Economy Forces Reduction in Sales Force

Economy Forces Reduction in Sales Force

The sluggish economy has had its toll, even on Google where it has recently reduced the size of its sales force. Other companies such as GlaxoSmithKline, Apple and Sun Microsytems have also reduced their sales forces. Re-sizing the sales force creates a cascading impact on the sales force and their customers. My experience shows that when this type of change occurs in the field, top line revenue and sales force morale are at risk because of the broken relationships between sales professionals and their customers.

Three critical questions need to be addressed when re-sizing the sales force:
1. Do you have the right number of sales professionals?
2. Are sales professionals covering the right accounts?
3. Are sales professionals located in the right locations?

The following proven, real-world process can be used to answer those questions:

1. Create a database
The process starts with a data template with elements including account characteristics, sales representative assignment, revenue, margin, volume, potential, account profile and sales visits.

The next step is to populate the template with customer and prospect data. Next, the database needs to be segmented. There are a wide range of methods for determining segments based on account characteristics, e.g., industry definition, products, services and buying behavior. The foundation of segments will have an impact on the following steps of the sales deployment process.

Once the database has been cleansed and segmented, estimating potential is the next step. Most companies can collect actual revenue or margin at the account level, but potential is usually not readily available. You could engage the sales force to estimate potential at the account level, or you could use a “mechanical” process. One route is to estimate specific spending at the national level, at the industry segment and at the company size level (either number of employees or annual sales). Then you can estimate potential at the account level. Another means of achieving account potential is more specific by using spending at a geographic level, i.e. spending in Atlanta which may be different than San Francisco. In some industries like pharmaceuticals, data exists that can pinpoint exact spending at the account level. Another option involves leveraging the customer database. Customer characteristics need to be included in the database such as industry segment, number of employees and annual sales at the account level. Based on these customer characteristics, estimators are created based on high share accounts by segment. This estimator is then used as a proxy for potential for all customers and prospects with the same characteristics.

Once you have potential at the account level, a deeper level of marketplace insight can be gleaned. For example, you could analyze market share by product or by industry segment and develop implications for current sales deployment.

The next step is to create account profiles. Account profiles are often based on size of potential and on customer segment. Profiles can also be based on factors other than “size,” e.g. purchasing process, product mix, contracting, etc. For example, all accounts that have greater than $10 million annual potential are in the Jumbo account profile in the Retail segment.

Next, workload can be defined based on account profiles. Workload is an activity-based approach and is the foundation for sizing the number of sales assignments. Workload is defined as the number of sales calls per period required to support customers and prospects. Workload is segregated by customers and prospects. There are several sources of information for designing workload structure: sales force survey, customer survey, sales interviews, previous workload analyses and/or sales process design.

Now that the complete database has been integrated and cleansed, the current sales deployment model can be analyzed for gaps, overlaps and misalignments.

2. Sales Assignment Design
At this time in the process, the database is complete and validated. The account-level database contains customers, prospects, segments, revenue, potential, account profiles and workload. Now you are ready to design assumptions for sales assignments. Sales assignments are groups of accounts that are aligned by sales rep. You need to determine what account profiles will be covered by what sales roles. For example, Jumbo accounts are covered by Key Account Managers, Large and Medium accounts are covered by Account Executives, and Small accounts are covered by Inside Sales Representatives. For each sales role, you need to design the workload specifications based on how many sales visits per day are needed. For example, time allocation for Sales Executives is 60% on customers, 20% on prospects and 20% on non-selling activities. Then, you need to agree on the number of actual days in the field for sales activities. Continuing with the example, there are 150 days available to make customer sales visits, and 50 days for prospects. The design assumption would be 3 sales visits per customer per day times 150 days equals 600 sales visits, and 50 days on prospects for 4 visits per day equals 200 sales visits. In total, there would be 800 sales visits per year. Now that you have the assumption for creating assignments, you can estimate the number of Account Executives needed based on the database. In addition, first-level sales management roles can be estimated based on span of control. This model of estimated headcount and costs (sales reps and first-level sales managers) is then compared to current headcount and costs. Usually, the models are revealing; either the current sales deployment is right or, most likely, there are gaps that need to be addressed.

3. Create Assignments
Creating assignments is the first step of sales deployment implementation in the field. Up to this point in the process, most decisions have been made centrally. Now, local insight and field buy-in takes hold. This is a critical step in the process where the implementation plan is handed-off from central resources to the field. An implementation team is selected, educated and trained on the work plan. Corporate sponsorship and leadership need to be aligned with field senior management. Education and training on the business case for change is developed and delivered by senior management to field sales management levels. All of the data is handed-off to first-level sales management.

