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To Tell the Truth Call it what you like: a fib, an untruth, a fabrication. A new SMM survey reveals that nearly half of all salespeople may lie to clients. Are you creating a culture that promotes deception? By Erin Strout

Every fat commission check has a price tag. For Matt

voice-mail messages that became increasingly hostile. Then came the death threats. “He left a message saying, ‘I know you’re there. I’m going to find out where you live and blow up your house.’ I never spoke to the customer again—I just told the company about it so that it was out of my hands,” Cooper says. “This kind of thing actually happened a few times.” Finally Cooper couldn’t take it anymore. “I started selling only what I knew worked, because I couldn’t lie anymore—so my managers told me to either close more deals or find another job,” he says. “It was the kind of culture where they broke you down and rebuilt you to be an animal.” A reformed liar, Cooper quit and now works at another start-up in New York, but one that holds him to a higher ethical standard. Though this dot-com is still struggling through more rounds of funding, Cooper is finding that building relationships with clients is a better long-term sales strategy—not only for his own financial well-being, but for the long-term financial health of the company. Unfortunately, not all salespeople learn that lesson so early in their careers. A new SMM/Equation Research survey of 316 sales and marketing executives reveals that 47 percent of managers suspect that their salespeople have lied on sales calls—only 16.5 percent have never heard one of their reps make an unrealistic promise to a customer.

Cooper* the cost of earning up to $150,000 per sale was spending every day lying to his customers. It was the promise of huge bonus checks—not his $40,000 base salary—that lured him to join the sales force of a large, wellknown Internet company two years ago. In his early twenties, hungry, and aggressive, Cooper fit the dotcom’s sales culture mold, but what he didn’t realize was that dishonesty was the price of admission. The New York–based start-up formed a big-deals team, a group that sold multimillion-dollar advertising campaigns to some of the world’s largest companies. The sales force’s key strategy? Do whatever it took to close those deals. Almost 100 percent of the time that meant lying to the client. “If you didn’t lie you were fired,” Cooper says. “It always came down to careful wording and fudging numbers.” Among various other deceptive tactics, the Internet company’s salespeople would book $2 million deals, promising a certain amount of impressions on the client’s banner ads for the first million and guaranteeing a certain amount of sales for the second million dollars. “We’d almost always be able to deliver the impressions, but you really can never guarantee somebody sales,” Cooper says. “Back then you could base deals on the industry standard by taking the impression rate, comparing it to the industry standard, and using the conversion rate to determine a sales projection.” Renewals were, of course, out of the question, which might explain the eventual demise of this and thousands of other dot-coms. The boiler-room culture began to take its toll on Cooper, especially after he had to begin screening his calls to avoid irate customers. “Some of them had just spent two million dollars on an online campaign and got completely screwed,” he says. One particularly incensed client who had spent more than $1 million on a campaign that failed to produce the results Cooper had promised began pelting him with

“Most people want to do the right thing, but when bad situations arise it's usually when the leadership has created an environment that tolerates it.” But don’t be too quick to blame your salespeople for their deceptive behavior. What drives sales and market1

Article 15. To Tell the Truth

FIVE SIGNS YOUR REPS ARE LYING

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t’s not often that sales executives are caught off guard when they discover salespeople are being dishonest. Experts say that typically, the behavior is ingrained in the corporate culture, starting at the top and permeating throughout the sales organization as accepted—and even expected. But even the most vigilant manager may hire a bad egg now and then. Here’s what to look for if you suspect a salesperson is being untruthful:

YOUR SALESPEOPLE ARE MOTIVATED BY FEAR It’s not uncommon for sales organizations to have a door-die mentality. If executives subscribe to Darwinist philosophies, it’s quite likely their salespeople are doing absolutely anything to close deals in order to earn their compensation and keep their jobs. “There are a few big U.S. companies that tell their salespeople that if they don’t make quota they’ll be fired,” Zoltners says. “That doesn’t encourage salespeople to focus on customer service, because they’re too worried about survival.”

