#209 – Sales models and strategies that work (Part 2) w/ Frank Cespedes

Full episode transcript: 

​Please note that transcription is done by AI and may contain errors.

George: Hi everyone, George here, the editor of the Sales Transformation podcast. This week on the show we've got the second part of Phil's conversation with Frank Cespedes. So if you haven't listened to the first part yet, I'd recommend you go back to last week's show and listen to that first. If you're all caught up already, then all that's left for me to say is enjoy the episode.

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Phil: So, um, kind of we've been talking about sort of sales models, and then we're talking about territory management, a little bit about account management as I, I, you know, again- Yes ... um, you know, what are the best strategies, um, for those.

One, one of the things that, uh, the last comment about sales models, which I found very interesting from your book, um, was about, um, sort of really understanding the buying, you know, the... You've talked about this a bit already, but the buying process for the different products and services that you provide.

And it made, um, it made quite an impact on me because even, you know, sort of i- in, in our business, and it, uh, it maybe I'm showing up how unstrategic we are, Frank, when I share this with you. But you can get very excited about developing a new product and service. Yeah. Um, but what you don't realize when you develop this new product and service is that the buying process for that new product and service is completely different.

Frank: Right.

Phil: And the personas that you need to sell to for that, and you talked about subscription as a service, you know, you know, different, uh, sort of models in here. Uh, and all of a sudden, yes, you've, you've created a, a sexy new sort of development to your, your product and service offering, but you then realize actually the, the, the market that you need to sell that to is completely different to the personas who are buying, you know, your traditional product and service.

I don't know what you would call that, sort of product and service creep. I don't know, meaning, you know, they're like scope creeps. But, uh, you know, y- you know, for us it's been a big wake-up call to say, "Yeah, we've very excited about this new solution that we've actually developed, but we've got a long way to go before we're able to get that to market in a proper way."

Yeah. Because we simply have not got the right personas in place. We haven't defined, you know, the buying side, uh, well enough.

Frank: Yeah.

Phil: Yeah. And, you know, yeah. I don't know whether some of your board, you know, when they start to launch new ideas, whether they have really thought through the sales model, uh- Yeah

in a really diligent way.

Frank: Well, I mean, just a, a couple of things. First of all, I think that, that change, what I'd call that domino effect- Yeah ... it's not just new products, it could be a new pricing approach. You know, again- Yeah ... we've lived through this in the last 15 years in software. When you go, you know, think about ERP software.

When you move from selling, you know, the way Oracle and SAP did, uh, for decades- Yeah ... uh, five, six, seven-year licensing contracts, that was a capital expenditure decision.

Phil: Yeah.

Frank: When it moves to the cloud, it's now an operating expense decision at customers. Yeah. Yeah. Those are different buyers, right?

Phil: Absolutely.

Frank: Yeah. Uh, and A, the, the beginning of wisdom is understanding that, and then B, uh, I don't think this is a mystery or metaphysics. You then say, "Where are our established relationships? Where do we need to, uh, go?" Yeah. And by the way, how do we reframe our value proposition- Yeah. Yeah ... for these new buyers who are concerned about- Yeah

different things? And again, this is a constant. This is what change- Yeah ... means. But- Yeah ... you know, what can I say, Phil? We chose this life, you know? We chose this life. That's, that's the way it

Phil: works. It's, uh, it's exciting, Frank. It's an exciting life. Um, can I just... The, I keep on thinking of questions I want to ask, but in, in your book you talk about the trillions that are invested in working capital that is affected by, um, the, um, sales cycle.

And, um, uh, you know, the route to cash. You know, you talked about it earlier on, actually. You mentioned it earlier on, but I found the figures were quite staggering but so important. You know, uh, you know, this, at the end of the day, you know, it's about, you know, sort of route to cash. The sales model needs to reflect the most efficient way of achieving that for your own business.

But could you just expand a bit more about the-

Frank: Well, I think, you know, the, what, what you're alluding to in the book, it, th- and this is not my research, I think it was research by- Yeah ... uh, PricewaterhouseCoopers. Yeah. But the amount of money that companies, uh, have invested at any given point in time in working capital.

Working capital is the money- Yeah ... we need to keep the business- Yeah ... going, and it's a huge figure. It's, you know, it's, um, uh, bigger than the economies of most nations in the world.

Phil: Yeah, yeah. It's massive.

Frank: Now, not only is that a big deal, it has become a bigger deal, and the reason is because of what's happened over the last decade and a half.

