How Efficient is Your Sales Organization?
In cooperation with the Technology Manufacturing Association of Illinois (TMA), AMark is conducting a research study on organizational constraints, with the target of identifying the major internal or external barriers to growth. While the study is still ongoing, results thus far suggest that the majority of companies currently experience a sales and marketing constraint – i.e. they would have the capacity to produce more. You might say this is not a surprise, since markets are sluggish and economic growth is slow, etc. However, none of the participants in our study have a presumed market share of more than 1% in the United States. This means that more than 99% of market share is still up for the taking. Even if the market would be down by, let’s say 5% – still 94% is out there to be won!
When our participants were asked why sales growth is not in line with their expectations, most of them say that they are frustrated by their distribution networks, low-performing independent sales representatives, or a lack of productivity within their own sales teams. Common issues are that their internal and external sales representatives are not focused enough, waste too much time on administrative tasks, are not motivated, etc.
The Salesforce Productivity Gap
In many cases, the general response to the problems cited above is that “compensation needs to be changed in order to create more financial incentive”. While financial incentives are important, they are rarely the long-term solution to the problem. The following are statistics and general research done on this subject:
The average sales team performs at less than 50% of true capacity due to:
Lack of focus and poor planning at all levels
Lack of sales management processes and tools
Lack of sales and customer analytics
Lack of potential-oriented selling approach
A recent study conducted by salesforce.com found that only 1/3 of sales force time is spent on active selling, due to lack of information and administrative tasks.
On the positive side, a recent study by the Harvard Business Review found that companies who apply a structured approach to sales management see an average of 15% productivity improvement.
A first priority, is to focus your internal and external selling resources on future-oriented potential, rather than historical sales. In our experience, one of the biggest mistakes companies make is having their sales resources go back to the same customers, over and over again. Balance the time spent on maintaining your current customer platform with the need to consistently build a pipeline, and focus on high-potential future customers. Diversification needs to be the strategy of choice in a rapidly changing market environment.
Less is More
Next, productivity needs to increase dramatically. In our experience, the majority of organizations struggle to measure and quantify sales force productivity in a way which is similar to that of operational performance management. We are strong believers that what is measured and accounted for will ultimately improve.
The chart below is taken from a Harvard Business Review study regarding the difference in headcount required to nearly double sales with a sales force productivity approach versus just adding capacity (hiring more sales resources). In year 5, the productivity improvement approach yielded the same increase in net revenue with significantly less headcount (161 less sales resources).
The key takeaway is that adding more “non-productive” heads to the field is not the answer.
The Five Layers of Sales Force Productivity
1. Develop targeted offerings for high-potential customers and market segments
The needs and requirements of your new, high-potential customers and market segments may differ significantly from your current customer base – this could be why they don’t do business with you. Before you start focusing your sales resources on these opportunities, make sure you meet their product and service needs – your value proposition has to support their demand. This is a critical step, as otherwise your sales efforts will fail. Additionally, lack of product and service alignment (i.e. not providing the products and services customers truly need) will drive your highest-performing sales resources away from your organization. A good salesperson will not be motivated to push a product or service that the customer doesn’t want or need.
2. Potential-driven sales force deployment
Put your resources where the potential is! I mentioned potential-oriented selling above, but we are always surprised to learn how many organizations assign sales resources based solely on historical revenue numbers. We need to stop looking through the rear view mirror and focus on future potential. This will require us to continuously challenge the status quo and critically evaluate our go-to-market approach.
3. Standardized, disciplined, data-driven, and focused sales management processes
We will talk about this in more detail in the next newsletter. The sales management process answers the following questions:
What activities are your sales resources focusing on?
How do they manage their time, customers, and product portfolio?
What are the roles of various sales team members?
How are targets set?
How are activities and results tracked?
How is the team managed?
These are just a few of the most important points (again, more in the next newsletter). Answering these questions will be the key to high-performance and consistent productivity gains.
4. Optimized and automated support processes, tools, and information management
As mentioned above, a recent salesforce.com survey found that only 1/3 of sales force time is spent on active selling, due to lack of information and administrative tasks. In a first step, we recommend that all sales support material (brochures, fact sheets, price lists, pricing agreements, customer history, etc.) as well as administrative requirements (order forms, credit applications, terms and conditions, etc.) are immediately available to your sales force. There are no excuses today – cloud-based solutions allow us to have access anytime and anywhere. However, special attention should be paid to how these documents are organized, accessed, tracked, and passed on. In many cases, we recommend hiring an outside resource to get this done for you. There are a lot of great organizational tools out there – no need to reinvent the wheel.
5. Active performance management, training, and coaching
There is no substitute; whether it be compensation, fancy score cards and KPI’s, shiny literature, etc. that will replace active sales management, mentoring, and coaching. Despite years of research showing that empowerment, de-centralization, and inspirational leadership are the way to go, many organizations continue to micromanage their sales resources on a daily basis. More to come on this topic in future articles…
We are operating in a business environment where many of our historically stable markets have shifted, or disappeared completely. The ability to identify new opportunities and diversify into adjacent markets has become a means to survival. Having the flexibility to expand into these markets in a focused and disciplined way will determine the time it takes to gain a strong foothold and achieve a return on investment. A well-managed, highly productive sales force will be the key. Please contact me at firstname.lastname@example.org with any questions or comments.