The sales team is the primary revenue source for most businesses. However, this revenue is not without significant cost. If not carefully managed, this revenue source can easily become a money pit. There are five areas business executives should watch to ensure they make wise investments in their sales teams.Hiring. In most organizations, if a new idea is proposed that costs $25,000 to implement, blue ribbon panels are commissioned, meetings are held and a decision is ultimately made. After all, the company is considering a significant investment which requires careful consideration.
However, when a company is hiring a salesperson at a salary of $25,000, there isn’t nearly the same level of due diligence performed. Yet, it’s the same $25,000! In essence, the worst mistake a company can make is to hire sales people. Adding headcount to a sales team should be viewed as an investment made in revenue. Recognizing that this is an investment is a critical first step toward driving sales team profitability.
As executives evaluate sales candidates, there is a perception that they can hire great salespeople. Unfortunately, there are no great salespeople. They don’t exist! The issue is the word “great.” Greatness isn’t a standalone quality, but rather an attribute of the relationship between the salesperson and the sales role in your company. Don’t believe it? How many sales people have you hired – great resume, fantastic track record, polished appearance – and they failed in your company?
If you believe that there is an entity called “great salesperson,” you must also agree to one of the two of the following statements:
“When the salesperson arrived at my company, she completely forgot how to sell.” “Our company is the absolute worst company to sell for in the history of business.” After all, what other choices could there be if this person is truly a great seller? Companies with highly profitable sales teams don’t search for great salespeople. Their quest is to find the right salespeople with the potential to be great on their sales teams. While this may seem subtle, its impact is not.
This quest begins with a 360-degree analysis of the role to determine the factors that impact investment performance. Once all of those factors are identified, an evaluation program is put in place to contrast candidates with those performance factors. Now, instead of looking across the desk wondering if this candidate is a “great seller,” potential investors (which is what the executive team becomes when adopting this philosophy) are looking for synergy – or lack thereof – between the candidate and the needs of the role.
Onboarding. Many executives believe that – once they’ve hired a salesperson – the hard work is over. And, why shouldn’t they believe that? They’ve just hired a great salesperson! Hand the new salesperson a phone book and send him off to sell.
Highly profitable companies recognize the real work is about to begin when a new salesperson investment is made … for both the new salesperson and the company. This work comes in the form of an onboarding program. Onboarding is commonly seen as completing new-hire paperwork and getting the salesperson’s office ready to go. While administrative work needs to be done, that does nothing to protect the new investment or ensure a healthy return on it.
During the recruiting process, the evaluation program helped the investors make an informed decision prior to extending an offer to the candidate. The new salesperson arrives at the company with potential, but a program is needed to ensure the potential becomes reality – in as little time as possible. After all, every minute that the seller is on the bench, not yet ready to sell for the company, she is merely a cost on the books.
The starting point in the development of a sales onboarding program is the end. In other words, without identifying the program objectives, it’s impossible to create effective onboarding curriculum. The investors need to clearly identify the finish line for the onboarding program based on expectations they have of those new salespeople who successfully complete it. Those expectations are identified in the context of KNOW-DO-USE. If a new salesperson has successfully completed the onboarding program…
What should they KNOW?
KNOW refers to information like product knowledge and territory analysis.What should they be able to DO?
DO refers to actions like conducting a sales calls or delivering a corporate presentation. What should they be able to USE?
USE refers to tools or systems like a CRM or order management system.
KNOW-DO-USE provides the framework to identify the desired onboarding outcomes. With that, the onboarding curriculum is designed to lead the new salespeople to this finish line. How do you know they are meeting expectations? Investors want visibility into the performance of their investments. There should be quizzes, a final exam and simulations to ensure proficiency has been acquired. If the new salesperson does not meet expectations, based on what the investors have documented as their expectations of someone who has successfully completed the onboarding program, there is an opportunity to protect the company by ending the investment early.