There was a period of time, starting with the financial crisis in 2008, really up until post-pandemic. Yeah. That's about a 15-year period. Interest rates were at historically, and by historically I mean going back to the Neolithic Age- Yeah, yeah ... historically low levels.

Phil: Yeah.

Frank: So the funding for working capital was at historically low levels.

But in the last few years, you don't need me to tell you they've gone like this. Yeah. Yeah. And given, you know, these, I think, deeply unwise policies about tariffs and trade- Yeah ... and other things.

Phil: Yeah.

Frank: We have inflation, they're going higher.

Phil: Yeah, yeah.

Frank: Those trillions invested in working capital are now even harder to finance.

Yeah. That gets me back to do we know our target customers? Do we know the buying? Do we know the implications for the selling cycle and time to cash?

Phil: Yeah.

Frank: Those basics now have even bigger economic significance-

Phil: Yeah ...

Frank: than they had during the decade of remarkably low interest rates. Yeah, yeah. Yeah. Those days are gone and are likely to be gone for some time.

Phil: For some time. Yeah. Very good. Well, can we change our focus, Frank, to performance management? Because I think the reason for switching, 'cause it, the, uh, to having the two topics in this order is, you know, the sales model, if you like, is kind of setting up the model for performance, and that, so the performance management I felt was a, a good continuation, um, of of the, uh, conversation.

Um, but I was taken by, uh, a comment, uh, that, that, that you, you made that people leave managers not, not companies. And, um, I just wonder whether you could talk about that from your experience. Yeah. People leave managers, not companies.

Frank: Yeah. Well, I'm borrowing that, um, that phrase, uh, people- Yeah ... you know, the phrase is people join companies but leave managers.

I'm borrowing that phrase because I heard it from a number of HR executives during the decade I ran a business. Yeah. And it's true, and I think it's true for a couple of reasons. The impact of your boss in business, especially in sales, is enormous.

Phil: Yeah.

Frank: You may join a company because their product or service is cool, or they pay me really well.

But when you do exit interviews, by far the most common response is my boss. He was either a micromanager or, you know- whatever. And this is especially true in sales. It should not surprise us. Yeah. Because a boss can, you know, if the boss is doing their job, they do performance reviews. Yeah.

Major motivational tool. They decide in sales in particular, not only on territory assignment but very often on comp, the incentive structure, the bonus, promotion possibilities, et cetera. Yeah. So that's one reason that's true. And the other, and, and this is something that about 60 years of research has consistently demonstrated.

If you ask yourself what really drives adult learning, I'm not talking about undergraduates or MBA students.

Phil: Yeah.

Frank: I'm talking about people on, you know, once, once they're, uh, b- in the workforce. By far the biggest driver of adult learning is what those people do. In other words, their job assignments. Yeah.

That is about 70-plus percent of adult learning. And again, those assignments are very often allocated by the boss. People join companies- Right ... but they leave managers. Um, th- I, th- that's, that's why that is a truth, uh, in most organizations.

Phil: So you're suggesting that managers perhaps, um, don't do enough to think about the task allocation in that sense to, um, excite the employees that are reporting to them?

Frank: Well, I mean, you know, I think some do, some don't. You know, there's a bell- Yeah ... curve there as- Right ... there is in, in most activities. Yeah. And by the way, I'm not a proponent of the point of view that says the goal of management is employee retention. Yeah, you know, unless your hiring processes are-

Phil: Yeah

Frank: perfect, and especially in sales, most hiring processes are extraordinarily sloppy. Yeah. Y- you know, the, the proof of the pudding is on the job. So a certain amount- Yeah ... of turnover, I think is- Yeah ... uh, uh, is to be expected. But managers, again, have to do the basics. They either know how to do performance and account reviews, or they don't.

Yeah. Even if they know, they either spend time on doing that and tailoring it to the- Yeah ... individual or they don't. They're either clear about why you got this assignment and not that assignment, or they don't. All of that, I think, is what quite rightly we expect from a frontline manager, especially in sales.

Phil: Yeah.

Frank: Uh, again, uh, uh, we're not optimizing for, for some retention figure. We are- Yeah ... optimizing for developing our people and keeping the ones who are really, really good, and knowing- Yeah ... the difference between good and not good.

Phil: Yeah Our observations, Frank, through some of the coaching programs that we run, um, for sales leaders, is that, um, they often defined coaching as, uh, sort of deal review sessions, you know?

Right. Uh, and, a- and, and so they spend a lot of time looking at pipeline and, you know, what's gonna come in at the end of the month, and trying to give some a- advice on, or voice some concerns about how can we speed things up, and so on. But it's really, you know, it's coaching a deal through the system.

