Four years ago, Martin Winterkorn, now the former CEO of Volkswagen, described an audacious goal to triple the company’s US sales. As he explained it, that achievement would be a milestone for toppling Toyota as the world’s largest automaker. “By 2018, we want to take our group to the very top of the global car industry,” he said.
This month, it was Winterkorn who was toppled as CEO when Volkswagen admitted to circumventing emissions rules. The company confirmed that software designed to fool regulators was installed in over 11 million diesel-powered vehicles. Deceit, too, can be mass produced.
But the idea behind VW’s strategy wasn’t original. It came from an ancient financial fact: transferring risks to others produces revenue and profit. Through clever software coding, VW saved billions of Euros in research and development, time-to-market, and the possibility that they might get bupkis for their effort. Health risks from dirty air? Deaths from emphysema and asthma? Those will be someone else’s problems. The VW Marketing team provided the right message: Clean Diesel. “Let’s face it: VW took advantage of a bunch of hippies with that line,” Dan Neil wrote in an article, VW Lost Its Moral Compass in Quest for Growth.
Winterkorn’s peripeteia reminds me of Yertle the Turtle, by Dr. Suess. King Yertle was a tyrant who conscripted his turtle underlings to place themselves in a stack so he and his throne could be higher than the moon. His project came to an end when the lowest turtle, Mack, burped, causing the pile to crash back to earth.
Then again, from below, in the great heavy stack,
Came a groan from that plain little turtle named Mack.
“Your Majesty, please . . . I don’t like to complain,
But down here below, we are feeling great pain.
I know up on top you are seeing great sights,
But down at the bottom we, too, should have rights.
We turtles can’t stand it. Our shells will all crack!
Besides, we need food. We are starving!” groaned Mack.
Presidential candidate Bernie Sanders can probably recite this dark rhyme in his sleep. It’s all about blind ambition, passion, and arrogance – a recurring, toxic C-suite trifecta, not limited to Volkswagen. “Shouldn’t a business manager care about whether capital is productively deployed to maximize returns, not about generating sales volume for its own sake?” Holman W. Jenkins, Jr. asked in The Wall Street Journal last week.
But many executives view selling risks the same as Winterkorn. They believe that sound financial strategy means dumping risks on others whenever possible. Sales workers toil under this ethos, bearing the brunt of business uncertainty. Employment-at-will. Compensation-at-risk. Flex scheduling. The Uberization of work. Orwellian-sounding terms routinely embedded in commercial parlance. “If this sales game is too much I’ll figure something else out,” a commenter, Mimii, wrote on Indeed.com in a forum titled, Things You Should Know about a Sales Position with AT&T Wireless.
Another commenter, Katie D, wrote “. . . since the last time I posted on here, AT&T changed the commission structure, which they do quite often. So yes, I am now working for peanuts and missing all my son’s football games . . .”
Not everyone in the conversation shared Katie D’s misery. But I couldn’t help thinking about her spirit as she tackles AT&T’s revenue goals. I envision her at the store, clad in a powder blue AT&T polo shirt, feigning a happy demeanor, while she longs to be part of her son’s fleeting childhood. Retail bosses and business bloggers call the Katie D’s of the world Customer-facing personnel, an appropriately tepid and joyless term.
“They have up to 48 hours in advance to change the schedule on you. So make sure you always check your time the night before so you don’t get a point for tardiness,” Katie D opined in another comment. Some would say she’s lucky to have a job. “Oh yeah, I used to be a salesman, it’s a tough racket.” The written rendition doesn’t come close to replicating Alec Baldwin’s mocking sarcasm in Glengarry Glen Ross.
Today, Mack from Yertle wears a tie and carries a mobile phone. And his belching can be heard all over social media:
“Hundreds of people are leaving [Oracle] each quarter,” a salesperson said in 2013, speaking on condition of anonymity. “Oracle has a horrible reputation in the tech sales circles at this point, so yes I see a migration from those who are competent, experienced, and see the writing on the wall,” another said, quoted in an article in Business Insider. “One issue frustrating salespeople is that they have been given quotas to sell Oracle hardware, even though they specialize in software, our sources tell us. That’s problematic because at many enterprises, the IT people who buy software are not the same people as the ones buying [hardware]. It’s an entirely different process.”
