Sales Process Engineering with Justin Roff-Marsh
Today I am talking with Justin Roff-Marsh, the author of, The Machine: A Radical Approach to the Design of the Sales Function. And guys, it truly is pretty radical.
Justin is also the founder of Ballistix, a consulting firm that builds and re-engineers sales environments from the ground up.
He’s been doing this for 15 years plus and he’s been building more efficient sales functions to help companies, really just grow. Dominate their market. And the work that he’s done is called, “Sales Process Engineering”.
In our chat today, we’re going to go over what exactly Sales Process Engineering is and why it’s so important for property management entrepreneurs. Justin walks us through what this looks like in practice, from the organizational structure to compensation.
Justin tends to work with larger organizations, but what we are talking about could not be more relevant to the property management industry and I’m so excited that Justin has come on the show with us today.
- (02:01) – What’s Wrong with Sales Today
- (02:13) – Justin walks us through the issues in sales that helped develop his thought leadership on the subject.
- (03:03) – Discussing The Division of Labour.
- (04:15) – Justin explains how his work relates to The Theory of Constraints as discussed in, The Goal.
- (06:16) – Sales Process Engineering
- (06:16) – Implementing division of labour in a ‘principled’ way.
- (07:18) – The importance of designing sales specific environments.
- (09:38) – Why Justin is not a fan of the Sales Development Representative (SDR) approach.
- (13:00) – Why sales must be segmented from customer service and marketing.
- (14:13) – Whether there is room for outbound marketing in this framework.
- (14:47) – Justin explores whether sales is a skill-based function.
- (17:03) – Context is everything.
- (18:13) – Where a small business should consider starting in regards to their sales approach.
- (18:50) – The difference between ‘demand generation’ and ‘business development’.
- (18:59) – Personality types best suited for sales.
- (20:15) – How to handle inbound leads.
- (21:43) – What early division of labour looks like for a small business.
- (22:59) – How to adapt as you scale and grow.
- (24:13) – Justin answers the obvious objections to the division of labour model.
- (06:16) – Implementing division of labour in a ‘principled’ way.
- (27:30) – Compensation
- (27:54) – Justin discusses the issues with the compensation-based model.
- (30:04) – Why paying commission is an alternative to management.
- (33:03) – A focus on activity.
- (35:37) – Why ‘portfolio-based management’ should be understood as ‘account management’.
- (36:29) – Viewing property management as a task-based service.
- (27:54) – Justin discusses the issues with the compensation-based model.
- (40:41) – If you could make one recurring objection to the concept of Sales Process Engineering go away permanently, which objection would it be?
- (42:29) – What is one book that has impacted you the most in your career?
- (42:41) – Name one sales trainer that you appreciate.
- (44:13) – If you could do it all over again, what one piece of advice would you have for your younger self?
- (45:26) – Are entrepreneurs born or bred?
- The Machine: A Radical Approach to the Design of the Sales Function – Justin’s best seller.
- Sales Process Engineering Blog – Justin’s blog dedicated to the discussion of Sales Process Engineering and to the Theory of Constraints.
- Ballistix – Justin’s consulting company that builds (or re-engineers) sales environments for mid-sized organizations, particularly manufacturers and tech companies.
- The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt (04:00) – Highly recommended learning resource on management thinking and The Theory of Constraints.
- Interview with Jeff Bezos (48:51) – Recommended viewing by Justin.
Where to learn more:
To hear more from Justin and learn about SPE, just head to SalesProcessEngineering.net
Jordan: 0:00:00.0 Welcome closers, today we have another episode of The Profitable Property Management Podcast coming at you. This is season two on sales.
I’m your host, Jordan Muela, and every week I interview world-class property management entrepreneurs and industry experts who share actionable insights to help you grow your property management empire.
Whether you manage 100 or 1000 doors, this broadcast is designed to help you see the big picture and to give you the tools and tactics that you need to get to the next level.
0:00:29.6 Today I am talking with Justin Roff-Marsh, the author of, The Machine: A Radical Approach to the Design of the Sales Function. And guys, it is pretty radical.
Justin is also the founder of Ballistix, a consulting firm that builds and re-engineers sales environments from the ground up.
He’s been doing this for 15 years plus and he’s been building more efficient sales functions to help companies, really just grow. Dominate their market. And the work that he’s done is called, “Sales Process Engineering”.
In our chat today, we’re going to go over what exactly Sales Process Engineering is and why it’s so important for property management entrepreneurs to consider.
Justin is going to walk us through what this looks like in practice, from the organizational structure to compensation. Got some really interesting perspectives on compensation.
And guys, because Justin has actually made a business out of this, because he’s doing this on enterprise level, he tends to work with larger organizations. Works with a lot of manufacturing organizations, etc. 0:01:36.4
But I just want to assure you right now, what we are talking about could not be more relevant to the property management industry and I am so excited that Justin has come on the show with us today.
0:01:47.1 Welcome to the show Justin.
Justin: 0:01:48.8 Hey Jordan, nice to be here.
Jordan: 0:01:50.9 So Justin, I just want to – I want to start here. You’ve really taken a radical approach and you have some controversial perspectives within the context of sales process engineering.
0:02:01.9 And I just want to start with why it’s even necessary. What is wrong with sales today that has merited the thought leadership and the body of work that you’ve developed?
Justin: 0:02:13.9 So if you think about it, a typical sales function today looks like manufacturing would have looked about 100 years ago.
Justin: 0:02:20.4 So if you imagine what – if you imagine that you could climb into a time machine and travel back in time 100 years ago, then if you were to go into a manufacturing facility – let’s assume a cobbler.
0:02:35.1 Interestingly, I like to pick on cobblers because they virtually don’t exist anymore. So cobblers were people who made shoes. 0:02:40.2 Of course, today it’s very hard to find cobblers because people simply don’t make shoes anymore. Shoes are made in factories.
