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Fixing the Fatal Flaws of Your Sales Force

Fixing Flaws 8/11/03 9:42 AM

Fixing the Fatal Flaws of Your Sales Force

Your sales force is one of your most strategic levers forimproving growth, market share, and profitability. Agreat sales organization will identify opportunities forcompetitive advantage and profit. Most consumer-goods companies spend as much as 7 percent of saleson the cost of their sales force, and the force is re-sponsible for up to an additional 20 percent of spend-ing on deals and promotions. But few companies feelconfident about their return from that investment.Fewer still are realizing the competitive advantagethey hope to create. “I could fire them all, and wewouldn’t see an effect for years,” the CEO of a $5 bil-lion company said recently. “What do they do? I don’tknow. How do they add value? I really don’t know.”

Today, given relentless retailer consolidation andinternational expansion, an effective and efficientsales force is more important than ever in fighting thewar for visibility, shelf space, and promotions. Asretailers have grown larger and more powerful,they’ve also become more sophisticated about cate-gory dynamics, product margins, sales velocity, pro-motions, consumer behavior, and returns—and theyare demanding more from their suppliers. Consumergoods companies must respond to these demandswhile continuing to provide coverage to the low-volume accounts. Sales force value added must be visi-ble, or the sales force should be reduced or replaced.

The Boston Consulting Group has conducted morethan 200 sales-force-strategy projects in the past fiveyears, across all major sectors and geographic areas,working with a wide range of organizational styles andproblems. The critical factors for a powerful, efficient

Fixing Flaws 8/11/03 9:42 AM Page 3

sales force don’t change: strategy and customer seg-mentation must be aligned with economic drivers andresource allocation. Yet over and over again, we seecompanies unable to realize their potential becausethey are saddled with at least two, three, or more ofwhat we’ve come to think of as the fatal flaws of sales.Remedies require detailed, thoughtful nuts-and-boltsadjustments. To have the best sales force in 2010, youhave to begin to create it in 2003. Here’s how you can start.

1. Recruit What You Want, Not What You Have

It’s no longer possible to succeed in sales the old-fashioned way, with a sample pack, a price list, and anorder form. Yet most sales forces lack the necessaryskills for today’s selling environment. Sales representa-tives need all the capabilities that go with running abig company: knowledge of logistics, informationtechnology, branding, pricing, and customer service.These are the attributes we look for when we help ourclients assess and recruit a top-tier sales team:

• Intelligence: “gets it”; processes information quickly.

• Problem-solving skills: assesses tradeoffs and rapidlydrives to solutions; recognizes problems from priorsituations and retains the analytical frameworks forsolving them.

• Raw creativity: thinks energetically and proposesoriginal ideas.

• Consumer knowledge: has a passion for understandingconsumer needs and shopping behavior.


• Tenacity: is principled; is tough under pressure anddefends well-founded opinions; is resourceful.

• Integrative skills: connects the dots; synthesizesacross disciplines and across offerings.

• Adaptability: deals with fluid situations; developssolutions to complex problems.

• Logic skills: substantiates claims; draws sound con-clusions from a sequence of facts.

• Communication skills: engages others with clear, confident arguments.

• Track record: has superior credentials and ex-perience.

If your current sales force lacks these qualifications,don’t expect your reps to recruit the people who havethem; you’ll only get more of the same. Instead of hir-ing what you already have, look for the people youwant and don’t settle for less. This flaw is the toughestto correct, and the solution starts at the top.

2. Avoid an Inverted Sales Force: Green at the Frontlines, Entrenched at the Top

Selling is an apprenticeship profession. Successfulreps develop by learning from experienced mentors.But most sales organizations aren’t structured tomake that happen. Frontline positions are commonlyassigned to the most junior employees, and too oftenthose reps aren’t screened for the key success factorsof today’s selling environment. The recruiting processmay underemphasize the analytic capabilities re-


quired for a rep to describe the company’s valueproposition and return-on-investment calculation.And district sales managers are often too burdened byadministrative duties to coach the frontline reps. Repsoften graduate to managerial roles as soon as theyacquire some experience. That means people whohave spent little time in the field are making strategicdecisions. All too quickly, they become entrenched inthe organizational culture and are unable to see orrespond to subtle changes in the competitive environ-ment. What’s more, star reps in particular are oftenpromoted to managerial roles despite the fact thatthey may not be suited to manage or coach people.

