What Is the Optimal Size of Your Sales Organization?

Publish Date : 2021-05-28


What Is the Optimal Size of Your Sales Organization?

For many sales organizations, this is not an easy question to answer. The size of the sales force affects customers, salespeople and the overall company. If the sales force is too small, it cannot serve the needs of the customer effectively. If it's too large, salespeople become an annoyance to customers and a drain on the bottom line.

As a result, most companies use a variety of financial or personal rules to determine how large their sales forces should be.

Common Approaches

Some of the most common rules are listed below, unfortunately these rules often lead to poor decisions.

1. Going with your Gut: Experienced sales leaders develop a feel for the market that suggests go-forward staffing levels. An un-scientific approach that relies on the leaders experience / gut as oppose to taking external factors such as customer needs, competition, and market conditions into account.

2. Maximize the Sales Budget: Another method to "size" the field sales organization is to add headcount up to the available sales expense funding. This approach can prove inadequate because it focuses solely on cost while ignoring market dynamics such as market potential versus total available selling time.

3. Looking at the Competition: Matching the competitors' deployment models ensures competitive coverage but it is only a single dimensional view. Plus it is based on the accuracy of your business intelligence.

4. Split a Territory: When a territory hits a certain threshold, sales leaders split the territory and give a portion of it to a new salesperson. The current salesperson's "reward" for working hard to build business is to have his territory reduced. Provides a dis-incentive to your sales people to grow a territory.

5. Keep Sales Force Costs at a Constant Percentage of Sales: While this is a great way to ensure that your sales force stays affordable it can have some unintended consequences. Especially during a downturn, where sustaining a historical ratio may result in excessive downsizing, amplifying the impact of the downturn, and leaving the company poorly positioned for a turnaround.

A Better Approach

Focus on the customer. Consider the following steps:

1. Look for Stress: Try to see if your sales team is under or overstaffed. If customers complain of inadequate service or your sales team is just taking orders instead of prospecting, you probably need to add sales people. If the customer complains of pestering or too much attention, or if the sales people feel that they don't have enough leads to work on, then you probably need to downsize.

2. Focus on the Customer's Buying Process: Understand the typical buying cycle of your customer, segment like customers based on their buying habits, needs and potential, develop a sales process that mimics the buying process, and determine where and amount of sales time needed to influence that processes.

3. Bring it All Together: Aggregate the time required to serve the customer across the various segments and then use that data to estimate the number of salespeople (and the type of roles) required to effectively cover your customer base. Then and only then, do a gut check on financial ratios (cost to sales) and competition's hiring practices

No-one would argue that it isn't beneficial to a business to minimise exposure to risk - that is risk to profit, revenues, the business and its staff. It is seductive to hold that if risk can be eliminated entirely it means that profitability and security will, naturally follow. This risk-averse attitude has given rise to many theories about how to attain the benefits it can bestow, how to control it and most importantly, measure it and eliminate the likelihood of anyone in the organisation deviating from "the path."

Ensuring that all staff, whatever grade or role they fulfill have to follow a common process for certain things is clearly necessary for some functions. For example, in the areas of compliance and legislative and regulatory overview digressing may damage brand and/or result in fines or jail for company officers. Or, it can be used to enhance and maintain brand uniqueness in the market place. Everyone singing from the same hymn sheet on for these subjects is not wrong or misplaced but it does have limits that need to be recognised.

Unfortunately, nothing in this life is certain from the weather to illness. No-one can lock down all the potential variables of life and eliminate the unwelcome ones. The compunction to achieve that can, if given more regard than all others, be self-defeating. The organisation seeking to protect itself will suffer damage because of it. This focus upon defeating risk can lead to the wrong decisions being made with no consideration of an alternative view - let's call it anti-risk fascism.

Anti-risk fascism is autocratic, inflexible regulation of every aspect of a business. Paper-based, electronic, or however authenticated, proof of compliance with anti-risk policies is demanded from staff. Some aspects of a business are better suited than others for this. As an example, the accounts department is ideal since its whole remit is to deal with quantifiable information and calculations. If the numbers add up there is a good chance "compliance" has been achieved - simple. Other departments might not fit in so easily to such an anti-risk view.

