The confidence and energy of a high-performing sales team will permeate through an organisation. To create this, a chief executive needs to think long and hard about what types of business development people are needed, the support structures provided, and how compensation will drive their behaviours.
These are big decisions – ones that can determine the success, mediocrity or outright failure of the business. Kate Donaldson, Managing Director for Performance Improvement at Alvarez & Marsal, notes that she’s seen senior executives shy away from making significant changes to sales for fear of the impact it may have on the organisation.
She explains: “A lot of management teams don’t understand what is wrong when they are facing a problem with a sales team – this tends to be compounded by a desire to not meddle with the department; an attitude that can lead to a lot of problems.”
Another common issue Kate finds is the incomplete way in which sales performance is measured. She explains: “A lot of companies consider output metrics, such as revenue and order backlog, but the input metrics are just as important, such as how often the sales team follow up on customers and what the pipeline sales rate is. This is something that is sometimes missed.”
Mark Whitby, Non-executive Director at software business Totalmobile, and former VP of Sales and Marketing for EMEA at data storage company Seagate, comments that companies can fall foul of adopting a generic approach to building a sales team – what’s required is clear and disciplined thinking about the skills needed to sell, or upsell, products and services.
“There is a tendency for the sales function to get very easily characterised in terms of its requirements and the skill-sets that will fit it,” says Mark. “You may have different sales models, or different parts of your business that sell directly to a customer and another that sells with a partner. The skills required for each role are subtly different, but it is critical to understand and then employ people with that firmly in mind.”
It comes back to Kate’s point around there being a basic lack of understanding about the sales function. “Often, sales teams do not have people that are dedicated to hunting new customers. Salespeople concentrate on maintaining the customers that they already have, and unless there are incentives in place, or a structure that creates dedicated hunters, then it is often difficult to get clarity on where new business is coming from,” she says.
Don’t spray and pray
The hardest time to implement changes is when a business is doing well, not least to the sales function. This is exactly what Mark Basham was tasked with in his former role as Managing Director for EMEA at safety and testing concern BSI. It was evident to Mark that, while the organisation was successful, a transformation was needed if it was to stay competitive.
Fundamentally, he wanted to implement a more structured approach to understanding customers, mapping out which ones generated the most valuable business, how much time was spent with them, and where new business opportunities were coming from. It meant rethinking the mix of skills in the team, as well as the information needed to support them.
“We started to generate propensity analysis, looking at individual clients and buying behaviours. We started to understand what size of organisation, in what sector, would be buying which type of product,” he says.
“We then broke it down by geography. We had national teams which we broke down into regional teams and we created a sense of cross-functionality. We also formalised a key accounts approach and started to sell our entire portfolio to larger customers.”
This was integrated with a far more targeted marketing strategy. “We started to think about what issues our customers may be facing and how we could package our products and services to meet client needs. In doing this, we started to build a solutions-based sales organisation,” he says.
Building this kind of intelligence about customers can be easier said than done. Julian Goldsmith, Senior Relationship Manager at Criticaleye, says that businesses often feel overwhelmed by the amount of information available.
“It can be tempting to analyse all the data you have, particularly what’s easiest to access,” he explains. “When it comes to understanding your customers and clients, it’s crucial to start from the standpoint of what you need to know and then work out how to best gain those insights.”
Kate at A&M agrees that many businesses suffer from a lack of understanding of how to use data. For example, she says that you should be able to use company financials and sales performance data to get a true picture of profitability for each product and customer, and, from this, you should know if your sales teams are spending too much time chasing unprofitable customers.
There ought to be a mixture of quantitative and qualitative analysis. When working with companies, Kate says that she will talk to current customers, potential customers and even lost customers in order to understand why a relationship went wrong. “We talk to competitors too, because that helps build an understanding of how others are selling against you,” she adds.
Any changes made to a sales team will involve discussions about compensation. It’s a somewhat sensitive subject for sales people, and if the alterations are too drastic and sudden then you can guarantee threats to leave, proclamations of betrayal and no small number of profanities.
However, it is essential to be thinking about the links between compensation and performance, as well as the culture you’re seeking to create in your organisation. Mark Basham says: “Compensation plans and reward structures are tremendously important, but you have to understand what outcomes you are trying to achieve before you build one, in order to drive the right behaviours.
“Where possible, we tend to tweak them rather than change them in a wholesale fashion. As little change as possible is a good thing, as it takes people some time to get used to a new system.”
John Allbrook, Criticaleye Board Mentor and Chairman of Borro, Cellesce and Franchise Finance, urges companies to take any opportunity to benchmark sales compensation structures as he is convinced this has a huge impact on behaviours.
Drawing on his time at GE Capital, where he helped establish the company as one of the pre-eminent, pan-European commercial finance providers of both plant and machinery and car-fleet management, he says that it wasn’t unusual to adjust the “leverage and reward structure, splitting the salesforce into hunters vs farmers in different geographies”.
He continues: “I believe that compensation architecture absolutely drives behaviour and it was therefore a matter of defining, in each segment of the business, or in each country, what behaviour we wanted to incentivise.
“Because of the number of acquisitions we made, we got to see twenty, thirty different models, which was excellent from a benchmarking perspective and really helped us in our decision-making."
If you’re seeking to improve the performance of your organisation, sales has to be at the heart of your thinking and that’s why it’s inexcusable to shy away from making changes. “One of the most common problems we see is that the sales team is often secluded in a black box,” says Kate.
For many companies, it’s a catastrophic mistake.
Robert Leeming, Editor, Criticaleye
Next week’s Community Update article is on the Role of the CFO in Navigating Disruption.