I made that up, Sinking Stock Syndrome, from some interactions I have had recently with a couple of small business owners.  Both owners suffered from this syndrome which had disastrously negative effects on their company, both in revenue and morale.

Here is how I define my newly-minted syndrome – an irrational hope that a grossly underperforming salesperson will miraculously turn things around and become a sales superstar.

It rarely happens.

The problem stems from the business owner who has invested in this failing salesperson.  Notice I used “business owners” – I do believe this syndrome is more prevalent among this group as they are closely tied to the business (i.e. financially, emotionally, historically).  They usually have a relatively accurate count of the resources invested in this salesperson.

The sinking stock analogy will be understandable to anyone who buys and sells stock.  When you purchase a stock, you expect (hope) it increases in value.  When it goes the other way, you encounter a sinking feeling as you have now lost money.  It is at this point that you need to make cold, objective decisions about the stock.  Is it going to rebound in an acceptable time frame or did you make a bad investment?

The temptation is to hang on to the stock with the expectation it will turnaround and at least get back to the buy price you paid so you can break even.  While you wait, the stock drops further and you have now lost more money.

Hope keeps you from dumping the stock.  The desire to earn back what you have lost keeps you from making the tough decision to sell.

Business owners can get caught in this same trap.  They know a salesperson is not performing and that they are losing money by continuing to keep them in the role.  Other employees see that this salesperson is not closing deals and they start to become upset.  This salesperson stays on the payroll even though it is clear that he/she cannot do the job.  At some point, the tough decision has to be made.  It can be to put together a get-well plan for the salesperson.  However, most times it is to part ways…or should I say cut your losses?

It is difficult, almost an admission of failure that hits the owner directly.  But it has to be done.

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Take a look at this headline from Twin Cities Business:

MN June Unemployment Rate Drops, Sheds 3,700 Jobs

Jobs are lost and the unemployment rate decreases…how can this be?  It is a question that begs an answer, yet you won’t find it in this article.  The closest it comes:

Minnesota’s unemployment rate dropped 0.2 percent in June to a seasonally adjusted 6.8 percent even though employers cut 3,700 jobs during the month, the Minnesota Department of Employment and Economic Development (DEED) said on Thursday.

Clearly workers had to leave the workforce or unemployment benefits expired for many Minnesotans.  It is probably a combination of both factors.  This is a critical flaw in the unemployment number.  The better approach here would be to track how many people are actually working.

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shove it…apparently.  The Herman Trend offers up some stats that may catch you by surprise (emphasis mine):

It is interesting to note that in the United States more people quit their jobs in the last three months than those who lost their jobs. After 15 straight months of time in which layoffs exceeded voluntary departures, it appears that the job market is finally shifting.

…

In a related development, one-quarter of our business community’s most promising employees are increasingly disengaged and many are actively seeking new employment opportunities. A recent study on employee engagement, conducted by the Corporate Executive Board’s Corporate Leadership Council (CLC), found that 25 percent of the “employer-identified, high-potential employees” plan to leave their current companies within the next year. Compare that figure to the one from 2006 and we have seen an increase of 250 percent.

Moreover, 21 percent of today’s employees identified themselves as “highly disengaged”. This group has increased nearly 300 percent since 2007.

The mass movement of employees is on the horizon, but I think there will be limited movement until the economy rebounds.  In spite of what the government says, the economic situation is still tenuous at best.

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I do think there is an impending, colossal jump of sales talent in the very near future.  The Herman Trend Alert speaks to this potential in their latest report:

According to a new CareerBuilder survey, more than one-quarter (28 percent) of sales employers are concerned about losing their high performing workers in the second quarter, while more than one-third (35 percent) of sales workers said it is likely they will start looking for a new job when the economy picks up.

And here is why:

Increased workloads, longer hours and fewer resources related to the recession may be contributing to job dissatisfaction. Looking at key factors that influence job satisfaction and company loyalty, sales workers reported the following:

•Pay – More than one-third (35 percent) of sales workers said they are dissatisfied with their pay.

•Work/life balance – One-in-five (20 percent) sales workers said they are dissatisfied with their work/life balance.

•Career progress – One-in-five (21 percent) of sales workers said they are dissatisfied with the career advancement opportunities provided by their current employers.

I’m a bit jaded here in that I think pay is probably much higher then what is normally reported in these surveys.  Nonetheless, I have talked to a handful of salespeople recently who are starting to put their ears to the tracks regarding new opportunities.  I still believe the hiring landscape will be slow this year, but will begin to ramp up in Q4.  A year from now may be one of the largest retention struggles we have seen in quite some time.

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Now this is something I have not seen yet – loaning out your employees during slow periods.  Inc.com provides the article:

How it works: On the StaffShare website the “seller” company lists the employee’s skills, daily rate, and availability. The cost is £50 (roughly $81.70) a year per candidate. The “buyer” company searches the database, uses the website’s message system to vet candidates and iron out details with the seller, and then a contract is sent electronically.

The background behind the idea:

“The companies had these redeployment pools of 1,000 people who needed to find other work within the company,” Flaxton says. “So we thought, ‘What if there was a service where they could find it at another company?’”