0:02:45.5 And really, that’s the big realization, is that – is that in the past, 100 years ago, manufacturing was an activity performed by people. 0:02:56.7 Today, manufacturing is a process performed by groups of people.
0:03:03.7 And the essential difference is what’s called, ‘Division of Labour’. And division of labour shouldn’t really be a radical idea anymore because it’s been embraced in every facet of the organization. The modern organization, except sales.
0:03:15.2 So we have clear division of labour in production environments, in engineering environments, in marketing, in finance. In every single part of the organization except for the sales function.
0:03:28.6 And in the modern sales function, bizarrely, we still have the situation where sales is an activity performed essentially by a single person.
And we’re, of course, railing against that and arguing that it makes sense and it’s long overdue for us to apply division of labour – in a principled way, to the sales function.
Jordan: 0:03:48.7 I love it. So the whole engineering mindset, the engineering perspective – one of the early books that I read – really one of the first books that was put in my hands was, The Goal. 0:04:00.4 by – yeah, exactly.
Yeah so, that was really a helpful book to me early on, but I read that maybe a decade ago. I didn’t have complete context. 0:04:11.6 I feel like a lot of the work you’re doing is kind of building off of that.
0:04:15.1 Can you just kind of briefly touch on ‘The Theory of Constraints’ and the degree to which what you’re doing is kind of building on that framework.
Justin: 0:04:23.4 So, so it does build on that framework although the book, The Goal was written to address a problem that most organizations simply don’t have in sales because the sales function isn’t sophisticated enough to have this problem. 0:04:40.2 And I’ll explain why in a second.
0:04:41.8 But The Goal by Eliyahu M. Goldratt was a book from about 30 years ago. The interviews for what he called, The Theory of Constraints.
And The Theory of Constraints is really an approach to resource planning in a production environment. It’s basically a new algorithm, or a simple algorithm for doing what’s called scheduling in a production environment.
0:05:11.3 And his critical realization was that – was around the interplay that exists between variability and dependent events. 0:05:25.5 And I’m not going into it in detail, because I can’t do justice to it.
But the important point is, The Goal kind of assumes division of labour and I’m hugely passionate about that book and about Theory of Constraints, but I realized when I read the book that The Goal doesn’t apply to sales even though it should.
0:05:48.0 So, you know, interestingly, at the time we had been – I had been experimenting for five or six years with the application of division of labour to sales, and reading The Goal solved some problems for me that I was encountering.
0:06:05.4 But they were problems that I wouldn’t have been aware of prior to going down this path. So I think the essential idea for us isn’t Theory of Constraints, the essential idea for us is the Division of Labour in a principled way.
0:06:16.9 And what I mean by a principled way, is it’s not just enough to have folks in your sales function with different business cards.
0:06:24.2 In order to implement division of labour in a principled way, it’s essential for folks to have clear demarkation lines between their responsibilities and the responsibilities of others.
0:06:35.5 So to talk in more concrete terms, if you look at a sales person in one of our followers’ organizations, you would see that that sales person does nothing other than have meaningful selling conversations. They do nothing else.
0:06:48.3 They don’t write proposals, they don’t get involved in customer service, they don’t even schedule their own meetings if they’re field based.
0:06:56.8 They do nothing other than have, you know, face to face or ear to ear selling conversations. Nothing. And it’s what they don’t do that’s more important than what they do do.
Jordan: 0:07:08.3 Yeah. Absolutely. I love that. So you’re really focused on freeing them up to pursue their highest point of contribution. I guess, when I…
Justin: 0:07:18.6 And that’s peculiarly important in sales because in other environments – if you employ somebody who’s a welder, their natural tendency will be to weld above all else.
But the interesting thing about sales is we need to recognize that even for those people who enjoy sales, who are good at it – human beings do not engage in the critical activities that are required to generate business in their resting state. You know, special effort is required.
You know, folks talk about call reluctance. It requires a lot of effort to pick up the phone and make outbound calls. 0:07:55.8 Or to pick up the phone and engage proactively in selling.
So people don’t naturally – except for occasional freaks. It’s not people’s resting state. 0:08:08.8 So it’s very important that we design sales environments so that sales people have nothing to do but sales.
Jordan: 0:08:16.6 I like that. Nothing to do. So let’s dig into division of labour. A couple of concepts here. #1: If you break down all of the task involved in selling, a subset of these are going to be lower or higher value tasks. At least in terms of what a market-based wage would look like to pay somebody to update the CRM versus to do outbound phone calls.
0:08:37.3 So if you have one body doing it, you’re invariably either or under paying them because of the broad variety of tasks that you’re expecting them to do. Right? 0:08:48.3 That’s part of the piece of it.
The other piece of it is there’s a lack of focus and the point that you just made is, if you provide somebody with a smorgasbord or a menu of options, and one of these options is cold-calling, no matter what the other nine options are, the likelihood is that they’re not going to pick option ten, which is cold-calling. 0:09:09.3
Justin: 0:09:09.9 What will happen is the other nine will expand to fill all of their available time and they will intend to get to the phone but they will never actually get to the phone.
Jordan: 0:09:22.4 So another part of the division of labour, because I feel like this is just really the crux of the issue – and there is some division of labour, at least enterprise sales, you think of the model of having an SDR, and account executive, etc. So it’s not like there’s no attempts at division of labour have been made, but I…
Justin: 0:09:38.9 Yeah, but it’s not – I’m very careful to say, “principled approach to the division of labour.”
0:09:44.1 I mean, that’s not a principled approach to the division of labour. SDRs and account execs or whatever they’re called, are essentially performing the same activity. It’s not division of labour.
0:09:56.2 So I’m not a fan of the SDR approach. I don’t think it makes sense. I think that you want your customers – if you’re really keen on your customer, it’s pretty important they talk to your best sales person first, not some 22 year old mothers.
