Downsizing The Sales Organization – Ensuring The Best Possible Outcome

2 Mar

I was truly hoping that I would not have to write this article, but the reality is that the majority of CEO’s will need to include the sales organization in staffing reduction initiatives.  Is it really possible that your company will decide to eliminate sales or account manager jobs when client acquisition & retention is so important?  The answer to that is yes, and the higher the salary base (fixed compensation) of those positions, the more quickly that directive will arrive.  One last comment before we dive deeper.  Many companies will not be profitable in this economy.  Companies do not go out of business because they’re unprofitable, they go out of business because they run out of money.  Your job has always been to maximize the money coming into your company.  For the next several quarters, your job will also be to minimize the money leaving your company.

So, as the top sales officer in your company you have a choice.  You can wait for the orders to come down and scramble to meet whatever deadline is imposed on you, or you can begin now to think through the best possible method & process and have a good plan ready.  Hopefully you are that strong, credible person described in “Why Leaders Get Followers”.  If I were you I would create a -10% solution, and a -25% solution.  But first a few questions.

  1. Can you categorize your fixed compensation expenses?  You may want to consider the following;  A) Customer acquisition (sales),  B) Customer retention (account management), C) Operations (CRM, incentive admin etc.), D) Support (anyone in the field who does not have a quota or direct customer accountability).  You need to understand where the fixed compensation expenses reside.  Understanding these numbers will help you think more creatively. 
  2. Are there any other expenses that can be annihilated before eliminating jobs?  Company Cars?  Rent?  Memberships?  Travel?
  3. Are there any operations that are now out of alignment with your company strategy?  (i.e. inside sales group soliciting small businesses while your curremt strategy does not focus on small businesses)
  4. Are there any creative solutions?  Would your organization be better off implementing a 10% reduction in salaries rather than a 10% reduction in workforce?  Careful, this may be more palatable but you will have adverse turnover if you do not manage this correctly.

If there is no other solution but to reduce the number of sales and account managers you have a challenge in front of you.  You can huddle with your field management team and come up with a list of jobs to eliminate, or you can create a process that will distill the best contributors from your group.  I would focus on the process and the more transparent, the better.  I am creating an in-depth process for publication, but for now I would suggest the following:

  • Extract quarterly sales results from the prior 3 years.  You need to rank contributors by quartile and summarize.  Refrain from using performance evaluations if possible, they are often biased.
  • If you have a good CRM program run a sales pipeline report.  But be careful, the pipeline can be chock full of dead prospects.  You can easily scrub the results by putting a time frame parameter.  For example run a report that only shows the pipeline of those prospects which have graduated in the sales cycle steps within the last 30 days.  This should show you the pipeline of each person with “active” sales progress.
  • What are the three to five most important sales competencies?  You must identify the most important self leadership competencies, and define them in terms of the action steps are best practices.

Having led several large “right sizing” processes of sales organizations I hold a strong conviction that assessing sales people fairly is a three step process.  You must consider past, present and future contributions.  I know this sounds wacky, but it can be done.  In fact, when you perform the tasks bulleted above you are half way there.

  1. Prepare an assessment of the previous 12 quarters for all sales people with more than one year of tenure.  You can best compare results by characterizing results in quartiles.  Obviously this exercise summarizes past contributions.
  2. Each representative’s sales pipeline is the best indication of the contributions they will make in the near future (present).  Take care to sort and cut this data to eliminate “hope” from reality.  If your sales cycle is 6 months perhaps you should only count prospects who have moved cycle steps in the last 30 days.  If your CRM system is not robust enough for this excercise you’ll have to enlist the help of your field managers to manually scrub the pipeline.
  3. Assessing the skill and will of each representative on each of the 3 to 5 competencies will tell you the likelihood of future contributions.  This step is the most overlooked in downsizing processes, and that is a fundamental flaw.  Your company, products and competitive environments are continuously changing!  You should identify the most important skills today and assess or interview to ensure those skills are in place.  Your sales people also change over time.  Yes, unfortunately a person may have all the skills necessary to be a peak performer but they may have lost the will to do the task.  For more information see the post “Sales Will”.

This economy will improve and believe it or not, you will be in a recruiting mode again.  In the meantime you are going to have to help your company get through the next several quarters.  How you go about this process is going to have a dramatic impact on the perceptions of your leadership, and the culture of your sales organization.  Do a poor job and you may survive, but when the economy improves your best performers may seek a better working environment.  Do the right thing, do it well and show your trustworthiness, compassion and support for everyone in your organization.

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