It's not really coaching a person through the system, you know?

Frank: Well put.

Phil: And I don't know if you've got any, any thoughts on, on that from your observations of some of the... I, I know it, you know, performance management and coaching are two, two related topics in your book.

Frank: Yeah. Well, I mean, I, first of all, let me agree with you, uh, what you said.

I, I do think- Yeah ... this is, uh, you know, by far the most common, uh, situation I've seen. Most so-called sales coaching is not really coaching development performance conversations. It's essentially a sermon. Uh, you know, I sit down with you and I say, "Phil, sell more and get better." And you say- "Wow, I never thought about that.

Sell more and get better." Um, performance, especially in sales, much more in sales than in any other business function, because sales deals with the external, right?

Phil: Yeah.

Frank: That external world that, as we've said- a number of times, is changing. Performance varies by individual- and by market conditions.

And part of the job of coaching for any sales manager is first, and here you do need processes, data information, monitoring and managing that difference, and then disentangling how much is the market in performance and how much is individual skill capabilities. You know, think about, you know, it's the, it's 2020, 2021, the height of the pandemic.

You work for Zoom in sales. You're gonna meet your quota even if you fall asleep. A couple of years later, it's very different market conditions. How much is that, and how much is the ability of the salesperson not to reach the right buying authority?

Or the salesperson who does everything right- except the most important thing, which is close the sale. It's the sales manager's job to diagnose that, and then, as you said- tailor the coaching to the individual's strengths- and needs, not some generic picture- some platonic version of what a salesperson does.

Phil: You relate, um, performance management, or one of the components of performance management is having the right data as well.

And, um, I love one of the anecdotes, and perhaps it was borrowed by someone else, about, about the story about, uh, the, the, um, what was it? Um, about the, the lamppost light joke. Well,

Frank: the, the drunk under the lamppost.

Phil: Yeah, the drunk. Could you just share that, Frank? Because I

Frank: think it's so funny. Well, it's, um, yeah.

Ba- basically it's an old joke told by statisticians, and the joke goes like this. You're, uh, walking down the street at night, and you see a man, you know, searching for something. You stop. You say, "Can I help you? What are you looking for?" And, uh, he says, "Well, I'm looking for my keys." And he's under a lamppost.

And you say, "Well, jeez, I'll, I'll help you. Where did you drop them?" And he says, "Oh, I dropped them about two blocks back there." And you say, "Well, why are you looking here?" And he says, "'Cause this is where the light is." Right? Now, it's an old statistician's joke, but the data revolution has made it more and more the issue- in sales, right? We have all this data. We look at this. Data, especially in sales, here's a simple way to think about it. Data is about the numbers. It's about the outcomes. It is about lagging indicators.

Phil: Indicators, yeah.

Frank: Information knowledge is about n- knowing cause and effect relationships- in your sales model.

What drives what. Those are leading indicators. And again, that's part of what a sales manager's job is. Good news is we have lots of data now that we didn't have- just a few years ago. Bad news is it's easier and easier to be the drunk under the lamppost.

Phil: Yeah. Yeah. I, I love the, uh, the, the analogy.

And I'll never forget one of our students, Who, uh, took on a big role in the Middle East and, uh, selling sort of big data solutions out there. And, uh, the company he worked for had no market share in this particular area, but he'd done a great job in Europe, so he was very confident, you know, that he could go out and transform the business out in the Middle East.

And, uh, when he got out there, you know, he found that there was absolutely zero pipeline, there was zero business opportunity, and, um, and, you know, they felt that there's just no chance of, of selling this new, uh, this new... Well, it wasn't new, but this, this, this new, uh, uh, uh, data solution. And, um, and so, you know, he was starting off from ground zero with nothing, and he said, "Well, so what did I do?"

And I, I, I first of all just started to ask people about, "Can you just tell me what you do?" You know. Yeah. "Can I... You know, who do you see? What do you talk about? And what's the outcome?" There were just three things. Who do you see? What do you talk about? What was the outcome? And he, he then started to build up data, and after about a month, he had quite a lot of data from the different people in the sales team, and he was able then to extract from the data, you know, certain things.

"Well, we're obviously not going to sell our solution to people, you know, that aren't in market." I can't remember what it was. But anyway, it be- but it was very interesting because the only thing he could work on was leading indicators because he had... But he, you know, had to create a database of leading indicators- Yeah

if you like, to get to the lagging, which came later. But, um, I mean, it really supports your story though, because, uh, the success that he had, you know, in turning around zero sales in this particular product, uh, led to, I think, 11 out of the 10 of them getting, uh, sorry, 10 out of the 11 of them getting to Winners' Circle, I think within two years, which was his proudest achievement as a manager, uh, which is great.