Jordan: 0:10:11.9 Ok guys, so let’s dig in. SDR, that’s a Sales Development Representative. In an enterprise sales model, that’s the lowest paid person in that department.
They’re all about raw outbound, they’re scrubbing, doing qualification to determine whether or not a prospect has potential.
Once potential is shown, then they’re progressively handed off, depending on how big the sales org is, until eventually they talk with the sales executive, who is the hired gun, the guy that has the magic. The guru inside the org, if you will. And that’s the closure.
0:10:42.4 What Justin is saying is, rather than segmenting the funnel from top to bottom, you have a different form of segmentation in mind, division of labour in mind, what is your perspective on how – what it means to do it in a principled way?
Justin: 0:10:57.1 So I think that the whole problem with this idea of scrubbing, of lower paid people, and therefore, lower skilled people, doing scrubbing and qualification, is that from the prospect’s perspective there’s no material difference between a telephone call you have with someone who’s scrubbing you or qualifying you than there is with a person who’s job is sales person.
Justin: 0:11:25.4 So your perception is always going to be, whoever you’re talking to at ACME is a sales person.
And what ends up happening is your first involvement with ACME is with a 22 year old, inexperienced sales person who is attempting to scrub you on the telephone.
0:11:45.1 So it’s fine if you’re lucky enough to be in a business where you have a stampede of people trying to transact with you, and the role of your SDRs is basically to man the velvet ropes to keep the riffraff out.
0:11:58.5 But in most organizations that is not the case. 0:11:59.9 In most organizations, you know, there’s no queue of people wanting to transact, and therefore, it doesn’t make a lot of sense to have our poorer sales people having first contact with the marketplace.
0:12:12.3 Because most sales opportunities are abandoned after one or two conversations. And if you have any inexperienced people performing those first one or two conversations, then you’re going to walk away from a significant volume of conversations that you could have had if you were prepared to put your experienced sales people up front.
0:12:32.9 So what that means is the marketing department in our world has to be very, very careful to screen prospects properly before they allocate them to sales people.
Because our feeling is, the minute somebody picks up the phone and makes an outbound call, that is a selling conversation whether you want it to be or not – from the customer’s perspective. 0:12:54.3 So you’re better off serving up a smaller volume of…
Jordan: 0:12:57.8 Higher quality leads.
Justin: 0:13:01.0 Yeah, yeah.
Jordan: 0:13:00.6 Ok. So, part of what I’m hearing you say is that you’re not a big believer in straight, cold prospecting where the sales person got the list themselves. You’re talking about some kind of a pre-filter on the front side to really…
Justin: 0:13:17.6 If a sales person is only having selling conversations, that means that somebody else has to be responsible for customer service.
0:13:23.6 It also means that someone else has to be responsible for generating those sales opportunities for them.
0:13:29.5 So in our world, if a sales person comes to work and puts their headset on, somebody has already topped up their queue that morning.
So they finished the day yesterday with maybe 70 opportunities in queue. They started the day yesterday with 80, they worked all day, they ended up with 70 in queue because they abandoned a bunch – maybe one or two. 0:13:50.3 And this morning, somebody has topped up their queue again.
So they always have a full queue of sales opportunities. And those sales opportunities have been carefully selected by the marketing department before they were pushed to sales people, so that marketing is reasonably confident that on average those opportunities are going to produce an economic return on sales people’s limited capacity.
Jordan: 0:14:13.1 So is there room for outbounding selling in this framework? Or is this primarily centered around an inbound paradigm?
Justin: 0:14:21.8 No, there is room for outbound. Outbound is critical in most organizations, simply because most organizations can’t generate the sales opportunities they need.
The difference is, is that you just have to accept that if you want to be effective with outbound, you need capable sales people making those outbound calls. Not SDRs.
Jordan: 0:14:40.1 Ok. So the segmentation then has to do more with the activities and the tasks.
Justin: 0:14:45.3 Correct. Correct, yeah.
Jordan: 0:14:47.5 Alright, so let’s get into that. Because a second ago you alluded to your distaste to the idea that you’re going to have the SDRs, the lower paid, less skilled person doing outreach, etc.
To what degree do you believe that sales is a skill-based function?
Because surely you recognize the power of charisma. All of the things that we traditionally think of as sales. The guy that has the positioning. The body language, the word tracks, etc.
I realize that on the whole you’re dismissive of just getting a bunch of these guys and letting them run wild. But to what degree do you believe that sales is a skill-based position?
Justin: 0:15:25.2 Oh, to a huge degree. And just from a pragmatic perspective, if somebody is not skilled, they’re not going to be much good at it.
And if they’re not much good at it, they’re going to find it painful and they’re probably not going to stick with the job.
0:15:40.4 So, skills are critical if you want to keep people and obviously they’re critical if you want folks to be effective.
0:15:45.8 Interestingly, and you kind of alluded to this in your preamble there – or in your question – a lot of the folks who are attracted to sales – and I’m not sure if they’re attracted to sales or if they just end up in sales because they don’t have any other option.
0:16:03.8 But a lot of the folks who end up in sales don’t necessarily have the finest communication skills.
0:16:10.4 You know, I go into organizations quite frequently and discover that the sales people are poorer communicators than some of the folks in the engineering department.
0:16:18.4 And I think the reason for that is that the folks in the engineering department have too much self esteem to be prepared to work on commission. And to be prepared to work in that environment. 0:16:31.4 But they’re much better communicators.
So I think that unfortunately, the traditional structure of sales doesn’t necessarily attract the most skilled people.
0:16:38.9 Now, if you’re talking about SAP and where sales people have the ability to earn $600,000 and millions a year, then surely you’re going to flush out some talented folks.
0:16:50.3 But I think for your clients or for your listeners, then they’re not going to be paying the kind of money where it’s even an option to attract those kind of…
Jordan: Manning, yes.