A salesperson from IBM shared a similar story:
“I was with IBM for 10 years and was the #1, #2, #1 rep in my software brand in the NATION for years 2009, 2010, 2011 respectively. In 2009 and 2010, I was paid accordingly. At least by IBM standards. In 2011, they screwed us all. 2012 was shaping up to be the same. In 2011, I was paid $40,000 commissions on $12,000,000 in revenue. Why? I was given a $12,000,000 quota. I left in February…and my former region’s best and brightest are peeling off.”
Why do companies shovel risk on employees, and then claw back their remuneration? Because the ka-ching is irresistible. And, because they can. Many employees simply put up with it. “I’ll take my chances with the added pressure of sales and high quotas if it means being able to provide for my daughter a bit better,” Mimii wrote in 2013. I don’t know whether she stuck it out, but the odds aren’t good. The employees “least committed to a company are its salespeople, 38 percent of whom planned to leave within two years.” A finding from a 2001 Hay Group Survey, titled The Retention Dilemma.
Variable compensation for salespeople offers many advantages, including higher pay, and lower risks for employers. But risks must be equitably shared. And they must be managed – not dumped elsewhere, like raw sewage into a river, or carbon into the atmosphere.
In 2016, there are seven imperatives for managing revenue risk:
1. Capturing, preserving, and sharing information. Quality information repositories have become the linchpin of selling. Yet, using a smokescreen called capital preservation, some organizations maintain antiquated systems that heighten selling risks. That’s changing. Companies currently spend approximately $23 billion each year on sales software, according to The Wall Street Journal, in an article, The Data-Driven Rebirth of a Salesman. “Sales offers possibly the biggest opportunity today in adding [artificial] intelligence in the enterprise,” said Mike Dauber, a partner with venture-capital firm Amplify Partners who has invested in the new generation of sales tools.
2. Acquiring, hiring, and retaining business development talent. “Talent acquisition and retention is a huge component of what we [CEO’s] need to think about,” said Christopher H. Franklin, CEO of Aqua America, Inc, a water utility in Bryn Mawr, PA. “That is where you get to set the culture.”
3. Ensuring high workforce productivity. The traditional numbers game mentality involves flogging salespeople for more revenue output. While that approach might provide positive short-term results, it sacrifices equipping salespeople with ways to be more productive. That means giving them proper tools, information, education, and professional development.
4. Continually matching sales resources to customer need. A sales process that doesn’t match buyer need jeopardizes revenue. Yet many companies fail to adapt, insisting that sales teams adhere to ineffective processes, or maintain ones that provide little value to customers.
5. Assigning, monitoring, and enforcing sales goals that create value for the company. Many organizations are short-sighted when developing sales goals, limiting them to revenue objectives. Executives overlook other opportunities for Sales to bring value, including high customer satisfaction, market intelligence, and higher profits.
6. Modeling and preserving high ethical standards. This needs no explanation as Volkswagen’s brand reputation implodes.
7. Increasing revenue opportunities. – A roll-up of all of these. Managing revenue risk requires getting better at growing sales. That includes expanding the number of accounts to call on, increasing win-rates, growing installed customer revenue, and reducing customer churn.
“Everyone knows that quotas will be going up next year . . . ” The predictable preamble to fourth-quarter sales meetings around the world. But will risks increase, too? I challenge anyone to find a Volkswagen salesperson who has been offered quota relief for the risks that Winterkorn shoved into the dealer channel.
Before I stomp on C-Level executives who blithely chuck their risks onto someone else – or in Volkwagen’s case, blast it out their tailpipes – I want to share a thought: transferring risks is as much a part of business as the exchange of goods and services. But management’s goal should be not only ensuring it’s done profitably, but openly, equitably, and legally.