YOU’RE GETTING CALLS FROM CUSTOMERS It’s no surprise that usually the first person to recognize they’re being duped is the customer. Clients are managers’ best resource when it comes to checking up on salespeople, and if they’ve experienced bad service they won’t hesitate to speak up. That’s how Brett Villeneuve, operations manager at Go Daddy Software, discovered one of his salespeople was up to no good: A client called when he discovered activity on his account that he didn’t authorize. “I rarely get customer calls, but one day I received a number of complaints,” he says.

RECOGNITION AND REWARDS ARE BASED SOLELY ON NUMBERS If the people heralded as sales superstars on your team are the reps closing the most sales, they probably aren’t the ones giving the best service. Recognizing financial gain over how it’s achieved isn’t a sound strategy for producing an ethical sales team. YOU LIE, TOO Salespeople are a product of their environment. If executives and managers practice unethical business strategies, it stands to reason that the sales force will too. “Executives have to make it clear to employees that the company is ethical and honest in everything it does,” says Bill Blades, a sales consultant in Scottsdale, Arizona. “If it’s an enforced part of the mission, salespeople will adhere to it.”

REPEAT BUSINESS IS DOWN You can only lie to a person once—after that trust is gone. If loyalty is something salespeople struggle to attain, it probably means that they don’t do much to deserve it. “You only buy from people that you like,” says Andy Zoltners, a marketing professor at the Kellogg School of Management. “In relationship selling you can’t lie—if you mess up you’ll never hear from the client again.”

—E.S.

Internet advertising isn’t the only industry that has sold fictitious products. As California is painfully aware, Enron and other energy companies allegedly made a fortune by selling electricity that didn’t exist, rewarding traders for coming up with new schemes and lying about how much energy the company had in its supply. As more details emerge about Enron, regulators are requiring traders to disclose full details of all energy sales starting this month. “Examples like Enron show that greed is really a U.S. phenomenon,” says Andy Zoltners, a marketing professor at Northwestern University’s Kellogg School of Management. “Some companies do whatever it takes to make money.” Such deception may be more common than we think. In the SMM survey, 36 percent of respondents said salespeople now conduct business in a less ethical manner than they did five years ago, and 36 percent believe there’s been no change at all. What kind of fabrications do salespeople resort to? The survey shows that 45 percent of managers have heard their reps lying about promised delivery times, 20 percent have overheard their team members give false information about the company’s service,

ing professionals to lie is often a combination of factors— not the least of which can be the way they are managed.

“Greed is a U.S. phenomenon.”

Back in the dot-com heyday one of the most commonly

used tactics in the industry included selling advertising space that didn’t exist. Telling clients that they had about a one-in-300,000 chance of actually seeing their banner ad appear on a page of the site, salespeople would sell a $500,000 ad, cut and paste it onto a page using Photoshop software, print it, and fax it to the customer to “prove” that the banner appeared as promised. “We might have sold all of our telecommunications inventory, but then another company would call to say they wanted to spend $50,000 on a campaign,” one rep at a New York dot-com says. “What would we do? Book it, even though all the space had already been sold. When the numbers didn’t come back as high as the customer expected, we’d just chalk it up to a bad campaign. We’d take anybody who was willing to spend a dime.” 2

ANNUAL EDITIONS

Source: SMM/Equation Research survey of 316 sales and marketing executives

tough economic times the quotas are as high as the stakes, and sometimes it’s enough to make even the most reputable salesperson resort to unethical strategies.

and nearly 78 percent of managers have caught a competitor lying about their company’s products or services. “It appears that misrepresentation of products or services is prevalent among salespeople,” Zoltners says. “This is a losing strategy, and this kind of behavior is not what the best salespeople do.” In the short term unethical sales tactics may prove lucrative, but in the long term every executive should worry about resorting to such strategies. Dishonesty, experts say, eventually ensures a company will have zero customer loyalty. Unfortunately lying is what some of the most profitable salespeople resort to—and experts don’t necessarily blame the behavior on the individual. “There are probably three participants in this—the customer, the salesperson, and the company,” Zoltners says. “They are all a part of the pressure to make money and the combination can make a rep succumb to it.”