If the compensation system is properly aligned toreward stellar performers (with a variable componentthat flattens but isn’t capped), one of the best solu-tions to these problems is to encourage some districtsales managers to rotate back to the frontline. Thatkeeps them up-to-date, and the company benefitsfrom their outstanding sales skills. In addition, we rec-ommend an apprenticeship program of at least 12months that screens for skills, sets expectations, pro-vides coaching throughout the program (with exten-sive help during the first two or three months), andcertifies basic skills after six months. Your goal isexperience and intelligence at the frontline and com-promise breakers and change agents at the top. (SeeExhibit 1.)

3. Make Compensation Congruent with Company Economics

Few companies have payout schemes that are alignedwith their growth and profitability. (See Exhibit 2.)Yet by linking compensation with their economics,companies could greatly improve sales and margins inless than six months. An effective plan matches sales


Prescreen1

week

2– 3weeks

4weeks

• Screening for skills, plus expectation setting• Continuous coaching throughout the program• Extensive coaching in the first two to three months• Certification of basic skills after six months

• Assess skills

Group training

• Learn the company’s history

• Role-play

Start-up

• Partner with a successful rep

• Cut teeth on easy accounts

Coaching in the field

• Attend two half-day sessions per week

• Complete homework assignments

Six-month report card

• Receive certification of basic skills

• Fine-tune techniques

Annual review

• Receive a formal evaluation

• Formulate an individual development plan

2– 3months

Year-end

• Receive early feedback

• Shadow a rep

6months

SOURCE: BCG analysis.

Exhibit 1. A Screening and ApprenticeshipProgram for Reps


force rewards with company goals, measures perfor-mance precisely and fairly, encourages salespeople tostretch their efforts, and provides rewards that attractand retain the best performers. By contrast, a poorlydesigned plan could unwittingly direct the sales forceto focus on the wrong customers, to discount unnec-essarily, and to overpay for poor performance. Itcould inhibit teamwork and discourage the forcefrom taking the time to educate customers about newproducts. It can signal that the only way to make a liv-ing wage is to leave the frontline. A winning incentiveplan is precise, fair, and simple.

Precision guarantees that salespeople are rewardedonly for those aspects of the selling process overwhich they have control. A fair plan ensures thatequal stretch yields equal reward. And a plan that is

10

Contribution of the sales force to company profits (index)

Sales forcecompensation(index)

8

6

4

2

–20 –10 0 10 20


Exhibit 2. Payouts and Profits: The Misalignmentof a Typical Sales Force


simple—with no more than four or five compo-nents—will be easy for reps to understand, measure,and control. The plan should pay for individual per-formance and maintain a spread between strong andweak reps. But it should also make it possible toreward group performance when, for example, a mul-tifunctional account team is selling many categoriesof products to a retailer, and collaboration across cat-egories and functions is important.

4. Recognize That Sales Force Size Isn’t Fixed

Most sales organizations are far too rigid to adapt to achanging environment. Markets move so quickly thatthe gap between estimated and actual needs forresources can get very big, very fast. To mitigate theeffects of channel shifts and market changes, sizingshould be reviewed at least every two years. Given theevolving retail landscape in most countries, we oftenfind that at least 20 percent of a sales force’s timeshould be reallocated every two years.

Another critical time to update or flex the size of thesales force and its assignments is right before a prod-uct launch. Too often, companies will move morethan half of the force to support the launch. As aresult, mature products are neglected and vulnerableto market-share losses. Instead of spreading the salesforce too thin, companies need to find creative waysto increase its capacity. For relatively small and briefresource gaps, companies can rotate internalresources—by assigning marketing personnel to thefield, for instance, to help cover a peak period. Forlarger or longer gaps, companies can make strategicuse of brokers and distributors or even employcomarketing agreements with a noncompetitor.


Flexibility is also crucial when it comes to accountsegmentation. When companies begin to segmentaccounts by economics and strategic fit, most discoverthat they are underresourcing their key accounts.Appropriate coverage (and capabilities) against criti-cal accounts should yield 1.5 to 2.5 times the averagecategory share. Companies may also find that they areoverresourcing nonstrategic, declining accounts. Forthese accounts, the primary objective should be todampen the declines cost-effectively, while at leastmaintaining market share.

