In retrospect, I realize that the loyalty of our sales force had much to do with our open approach to information. People are inspired by a crisis, provided they believe in the organization going through it and feel they can participate in solving the peoblem. In our case, the salespeople became obsessed with helping the company through its difficulty.
* Pay for profitability, not volume.
A strange mentality exists in our industry. Many mortgage-banking chief executive officers seem to have in common a sense that there is an adversarial relationship between a company and its salespeople.
Part of the problem, I believe, stems from our industry's cyclical nature; it has a history of hiring and laying people off as interest rates and loan volumes fluctuate. Another factor is that CEOs of mortgage-banking companies tend to regard the sales department as a group of independent contractors, rather than the most important part of their organization. Compensation systems reflect this mentality by basing pay on sales volumes. Our company takes a different approach, basing managers' compensation solely on profitability. That way, our managers win when the company wins and lose when the company loses.
As for our salespeople, their compensation is set by the sales managers, who usually tie commissions to profits rather than volume. This approach encourages our salespeople to learn about the company's margins and overall finances. As they do, their trust in the company increases, and so does their effectiveness in the field.
* Support your sales force personally.
The Hammond Co. goes out of its way to provide tangible forms of support to the sales force. We insist that our salespeople have professional displays for presentations. I myself periodically call on major customers with our local salespeople as a way of encouraging professionalism.
Through all this, the message to the sales force is clear: we regard the sales organization as the premier part of our company, and everyone else -- including myself -- is there to support its efforts. The message, in turn, reinforces the sense of opportunity in The Hammond Co. Our salespeople want to become branch managers; our branch managers want to manage regions; and our regional managers all want to be president. This mentality is a fundamental aspect of our company culture and, in my opinion, the most important ingredient of our success. I sometimes wonder whether we'll be able to maintain this attitude when we operate in 40 states rather than the 4 we currently serve.
* Promote from within -- but beware the pitfalls.
Managing salespeople is an ongoing chess game. Small companies pay a steeper price than large ones for attempts to cover the failings of weak managers and for premature promotions to meet growth targets. We cannot incubate salespeople or put them on hold waiting for someone to retire or for a new product to come on line. Every salesperson in a small company must come to bat every single day and create revenues.
But not all salespeople develop at the same rate. Some blossom early, while others take a much longer time. And some may never rise above mediocrity. What is their future? They may be nominally profitable, but they are not promotable. On the other hand, it can be very damaging to their selfesteem to see others promoted over them -- especially in a small company, where they cannot blend in with an army of average performers. When they are passed over, these people become receptive to outside job offers, creating more turnover in the sales organization than I, for one, would like. The fact is that every company needs a certain percentage of average salespeople. Unfortunately, I have not yet figured out a satisfactory way to hold on to them.
Another pitfall of promoting from within concerns the challenge of getting new managers up to speed. At The Hammond Co., the main criterion for promotion is a history of sales success. This has led to a recurring scenario -- so recurring that we teach new managers a case study based on it. The problem, however, arises again and again.
The scenario goes like this:
We select a new market and promote the salesperson will the top sales record. This person is usually young, with little management experience. Initially, believing that the previous sales group didn't run a tight enough back room, the new manager decides to get everything organized. After several months, the staff appears very efficient, if only it had something to do: there is little or no business.
Frightened over the lack of sales, the new manager focuses now on developing business. Suddenly the business appears in such quantities that loan processing breaks down. Despite all the time spent on organizing, the back-room operation cannot handle the load efficiently because the overworked staff has had to rearrange its priorities in order to solve short-term problems. When customers get angry, written procedures and policies fly out the window.
Next comes the most important test. The new manager has usually lost some customers because of poor service but gained administrative experience under fire. If the manager can go on to develop a balance between sales and back-room management, he or she will succeed and become profitable for the company. Most of our sales managers have been through these phases, and the majority have passed that final test, but not without some bruises.
When I explain this process to my directors or to managers of larger companies, they are astounded at its apparent inefficiency. "Why don't you train these people better?" they ask. "Why don't you give them better support? Why don't you have better training manuals?"
My answer is that we do what we can afford to do and teach what we know how to teach. Left unsaid is the fact that out of this chaotic process comes strength -- strength that is a direct result of the opportunity we are able to offer our people because we are small.'
