Business Journal

When to Say, "You're Fired!"

by Benson Smith

What successful sales organizations have in common with "The Donald"

Once again this television season, millions of viewers are tuning in to watch America's most famous businessman fire one of his would-be apprentices. As odd as it seems, seeing Emperor Trump give someone the ax now qualifies as entertainment.

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Sometimes we cheer. Admittedly, it felt pretty good to watch the villainous and conniving Omarosa get sacked. But can executives learn anything real from The Apprentice?

Well, even the most hardhearted businessperson would have to agree that we can all learn something about self-promotion from The Donald; even his hairdo has become famous. He has received the ultimate honor in American society: hosting Saturday Night Live. Jack Welch must be green with envy. Sorry, Jack; all you did was deliver outstanding shareholder value and turn around General Electric. Mr. Trump, on the other hand, has found it easier to please viewers than shareholders.

But one thing that's crystal clear about each Apprentice episode is that someone is going to get fired. On a similar note, Welch also made it clear that not all of GE's employees could take their jobs for granted. He encouraged his operating units to fire the bottom 10% of employees each year. While this kind of drama may be good for ratings, is it good for business?

Gallup's research and analysis suggest that firing poor performers is not just good for business, it's necessary -- especially if your goal is to continually improve the quality and performance of your sales organization. The hard truth is that each year, some salespeople need to get the ax.

Looking at your worst performers

Why do we say that? Over the past five decades, Gallup has had the opportunity to study many sales organizations, including some of the world's best. As I reported in Discover Your Sales Strengths, we found a considerable range of individual performance between the top-performing quadrant and the remaining groups. (See graphic "Year-Over-Year Sales Performance.") Since most of the companies we were studying were growth-oriented, we normally looked at sales increase over prior year as the key indicator of productivity.

The graph "Year-Over-Year Sales Performance" illustrates results that are typical of many sales forces. First, when we analyze performance data, we usually exclude sales reps with less than two years of experience, because most salespeople go through a learning curve before they are up to speed. We want to separate learning issues, which usually correct themselves over time, from other more problematic causes of poor performance.

This graph shows that the top 25% of the sales force was responsible for generating 57% of the sales increases. On the other hand, the bottom 25% of the sales force was in negative territory; those reps sold less in the current year than during the prior year.

CHART: Year-Over-Year Sales Performance

We also typically find significant range of performance in creating or improving customer engagement levels. A close look at customer engagement scores on a territory-by-territory basis generally reveals that the best sales reps usually have the highest customer engagement scores. On the other hand, it isn't unusual to find bottom-quartile reps eroding engagement.

This is crucial information for sales managers, because customer engagement levels are strongly linked to sustainable growth and future financial performance. If your sales force includes reps who are eroding customer engagement levels, they may also be limiting your company's opportunities to achieve sustainable growth -- and negatively affecting your business' future financial performance.

What to do about them

Even though low-performing reps may be selling something for you today, they are ultimately hurting your chances for better results tomorrow. This leads to perhaps the most important question: What can you do about poorly performing reps? And why are they performing so poorly in comparison to your best sales representatives? Gallup's analysis provides an important clue.

Often, our work with sales organizations involves developing a selection system that helps them identify candidates who are most likely to produce exceptional results. In developing this selection system, we determine the talents and attributes that are reliably predictive of success in a particular sales role.

So ask yourself: What talents and attributes are required for success in your sales organization? And what percentage of your current sales force actually has those particular talents? Gallup's analysis reveals that even in good sales forces, we typically find that 30% of sales reps are significantly lacking in the required characteristics. In other words, 30% of your sales force might not have the right talents to be successful at your company.

QUOTE: It's always easier for a manager to muster the emotional courage to fire someone when the employee has done something wrong.

This doesn't mean that they are bad people, aren't trying, or aren't dedicated to your company's success. What it does mean is that they do not belong in sales -- at least at your company. Their inability to meet your sales standards will inevitably affect their attitude -- and it will negatively affect how your customers view your company. And because they lack the talents required for success, these reps aren't likely to improve even with more experience, training, or management attention. Often, they're trying hard and want to succeed. Consequently, firing them can be a tough decision.

It's always easier for a manager to muster the emotional courage to fire people when they have done something wrong -- if they are difficult to work with, or are argumentative, or have cheated on their expense reports. However, it's harder for most managers to fire someone simply because he or she is underperforming, especially when the employee seems to be making a sincere effort. Front-line managers usually need to be prodded to fire these lackluster performers.

The organizations we've studied that handle this issue most effectively do so by developing clear performance expectations, then enforcing them fairly and firmly. Jack Welch's policy of terminating the bottom 10% of performers each year is a good example. Another organization we've studied fired every sales rep who was in the bottom 25% two years in a row. A major brokerage firm recently mandated that if its brokers earned less than $225,000 a year in commissions, they would have to go. Finally, another stellar sales force sets a minimum growth objective of 20% annual growth for sales reps to keep their jobs.

Needed: a clear line

None of these guidelines may be right for your company. It might take intense discussion within your organization to find the right place to draw the firing line. But remember: That line needs to be drawn high enough so that it is effective in weeding out bottom performers, year after year.

QUOTE: You need to weed out bottom performers, year after year.

By rigidly enforcing this performance standard, you might avoid the potential legal problems that can arise from more arbitrary firings of poor performers. But more importantly, you will be removing performers who have little potential for improvement and who are limiting your company's ability to improve customer engagement levels and future financial performance.

You don't need a television show to do this. You don't need to imitate Donald Trump's gestures -- or his haircut. But you do need the will and discipline to determine that every year, somebody will get fired.

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