If your sales people are already giving it all they’ve got, it’s time for you to consider a Sales Effectiveness audit.
Not too long ago, a white van crawled past my house and a pack of heavy books were hurled out the side door and on to my front lawn. The first thing I did was to hop online and cancel any future deliveries of the giant phone directory. Times have changed. In a distant past, I actually welcomed the yellow books when they appeared in my doorsteps. Like most people, I didn’t mind flicking through the pages to find a plumber. For the directory business, sales were good—every company in town wanted to be have their details inscribed on those thin sheets of yellow paper. But now we live in a Google-centric world, it’s likely that you too have cancelled your delivery or are using the heavy books as a door-stopper. Sales are not so good anymore. It’s no secret that revenue of directory businesses has been declining for a decade and the same is true in countless other industries that have been disrupted by a new technology.
And what do most companies do when there is a drop in sales revenue? They try to get their sales people to sell more. Sometimes that’s the right move, but more often than not, and especially in the fast-changing market of today, business performance is rarely a sales issue in isolation. As a global leader in the reward space, we see this scenario time and again. Many organizations come to us looking for a magic answer, an industry benchmark, a fail-proof sales incentive that will motivate their sales people to sell more.
The general assumption is that their organizations are not offering their salesforce enough incentive pay—put more money to it and it will solve the problem. We know that rewards have a direct link to performance and that the right compensation package can help to motivate the sales team. But based on the work we do with our clients, it is clear that sales effectiveness is the result of a combination of a sound product and channel strategy, organizational design, structure, processes and sales force capability and motivation. No amount of money thrown at the individual sales person can turn a business around if the other elements are not in balance.
No amount of money thrown at the individual sales person can turn a business around if the other elements are not in balance.
We divide these elements in two groups: Organizational Factors and Sales Person Characteristics. The latter is easier to identify and address, it includes issues that are more within the company’s control: rewards and recognition, the knowledge that the sales force has about the product, their technical skills and sales competence. Organizational Factors are harder to pinpoint and includes elements that impact both the sales and the organization strategies. These include the market segments, channels, products, organizational structure, business processes.
In the case of the telephone directories for instance, for years, revenue was going down as the internet and Google were taking over the market, offering access to businesses information with convenience and for free. Directory owners globally tried to fight the digital beast by protecting their traditional business model and throwing money at sales incentives that rewarded both top performers and the acquisition of new customers. But by focusing on the wrong problems they continued to lose sales and customers.
There are too many variables that can affect the effectiveness of a sales program. That is why we encourage clients to do a sales effectiveness audit, to assess all factors that could be contributing to the decline of their sales, before they start changing their rewards and incentive programs. The table below shows the steps and elements to consider when conducting a sales effectiveness audit.
This diagram shows the step and elements involved in the Sales Effectiveness audit
The publisher of the Yellow and White pages, realised that the old model of their phone directories sales “was no longer sustainable”. As the business’ CEO shares in this presentation, the company had to go through a journey of digital transformation that required a new operating model that extended the customer offerings to include a combination of digital advertising and marketing products and services, new segmentation and channels. The solutions and products that they introduced required a change from a sales to a service mindset and different skill sets from their sales force. The company’s CEO said that “radically changing the sales force was the key to saving the company.”
As this example illustrates, first you need to look at the organizational factors before you can fix your reward and motivation. For businesses like the telephone directories that are moving from a sales to a services organization, they need to hire or train their sales people to support the new business model. Depending on the nature of their products and strategy, they may need to move from the traditional sales Hunters, who are energized by new deals and large territories to Farmers, who excel at collaborating with customers and enjoy building relationships. At this point, the organization will then create incentive programs to match the new profile of their sales force.
Surely, organizations that want to succeed need to get their remuneration strategy right but this is not enough to ensure business success. Companies have to fix their organizational factors first, and then look at the salesperson characteristics that will support the new business model. Compensation can and should be a driver of sales revenue but it is only one element of the sales puzzle.