UK: BEST PRACTICE - NEW, IMPROVED SALESFORCE.

UK: BEST PRACTICE - NEW, IMPROVED SALESFORCE. - New research on the most effective salesforces highlights the importance of a high salary base and of performance yardsticks based more on customer service than on the hard sell.

by Judith Oliver.
Last Updated: 31 Aug 2010

New research on the most effective salesforces highlights the importance of a high salary base and of performance yardsticks based more on customer service than on the hard sell.

Sales team management is one of the few areas of marketing that has yet to receive the full attention of academics, business gurus, management consultants and trainers.

Yet recent research published in one of the few academic papers on the subject suggests that there is huge scope for improvement in this area.

An organisation's ability to build and sustain an effective sales organisation is becoming increasingly important, claims Nigel Piercy, professor of marketing and strategy at Cardiff Business School. 'A growing number of companies are beginning to realise that the only thing which matters is the value which they can create in deals with customers. Firms are therefore reorganising themselves and their processes around customers.

For many companies,' he continues, 'the salesforce is the most critical link with both the distributor and customer marketplace. Improving the effectiveness of the sales organisation offers a major opportunity to build long-term relationships with customers and enhance both sales and profit performance.'

Moreover as a company's salesforce frequently represents a very substantial marketing cost centre, if not the company's largest single marketing expenditure, it is vital that salesforce performance is maximised. The average cost of employing an experienced salesperson in UK companies now exceeds £56,000. Yet, says Alan Webb, director of training and development at the Chartered Institute of Marketing, 'on average between 74% and 84% of company turnover is created by selling activity. So the performances of individual companies, and of the economy as a whole, depend heavily on an outstanding performance from the sales team.'

To gain a better understanding of the skills, structures and policies pursued by successful sales organisations, Piercy recently undertook research into 140 UK companies operating in a variety of product markets and selling environments. Using various different measures including sales volume, market share, profitability and customer satisfaction, researchers split the 140 organisations into two categories, straightforwardly enough: those companies with higher, and those with lower, sales effectiveness. 'The difference in performance between the two groups was extreme,' Piercy says.

His research findings suggest that effective sales organisations differ from poor performers in their approaches to salesforce pay structure, training and salesperson behaviours. The research also reveals marked differences in the way best practice sales organisations monitor salesforce performance and handle customer relationships. Interestingly, when the lower and higher effectiveness groups are compared according to conventional measures of performance such as accounts per salesperson, new customer sales or the number of sales/calls per week, no significant differences arise.

Beth Rogers of the Centre for Advanced Research in Marketing at Cranfield School of Management stresses the role of compensation policy in ensuring a high performing salesforce. 'Most marketeers believe in a move away from heavily commission-based compensation systems which seem to encourage hard-selling techniques and short-termist attitudes towards customers,' she explains. 'What companies really need to engender through their salespeople today is a feeling of long-term partnership with customers.' A significant minority of firms continue to pay salespeople on commission only but, says Rogers, the majority now accept the benefits of rewarding their sales staff according to a mix of salary and performance-related pay.

Almost one third of the sales organisations surveyed by Cardiff Business School paid more than 95% of a salesperson's total remuneration as salary. Very few paid less than 50% of the overall package as salary. The key regarding compensation, suggests Professor Piercy, is to gain the appropriate balance between fixed and variable compensation. A large proportion of the more effective organisations in the sample paid salaries in the 75%-95% range. The majority of less effective companies paid salaries in the 95%-100% range. 'By basing a relatively high proportion of total compensation on salary, sales managers are better able to guide salesperson activities and priorities,' says Piercy. 'But by also offering an opportunity for incentive compensation, managers are encouraging and rewarding superior performance.'

Compensation policy at newspaper company Telegraph plc supports Piercy's view of the different functions served by salary and commission. The Telegraph's field salesforce receives a basic salary with the scope to add a further 10% in the form of bonuses or financial equivalents. 'What is most important about reward policy is that it is seen as equitable,' says director of circulation sales Cliff Ewan. 'Our reward system has a very high element of basic salary with a much smaller incentive element. We need our salespeople to excel at relationship building and negotiation with customers rather than a hard-sell approach.'

Ewan also encourages non-financial incentives such as the name-in-lights approach. The company recognises individual success at a medal-giving ceremony during sales conferences. Top performing salespeople are also rewarded through promotion or lateral development within the organisation.

The careful monitoring of salesforce activities, says Ewan, lies at the core of improved sales performance.

