Players’ Strike? Owners’ Lockout? Our Boy Is Still Selling Footballs to the NFL.

Back in September, I had a call from a former executive of one of my clients, who wanted to talk about sales, which, as I said at the time, was interesting, because the consulting practice at SAI does not deal with sales, and because I did not think this guy could sell anything. In fact, he could not sell footballs to the NFL.

His story was about a sales turnaround. At the end of May 2010, seven months into his new community, five months into his budget year, he was already six sales behind budget, and the situation was getting progressively worse; at the time, they were four sales behind budget in just the last past three months, Traffic counts had improved, doubled, in fact, but the conversion rate (percent) had fallen from the 10% to 16% range to the 3% to 6% range.

In the next three months (June, July, August 2010), they sold 16 homes, one above budget. Compared with the previous three months, sales were up 150%, traffic was up 100%, and the conversion percentage rose from 4.7% to 7.7%, a 65% improvement.

And, of course, he had wanted to tell me why.

As it turned out, there were several factors involved in the turnaround, but – the most important decision – had been to take one specific element of a team-based performance compensation this manager had learned at our client, and apply it to resolving the specific constraint that he faced: Insufficient sales.

He and his sales manager had hired additional sales agents, but they had also taken the commission/draw arrangement and converted it to a base salary with a team-based commission arrangement, so that sales agents received a base salary and shared equally in a commission pool on all sales, versus the previous straight individual commission and reimbursed draw. They had also instituted a new, flat, monthly cash bonus, for every sales agent, paid in any month where the team sold more than five homes (the 2010 budget had called for three sales per month).

At the time, here is what he had said:

“In addition to the obvious results, the culture of the team was elevated to that of a pre-recession environment. The team is excited to come to work. They work together. Every day, they discuss where they are in relation to their targets and work together to constantly strategize how they are going to reach their goal as a team.

“I underestimated the impact this [compensation change] would have on the culture of the work environment. We had reduced the overall sales compensation line item in the proforma. We spent less, we paid out less. But, with the base salary (which relieved a lot of pressure in this difficult economic time), and with the new and improved team environment, we had overwhelmingly changed the culture and made it a better place to work.”

At the time, my own observations had been: One – the improvement had nothing to do with the homebuyer tax credit. Two – it broke a lot of rules. Three – it was a lesson about the effectiveness of changing a paradigm for how to compensate sales agents, and about using that change to break the external (market) constraint that limited the ability of this project to make money. And, now, I will add a fourth observation: The objective had nothing to do with spending less or paying out less.

In a larger, more important sense, I said, this had been a call to challenge the status quo, to challenge the accepted way of doing everything. It had been a warning not to settle for “industry best practices”. It had been a call to not be afraid of being different, in the quest for being exceptional. It had been an encouragement to resolve conflicts, challenge assumptions, break constraints, and solve problems, not compromise on the solution.

It had been a call to stop settling for averageness.

So, where are they now?

In the last four months of 2010, they sold 17 homes, five homes above budget, and ended 2010 seven sales (20%) above budget, remarkable, considering they had been six sales behind budget at the end of May. During the first five months of 2011, they have sold 25 homes, five homes (25%) above an increased sales budget (the 2011 budget calls for four sales a month, up from three sales a month in 2010).

All told, in the nine months since we had last reported on this team’s accomplishments (in August 2010), they have sold 42 homes, an average of 4.5 homes a month. The conversion percentage, which had been 7.25% when we last reported it, has increased to 7.90%. In the first five months of 2010, before the change, the team had sold just 10 homes; in the first five months of 2011, the team sold 25 homes, a 250% improvement.

Here is what this manager now says about the intervening performance:

“In recent months, our traffic has been strong, but our conversion rate has fallen off. We are addressing that problem. However, our research indicates that we have not lost a single sale to competing projects. It just appears, in our demographic, we are experiencing caution from buyers about moving forward. Getting buyers off the fence has been a challenge recently, but the team is committed to working together, and they discuss and strategize about each prospect.

“On nearly a dozen instances, I have been pulled aside by Realtors who wanted to complement the sales staff. They recognize that this team works together – with each other – like no other on-site new home sales team they have ever encountered. The Realtors clearly see it, and prefer it, because they do not like to get involved with competing sales people, they do not want to worry about not being treated the same by everyone, and they do not want to worry about having the best interests of their buyer’s served.

Then, he added, “After the lockout, we expect to meet with the NFL, and secure the football purchase agreement for the 2011-2012 season.”

They might just get it.