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Damage From Mediocre Sales Reps
Mediocre sales reps are the most damaging because we keep them too long.
Understanding the sales rep profile that maximizes that chances of success is key to building a go-to-market machine that is repeatable and can scale quickly. Many companies stick with the lower performing reps for too long for reasons such as:
Desperation to hold on to ramped sales capacity
Delusional belief that they will get better
Too nice — afraid to fire because it will hurt company morale
Don’t have the proper guardrails to timely spot bad/mediocre reps
I can’t really help you with the first three…All I can say is it is an employer market and times are tougher so harder decisions have to be made faster.
Spotting the worst reps is usually pretty easy. They don’t sell anything… The percentage of truly terrible sales reps at any given company is usually relatively small so the damage is somewhat contained.
But how about the mediocre reps?
This group of sales reps is often the most destructive to a company because they stay way too long and cause a lot of damage along the way. Everyone has mediocre sales reps but if you can minimize this group and maximize the good/great reps then it will have an outsized impact to the company.
Spotting Mediocre Sales Reps
Let’s start with a story:
Mario Mendoza was a major league shortstop for 9 seasons (1974 - 1982). But unfortunate for Mario, he is most famous for having a low batting average that was coined by his teammate as the “Mendoza Line”. The Mendoza Line is considered the minimum hitting percentage that a player must obtain to stay in professional baseball (i.e. the bare minimum requirements). If you are above the Mendoza Line then you feel safe, but if you are below then your days in the big leagues are numbered.
Outside of baseball it has frequently been used to describe the minimum baseline performance that must be achieved.
What is the Mendoza Line for sales reps?
This is where a lot of companies fail with sales reps because 1) The Mendoza Line isn’t defined or 2) it is set at the wrong place because of incorrect metrics for what good looks like.
How to evaluate sales reps and how to define the Mendoza Line can vary on a lot of company-specific factors, but the method most companies default to (new annual recurring revenue) might be misleading…
Errors in Sales Rep Mendoza Line Example
Enterprise software sales reps are typically compensated on annualized recurring revenue (ARR or ACV). If you were to only look at the attainment between Sales Rep A and Sales Rep B in the example below then you would be quick to conclude that Sales Rep A is significantly better with a quota attainment of 78% vs 67%. Sales Rep A brought in $100K more in sales and earned $10K more in commissions!
This is how most companies end up evaluating performance and drawing the Mendoza Line — Sales Rep A is above 75% attainment consistently so they are safe.
But wait….not so fast.
If you look at the average sales discount for each sales rep, Sales Rep A discounted 1.5x more than Sales Rep B. The customers from Sales Rep A also don’t stay a customer as long — 4 year average life vs the 5 year average life of Sales Rep B.
Sales Rep B actually generated $600K more in customer value than Sales Rep A!
Discounting (and customer life) can have huge impacts on true value to the company but are typically left out of sales rep performance. Customer life is nearly impossible to measure at the time of sale but discounting is easily measured.
Bad/mediocre reps overuse discounting versus selling based on value and there can be huge value implications.
Great sales reps easily pay for themselves but be careful how you compare sales reps because the typical quota attainment can be misleading. Some big things to also look for:
The last two bullets can be summarized with Net Revenue Retention (NRR). Are the cohort of deals being sold by each sales rep increasing at different levels over time? Some reps will oversell new deals which cause higher and faster customer churn.
Customer life is hard to measure sales reps on in enterprise software given typical minimum contracts of one year and expectation of at least 4 years of customer life. But if a lot of customers churn after one year or customer net promoter scores (or other indicators of customer health) for a specific sales rep are bad then that might be a sign of bad selling.
We keep mediocre sales reps for way too long because we haven’t clearly defined and understood what the Mendoza Line for sales reps should be — we then potentially fire the wrong sales reps. Companies who spend more time on this will see significantly better results in the long term.