The Blueprint for exploding profits with your existing sales and service team (SelectBooks). "It's the profitable revenue, the revenue that puts you over the top (well past paying your bills) that makes that P&L look oh-so-sweet. This is the additional and incremental sales revenue that your Frontline can produce." In this excerpt from Frontline Profit Machine, Khoury explains how to understand the true value of your top performers:

Jim Collins, author of business-building power-book Good to Great, found there were 11 companies that outperformed the Dow by a factor of at least three over a 15year period. Much to his and his researchers surprise, many of these companies did not come from high-tech, high-profile, cutting-edge or high-flying industries. Good to Great describes one of the key metrics each of these 11 companies shared.

Collins states he expected to find that the first step in taking a company from good to great would be to set a new direction, a new vision and strategy for the company, and then get people committed and aligned behind that new direction. What he found instead was that the first step undertaken by the executives who pushed their transformations was to first and foremost get the right people "on the bus" (and the wrong people "off the bus"). Once that was accomplished, they then figured out the process of achieving greatness.

Universal Under-appreciation

A point I make throughout this book is the widespread lack of appreciation we see from most companies toward their Frontline producers.

On the surface, and in most situations, the Frontline looks like an entry-level position, low on the prestige hierarchy in a business. The primary role of the Frontline in many companies is to first fulfill an order, and then to try and sell. For example, a car rental agent first fulfills a reservation and then tries to upgrade a customer to a more comfortable vehicle. A front desk clerk first processes the reservation then tries to upgrade the customer to a suite.

Even when a Frontline position is defined strictly as "sales" (such as an associate behind the fragrance counter at a department store), the perception by an organization's powers-that-be is that selling is an easy job. They think it's easy because the product or service being sold is fairly basic and they may feel "most customers know what they want."

Walking the Walk

To truly understand the value on your Frontline, do yourself a favor: go out and do it yourself for a day. Is it really that easy to balance sales and service? Is it really that easy to keep a positive outlook after five consecutive rejections, three of which came from irate and disgruntled customers?

The pressure to repeat this process 10, 20, or 100 times each shift can be exhausting, to say the least. Most decision makers in Frontline service and sales organizations never came from the Frontline and have never actually spent much meaningful time there. Those who have that experience usually have a completely different perspective and appreciation for what really goes on and what it really takes to be successful.

We don't hire consultants who have not been top performers in the field. They simply cannot relate as well, and if they cannot relate, they will not be as effective.

Having said that, I want to also state unequivocally that there are terrific managers who understand the Frontline position. There are many managers who appreciate the nuances and the involved and challenging nature of making it all work. They usually have a very open mind and a great deal of empathy. They usually also make outstanding leaders.

I would agree that the Frontline position is not an extremely complicated one; chances are your Frontline is not selling million-dollar banking software. However, I absolutely believe that executing sales well on a universal scale consistently requires a great understanding and appreciation of the Frontline. It also requires a good deal of organizational depth and maturity.

Valuing from a Customer's Perspective

Your customers mostly interact with the Frontline and generally do not deal with anyone else in your organization. Customers don't care if you have a highly educated and professional staff behind the scenes. They do care, however, that the people they are dealing with are engaged, caring, and professional.

Does what happens in the back office actually matter to your customer? Your upper management's MBAs and PhDs do not "connect" your customer to you. What does matter, ultimately, is the interaction your customers have with your Frontline because it is through them that your reputation is built or destroyed. Essentially, it all comes down to this:

Do you truly understand that statement? Do your managers understand it? And, most importantly, do your managers' actions show it?

Valuing from a Manager's Perspective

Do your managers value the power and profit influence of the individuals in sales roles for your company, or do they resent them for what they perceive as "easy work" and in some cases "higher pay for top producers who earn bigger commission checks?" If the latter is the case, the result is usually a stark lack of support, resulting in salesperson demoralization, falling numbers, and grinding turnover.

  • Understand and value the full impact of these team members, the "vanguard" of your organization.
  • Forget about having your junior third-shift manager hire someone based only on a belief that the new employee will show up to work and simply "handle" a position the manager desperately needs to fill!
  • Identify the strongest people you have-this is your overriding objective. Then, make sure you keep them and add more high-potential talent!
  • Go after the best to join your best!

Calculate Relative Profit Potential

I am cautious about being too repetitive when it comes to numbers, but quantifying the results are a huge part of what really drives this system and what fuels a Frontline Profit Machine. In fact almost every aspect of the KPE can be dollarized and the profit impact can be quantified in some manner.

This exercise speaks to that impact:

  1. Look at your top performers and compare their production to that of your below-average performers.
  2. Take that difference and annualize it.
  3. Now multiply this figure by the number of low-performing employees you have.
  4. How does that revenue affect your margin and your bottom line?

Note: When figuring your net profit impact, be sure to consider the economies of scale traditionally associated with higher incremental revenue. As your sales revenue rises, your fixed expenses typically remain fixed, thereby dramatically increasing the net profit margin on the found money generated.

Following is one example from a familiar industry:

Karl's Rent-a-Center

  • 10 salespeople
  • Top two sell $2,000 per shift
  • Bottom five average $1,200 per shift
  • Difference of $800 per shift, per bottom
  • Bottom five total cost per day = $4,000 ($800 X 5)
  • Difference per year = $1,440,000 ($4,000 X 360)
  • Margin on incremental sales= $576,000 ($1,440,000 x 40%)

Now analyze the implications of these figures:

  • If your current net margin on new business were 10%, you would have to generate $10 in gross revenue to create $1 of net profit.
  • In the preceding scenario, $576,000 dollars of net profit is being left on the table.
  • Therefore, in order to generate the same financial impact of this sales improvement, you would have to generate $5,760,000 in new business annually, or add another 28,800 customers at $200 per ticket. ($576,000 x 10 = $5,760,000; $5,760,000 / $200 = 28,800 new customers)

Wow! Ask yourself what is easier: To find over 28,000 new customers, or improve or replace the performance value of your weakest Frontline staff?

The math is clear and the difference is staggering. These variances exist in the overwhelming majority of sales environments, regardless of product line, market or demographics.

Barry Leskin, the former chief learning officer for ChevronTexaco and chairman of the management and organization department at the USC's Marshall School of Business Research, has demonstrated that a company's top performers in mid-level to senior-level jobs are 50% more productive than their average-performing counterparts. With that kind of data, it's clear that your company's success depends on identifying, hiring and enabling as many of these top performers as possible. This is a critical key strategy in building a strong performance culture.

Doing this math is extremely important. After all, hiring and firing usually involves getting multiple levels of management on board by convincingly making your case.

Most managers know their lower-end producers are hurting the organization, but do they know how intensely these individuals are burning profits? Only when these losses are quantified consistently will most leaders take action. It is then when a full transformation in recruitment practices becomes a much easier sell.

Just the Beginning

Valuing the impact of your Frontline is a critical first step to making the changes necessary across multiple departments and decision makers to improve the quality of your sales and service team.

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About the author: Ziad Y. Khoury is founder and president of Frontline Performance Group, as well as developer of The Khoury Performance Equation.

Excerpted from Frontline Profit Machine by Ziad Khoury (SelectBooks, 2009).

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