Managing. There is an age-old debate on micro versus macro management. Micro-management is often defined as constant, in your face management. Macro-management is aligned with the French “laissez-faire” philosophy of leave them alone. The debate seems to be limited to these two extremes. Yet, top performing companies cast this debate aside and take on a different philosophy.
Hiring and onboarding are seen through the lens of an investment in revenue. Managing the sales team falls in line with the “investment philosophy” as well. Each salesperson on the team represents an investment made on behalf of the company. When investors consider investment opportunities, they look for a sound business plan. This is the same philosophy highly-profitable sales teams have in place to ensure there is a strong return on investment.
The investor team develops a sales business plan template which is structured in a “wizard-format.” The plan is designed so that the investors can get a high level of confidence in the strategy, tactics and measures for each member of the sales team. Once the plan is completed by the salesperson, an investor call is held during which the salesperson presents the plan for acceptance.
During the call, the investor team asks questions to instill confidence in their investment decision. Once accepted, periodic calls are held to update the investor team on sales business plan implementation progress.
Rather than argue micro-management or macro-management, these companies have a management structure in place that positions them for a high return on their sales team investment. Those sellers that perform well receive additional investment (time, dollars, resources, etc.). Those that don’t, they find their business ventures no longer funded.
Measuring. There is no end to the data associated with sales and it’s easy to get lost in it. Worse yet, it’s common for executives to focus on the wrong data points. Companies that recognize that the sales team is a revenue investment develop their sales metric management system designed to help them analyze performance.
Many start their system with “revenue” identified as their first metric. Yet, revenue is not a metric. It’s a result of the right metrics being delivered upon by the sales team with the right frequency. Companies can’t affect revenue, but they can affect the behaviors that lead to it. The investor team identifies a series of metrics that indicate that the business is on track. There are four criteria for each metric that is to be included in a sales metric management system:
- Measurable. It is easily quantifiable as opposed to merely gut-feel.
- Meaningful.The data point indicates something of importance to the business and seller performance.
- Trainable.If a seller is deficient in this area, training can be provided to improve performance.
- Goal-oriented.As it is measurable and meaningful, a driver is needed to ensure it is achieved.
With a sales metric management system in place, the investors have the ability to monitor the corporate investment and take swift action.
Compensating. “You’re only as good as your last sale.” This is one of the worst expressions ever uttered as it conflicts with how businesses are measured. Wall Street looks at tomorrow much more than yesterday. And, it is this expression that leads companies to develop flawed sales compensation strategies.
Traditional thought is that sellers are paid an incentive over their salary because they sold something yesterday. Profit-focused companies pay an incentive to get more sales in the future. Their focus is on growing a healthy sales pipeline in addition to winning accounts. When companies pay for yesterday’s news, their performance chart resembles an EKG.
The common starting point when developing a sales compensation plan is to ask:
“How much do we want our sellers to make if they achieve plan?”
While this is an important question, it should not serve as the foundation for the compensation plan. Since paying dollars beyond salary is a further investment made by the company the foundation question to be asked is:
“By paying an incentive (bonus, commission, etc.) to our sellers, how will that help us get more of the sales we want in the future?”
The answer to that question helps to guide the development of a sales compensation plan that not only rewards for yesterday’s results, but for a healthy sales pipeline.
Each of these five areas has a major impact in the profitability of your sales team. While it may seem like a large undertaking, the result of transitioning your sales team to a “revenue investment philosophy” is exactly what the corporate bottom-line needs.© 2013 by Lee B. Salz. Lee B. Salz is a leading sales management strategist specializing in helping companies build scalable, high-performance sales organizations through hiring the right salespeople, effectively onboarding them, and aligning their sales activities with business objectives through process, metrics and compensation. He is the Founder and CEO of Sales Architects, Business Expert Webinarsand The Revenue Accelerator. Lee has authored several books including the award-winning book Soar Despite Your Dodo Sales Manager. He is a results-driven sales management consultant and a passionate, dynamic speaker. Lee can be reached at lsalz@SalesArchitects.net or +1 763-416-4321.