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A further example of anti-risk fascism in practice is the belief that academic qualification is the ultimate affirmation of a person's suitability for the role they fill. But, this will only take you so far. Exams passed may prove possession of good study technique but will not expose blind luck or worse, psychological flaws. Impressive interview technique demonstrates only that. The only other variable is going to be practical experience and evidence of that experience - competency (another "in" word). How that is judged is still going to be subjective unless it is a driven by strict and unequivocal results such as those found in numerical calculations. All else is uncertain. Therefore, each time you appoint, it is still full of uncertainty and the outcome or effects of your decisions must therefore be uncertain and unquantifiable. Each appointment is a gamble. Getting it wrong can have a negative impact above and beyond expectations. How to reduce the risk in appointing people to roles is difficult. Human beings in all respects are different to each other. How to identify and quantify suitability for a role is a key skill that should take into account a lot more than paper qualification, good interview technique and the right vocabulary or trendy outlook.

It has been my experience that those who believe leadership is a simple academic process supported by the blunt instruments of metrics and key performance indicators (KPIs) will only succeed in antagonizing and weakening the team to which these are applied. To try to quantify the value and worth of collective knowledge and experience by strict interpretation of numbers is folly. It is the worst of all options that a leader can take. Trying to apply a strictly, scientific process to unscientific variables and subjects is not going help anyone gain meaningful control of human beings or their behaviours. In fact, even the term "behaviours" along with "competencies" or "compliance" are glaring examples of the control the business "thought police" have had over our business vocabulary in recent years and the mindset which demands that everyone embrace their view or else. It is even more astonishing when an organisation permits its leaders to micro-manage the business-critical function of sales. How can you distil down the abilities and performance of a human individual to a strict set of metrics without any quantification of the rest of their skills (soft skills? team ethic? leadership? empathy? experience?) or equal accreditation of the same.

More importantly, when a company chooses to place at the head of its sales organisation a non - salesperson it is taking a massive risk. A business cannot function without sales so why put someone who has never won business themselves or experienced the selling process at first hand in charge of a company's most valuable resource - its sales people?

If an accountant was to be replaced at the head of the accountancy department by a sales person, people would scratch their heads and ask why? - Unless, of course, the sales person also had all the relevant accountancy qualifications and (equally important) experience to fulfill that function. In small organisations it is unlikely to happen as more often than not the directors or owners of the business are also the sales force. However, in larger companies with large staff numbers it does. This begs the question why? I think the answer lies in the desire to regulate and control every aspect of business if possible so as to remove as much risk as possible from the business equation regardless of its likelihood of success.

Slavish reliance upon KPIs not only adds pressure to those in the firing line but can at the same time help to hide the failings of the management team and its processes. It switches all blame to the sales force and damages their morale and enthusiasm. When an accountant who has never had to make a sale, has the temerity to question the sales skills of very experienced sales people (for example looking to identify why the revenue is down) who have historically and regularly won major customers it should ring alarm bells about the accountant's suitability in role - even more so if their knowledge of sales is provided solely by academic theory. In sales in particular, theory can only give a very superficial view of qualities needed to succeed. In many cases the morale and enthusiasm of salespeople will be affected by clumsy, uneducated (in sales culture terms) interference. KPIs have their place in an organisation's sales function but when they become the master rather than the slave, huge damage can be done. In my experience, managers with a non-sales background struggle when faced with a sales culture and sales people. There is only one outcome for such a situation within a sales team - a switch of focus from winning business and increasing revenue to box-ticking. Pursuit of business becomes secondary to managing the micro targets that inevitably follow.

On three occasions in my career I've witnessed what happens when non-sales people take charge of a sales team - discord, unhappiness and restlessness. The pursuit of revenue suffers. This has a cyclical effect - more focus upon KPIs from the new leader in an attempt to turn what is an inexact science into a heavily regulated and thoroughly predictable one and the demand for what is impossible to achieve - absolutely



Category :business

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