Expansion isn’t always the best answer to drive sales growth; it’s time to look at the performance of the sales force you already have.
The “blind squirrel theory” suggests everyone gets lucky once in a while, and for more b-to-b sales reps than we care to admit, it certainly applies. As a sales management strategy, relying on sales reps stumbling onto deals is probably not the best idea, for even if the forecast is achieved this month there is little if any faith that the good outcome will repeat itself.
The best sales leaders always are looking forward to ensure that performance will be maintained and increased, even if the current quarter’s results have come up roses. In this article, we will identify the key sales dials that can be adjusted, so that your sales team hopefully will be able to find a few more nuts.
Optimization and Its Five Dials
While there are a series of external drivers, economic conditions, market dynamics, competitive alternatives and product capabilities which can impact sales performance, sales leaders must focus attention on the elements inside their control to deliver revenue growth.
A sales expansion strategy drives performance by increasing the number of quota-bearing, client-facing sales resources. The function also can grow through acquisitions, the introduction of new sales roles (inside sales, global accounts, vertical specialists, channels) or the addition of territories in an existing structure. In all cases, sales operations resources will be diverted to support the recruiting, hiring and training processes to bring new personnel up to speed.
First-line sales managers always feel the brunt of sales expansion initiatives, as they have to make critical hiring decisions and allocate time to provide additional support. Sales expansion is also costly, as the expense usually occurs long before any incremental revenue is generated.
A sales optimization strategy, on the other hand, seeks to improve performance of the existing sales organization through either structural or individual productivity initiatives. Structural initiatives are driven through sales management to maximize the impact of salespeople. Individual initiatives target what salespeople do and how they do it by expanding competency and capacity, and providing the right tools. Both types of initiatives require an examination of the competencies and activities currently used by sales to engage with clients that advance opportunities; only then can they be optimized.
These two main optimization “families” can be further broken down into five “dials” that drive strategy, directly impact sales and are in the control of a sales leader. They include:
* Coverage model (structural). Between 70 percent and 80 percent of sales expense is committed to headcount. Balancing the proper mix of global, strategic, national, key, geographical, vertical, inside or partnered sales roles with the management hierarchy, sales overlay/specialist and non-quota-bearing headcount sets the stage for customer interactions, and sets up the cost structure.
* Performance (structural). A complete, well-conceived metrics structure will properly shape the focus, priorities and time allocation of sales management and salespeople. Performance metrics including quota attainment, revenue, margin, retention or unit sales ensure sales is aligned with critical financial indicators. Opportunity metrics (growth, velocity, total, factored) measure the status of opportunities as they move through a lifecycle. Activity metrics (sales calls, demonstrations, leads accepted) focus attention on the key tasks and milestones that drive opportunities. Productivity metrics including deal size, sales cycle length or total opportunities measure the efficiency and effectiveness of sales. Finally, operational metrics measure expense, headcount and infrastructure costs.
* Behaviors (structural). Salespeople respond to two things: what they are paid for and what their manager makes them respond to. Compensation plans and quota tie income with performance, and can certainly change behaviors in a hurry. Managing and influencing behaviors over time is the responsibility of first-line sales managers, who create a sales culture, define its values, and drive performance and development while enforcing standardized business processes.
* Productivity (individual). Improving productivity empowers individual reps to work better, smarter and faster. Sales competencies define a set of sales processes utilized by the organization, the sales skills required to execute the processes and the knowledge a salesperson needs to be customer relevant. Defining and managing sales activities ensures enough time is being spent on the “right” activities versus those that do not generate revenue. Finally, opportunity management optimizes sales cycles and provides insight into the status of opportunities as they advance through the sales cycle.
* Tools (structural, individual). Sales needs access to information and content about clients, the company, its products and the marketplace to be successful. The PC platform and a suite of office applications has allowed an individual to be more productive; sales automation applications including opportunity, account/contact, territory and performance management form the basis of a sales management system; and customized sales communications, sales knowledge and sales training applications all impact productivity.
The Heart of Optimization
The skeleton that supports an optimization strategy is the sales infrastructure. It maintains the sales hierarchy, drives critical sales processes, provides access to client data systems and connects with marketing. The loss or decay of any part of this infrastructure will derail even the best-conceived productivity; as an example, a poorly maintained sales knowledge repository always will require salespeople to spend more time creating customer communications than is desired.
Best-in-class sales operations functions have expanded their role to become “field operations” teams that are as responsible for productivity as they are for the more traditional tasks of measurement and reporting. Sales strategy, planning and analytics resources within operations manage the sales structure while providing the reporting and analysis on sales and selling. Sales program teams support briefing centers, client demos or RFP/RFI response centers, while sales training supports new hires and the continuous development of current salespeople. Sales technology teams support an overall sales platform and its applications, while sales readiness resources drive marketing programs, campaigns, leads, product launches and collateral. Only with this robust sales infrastructure in place do sales leaders have the ability to optimize, or “tune” sales.
As sales leaders develop their strategy, they need to evaluate the impact of each of the five dials as well as their associated costs. With headcount and merit increases taking the lion’s share of expense, there is precious little budget left for optimization, meaning that any initiatives must be considered very carefully. Should you expand inside sales? Retool your dashboard? Change your compensation and quota structure? Invest in sales development or technology? Each of these choices requires a tradeoff of both funding and resources, and chooses a different path of focusing on organizational or individual productivity. The real question is, do you understand how your organization is performing in each of these areas currently to make the right choices?
About the Author:
SiriusDecisions, a leading source for business-to-business sales and marketing best-practice research and data. SiriusDecisions Executive Advisory Services, Consulting Services, Benchmark Assessment Services, Learning and Events provide senior-level executives with the sales and marketing operational intelligence required to maximize top line growth and performance.
©SiriusDecisions, 2008. Reproduced with permission.