Sales & Marketing: My Salespeople Are Great—They Don’t Really Need To Be Managed!
 
March 1st, 2007

By A. Craig Stimmel


March-April 2007

If I’ve heard this once, I’ve heard it a hundred times, “My salespeople are great—they don’t really need to be managed.” These executives or entrepreneurs believe that a “self-managed” salesperson does better on their own without any management involvement. Are they right or are they putting their company at risk?

The answer is YES—they’re sticking their neck way-WAY out and waiting for it to be cut off.

Why? Because companies that do not manage their salesforce put their company at risk. At risk of what? Well how about:

  • Loss of business opportunity—unmanaged salespeople only rarely “suggestive sell”—making their employer vulnerable to competition and lower-than-acceptable levels of account penetration.
  • Risk of competition getting into their account—stealing it from them without their even knowing it. This is especially likely with small-to-medium size accounts—those who rarely, if ever, see their account rep.

The Communication gap—today’s savvy companies strive to maintain a strong communications link with their customers. With self-managed salespeople, the executive in charge of business development is rarely kept up-to-date or even aware of:

  • Correct current customer contact information—often the only one that knows is the sales person, and far too frequently h/she keeps it to themselves. Companies often know the AP person but not the buying influence.
  • Sales opportunities—current and future—allowing management to project revenue into the future and track the sales person’s success in closing new accounts.
  • A sales funnel—allowing sales professionals to manage new or previously identified sales opportunities on an on-going basis until a sale is made or the opportunity is found to be no longer valid.
  • Or given the opportunity to communicate directly with accounts—maintaining or enhancing the visibility of the company regarding new products, new services, important changes (service enhancements, product mix, order fulfillment), etc.
  • Losses of control—the company’s inability to monitor/mentor sales personnel’s activities and provide support/guidance when appropriate.

A Case Study

A client of mine operated a distribution company with a salesforce of 14 salespeople serving three states in New England. Each salesperson was assigned to a distribution center—one of four serving the customers of the company. The salesforce met once a month at the company’s head office mostly for a rah-rah session, and no other effort was made to direct their activities. The company’s annual sales were $15,000,000 and flat—little if any growth had taken place over the past 5 years.

My client, the CEO of the company, asked me to come in and see why the company’s profitability was flat or declining while sales were growing at only marginal levels. The company had over 7000 accounts on their books with salespeople assigned to an average of 500 each. The newest salesperson with the company had been there for more than 8 years and the senior salesperson had been there for more than 30.

The company had experienced, as so many firms have lately, a significant increase in their operating costs:

  • Medical insurance had shot through the roof (20% 2 years ago, 15% last year, etc.).
  • Energy/Fuel to operate their delivery vehicles doubled in cost over the past 3 years.
  • Casualty insurance for their facilities, for vehicles, for workman’s comp, etc., had grown by 25%.
  • OSHA compliance costs went through the roof.

The list went on and on. Naturally because this was a closely held private corporation with multi-generational management in place, employees received full benefits at no cost to themselves. It was a great deal for the employees and not so great for the stockholders.

Profits were flat—closely matching their direct cost of doing business (breakeven) as it continued to climb—producing a “zero %” ROI for the stockholders of this privately held corporation.

Something had to be done. No longer a matter of “it would be nice,” it was a critical situation that needed to be fixed or the company couldn’t continue in business, and 60 people would lose their jobs.

My firm did some research and identified that fewer than 100 accounts per rep (of the 500 typically assigned to each rep) saw their sales person more frequently than once-a-year. The largest accounts, naturally, saw their rep as often as weekly or monthly. Another 25 saw their rep twice a year and 50 saw him/her once a year. What happened to the rest of the 400 accounts? They “never” saw their reps. Never ever!

We took our research a little further. We identified 6 product categories that reflected the products sold by this distributor and started tracking the sales by account in each of these product categories. Fewer than 25% purchased more than 2 categories of products despite the fact that most of the small-to-mid-sized accounts used a broader spectrum of products than their sales represented.

In effect the company was losing significant business (maybe equal to the amount of business it was getting from these accounts) because it was not on top of what customers were buying. In effect this company was allowing competition to take the business away from the company because if they weren’t buying it from this company, they were buying it somewhere—and that somewhere was through the competition. They were making it easy for their competition to take business away.

We then tracked how frequently the company communicated with their customers. The answer—rarely if ever. Invoices were sent when an order was fulfilled and a general mailing was done every 6 months with price changes and new product announcements. Because the company didn’t know the name of the buying influence, often this information was being sent to the Accounts Payable clerk rather than to the buying influence. Who had the right contact information? The sales rep—naturally!

How much was this lack of management of the selling process costing this company? After careful evaluation and research, we projected the cost in lost business at over $10 million in sales that they should have but didn’t. They should have been a $25 million company—yet they remained a $15 million firm.

The Recommendations We suggested the following:

1. The entire account base would be evaluated and categorized as follows:

  • Potential Business—based on the size/type of business and general knowledge of the products that were used in similar firms.
  • Existing Business—as a comparison broken out by product category
  • Targeted product categories—account by account

2. Accounts would be assigned to salespeople based on the “real” number of accounts they could effectively serve—500 per salesperson was way out of line with reality. Salespeople were assigned 150 accounts. Some required visits to the customer site. Others could be served by phone or through a combination of phone and much-reduced on-site customer visits.

3. Salespeople would be trained to use a contact management software system that was network compatible. Salespeople were taught to use the corporate sales campaign programs designed to maintain contact every five weeks with accounts—using emails, eNewsletters, Faxes, letters sent with corporate literature via USPS or phone calls. The process was automated so all salespeople had to do was to follow the programmed sales campaigns designed to build revenue for this account base.

4. Accounts not assigned to the salesforce were re-assigned to the distribution center store managers who had time during the day to undertake a pro-active outcall telemarketing program designed to serve this account base and to reactivate in-active accounts (over 6 months inactivity).

5. Salespeople were required to input sales call reports into the CRM system which produced reports on sales performance, account penetration, growth and provided triggers for when sales management needed to get actively involved. This was a part of their responsibility and they were going to be held accountable for it. Salespeople were given laptop computers and access to the Intranet and were required to synchronize their database with that of management daily.

6. As a result of this information flow, management—both the sales executive and line managers—would have instantaneous access to all sales account information in all categories appropriate to that account.

THE RESULTS

Within 15 months, sales were up 50% (to $21 million). Profits were up 1.5% and salespeople were making more money, the company was upbeat and profitable, and senior management received the benefit of having turned things around.

For the sales staff, the benefits were meaningful: enhanced opportunities to grow their assigned account base, increased compensation together with the pride that comes with being part of a successful, fast growing company.

WHAT MADE THE DIFFERENCE?

Management was the key—savvy management who dug, identified “holes” in the sales process, and created internal and technical systems that gave them the information to effectively know and manage.

The company found that salespeople like to be managed if management is savvy, understanding of the realty of what they do and capable of giving the salesforce the support they need to do their job.

Talk about a win-win!

A. Craig Stimmel, CMC MBA, is President of Planned Growth Business Development Solutions LLC.

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