When field sales management is educated and trained, an interactive, hands-on sales assignment design session is ready for execution. The input for the design session is the data classified by segment and geography. A software mapping tool is utilized to assist with the facilitation of the session. Participants in the design session are the appropriate implementation resources and field sales management. One of the sales managers is selected to start the process. In addition to the sales manager who has insight on the marketplace, other resources could be involved such as a distribution center manager or a previous sales manager located in the geography. Projected on a wall is a map of the appropriate accounts (based on customers, prospects, segments and or account profiles). The sales manager selects accounts into the first sales assignment. Based on the previous example, the constraint for each sales assignment is 800 sales visits per year. The sales manager completes the first sales assignment and continues with the process until his/her geography is completed. The process continues until all accounts have been grouped into sales assignments. Once the sales assignments are set, the first-level sales management assignments are designed. At this time, the straw model (headcount and estimated costs) is presented to senior management for preliminary approval. Final approval of the model cannot occur until all geographies have been designed. The output from the design session is an account list by sales assignment, account maps by sales assignment, organizational chart, summaries of revenue, potential and estimated costs, and issues and next steps.

4. Role/Fit
The next step of the sales deployment process is to assess and select incumbents into the sales rep and first-level sales management assignments. Data needs to be collected in order to make decisions concerning fitting incumbents into the assignments. Some of the data sources are performance appraisals, self assessments, employee preferences, manager recommendations, relocation desires, etc. Once sales managers have been selected and approved, field sales management is convened (by geography) to fit incumbents into sales assignments. Based on the available data, decisions are made to select incumbents into sales assignments. Some assignments may be left open and could be filled from a different geography or from the outside. Some incumbents may not fit into the new assignments. In those cases, other roles could be an option or sometimes severance. It is possible that some of the sales reps will not accept the new positions. In order to prepare for that event, contingent plans need to be ready. Once the preliminary organization is set, projected actual costs are updated into the model.

5. Account Risk Transition Plan
When the incumbents and/or open assignments are complete, it is possible to determine the account risk of changing one sales rep to another. Since you are changing the key link, the sales rep between accounts and the company, you need to identify and mitigate these risks. The focus is to protect top line revenue during this phase of transition. For some accounts, there may be a significant change, e.g., “I had the same rep for the last five years. Now, my new sales rep is new to the company.” What if the account is a Jumbo account? Other accounts may have the same rep; either way, we need to account for the risks. The data can show the variances at the account level where sales rep changes occur. At least six key risk factors have been identified: account profile, share of revenue as a percentage of potential, sales rep change, distribution center change, customer service change and qualitative assessment. All accounts are rated by the six key factors, and a score is calculated. By leveraging all of this data, a plan can be developed to alleviate the risks, e.g., the accounts with the highest risk score will have a face-to-face meeting with the customer and your Regional VP.

6. One-On-One Meetings
We are almost ready to implement at the street-level. Executive management has approved the organization headcount and costs. Assignments are complete with account lists and account maps. Incumbents have been selected. Account risk transition plan is in place. Education and communication materials have been developed and approved. The key step is a one-on-one meeting between a sales manager and a sales rep. This is the most critical interaction of the implementation. All of the work that has been completed needs to be delivered to the sales rep level. And this communication needs to be delivered flawlessly. If not, all the invested work will be at risk. So, the key implementation role is the first-level sales manager. Make sure that first-level sales managers are prepared for the one-on-one meetings with education, training, role play activities and tools. In addition, the first-level sales manager has experienced first-hand the design of the sales assignments and the process to fit incumbents into sales assignments. If any of the sales managers are questionable about delivering the communication, his/her manager could team for the one-on-one meeting. In addition, since you have identified the sales reps that are at risk of not accepting the new role, they have been scheduled early in the one-on-one meetings, and the contingent plan can be deployed if needed.

Finally at the end of this proven, real-world process, you will be able to answer the question that you do have the right number of sales reps in the right locations covering the right accounts.

Bob Malandruccolo is the founder and principal owner of Sales Force Effectiveness Consulting. With over twenty-five years of practical business, management and consulting experience in sales and marketing, Bob has worked with a broad range of clients from Fortune 100 corporations to small, closely-held firms with special emphasis on sales and marketing process implementation. He has worked closely with his clients through hundreds of successful engagements and implementations across multiple industries (manufacturing, engineering, distribution, software, healthcare insurance, medical products, healthcare, automotive, telecommunications, retail, information handling, media).

Prior to founding Sales Force Effectiveness Consulting, Bob was a Principal in Mercer’s Human Capital Business, specializing in Sales Effectiveness. Based in Chicago, Bob worked with his clients’ sales organizations to achieve improved business impact with special emphasis on sales compensation along with sales coverage design and implementation. He was actively involved in the design of solutions in the areas of sales force sizing, sales force organizational structures, roles, training, automation, forecasting, goal setting and change management.

Prior to joining Mercer, Bob served as a consulting practice manager in a firm that provides sales and marketing effectiveness training and consulting to high-tech companies. Earlier, Bob founded and managed a consulting firm based on his extensive technical sales experience with a multinational chemical company. He has also taught courses in management strategies at Governors State University of Illinois.

Share

Leave a Reply

Your email address will not be published. Required fields are marked *