It, it wasn't his success, it was the fact that so many of them got to Winners' Circle. But he somehow- Yeah ... he managed to change the mindset to focusing on leading indicators, uh, to the lag result later.

Frank: Well, you should, uh, but you should also feel proud. Obviously, that student was well-trained, Phil. He did the right thing-

which is, "Hey, let me- Yeah ... let me understand what's going on here." You know, it's a little bit... There's another old, one of the older jokes- Yeah ... in business. You may know it. It's the joke about, uh, the company. They sell shoes. They post, uh, two of their, uh, people to these very remote countries. And, uh, after, uh, doing, uh, some of their research, the, the fellow in country A says, "There, there's no, there's no market here.

The, uh, the, nobody in this country wears shoes." And the fellow in the other country says, "We have an enormous opportunity in this country." "Nobody is wearing shoes." So, you know, the, the, the, the point your student was quite rightly- Yeah ... understanding is what's the difference? Where are the- Yeah

segments where there's opportunities? Where are the segments where they're not?

Phil: Yeah.

Frank: Ultimately, you've got to... It's the customer who decides that, not the seller.

Phil: Yeah. No, really, really interesting. so, um, you're a great believer, I bel- in perform- you know, having structured performance appraisal sessions.

Um, and, um, because I know that it's one of those things that- Uh, can be easily neglected in the pressure, you know, to get results. You know, you don't spend enough time doing that proper performance appraisal. Uh, so can you tell me, you know, what, what's behind your thinking there, and why, why you feel it's so important to do?

Frank: Yeah. And, and by the way, I do find that this is something, um, you know, the importance of doing performance reviews, performance appraisals, I find this is something that amazingly has to be argued for. Every year, and I mean every year like clockwork, you're gonna find an article in Harvard Business Review or some other management journals, "Oh-" Yeah

"performance reviews, nobody likes to do them. They're unfair, they're biased. Why don't we just scrap them?" I think that- Yeah ... is deeply, deeply misguided. Uh- Okay ... people want feedback. They need feedback. And in sales- Mm ... in particular, uh, so much important data about buying, what we've been talking about- Yeah

for the last hour, is not in the CRM system. Yeah. It's lodged in the heads of those account managers. Think about that guy that was calling on Vodafone, uh- Yeah ... uh, for years. When a sales manager does a sloppy or what I call drive-by performance review, they're not only demotivating their people, they are- Yeah

inhibiting the flow of vital information in the company- Yeah ... that only becomes visible, only becomes apparent- Yeah ... and actionable when you do the good review. Yeah. The second, uh, second comment I'd make, this is one of those areas of management and leadership- Yeah ... that is in fact very trainable, and you know this 'cause you do a good job- Yeah

with this. You know, so much of our talk about leadership, again, belongs, in my view, in the school of theology, not the school of management. You know, you, it's let's be transformational- et cetera. Performance reviews are a very, very trainable skill. Company I ran- Yeah ... I waited almost five years before I brought in this wonderful, experienced HR, uh, woman to help us- Yeah

with this, and she was fantastic. I waited five years too late. So it's a very- Right ... trainable skill. It's not-

Phil: Yeah ...

Frank: you know, it's not spiritual. It's, it's- metaphysical. And unfortunately, many, many busy sales managers do drive-by- reviews. Not a good thing. Not a good thing at all.

Phil: Yeah Frank, can I, can I c- come back to the comment you made about theology? Yes. 'Cause I found that... Could you- Yeah ... could you explain that to me a bit more about theology- Sure ... versus philosophy? I, I, I think you said.

Frank: Well,

by theology I mean, you know, what is theology? Taking things on faith. Uh- again, sermons, et cetera.

Uh, and, you know, who knows? Uh, but-

far as I can tell, all the best empirical evidence, Phil, says- this is our one shot at life, you know? Right. Okay. Where unfortunately- we'll all find out the real truth.

Phil: Yeah.

Frank: Um, and business, whatever else it is, is about managing in this world, not the next world.

So, you know- I find, I find a lot of, um, what I call the semi-theological things in business. Purpose- et cetera. Yeah. I, I find those things generally overblown because they're- easy to say, and they do not require the allocation of resources. And many of the more important impactful things- account selection, performance reviews- systematically underplayed because they take work, and they do require the allocation of time, money- and effort. And I'm no longer apologetic, uh, about that. Uh- Yeah. Yeah ... I, I think, I think that, uh, the discourse in many management schools and the discourse in many companies is imbalanced.