Justin: 0:17:01.5 Those type of characters.
Jordan: 0:17:03.9 Yes! So true. I’m so with you on that. So context is everything. Generalized advice, for the most part, is always going to get clubbed over the head by context-specific advice.
So the context here is, small businesses, that either don’t have a functional sales department, or they just hired somebody in that seat. They just hired their first BDM, they’re thinning through compensation and they’re struggling.
Because they don’t have more than 50, 80, 100k a year to drop into that seat. 0:17:33.5 It’s an unproven model and the idea of division of labour sounds great but they’ve got – they have these things that are in tension. They have both the pressure to do the lead gen sort of thing.
0:17:45.2 So they got to build up that marketing function to then get somebody that they can actually feed if they want them doing primarily outbound. But they’re not quite there so they want to supplement with some outbound.
0:17:56.5 And it ends up just being a complete mess because the person comes into the organization, they get no formal training, they’re unclear on what their key priority is. The compensation model is potentially working against them. 0:18:09.4 There’s just – there’s a lot going on there.
0:18:13.2 Where would you say a small business should start? What should the priority be of all of these considerations in light of that context?
Justin: 0:18:20.5 Ok, so I think we need to recognize that sales, as a function, needs to be outbound. Sales a skill, I guess, as a role, needs to be outbound.
So if you’re talking about adding sales to your business, we’re not – hopefully we’re not talking about somebody that’s just going to answer the damn phone.
0:18:38.5 That’s not sales, that’s customer service. If we’re talking about sales, presumably we’re talking about somebody that’s going to pick up the damn phone and start conversations that weren’t going to occur otherwise.
Jordan: 0:18:47.7 Demand generation.
Justin: 0:18:50.2 Well yes, or business development. Demand generation can mean something a little different but I would say business development. So proactive.
0:18:59.5 Now, the best starting point for a small business would be to – where skills are concerned, find someone who is naturally tenacious.
You know, I think we all know, you know, young people who are tenacious who kind of – I’m sure we’ve all got daughters or sisters or we know folks who’ve got daughters or sisters or sons or whatever the case is, who are tenacious.
0:19:25.6 So, employ someone who’s naturally tenacious and somebody who’s prepared to pick up the damn phone. And then structure their day so that they do nothing else other than have conversations with prospective customers.
0:19:38.7 Now that sounds hard – it’s harder than it sounds, but if you take – if you take that advice seriously and do exactly that, then you will grow unless there is something fundamentally wrong with your business.
0:19:54.0 And the key number that you want to watch is how many meaningful selling conversations a day and I would expect 20 to 30.
A sales person should have 20 to 30 meaningful selling conversations a day. 0:20:02.7 Tweet. Which means they probably, assuming they’re inside – which means they probably pick up the phone 70 or 80 times. They have 20 to 30 meaningful selling conversations a day and they do nothing else.
Jordan: 0:20:15.7 So, alright, so then what do you do with the inbound leads? Do you let them touch them or is that handled – is that literally handled by the receptionist and a customer service person?
Justin: 0:20:24.6 Well, you have to question whether they are inbound opportunities or whether they are inbound business.
If it’s inbound business, it shouldn’t go to sales, it should simply go to customer service to be processed. 0:20:36.1 So, if somebody rings and they say, “I want one of those things just like the last one I bought.”
Or, “I want one of those things just like my neighbour bought”, then that doesn’t require salesmanship, it just requires somebody to take the money. You know, grab credit card details. 0:20:54.4 It’s customer service.
0:20:54.7 If somebody rings and they have a general interest but they don’t know specifically what they want, then fair enough, you can route that to sales.
But you want to make sure that of the 30 selling conversations your sales person has in a day, only a very small number of those conversations, maybe four or five of them, come from inbound opportunities like that. Unsolicited inbound in other words.
0:21:20.1 Because it it’s too great a percentage, if it starts to approach 20% or 30%, what you’re going to find is that your sales person will stop picking up the phone and will simply wait for those inbound calls.
Jordan: 0:21:33.4 Ok. Alright. So let’s graduate from one body. Let’s graduate to two bodies. So the entrepreneur is willing to make the bet to invest in two people.
0:21:43.6 Compensation is kind of tied up in this conversation, but with two people present, the immediate opportunity for division of labour happens. 0:21:49.5 What are those early steps? Is that dividing initial outreach versus followup? What does early division of labour look like?
Justin: 0:21:58.0 So I’m assuming that you have division of labour from day one. In other words, in describing the sales person’s role as making – as having meaningful sales conversations and doing nothing else, that already presupposes division of labour.
It presupposes that you have a customer service rep there who can generate quotes and do all of the transactional stuff. 0:22:18.9 Meaning that none of that lands on the sales person.
It also presupposes that somebody else is queueing up sales opportunities for the sales person. 0:22:26.9 So the critical division of labour has already occurred.
Jordan: 0:22:30.6 Ok. Got it. So when – so what I was thinking of is one person. You were actually thinking of as either two or three people already.
Justin: 0:22:41.5 So hang on. Let’s – it depends how big the firm is. If it’s a small firm – let’s say there’s less than ten people in the firm. The – you’ve already – you’re probably in a situation where you have, sort of a, all hands on deck approach to business.
Justin: 0:22:59.2 Ok. Which isn’t optimal. Obviously. It’s not efficient. But when you’re a small business, you don’t have a choice.
But I think as you start to grow, the key to growing successfully is to recognize that where we need to migrate towards divisions of responsibilities. Division of labour.
0:23:15.9 And then #2: we need to think, well where should we apply division of labour? Where should we have clear demarkation lines between responsibilities in order to maximize our rate of growth?
0:23:26.3 So, it would be far more beneficial for you to have the strict division of responsibilities where your sales person was concerned than it would be to have a strict division of responsibilities where your receptionist is concerned.
Jordan: 0:23:37.6 Ok, got it.
