Too often, in trying to “manage performance,” we put in place rules, policies, processes, we find they fail to produce what we expected. Sometimes, surprisingly, it’s the opposite of what we hoped. People “game” the system. The gaming process is the natural reaction of people to respond these rules, even if they, wittingly or unwittingly, drive behaviors counter to what management is trying to achieve.
We typically see “gaming” of processes when management puts “rules” in place.
Just as an example, one of the most gamed metrics is “calls/dials.” It’s very easy, particularly with technology, for sales people to achieve any call goal that’s set. But the quality of those calls may be horrible. Another metric that’s easily gamed is pipeline coverage. Managers, often, declare, “You have to have 3X pipeline coverage!” It’s actually pretty easy to do this, sales people can fill their pipelines with low quality opportunities, meeting that requirement–however it adversely impacts win rates and other pipeline metrics. But they’ve met the management dictum, of 3X coverage.
Before going further, gaming metrics and the process isn’t necessarily malicious behavior. It’s often a natural human reaction to achieve a goal by taking whatever shortcuts possible to achieve that goal. Gaming, when we understand it, can actually be helpful. If it is driving the behaviors and results we are trying to motivate, we can leverage gaming in very powerful ways.
But, I’m seeing management putting rules and processes in place, that are driving very non productive behaviors in sales people. Or even worse, it masks the real performance issues in an organization. People’s response to the rules we put in place, however well intended, may prevent us from understanding the real performance issues impacting individuals and the organization.
Let’s look at a “pipeline,” case study.
Some time ago, I was working with a large organization. Somehow management had created pipeline management “rules” that basically established an expectation that anything committed to the pipeline would be closed and won. It was almost as though the pipeline had replaced the forecasting process. (To be fair, I don’t think management purposefully did this, but somehow the pipeline management process had evolved to, “If it’s in your pipeline, you are committing to win this.”)
The company was achieving it’s goals, but the top executives had a sense that performance was not sustainable. While they were making their numbers, they were struggling to grow.
As I started to look at the data, I started with the pipeline analysis. I saw win rates that were actually very good—in the 60-70% range. But average deal values were about 20% of what management thought they should be (and I tended to agree). But what was astounding was that sales cycles were about 30% of what I had seen in similar organizations. This client had very complex solutions. In my experience with organizations like them, I had seen typical sales cycles of 9-12 months. The average sales cycle for this organization was less than 90 days. The difference was so great, I wondered what caused this. I thought, perhaps they were doing something very unique with their customers.
As I started to talk to sales people understanding how they sold, I discovered something fascinating. They were gaming the pipeline management process in a way that kept management off their backs, but were actually sub-optimizing performance.
It was through these interviews that I learned about the “punitive” attitudes managers had established around pipeline management. “If it’s in the pipeline, you are committing you will close it….”
As a result of these attitudes, sales people were “gaming” the system to keep their managers happy. The first thing they did is they carried the majority of their qualified opportunities outside the pipeline, never putting them in the system until they were very late in the cycle and had high confidence in winning.
Some kept them out of the CRM system completely, others carried them in a prospecting stage. As I started looking at this behavior, I discovered win rates were significantly lower than the pipeline metrics indicated. The sales people would be working on “qualified opportunities” for months before moving them into the qualified pipeline, they wanted to be certain about their ability to close the deal.
As I started to study this, I learned their sales cycles were about the same as those of their competitors, but it was invisible to management because deals weren’t put into the pipeline until very late. I, also, discovered the win rate was significantly lower than the pipeline data indicated. Many “real, qualified” deals were lost before even entering the pipeline. Working with the sales people, we discovered the real sales cycle was closer to 9 months than 90 days. Their win rates were in the 20-30% range, not in the 60-70% range.
Most importantly, we found the sales people, over time, were chasing smaller and smaller opportunities, almost completely ignoring all but the most “certain” large opportunities. Sales people were learning they could close enough of those smaller deals to make their numbers (both pipeline metrics and quota), that they stopped chasing the bigger deals that were strategically important to the company.
Let’s hit pause for a moment. Were the sales people wrong? Absolutely not, they were responding to the rules and work environment managers were putting in place. If I were one of the sales people, I would have done the exact same thing. They were displaying perfectly rational behavior based on what management was “telling them to do.”
Were the managers wrong? Well, No and Yes….
When they originally put these “rules and practices” in place, they had good reasons. They had pipeline quality and integrity problems in the past, they wanted to improve pipeline quality and integrity. They were trying to increase the performance of the sales people, primarily focusing on win rates. That’s expected, managers should be focusing on these and other issues around performance.
But the error managers made, unconsciously, was they didn’t understand the behaviors these rules would drive. They didn’t understand what the sales people were actually doing to comply with the rules managers had put in place, hoping to improve performance.
This situation created a “great news” outcome. While they had been meeting their goals, we helped the sales people and managers discover they were actually under-performing their potential. They realized the metrics and rules they had put in place were driving behaviors that, while rational, caused people to focus their work on the wrong things. They realized these metrics were masking the actual performance issues in the organization. The real performance was much different, but invisible to management. As a result, they couldn’t coach and work with people to help them.
We adjusted the metrics and rules, ran reviews with sales people and managers to get them to refocus their work. The “punitive” attitudes around pipeline management were changed. There were strong qualification expectations, but management wanted people be confident in putting all qualified opportunities in the pipeline. The pipelines grew tremendously. Of course the win rates went down, but those were actually the real win rates, they had just been invisible to management. But now, with the complete pipeline visible, managers could start to identify performance and skills issues, impacting the win rates. Since these were now visible, managers could work with sales people to improve their ability to win. Average deal sizes started to skyrocket. Sales people were now focusing on larger deals that took longer. Managers were coaching and helping them win those deals.
Over about 18 months, the situation had completely changed–for the positive. The pipeline more accurately reflected the opportunities people were spending time on. Managers had greater visibility into the work people were doing, where they were struggling, and where to coach and improve performance. Of course win rates went down, originally they plunged to the low 30%, but over time they increased to roughly 50% and were improving. Sales cycles were more realistically reflected, and average deal size increased dramatically. Most importantly, revenue and growth more than doubled.
What happened in this organization is not unusual. I’m seeing it in more organizations, where management is unwittingly driving behaviors that mask performance issues and limit our abilities to maximize performance.
The 3 areas that I see having the highest propensity for being gamed are activity metrics around prospecting. Pipeline guidelines/rules. Forecasting processes. In at least 70% of the projects we work on, we find management has inadvertently put things in place that drive high levels of gaming in the organization. In every case, when management and the people understand this, they are able to identify and focus on the real issues impacting performance, and begin to correct them.
For managers, there’s an easy way to begin to understand this. As you consider putting policies, practices, and rules in place, put yourselves in a sales person’s shoes (or actually ask them). Figure out how you would game these. If they drive the behaviors you want, they are probably good. If they create unintended consequences, rethink things.