“Where I worked, all of the reps were in this big room, standing up, pitching to clients over the phone,” Cooper says. “People might hold their phones out so everybody could hear them closing a big deal. Making a three-percent commission off of a multimillion-dollar deal makes you willing to lie.” In fact, the majority of U.S. salespeople are dependent on commission-based pay plans. Experts say this is part of the problem. “If salespeople have to eat what they hunt, it puts stress on them and motivates them toward bad behavior,” Zoltners says. “If you look at some of the companies that are in big trouble, you see that they give negative incentives, such as demanding that reps make quota or be fired. That does not create the best sales forces. You have to create fair rewards for people.”

“Making a three-percent commission off of a multimillion-dollar deal makes you willing to lie.”

Brett Villeneuve, operations manager at Go Daddy Software, in Scottsdale, Arizona, says he purposely hires reps who are less money-driven and more relationshiporiented. “Quotas, in general, are usually set too high,” he says. “We increase base pay and make realistic sales quotas that are challenging, but attainable. We don’t want our people to run around scared of losing their jobs—that makes them lose focus on what needs to be done.”

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or top salespeople the pressure, especially in this rocky economy, is almost palpable. More than a quarter of the respondents in the SMM survey said that the recession is causing their salespeople to become more dishonest. In 3

Article 15. To Tell the Truth cal understanding, and no one should ever be treated with disrespect.”

Villeneuve might be on to something. The SMM report indicates that quotas may inhibit salespeople more than motivate them. Seventy-four percent of respondents admitted the drive to achieve sales targets encourages salespeople to lose focus on what the customer really needs. Though Villeneuve tries to run a tight ship when it comes to business ethics, he has experienced a few situations where salespeople have crossed the line. “I just had to fire one of our better sellers after I received a complaint from a customer,” he says. “In two days I got four calls that a rep had put charges on clients’ accounts that he wasn’t supposed to. It made his sales look great, but that’s not how we do business.” Another team leader at Go Daddy decided to boost his team’s sales with an underhanded tactic—one that caused him to get fired. “A client would call in with a problem and his team would refund the order that the client had placed with another sales team, then put the reorder on his team’s credit,” Villeneuve says. “It made their sales look really good. Even though he wasn’t really lying to the customer, that kind of behavior isn’t tolerated. When you fire somebody because of it, the message you send internally is really strong.”

“Where I came from, sales drove everything.”

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he key driver of a sound sales strategy is that the leaders of the organization exhibit the values that they want employees to follow, says Steve Walker, president of Walker Communications, a stakeholder research and measurement firm in Indianapolis. “Most people want to do the right thing, but when bad situations arise it’s usually when the leadership has created an environment that tolerates it,” he says. “Until boards of directors want to sniff it out, the scheming will stay in the hallways.” Walker Communications offers clients products that determine whether a company’s employees are telling lies, abusing drugs, or otherwise violating the rules. It’s been a tough sell. “Offering these kinds of products in a litigious society is difficult,” he says. “Executives actually don’t want information that may indicate that there’s a problem. They don’t want to officially know that their sales force is lying.”

“When the numbers didn’t come back as high as expected, we'd chalk it up to a bad campaign. We’d take anybody willing to spend a dime.”

“I started selling only what I knew worked because I couldn’t lie anymore, so my managers told me to either close more deals or find another job.”

That message is key to instilling an ethical standard in the corporate culture. Some managers do this by giving employees a means of questioning behavior they may observe. According to the SMM survey 56 percent of respondents have a process in place that enables salespeople to alert managers to ethical breaches. Executives at Go Daddy use the company’s intranet to help employees bring up any questions or concerns. An anonymous section allows for executives to read and respond to e-mails written by coworkers who observe others lying, cheating, stealing, or otherwise behaving badly. “Initially we were scared that it might turn into minor bickering and tattling but so far it’s helped keep us aware of legitimate concerns,” Villeneuve says. Though the intranet tool is still new to Go Daddy, executives say the most common type of anonymous notifications relate to customer treatment by individual salespeople. Other examples include reporting a coworker’s uncontrollable attitude or anger with a client, and the failure of another salesperson to follow procedures in place to assure proper customer care. “We have zero tolerance for this kind of behavior here and our salespeople know it,” says Bonnie Leedy, public relations director at Go Daddy. “Everybody is trained to understand that customers come to us with all levels of techni-