Justin: 0:23:39.6 Yeah. So I’m assuming that on day one when you add your first sales person, you’ve taken those non-sales activities – so customer service and prospecting, or marketing, and you’ve simply allocated those – you’re simply making sure that those activities are getting done.
0:23:57.4 I don’t care who does them, but they need to get done. Because if somebody isn’t going to do those activities and you add a sales person, then in a month’s time, your sales person isn’t going to be a sales person anymore, they’re going to be a customer service rep, or half CSR half marketing person. 0:24:10.8 and the end result is, there’s going to be precious little selling occurring.
Jordan: 0:24:13.3 Right. So I’m thinking about all the objections that you might encounter with this philosophy, and one of them is, “Well if I’m paying this sales person all this money, then why wouldn’t I have them do followup and handle all these other things. As opposed to allowing them to get outsourced to somebody else in the company.” 0:24:27.6 So let’s talk about compensation.
Justin: 0:24:31.6 Hang on, hang on, hang on. Before we get to that, that objection is kind of idiotic. So we shouldn’t allow people to make – I mean, I’m sure people will ask that question, but there are certain questions where you need to tap the person on the shoulder who asked that question sand say, “Dude, did you really mean to ask that question?”
0:24:50.6 And I’m not – I don’t mean to damp on you, Jordan, because you’re absolutely correct, people are going to ask that question.
0:24:55.7 But what we need to understand is that people who are capable of, and prepared to sell, generate enormous value.
0:25:02.7 So it doesn’t make sense to say, “Well we’re going to have a person in the sales role and have them do a bunch of stuff other than selling.” 0:25:08.0 So the 0:25:09.2 [Inaudible] well opportunity cost.
Jordan: 0:25:12.2 Well, so this is the revenue versus the cost mindset, Justin. And you know this, and I know this, but we’re also aware of the fact that some people think of – orientate towards money going out the door as a revenue opportunity and some people orientate it around it being a cost center.
0:25:29.3 And for small businesses, they really feel the pain of writing and signing those cheques. So if I know I’m paying a sales person $80,000 then there’s this anxiety around the unknown.
0:25:41.2 When you hire a receptionist or a person in operations there’s less of an unknown. You can see the number of widgets that are getting put out or the number of hand crank rotations that are happening.
But this unknown variability with the sales outcome, the results that come from it, creates a lot of anxiety for small businesses. 0:26:02.1 And…
Justin: 0:26:01.8 But if you structure – if you structure sales properly it shouldn’t be like that. I agree that in a traditional environment it is, because you employ a sales person, you pay them a shit-ton of money and you hope that somehow they, you know – via some kind of bizarre magic they end up booking revenue for you.
0:26:18.9 But we’re not advocating you 0:26:19.9 [Inaudible] sales like that. We’re advocating that you maintain a queue of sales opportunities at all times for your sales person.
And you make sure that your sales person has 30 meaningful selling conversations a day. 0:26:33.6 Those things are necessary conditions. Those things are things that your sales person has to do in order to keep their job.
0:26:40.7 Now, if I employed a person and paid them $80,000 a year. Which is probably on the high side for your customers, I suspect. And I was confident that A: they were a tenacious, capable communicator, and B: that they were going to consistently have 30 meaningful selling conversations a day, I would have no concern at all that that person was more than pay for themselves.
0:27:04.5 And if they didn’t, you would quickly spot it and let them go again. I mean, everything about the US, and one of the things I love about working here, is if folks don’t work out you can let them go.
Justin: 0:27:16.3 Some of our clients in other countries, and certainly Australia where I’m from, it’s a lot harder to let someone go who is not working out. But in the US, you don’t have that consideration, particularly for small businesses.
Jordan: 0:27:30.3 That’s the beauty of America, man. So one of the obvious ways that people want to de-risk it though, is to say, “Hey instead of paying them 100k, 80k, 50k whatever it is, let’s just really focus on this commission based model where if they don’t produce, they 0:27:44.5 [Inaudible]. Don’t work, don’t eat. That’s the Protestant work ethic. What are the problems though that come with that commission based compensation model?
Justin: 0:27:54.8 Well, the problem with putting people on commission is they don’t work for you. They work for themselves.
So if you put someone on commission, they are essentially an agent. It’s up to them to design their day and up to them to determine their own rate of work, because ultimately, they’re responsible for their income.
0:28:13.6 If I’m going to employ someone and take on the risk that’s associated with employing somebody – and there’s always risk.
0:28:21.6 It’s very hard nowadays to pay someone 100% commission. You’re always going to have to pay them a retainer plus commission.
0:28:27.3 And the retainer’s probably going to be 40-50k. So you’re always on the hook for a decent amount of money anyways.
0:28:36.2 So if I’m going to take a risk on somebody, I want to – I want them working for me. I want to dictate what they do and when they do it. And I don’t want selling to be optional, I want it to be mandatory.
0:28:48.7 So I have no interest in commissions whatsoever and I have no interest in folks who insist on earning commissions. 0:28:56.0 I’ll pass them over every time to employ someone who would rather work on a salary basis.
0:29:00.4 I talked before about, you know, going into environments where the folks in the engineering department are better communicators than folks in the sales department.
0:29:07.6 And this is one of the reasons why. Because, you know, higher calibre people – unless you’re talking about the SAP or the Oracle sales person who earns a million bucks a year – higher calibre people are not prepared to work on a retainer plus commissions basis.
0:29:23.8 Especially not if the outcome of that is they’re going to earn $60,000 – $70,000 a year. Which is the case, I think, for your listeners.
Jordan: 0:29:31.6 So you just indicated that commissions make selling optional, but by the same token, does it also tend to make the management function optional?
0:29:41.7 You talk about management abdication, what is the relationship there? Because I certainly see this mindset of saying, “Hey we’ve created a commission-based structure, and if you want to make a million dollars, you can. But it’s all on you.”