The best methodologies use both a top-down and abottom-up approach to determine the appropriatenumber of reps for each account segment. A top-down approach calculates the contribution and costassociated with adding each rep and then adds repsuntil the increased contribution just covers the incre-mental cost. A bottom-up approach assesses the nec-essary depth of coverage—how many targeted cus-tomers should be called, how frequently they shouldbe called, and how much time is required per call—and the number of reps needed to get the job done.The combination of the two approaches strikes thebest balance between a long-term and a short-termview of sales force sizing. (See Exhibit 3.)

5. Be Alert to the Cost of Low-Value Work: At $1 per Minute, You Own the Reps’ Time

The average cost of a fully loaded sales rep (includingall expenses and allocated management time) is morethan $100,000 per year—a significant amount for anyorganization. That works out to about $1 per minute.You own that time, and you should know how it isbeing spent. Yet all too often, the reports that sales-people turn in are woefully lacking in detail, and


Presentvalue ($) Contribution of added reps

(diminishing marginal return)

Maximum number of additional reps (where marginal contribution equals marginal cost)

Number of reps

Cost of addingone more rep(hiring, training,salary, benefits)

. . . and a Bottom-Up Approach

Number of targetedaccounts to call on in segment

Number of callsrequired per account per year

Time required per call

x

x

Face-to-face sellingtime required per yearfor each segment

Available face-to-faceselling time per repper year

÷Number ofreps persegment


Exhibit 3. A Top-Down Approach to Sizing . . .

managers can’t make sense of individual schedules.Days escape into “black holes.”

In nearly every sales-force-effectiveness project thatwe conduct, we begin with a detailed audit of salesforce time. In many cases, we find that less than halfof that time is actually spent with customers. (SeeExhibit 4.) Reps are burdened with too many admin-istrative chores. Paperwork, budgets, internal meet-


ings, training, travel, and requests from marketing alleat into time with the customer.

To increase selling time, first eliminate redundant oroutdated paperwork requirements. Then considercentralizing administration to gain scale and utiliza-tion benefits. It may take additional resources—and

Vacation, holiday, illness 9.1

Training,annual meetings 5.4

E-mail, paperwork,other administration 9.6

2.3Time withsales manager

15.2Travel

Telephonecalls 7.5

7.8Salespreparation

43.1Face-to-face timewith customers

Percentage of average rep’s time

0 20 40 60 80 100

SOURCE: BCG surveys of reps.

Exhibit 4. Most Reps Spend Less than Half of Their Time in Front of Customers


productivity may be temporarily affected—but theinvestment is almost always worthwhile. Support maycome in several forms, such as back-office processesto reduce paperwork, added merchandisers to per-form “shelf” activities, part-time employees to per-form lower-value-added tasks (pickups, drop-offs),and IT applications to reduce and automate manualpaperwork.

The first step, however, is to enforce a policy of accu-rate record keeping in order to calculate the timesales reps spend or don’t spend with accounts, byactivity and by account. Without such metrics, it isextremely difficult to design an effective compensa-tion system, allocate resources, and ensure maximumproductivity.

6. Look to the Customer for a Definition of Value Added

The days when a sales rep could ride in on “a smileand a shoeshine” are long gone. Today, leading com-panies are redefining brands to encompass not justthe product, or even its image, but the total con-sumer experience—from purchase to use to after-sales service. Sales teams will be playing a starring rolein helping their customers, the retailers, enhance thatexperience. Instead of being seen as pipelinesthrough which to push products, they will be seen—and will see themselves—as information and solutionproviders. Today’s world-class sales teams don’t justsell products; they provide retailers with the solid evi-dence that their brand adds the value that consumersdemand.

We have found that top-to-top discussions betweensenior executives from both the supplier and the


retailer are required in order for them to share stra-tegic goals, identify areas of mutual interest, andestablish specific goals and metrics for committingresources and tracking results. These senior discus-sions need to be supported by an objective, sharedfact base that comes from a deep discovery of theend-to-end supply-chain economics, the behavior anddissatisfactions of targeted consumers, and the keyopportunities for innovation in a category. The way toretain critical accounts is for sales reps to offer whatthese retailers value. That might be insight into spe-cific problems, innovation and new products, creativepresentation of categories, or the ability to reducesupply chain costs in order to deliver lower prices.

7. Provide Technological Leverage for Efficiency and Effectiveness

Most sales forces are woefully behind in their use oftechnology. Many reps don’t have cell phones, per-sonal computers, or wireless hand-held devices. Forsalespeople to have meaningful contact with cus-tomers, they need technology that enables them tohave the kinds of discussions a sophisticated categorymanager will find compelling. Putting the right infor-mation in the hands of your salespeople, at the righttime, can be a complex undertaking, but that’s whatmakes it such a powerful competitive weapon.