Conceptually, I think it is a tremendous idea.  Logistically, I’m not sure how this approach would work for retention.  Still, I believe there will be major transformations once we finally come out of this severe recession.  Employees moving to a contract agreement seems to be a natural progression.

The movement of health insurance payments from the employer to the employee (inevitable based on rising costs) will remove one of the incentives of traditional employment agreements.  A contractual (1099) agreement could become the more standard arrangement.

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You don’t have to look far to find disconcerting news about the present economy.  This AP story from one of our local papers lays out numbers that paint a vivid picture (emphasis mine):

There were nearly 6.4 unemployed workers, on average, for each available job at the end of November, according to Labor Department data released Tuesday. That’s up from 6.1 in October, and a record high.

There were 1.7 jobless people for each opening in December 2007, when the recession began.

Job openings fell sharply to 2.42 million in November from 2.57 million in October, according to the department’s Job Openings and Labor Turnover Survey.

That may sound like a lot, given the depths of the recession, but it’s the lowest number of job openings since July and the second-lowest since the department began tracking the data in 2000. It’s also about half the peak level of 4.8 million, reached in June 2007.

It will turn as our economy is almost constantly in a state of expanding or contracting.  The real issue on the horizon is retention as I have written about in the past.  Hiring is the key.  There are many salespeople today who are “corporate cocooning” until hiring picks up again.

Earlier this week I spoke to just such a salesperson.  He is stuck in a development position where the company is eager to talk about supportive changes but reticent to act on them.  He is simply performing in the role as best as he can with the internal company factors working against him.  He basically said he is ready to leave once there are signs of expansion in the economy.

There is probably a ratio in the above quoted article that flips the exit light on for salespeople.  I won’t hazard a guess, but I suspect it won’t have to get back down to 1.7 jobless people for each opening to open the floodgates to job jumping.

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Employment in this economy is a wonderful asset, to say the least.  However, this abcnews.com story points to an impending problem – retention.

Even Americans who are lucky enough to have work in this economy are becoming more unhappy with their jobs, according to a new survey that found only 45 percent of Americans are satisfied with their work.

That was the lowest level ever recorded by the Conference Board research group in more than 22 years of studying the issue.

The economy will eventually turn around though it appears it is going to be a slower process in comparison to historical recoveries.  When it does turn and hiring picks up, there is going to be a tremendous push for retaining top sales performers.

I have talked to top salespeople recently who are not satisfied with their current position, but they are unwilling to make a change right now.  Interestingly, I have had a few of them contact me to get their oar in the water for when hiring picks up again.  At that point, they will use their sales prospecting skills to find a new opportunity for themselves.

The key to improving retention is understanding the salesperson’s motivations and identifying their reward structure.  Here is an example of how it works – if you have a salesperson who has a strong Utilitarian motivation (hopefully you do), they are driven by return on investment.  They will appreciate practical, efficient workplaces that assist them in their quest to close deals.  A sales department rife with gross inefficiencies will grate on this salesperson.

Now that you know their motivation, it is important to understand what rewards them.  Here is a fine point, but an important one.  If your salesperson is rewarded by Material Possessions, you can expect them to respond to money so they may acquire the possessions they desire.  This seems logical.

However, if you have a Utilitarian salesperson rewarded by Status & Recognition, their will respond more to titles, exclusive clubs (President’s Club) or money that they can use to gain access to a higher status (e.g. private golf club membership).  Both salespeople will appear to have similar reward structures, but they respond differently based on their deep-seated structures.

If you are interested in learning more about your team, please contact us at your convenience.

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This is from the Herman Group as they make their predictions each year.  I can attest to the first point being valid – I have talked to a handful of salespeople who are waiting out the economy to jump from their current position.  These guys have a wonderful grasp of new words and phrases.  I always learn about some relatively new word from them.  I have taken the liberty of bolding some of them in the pull quote below.

1. Cutbacks and Re-Engineering will continue into 2010 Expect ongoing reductions in force as some employers continue to optimize their workforces and eliminate “redundancy”. We caution these employers to be very careful, because we know that 54 percent of today’s employees are ready to jump, as soon as the economy improves. They are currently “Corporate Cocooning“.

2. Shortages of Certain Skill Sets will become More Acute As the economy begins to recover, certain skill sets will be more critical and difficult to find. These high-demand workers will be more demanding about their work schedules, environment, etc. The wisest employers will embrace not only flex-time, but flex-place as well.

3. Employers will embrace Innovative Ideas to Reward their Valued Workers This innovation will include non-financial ways and even non-reward (recognition only) ways to add value for their top talent; these innovative ideas will come from the employees themselves. Employers that do not mine the collective intelligence of their workers will find themselves unable to optimize profits.

4. Fear and Apprehension continue to reduce Productivity A significant percentage of employees continue to worry about the future. These negative feelings will persist, unless addressed. Transparency, besides being one of those elements employees seek, will be imperative.

5.More Employers will invest in a Variety of Healthcare Cost-Cutting Strategies Besides wellness programs to address expensive unproductive behaviors (like smoking and over-eating), more large employers will embrace ideas like onsite clinics and health coaches. For some candidates, the cost of not complying with the prospective companies’ wellness programs will change their employee value propositions so drastically that they will choose to work elsewhere.