It's- it's, it's spending too much time on what I think are, of, uh, ultimately sermons, and not enough on doing- good deeds, which is the heart of virtue. Um-

Phil: Right. Yeah, yeah God, that's so interesting. Frank, you mentioned, I, I, I can sense from the passion with which you talk about this subject, about you use words like the sales manager in particular or sales leadership in particular.

It sounds as though you feel that because they have this context with the outside world, not the inside world, that the challenges of being a great leader as a sales leader are sort of different to maybe other leaders in the business who may not have that context. Do you, do you believe, um, that the two disciplines of leadership are different?

You know, sales, being a sales leader versus being a general manager, let's say. You know, are there particular challenges that a sales leader has that other leaders don't have that make that role particularly-

Frank: Yeah ...

Phil: unique? Yeah.

Frank: I, I think it's a difference, uh, I'm not sure if this is the right metaphor, Phil, a difference more in quantity rather than quality.

And, and here's what I'm getting at.

Phil: Yeah.

Frank: I think most, not all, but I think most of the challenges are common to both sales managers, sales leaders, and people in other functions. But I think in sales, they're more, uh, direct for a couple of reasons. Think about what most sales managers do. They- Yeah ... you know, the things we've talked about in this podcast.

They allocate opportunities. They affect- Yeah ... compensation, promotion. In other words, um- Yeah ... while in any function people join companies but leave managers, in sales there are fewer buffers between- Yeah ... the manager and the individual, right? It's much more direct, uh- Yeah, yeah ... because, you know, because of the, uh, the, the metrics, uh- Yeah

in sales. The second thing, and this is a- again, true in any career, in any function, but, uh, but more so in sales One of the classic transitions in any career is moving from individual contributor to- manager leader. In other words, moving from someone who knows how to do their job, knows how to take care of themselves, to a manager or a leader who by definition must get things done through others.

Yeah. And in sales, that's a big issue. Um- most salespeople enjoy sales because of the autonomy. I make my numbers. They leave me alone. But once they become managers or leaders, it's a different game. And, you know- by far the most common complaint I've ever, I hear throughout my career, this goes back over 30 years.

You know, we promoted so and so from, um, sales to our sales leader, was our best salesperson.

Phil: Yeah.

Frank: Continues to be a good salesperson- but doesn't manage, doesn't lead. That's a classic transition. And in sales, it's a particularly fraught one. So again, I think it's more a difference, what I'm calling quantity rather than quality, but, you know, it remains a big issue in developing, uh, your, your leadership in a core business activity.

Yeah.

Phil: Yeah Yeah. No, I, uh, yeah, 100% agree, um, with what you've just said. Um, I'm just checking my notes, Frank, to see if there are any questions here, because I've realized that time is over the hour,

Frank: Yeah ...

Phil: already. I just love our... I-- maybe George decides to split this one into two. I'm not sure. But, um-

Frank: Well, yeah. So again, you, you do this well. You, you, you naturally ask good questions. It's a pleasure to converse with you because we share, I think, a fair amount of experience- Yeah ... uh, in, in this core business, uh- Yeah ... activity. Um, you, you know, I don't have more questions. Uh, I don't know if you do, but, um- No

you know,

Phil: you- I don't. I don't. I, I do have, but of course, because we've only focused on a few chapters of your book. So, uh, I'm sure going to leave the door open again, Frank, maybe at a future stage you'll like to come back. I, I... One question for you, Frank. Is there another book that you're in the process of writing that we can look forward to?

No, right now, but, you know, I've published, you know, um, you know, the book you, you were kind enough, uh, to mention- Yeah ... is my sixth book. And- Right ... actually, if you want to say, "

Frank: This

is the last book." Um-

Phil: Right ...

Frank: that, that's where I am right now, but who knows?

Phil: Who knows what will happen? Yeah. Okay. Well, all I can say for those listeners who are leading in, pick up this book, Sales Management That Works. I'm just gonna show it on here in case George is able to put that on one of the video clips. It's a fantastic book to read, and it's got so many practical ideas and tips.

But you know it's written by someone who, who really does know, know the business. And it's been a, a, an absolute privilege, Frank, to have you on the podcast again. So thank you very much for joining us.

Frank: Thank you, Phil, and again, as always, a pleasure.

Phil: Yeah, for me too. ​