The economic downturn has forced manufacturing sales organizations to make many unpleasant decisions. However, as the example of one building products company shows, firms that focus on protecting sales in the short-term while building a foundation for long-term success can emerge from the downturn stronger.
This company cut costs while protecting their bottom-line by reallocating their resources in a swift, fair and profitable manner. They achieved this feat by moving away from downsizing and adopting a rightsizing approach, which helped them focus their resources on their best accounts, retain their best salespeople and then assign them to the correct territories.
Define Coverage Strategy to Focus on the Best Accounts
Company leadership recognized that reducing the size of the sales organization would diminishes its capacity and the ability to even hold a steady market position. Therefore, the decision was made to identify what accounts, activities and products the sales force should retain, which it should relinquish and where its focus should lie. While companies usually have a good idea what their most important accounts are, they also need objective measures of opportunity and selling costs across all accounts.
For our VP of sales this effort began with understanding the impact of alternative coverage scenarios. His analysis determined that a 20% reduction of sales force activity on the least-valuable 60% of accounts may only put 6% of sales at risk. But a uniform 20% reduction in sales force activity would almost certainly affect more than 20% of sales.
After a cost-to-serve and customer needs analysis, the VP of sales determined which accounts would continue to receive direct calls but at a reduced number, thereby freeing up some sales person time to call on additional accounts. Another scenario grouped accounts into those that would be best served by a telesales organization.
Identify Top Performers to Retain the Best People
Although salesperson turnover is historically low due to the slow market, top performers are always in demand. Additionally, in one recent case, the best-performing sales people achieved 25% higher market share in their territories than average-performing representatives. Therefore, retention is crucial.
There are many viable ways to identify top performers, such as comparing representatives on historical sales performance, attainment of sales goals or past performance evaluations. Historical sales performance alone is not, however, a desirable basis for comparison, because territory-level sales can be volatile and strongly influenced by the territory's underlying potential. Historical sales performance can be used fairly for comparison if it is adjusted for territory potential. However, comparing sales representatives using several factors is the most effective manner to identify the strongest performers.
Assign Team Members to the Right Sales Territories
The next step in the process -- assigning team members to the right territories -- requires sales executives to combine objective data with managerial insight. This ensures that:
- The best accounts are covered appropriately
- Salespeople are assigned to territories where they can maintain or improve sales most effectively
- The organization retains the best performers.
Companies can successfully assign salespeople to territories using a rules-based algorithm, analytical techniques and technology.
1. Algorithm Builds in Territory Characteristics and Salesperson Profile
The algorithm incorporates perspectives at both the territory and salesperson levels. On the territory level, the process analyzes which representatives are best suited to meet customer needs, based on business rules that include information such as current relationships, performance and location. From the perspective of sales personnel, the factors the process analyzes include which accounts a representative currently covers and the distance the representative must travel to reach those accounts.
2. Taking an Iterative Approach to Matching Territories and Sales Representatives
The matching process uses clearly defined business rules to assign sales representatives to the most appropriate territories. For example, management assigns "Amanda" to the North Des Moines territory when the process selects Amanda as North Des Moines' first choice for coverage, and simultaneously has selected North Des Moines as Amanda's first choice. Once Amanda is assigned to North Des Moines, both Amanda and North Des Moines are removed from consideration and the next "perfect match" is identified, until all sales positions are filled.
Achieving the best match between territories and representatives minimizes the risk of losing sales. Also, because the process is fair and objective, it reduces the emotional component of sales team rightsizing and account reassignment. In addition, this structured and objective approach helps ensure compliance with the company's human resources policies and procedures.
3. Technology Supports Assignment of Team Members to Territories
Territory-design software supports the most effective processes by matching people to territories while providing a geographic visualization of territory and representative mappings. Such software enables organizations to centrally manage field-personnel information and territory assignments while viewing the personnel configuration on the map. As managers finalize personnel assignments, they can view the results of the matching algorithm alongside territory statistics, such as the percent of relationships that the process will disrupt.
Communicate for Successful Plan Implementation
Finally, territory assignment changes need to be implemented quickly and communicated to the sales force effectively. This will ensure high sales force morale and reduce the risk to customer relationships that accompanies uncertainty within the sales force. A clear and comprehensive communication plan keyed to critical milestones replaces rumors and incorrect perceptions with facts. Furthermore, a well thought-out transition process helps reduce customer anxiety, establish new relationships and reduce top-line risk.
Protecting Sales While Cutting Costs is Key
Sales executives around the globe must do more with less. While the short-term need to adapt is urgent, organizations can and should take the time to develop a plan that is not only responsive to immediate needs but is also aligned with long-term corporate goals.
The key to rightsizing is to remain intensely focused on protecting sales. Doing so requires a strategy that produces the optimal sales force size. The building products company did just that, and company leadership is confident these changes will help them sustain a leading position.
By carefully defining and implementing its coverage strategy and objectively assigning team members to the correct accounts, companies will be better able to grow sales in today's economy -- and beyond.
Scott W. Sims is a principal with ZS Associates (www.zsassociates.com), a global management consulting firm.