6. Focus on Engagement will replace the Focus on Retention Recognizing that with engagement comes not only retention, but greater productivity and profitability, too, employers will change their focus. We will see Directors of Retention morph into Directors of Employee Engagement. The next step (coming much later than 2010) will be to recognize the importance of the total “Internal and External Customer Experience”.

7. Increasing Attention to Succession Planning Around the globe, we see an increasing attention to succession planning and management. However, the issue of succession preparation continues to take a backseat to succession planning. This big mistake will begin to be felt in 2010, when Baby Boomer retirements combine with the lack of trained people becomes a critical problem. Succession management continues to be critical to long-term success.

8. Employers that did not build Bench Strength will pay More to hire Experience Organizations that did not take the opportunity presented by this business slowdown to send their people for more training, will have to pay more to hire trained, experienced people.

9. Some Employers will eliminate Reward Programs Misunderstanding Dan Pink’s new book, “Drive: The Surprising Truth about What Motivates Us”, some employers will abolish their reward programs altogether. This ill-advised shift will cause significant, negative, unintended consequences.

10. Burned out Employees will begin Leaving Employers Over 80 percent of today’s employees feel overworked and under-appreciated. Too many organizations have survived and maintained some level of profitability by over-loading their long-term employees. Once we begin to see positive job growth in the second half of 2010, some employees will feel confident enough to leave their companies.

11. Employers will accommodate Older Workers like Never Before The exodus of their long-term employees will challenge some employers to get the work done, without resorting to hiring expensive contract help or paying high fees to recruiters. Enlightened employers will mine the rolls of their retired workers and hire them back on a part-time, temporary, or seasonal basis. These seasoned professionals will be welcomed back, in spite of the fact that they will dictate their own terms.

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As a long-time fantasy football player, I am terrified by this story of a termination that occurred in Texas (one of the football capitals of this country).  The quick details:

Pettigrew and three other Fidelity employees were fired for playing fantasy football.

“Firing a guy for being in a $20 fantasy league? Let’s be honest; that’s a complete overreaction,” said Pettigrew, who lives in Grapevine and has an MBA from the University of Texas at Arlington. “In this economic time, especially. To fire people over something like this, it’s just cold.”

Said Fidelity spokesman Vin Loporchio: “We have clear policies that relate to gambling. Participation in any form of gambling through the use of Fidelity time or equipment or any other company resource is prohibited. In addition to being illegal in a lot of places, it can also be disruptive. We want our employees to be focused on our customers and clients.”

Yikes.  That is some draconian policy they have, but I’m not sure Mr. Pettigrew is completely innocent in this situation:

Pettigrew, who was the commissioner of his league, knew Fidelity had a policy against playing fantasy football at the office. But he said the policy was poorly communicated and ignored by leadership. Pettigrew said there were at least 10 fantasy leagues in which leaders and managers played.

But the story has another turn:

Pettigrew, though, said he never sent any fantasy football e-mails at work or using his work e-mail address. But the investigators found two instant messages that had fantasy-football-related material.

“One of my buddies sent me something about how bad Trent Edwards was playing or something like that,” Pettigrew said. “So they called me in and talked to me for about 90 minutes on everything I ever knew about fantasy football. They interrogated me as though I was some sort of international gambling kingpin. Then they released me for the day, and I was like, ‘OK.’ I never thought they’d fire me for this, but, the next day, I get the call saying I had been terminated.”

No way this guy should have been terminated.  Clearly his analysis of Trent Edwards play is spot on, in my opinion.  In all seriousness, this does seem quite harsh in this economy during the Christmas season.  I would say some sort of reprimand was in order, but a termination without warning is over the top.  One of the often discounted items is the effect this type of leadership has on team morale.  Upper management could have gotten their point across without sacrificing team morale with an overreach.

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It has been a hectic week of crashed computers, new blogs set up, new video integrations, business deals, etc.  Suffice to say, I have been worn out by the myriad of tasks.

In the middle of this busy week, I talked to a strong salesperson I know who has been quite successful in an industry that normally would suffer during this economy.  Unfortunately, he is starting to fade in his current position.  What I mean is that the company is grinding him down to where he is looking for another opportunity.

The main reason is disgustingly simple – he can successfully close deals in this economy, but his company struggles to deliver the product/solution.  The owner is absent from critical, time-related decisions.  The production department misses deadlines.  Installations fail due to installer error.

I met with this salesperson for coffee to discuss the situation and you could see the light fading in his eyes.  I’ve seen this scenario play out many times.  Companies want to hire strong salespeople, but they do not have the structure to support them.

The key here is to make sure you have the proper structure in place before hiring a strong hunter.  These hunters will stretch your company in new directions.  They will expect fast responses.  They will prefer to pass along the deal to a support person while they track the next deal.  These principles are simple to understand but difficult to put into action.

If you have strong salespeople today, be sure to monitor their internal company tasks.  What areas are slowing them down?  What could be done to be more efficient?  Don’t allow lethargic internal procedures to wear down the drive of a deal-closing hunter.

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