'We have recently introduced very much a league table mentality in which every aspect of the salesforce activity is measured. We only measure aspects of performance which are relevant and which can be changed or influenced by salespeople themselves. People need to understand why things such as calls per day or number of presentations need to be measured.'

Other metrics may also be called for, according to Professor Malcolm McDonald, co-author of Key Account - Management Learning from Supplier and Customer Perspectives. 'Salespeople should be appraised according to how well they build relationships,' he says. 'You must first find out what the customer wants and then measure how well those needs are met.' With those objectives, he argues that traditional performance measures such as volume sold in a planning period lose meaning. 'In certain circumstances, better criteria for measuring salesperson performance might include items such as the number of complaints, speed of transaction, accuracy of paperwork, response time to service requests or general enquiries,' he suggests.

Not only are the measures changing, so too is the interpretation of the monitor's role. The old image of the salesforce manager as a controller who would encourage staff to do anything to pull in a sale while keeping a tight rein on expenses is increasingly recognised as inappropriate, insists Rogers at Cranfield. 'Companies at the leading edge of salesforce management such as Hewlett Packard or IBM no longer view monitoring in the sense of control but in terms of coaching or counselling,' she says. Monitoring in effective sales organisations involves observing selling performance and reviewing call reports with salespeople and making joint calls with them. The time which is required to coach and appraise sales team members means that the optimal size of a field sales unit which one person can manage effectively is between seven and 12 people, she believes.

The ability to work in teams is increasingly viewed as a vital skill for all salespeople and more effective sales organisations provide extensive training in team orientation. 'The day of the lone wolf salesperson who pursues his or her objectives are over,' says Piercy. Customers, adds Rogers, make judgments not of 'Do I like the deal this salesman is offering?' but 'Is this the sort of supplier who will provide me with performance month after month?' The salesperson, therefore, must build working relationships not just with the client but with colleagues to close sales, solve customer problems and meet service requirements.

Salespeople must be able to motivate people in all parts of the organisation including accounts, distribution and customer service.

State-of-the-art sales organisations should also continually scrutinise the value of their existing structure. Organisations, for example, which are structured around the belief that there is a large number of relatively small, geographically separate and independent buying points out there, all with similar requirements which can be serviced by a large number of geographically separated salespeople all performing similar tasks, may require a radical rethink. The buying power in many industries is no longer evenly distributed so while sales organisations' structures have in many cases changed little, the number and type of customers with whom they deal have altered dramatically.

The key to best salesforce practice lies, concludes McDonald, in remembering that not all customers are created equal. 'All customers cannot therefore be treated the same,' he argues. Segmentation - of customer and of sales staff (the relationship-builder versus the pure hard-seller) - is the name of the game. 'Saying, "This is how we organise our salesforce" is no longer good enough,' McDonald rounds off. 'A salesforce must be organised wholly around customer needs and wants.'

Hewlett Packard

One company's reinvented, customer-focused salesforce

Three years ago, Hewlett Packard reorganised its 100-strong computer business salesforce into a two-tier structure: client business managers and product salespeople. The rationale behind this lay in HP's drive towards a customer-focused salesforce, explains Karen Slatford, director and general manager of HP's computer systems organisation. 'We looked at our top customers and realised that, in textbook fashion, 20% were indeed responsible for 80% of our sales. We reorganised the salesforce to build better relationships with these customers.'

The HP salesforce is now segmented according to industry rather than geography, with one sales manager responsible for a team of 10 salespeople.

The salesforce is further divided into those skilled at building relationships (client business managers) and those who excel at selling (product salespeople).

'Both are equally valued,' insists Slatford. 'Some salespeople are more natural at one activity than the other. Client managers require the confidence to work at very senior levels and be content with few big deals in a year. Product salespeople generally require the motivation of much repeat business and continual ordering.' Client managers receive special training in developing industry partnerships with emphasis on broadening their business understanding, account planning and relationship-building skills. Product sales people receive more traditional sales techniques and product training.

Key to recent changes is HP's drive to ensure the salesforce spends more time with customers. 'Making the office less comfortable by the introduction of hot-desking, where desks are shared by one in three salespeople, reduces the time people spend in the office,' says Slatford.

A new phone system which diverts all calls to salespeople wherever they are and the greater use of video and telephone conferencing have also increased time spent with clients.

However, not all ideas, Slatford admits, are fully taken up by the salesforce.

'Increased use of database techniques to build up customer profiles would ensure a more targeted approach. Unfortunately, the salesforce could do far more to capture customer information,' she says. Currently customers are obliging HP by returning customer profile forms themselves.

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