0:29:56.7 Do you feel that the commission-based wage also has a mindset on the management and implications there as well?
Justin: 0:30:04.7 Yes. So paying people commission is an alternative to management. 0:30:07.8
Jordan: 0:30:09.6 An alternative to management. Write that down guys. It is an alternative to management. Ok, proceed. Why?
Justin: 0:30:14.8 Well, what you’re saying is, I am going to trust in the fact that the – that the, that the smell of the carrot will cause the donkey to trudge forward.
Jordan: 0:30:30.9 And that’s so deeply flawed. There is so much research contradicting that.
Justin: 0:30:35.7 Yes. Flawed to the point where – as years go on, Jordan, I’m becoming less and less interested in having this argument with folks, because I think if folks truly believe that, it’s a sad indictment on either their understanding of human nature or on themselves. If they are – if they are drawing insight into human nature from introspection.
Jordan: 0:31:01.8 Right. So I think what you’re saying by that – what you mean by that is that in every other function of the business, the title of – whether it be receptionist or property manager, etc., the title and the annualized, flat remuneration is enough to expect that that person will do their job because they have a job.
0:31:23.4 But in the sales function, somehow we think that only on the basis that they have the commission, that’s the only basis upon which you can expect anybody to actually do anything.
Justin: 0:31:34.6 Yes. And the assumptions that underpin commissions simply are not borne out by even the most cursory – even the most cursory – cursory – what do I want to say – analysis of human nature 0:31:54.7
0:31:56.0 Simply do not perform that – behave that way. 0:31:59.4 Particularly when we’re talking, you know, property management.
If we’re talking million dollar software sales, you can mount a stronger argument. I still won’t buy it, but you can mount a stronger argument.
0:32:12.9 But certainly, what we’re talking about here, it really doesn’t make any sense. You know, if you’re a small business and this is a risky hire, you need to be – you as the manager need to be in control. You need to employ someone, you need to say, “There’s the chair, here’s the headset, I need you to have 30 selling conversations a day, every single day.”
Jordan: 0:32:33.5 Yeah. The activity-based model is all about saying that by asking you to do that, by some degree, we’re acknowledging that sales is not voodoo. Yes, there is absolutely skill. Communication.
Those things definitely matter, but the more that we get more specific on breaking down the role and we get granular on our expectations on an activity-based level, the more we can have a coherent conversation that feels less like just praying to the gods.
Justin: 0:33:03.2 Exactly. So, I mean, activity is not everything, but it’s true. But activity is certainly 70% or 80% of everything.
0:33:14.1 So, my view is, get a decent volume of sales activity and then fine tune from there. And where most folks fall flat, where sales is concerned, is there’s not enough activity. Not enough selling conversations.
0:33:26.8 You know, if we go into an environment, the very first thing we will do is crank up selling conversations to 20 or 30 per sales person per day.
And then we’ll look around after a few weeks and say, “Well what’s not working here?” 0:33:37.4 Oftentimes, you discover that once you’ve got the conversation – the volume of conversations up, all of a sudden the sales are coming in.
0:33:44.5 And what you have to worry about, is if you get the volume of conversations up and the sales aren’t coming in, then maybe there’s something fundamentally wrong with the organization’s proposition.
0:33:52.1 Maybe the company’s not viable to begin with. If the company is viable and you have one or two people have 20 to 30 meaningful selling conversations a day, you will end up making money. It’s not rocket science.
Jordan: 0:34:05.8 So this is why I brought you on the podcast. The plague. The parasite in our industry – in the property management industry, is this, is called portfolio-based property management.
And people go back and forth from an operational perspective, whether or not departmentalization or portfolio management is best.
0:34:26.1 The argument for portfolio management is that as the consumer you have one point of contact regardless of what your need is. Whether or not you have a maintenance issue or you want to boot the tenant or whatever your issue is.
0:34:37.2 But the problem, the deeply flawed problem, is the expectation for independent property managers that carry their own book of business and whose income comes directly from the number and the quality of the properties that they manage, expecting those people to sell.
0:34:54.4 And part of my frustration is the implicit and the underlying laziness that is really girded up in that. It’s the idea that you can put it off on these people. Put it off on somebody else. 0:35:09.5
And because everybody’s motivated by money and they have the ability to grow their own portfolio, you gotta just expect them to figure it out.
And if they don’t perform, these two completely disparate tasks, which is managing the property, you know, operations, and selling, they’ve somehow failed. 0:35:29.6 And it seems to me to be a very unfair and inequitable philosophy to place on the employee.
Justin: 0:35:37.2 Exactly. So, I think portfolio management, A it’s the wrong term. Really what we’re talking about is account management.
I mean, portfolio management kind of refers to a theory that has nothing to do with what’s being discussed here – around risk aversification and so on.
But, I guess you could say well they’re managing a portfolio property. But, this is no different from what happens in a traditional organization.
You know, if – most organizations have these things called accounts and accounts need to be looked after and 0:36:14.7 [Inaudible] regularly. 0:36:16.6 But the folks who are responsible for adding new accounts are not the account managers.
The account managers are the customer service reps. You know, the folks who do all of the day to day transactional work – look after accounts are customer service reps. That’s where all the work is done.
0:36:29.2 Now I think we’re – where property management is concerned, it’s basically a task based business.
There’s a whole bunch of tasks that need to be performed very efficiently in order to do a good job of managing the account or managing the portfolio of accounts.
0:36:49.7 I think that you’re overstating the significance of your relationships if you start to think of it as account management or portfolio management. It’s really not.
I mean, it’s not like – if I have somebody managing a property for me – and I’ve just sold a couple of properties that I had in Australia – now I’ll tell you what pissed me off about property managers, it’s not that they didn’t ring me and have conversations with me, it’s that they stuffed up the little tasks. They didn’t do a great job of the small stuff.