In addition to improving selling effectiveness, tech-nology will also enhance selling efficiency. For exam-ple, a North American company recently invested in anew order-quotation system that reduced the timerequired to provide quotes to customers. It enabledsalespeople to enter customer data on standard lap-tops and, through linkages to a centralized system,receive quotes the next day for prices to be offered. It


also allowed the company to track win/loss ratios; thedata were then used to optimize pricing. After imple-menting the system, the company found that it hadtwo choices: it could cut the sales force and strive forhigher productivity or reallocate the existing force’stime to make more sales calls. It decided to reallocatethe time, knowing it could track the number ofquotes issued and won.

More and more companies are benefiting from real-time information and access to their corporateintranets. Sales reps are reachable anytime, anywhere.They are able to react daily to detailed informationon what is happening in their territories. They areable to respond immediately to customers with thefacts, rather than with “I’ll look into it and get back toyou.” The vice president of sales can ask his or herpeople to check on competitive activity or stockoutsduring calls in the morning and have all the databack and collated by day’s end.

To create such value, IT investments need to befocused and carefully implemented. Avoid expensive“big bang” IT systems: smaller, incremental invest-ments in information have a much higher rate of suc-cess. Over the years, value will accrue from develop-ing a sales force that uses real-time information as aselling weapon.

8. Ensure That Sales Drives the System

In most companies, the sales organization rankslow—in prestige, credibility, and power. Strategies areoften developed without participation from salespeo-ple, priorities are changed without their consultation,and targets are set without their input. Reps oftencomplain that they feel like pawns, with little control


over the rules and expectations set for them. Al-though that is often the case, it doesn’t have to be the way of the future. The sales force represents thecompany’s face to the world; it is a direct link to thecustomer.

When we quantify the value of sales force effective-ness for managers, they are invariably surprised at theupside potential. In addition to improving overallproductivity, an optimized sales force can yield signifi-cant top-line growth and competitive advantage. Thecumulative effect of small changes can be substantial.(See Exhibit 5.)

* * *

Many companies are beginning to discover the needfor a radically upgraded sales force to serve increas-ingly sophisticated customers. But product pushers

900 repsIn the field 165 days per yearMaking 5.5 calls per day60% of calls in targeted segments

490,050 calls in targeted segments

64% increasein targeted

calls

Before

900 repsIn the field 175 days per yearMaking 6 calls per day85% of calls in targeted segments

803,250 calls in targeted segments

After


Exhibit 5. Sales Force Effectiveness Is a Matter of Nuts and Bolts, but the Rewards Are High

Results from a Recent Optimization Effort


can’t be transformed into insight generators over-night. It takes an initial investment in recruiting,training, and technology, as well as an organizationfully committed to its customers. Here’s a self-gradingtest that will help you assess your efforts in the areasthat count most in today’s selling environment. Giveyourself no points if you haven’t looked at the area ina few years, one point for doing a little in that area,and five points for achieving world class.

1. Have you established a program that will recruitthe people you want rather than carbon copies ofthe people you have?

2. Do you have experienced reps on the frontlineand change agents at the top?

3. Is your sales compensation system congruent withyour enterprise’s economics?

4. Do you review sales force size regularly, particularlywith regard to whether the force is flexible enoughto handle channel shifts, market changes, and new-product launches?

5. Can you account for your salespeople’s time, and isit consistently used for high-value tasks?

6. Do your sales reps understand how their customersdefine value, and are they delivering it?

7. Does your sales force have all the technology itneeds for maintaining efficiency and effectiveness?

8. Are your salespeople sufficiently integrated intoyour organization, and do they get the respect theydeserve?


© The Boston Consulting Group, Inc. 2003. All rights reserved.

If you score less than 30 points, you are missing ahuge opportunity for improving growth, marketshare, and profitability. It’s time to address the prob-lem comprehensively.

John BogertGary Breissinger

Cliff GrevlerKatrina Helmkamp

John Bogert is a manager in the Toronto office of The BostonConsulting Group. Gary Breissinger is a senior adviser tothe firm’s Consumer practice. Cliff Grevler is a project leaderin BCG’s Toronto office. Katrina Helmkamp is a vice presi-dent and director in BCG’s Chicago office and the firm’sGlobal Sales Force topic leader.

You may contact the authors by e-mail at:

[email protected]

[email protected]

[email protected]

[email protected]


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