Sometimes it’s the executives themselves who promote deception. Take VeriSign Inc., a domain registration and Internet security provider. The marketing team sent out domain expiration notices to their competitors’ customers, designed to look like the notices were coming from the company they currently used for their Internet domain registration. The hope was that the notices, which stated that owners would lose control of their domain name if they did not return the form and $29 by May 15, 2002, would get people to transfer or renew their domain names with VeriSign, in some cases at three-times the price they were paying. A U.S. court ordered the company to cease the directmail campaign in May, saying it was misleading to consumers. VeriSign would not comment on the litigation, but a spokesperson said the company is complying with the court order. “The industry is plagued with unethical marketing and sales tactics,” Leedy says (Go Daddy is a VeriSign competitor). Some executives have their priorities focused solely on profits, thereby placing rewards on the wrong behavior. “I came from a sales organization where the culture was bottom-line focused,” Leedy says. “The top performer 4

ANNUAL EDITIONS territory to retain clients,” he says. “If you don’t, people will get hurt down the road. The only reason execs don’t deal with this is cowardice.” Making an example of unethical salespeople is one way of letting the rest of the team know that lying won’t be tolerated by the company. When somebody is allowed to sell by whatever means necessary, it sends a message that the behavior is acceptable. Where Go Daddy’s Leedy used to work—a call center sales environment—the signals were clear to everybody. “You could hear the top sales guy making false comments to his customers, but no disciplinary actions were ever taken,” she says. “To the people who were lower in the company it was an example of what they needed to do to be recognized.” Another way to safeguard your team against dishonesty is by making smarter hiring decisions. “I always talk to a potential hire’s former employers because I find they will say more about a person’s personality than anybody else,” Blades says. “The best predictor of future behavior is looking at past behavior.” Keeping a sales organization honest means keeping close tabs on its performance. “I find that conducting monthly evaluations is more productive than annual evaluations,” Blades says. “Get salespeople to tell you how they achieved something or what they think went wrong. You have to be strong and let reps know from the beginning that you’re a straight shooter.”

was the roughest salesperson I’d ever seen. Customers complained about him, but there was never a response, because he was bringing in money.” Top salespeople with poor ethics are the trickiest creatures for managers to deal with, experts say. Bill Blades, a sales consultant in Scottsdale, Arizona, has walked away from projects that involved dishonest salespeople because CEOs hesitated to get rid of them. On one occasion Blades asked the president of a company to let one top salesperson go, because he consistently cheated on his expense reports—it was a well-known fact that the company was footing the bill for his “dates” with call girls. “The president agreed he should be fired, but in the end wouldn’t do it. He was afraid of losing clients,” Blades says. “I’d say that ninety-nine percent of all of my clients are ethical, but a bad banana shows up once in a while.” In May Blades and executives he was working with on a project sent a rep home for two weeks when they discovered he released false information about an acquisition to a customer. “He’s not allowed to make any client calls while we figure out what value he brings to us,” Blades says. “He’s missing the national sales meeting, which is embarrassing for him.” Such discipline isn’t necessarily the norm among sales organizations. The SMM survey shows that although 87 percent of respondents believe salespeople who are caught lying should be disciplined, 51 percent have never actually punished anybody. Maybe it’s because they’ve never caught them, but likely a percentage of managers don’t know how to deal with superstars fibbing to clients. Blades has suggestions. “If you have a top guy with a lying problem, get the vice president of sales to cover that

*Salesperson’s name has been changed.

Senior Editor Erin Strout can be reached at [email protected]

From Sales & Marketing Management, July 2002, pp. 40-47 by Erin Strout. © 2002 by V N U Business Publications USA. Reprinted by permission.

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