0:37:17.6 So I would much rather have somebody that did a fantastic job of the small stuff and – rather than somebody who was going to reach out to me and have strategic conversations with me about the performance of my portfolio.
0:37:31.3 I’m not interested, you know, not interested in that. And I think that most folks probably are not. They’re probably interested in having the small stuff done properly.
0:37:38.4 So I think what we’re doing is we’re over-hyping it to try and motivate the account manager into being – or the CSR, into being a sales person.
0:37:46.9 But that makes no sense. We’re better off splitting the two. We’re better of saying, “Look, acquiring new accounts is the responsibility of the sales person.”
And you would expect if you’re doing a stellar job of managing someone’s existing properties and they buy one more property, they’re going to tip it into the same property manager.
0:38:06.2 But if they – maybe if they switch and they buy a materially different property, if they switch from residential to commercial, maybe you want to involve a sales person in convincing them to let you handle their commercial as well.
But in that case I would hope that you have a different team looking after the commercial than you do the residential.
0:38:25.9 I’m not a fan of the idea of portfolio management in that context. And another place where you see this is banks. 0:38:34.5 They’ll have a – high net worth clients will have a – what do they call it – like a wealth manager or a person allocated.
0:38:42.1 And I think it’s rubbish. I think it ends up – it ends – you end up with a person who’s not capable of talking at a high level anyway about money.
0:38:52.5 Unless you – unless maybe you have tens of millions of dollars in the bank. But it ends up making it harder to transact with the organization because all communications have to go through one person. I think what people are interested in are speed and efficiency.
Joran: 0:39:09.5 Sure, yeah. Speed and efficiency are only going to be more important as time goes on. I do want to just transition now…
Justin: 0:39:16.3 I went up to the bank the other day, to give you – and I said, “Oh look, I want to add another account.”
And I said, “Look, it’s – I went to do it online, it’s deactivated.”
And they said, “That’s because you’re a Platinum account. Because you’ve got more than x number of dollars in the bank you’re a Platinum whatever and we’ve allocated a wealth manager to you.”
I said, “What does that mean?”
“That means you have a personal concierge looking after all your stuff.”
I said, “You mean that you’ve turned off the ability to add accounts so that I talk to a – so that I have to talk to a wealth manger?”
And they said, “Yes.”
I said, “Well, this Platinum thing, how do you reverse it?”
And they said, “We can’t, it’s automatic.”
I said, “Well I don’t want it, I don’t want to be Platinum. I want to be able to manage my own damn accounts and I don’t want to talk to some 22 year old.”
And they said, “Well we can’t reverse it.”
I said, “Well fine, leave it the way it is, but take away this requirement.”
0:40:06.6 And I sat there and demanded that this guy get on the phone and call his superior and have – and the superior got on the computer and disentangled me from this wealth manager. 0:40:19.1 Because all it was doing is slowing things down.
Jordan: 0:40:22.8 Yeah, I spent enough time waiting in bank lobbies to write a small book by now. It’s amazing to me how dysfunctional that whole ecosystem has become.
0:40:30.9 I do want to transition now to, kind of, wrap up the interview with a rapid-fire series of questions. We ask these to every guest. They’re always a little bit tailored to the guest.
0:40:41.3 And the first of those is this, if you could wave a magic wand and make one recurring objection to the concept of sales process engineering go away permanently, which objection would it be?
Justin: 0:40:58.1 Oh I know what it is. This idea that relationships are the antecedent to sales. So, whenever we talk about division of labour, somebody will say, “Well isn’t sales all about relationships?”
The interesting thing about that question is it’s not actually a question. 0:41:20.4 It’s designed to be a rhetorical statement.
0:41:22.9 Folks think that they can kind of drop that in front of you and it kind of ends the conversation.
And as far as I’m concerned, it’s bullshit and it’s an example of fuzzy thinking. 0:41:32.7 Because in my experience, sales are more – sales are not an antecedent – well, relationships do not cause sales so much as they are a consequence of sales.
0:41:47.8 If you have a successful commercial relationship – if you have a successful commercial relationship, it’s likely that some degree of personal familiarity and personal friendship will develop.
0:42:01.1 But if you have an ugly commercial relationship, it’s very unlikely that you’ll end up with a personal relationship – a relationship with the person that you interact with.
0:42:09.9 And I think that this idea that relationships cause sales, slows sales down significantly. If you want to sell, you need to go and talk to a whole bunch of folks who you don’t have a relationship with currently.
Jordan: 0:42:19.7 Right. So maybe, maybe it’s not to say that relationships don’t lead to sales, but at least that mindset is overblown and it comes at the expense of structuring sales in a coherent way. That makes sense to me.
0:42:29.3 What is one book that has impacted you the most in your career?
Justin: 0:42:37.0 Probably, The Goal, which you mentioned earlier.
Jordan: 0:42:38.9 Awesome. Love it. Everybody should get a copy.
0:42:41.8 Name one sales trainer that you appreciate, Justin?
Justin: 0:42:49.8 I – so 0:42:58.5
0:42:58.6 It may surprise you to know that we don’t have a lot to do with sales trainers. We do our own…
Jordan: 0:43:03.5 No, no, no, this doesn’t surprise me at all. I thought this was going to be a difficult question for you because I thought it would be a pretty short list. Can you name one? Can you name one sales trainer – because I think of you as kind of the antithesis to the typical razz-tazz sales trainer. Is there anybody on that list for you?
Justin: 0:43:20.5 Yeah, so we’re a process people. If I had to simply name one, there’s a guy called Grant something or other…
Jordan: Grant Cardone?
Justin: 0:43:24.6 Grant Cardone. I’ve listened to a couple of his. I think he’s amusing.
Jordan: 0:43:35.4 Amusing? Ok. That’s telling. Grant Cardone, there we go.
Justin: 0:43:41.2 And I think that all of the sales trainers have basically the same message and for novice sales people it’s not a bad message. And when I was a sales person myself, I vacuumed that stuff up.
I drove around in my car with a cassette pack back in the days with cassette days listening to – I remember I had like, a 12-tape pack with Zig Ziglar and Tom Hopkins and Dennis Wakeny ((??)) 0:44:05.1 and I listened to those guys until the tapes literally stretched.
Jordan: 0:44:10.1 And they started talking slower and slower.
Justin: Exactly. Yes.
Jordan: 0:44:13.0 Love it. Alright. So if you could do it all over again, Justin. If you could go back ten years, what one piece of advice would you have grabbed yourself by the shoulders and tried to deeply get yourself to actually buy in a decade ago.
Justin: 0:44:26.2 I would have written a book a lot earlier. I think it took us far too long – took me far too long to get the book out. I always knew that it was handicapping us not having the book out.
0:44:37.1 I started writing the book five years ago and a good thing I did was I wrote the first three chapters and started giving away the first three chapters to generate sales opportunities and that was very successful.
0:44:47.1 But the problem with that is it took the pressure off to finish the book. So, you know, the book has had a huge impact on – not just the volume of sales opportunities we generate, but it also has simplified our whole sales process because there are folks that literally read the book and they make contact with us and say, “Hey, we want you to come implement this with us.” 0:45:07.7 So it’s made sales so much easier.
Jordan: 0:45:11.4 Love it. Yeah. And I’m obviously one of the people that came in early through the blogs. Salesprocessengineering.net. Check it out if you haven’t.
But I was absolutely waiting for you actually finish the book and it felt like it did take awhile. But there’s a lot of meaty content there.
0:45:26.3 Last question of the day. I ask this to every single guest. Justin, in your opinion, are entrepreneurs born or bred?
Justin: 0:45:37.0 I think, I think – if you asked me about anything else, like a sales people, I would say anything else you can probably learn the skill.
But I think that entrepreneurs – I’m not sure but I think there’s – I think there’s to a greater extent than any other profession, I think that entrepreneurs may be born.
Because, if I think of myself relative to my friends, I have a different risk profile. I’m a lot more comfortable with risk than they are. And I’m not sure it’s necessarily a good thing. I think that there’s a little bit of psychopath in every…
Jordan: 0:46:27.6 Oh man, well said.
Justin: 0:46:30.8 Yeah, so I don’t think it’s necessarily a good thing, but I think that it can be a blessing, it can be a curse as well.
I know some business people who plug away for their entire lives trying to accomplish something that they don’t quite accomplish.
And as a consequence they earn significantly more and work much longer hours than they could if they went and worked for someone else.
Jordan: 0:46:52.8 I kind of take that as a given. Honestly, Justin. I’ve read so much research bearing out that entrepreneurship is a sub-optimal financial outcome for most people. I kind of accept that as a given.
And that really speaks to – if you’re a true entrepreneur, on some level it’s just what you want to do. Like, the finances have to become secondary.
And if you’re primarily doing it for the money, at some point, at some point you’re likely to do something else unless you’re one of the few that has an easy path to striking it rich.
Justin: 0:47:21.9 And this is why I get frustrated with business owners who get upset about my position on commissions.
Because I think, well my goodness, if you made decisions purely on the basis of pursuing the greatest dollar, you probably wouldn’t be in this business yourself. 0:47:40.4 You’d probably be working for someone else.
So I think not only when you look at your existing staff – it’s easy to see that they’re not motivated by money above all else, but most business owners are not motivated by money above all else either.
0:47:58.1 And I think that – you talk about rich industrialists, and I guess we all look up to them – nowadays it’s the Zuckerbergs and the…
Jordan: Elon and Bezos.
Justin: 0:48:10.4 But Bezos is a perfect example. You know, there’s a – he doesn’t do it for the money.
He has a high self-esteem and I think he deserves to do well and he was going to do well whatever he did, but I think the difference between making billions and making millions, it’s huge in terms of the size of his bank account, but I don’t think it’s had any impact on his quality of life. 0:48:33.1 I don’t think he was driven by the money. I think he was driven by the game.
Jordan: 0:48:38.0 I couldn’t agree more. There’s a lot to chew on there guys.
Justin: 0:48:43.0 For folks who are interested in Bezos, there’s an interview with his brother. So, if you go to YouTube and type in ‘Bezos Brother’, 0:48:51.1 there’s an interview with his – I think 0:48:51.4 [Inaudible] interviewing him.
It’s a fantastic interview and it’s amazing how down to earth the two of them are. And how close the two of them are as brothers. 0:49:01.1 And just, yeah, so your viewers may want to go watch that. Listeners.
Jordan: 0:49:07.4 I’m looking at it right now. I can definitely see the connection. Guys, I want to encourage you to get the book, get it on Amazon, The Machine. It’s meaty.
I want to – I’ll tell you right now guys, this is not an easy read. This is not in the self-help category. It’s going to challenge you.
But there is so much to glean from it and there’s so much room for improvement within the property management industry about thinking deeply and coherently about sales.
0:49:36.3 Those anomalies in the industry. The Renter’s Warehouses, the HRGs, those companies that are really experiencing explosive growth, they seem odd to so many of us because they’re running a different playbook.
0:49:51.1 And in large part, whether or not they’re running the playbook, 0:49:53.5 [Inaudible] or a different one, there’s a level of intentionality and thought going in to their process and the structuring of their organization that is really different than what the average property management company looks like.
0:50:07.1 And this isn’t to say you need to be a copycat, but we all have to do the work of thinking hard and deeply about these challenges that directly relate to our long-term success.
0:50:16.3 Justin, I appreciate the work that you have done, both thinking, developing the seed of that thought into something that is now mature, as well as sharing it across the world and with my audience in particular. Thanks for your time today.
Justin: Thank you Jordan.