Sales organizations have felt COVID-19’s seismic impact more than most, if not all, functional groups. Most distributors’ sales forces live on the road or behind a counter. Shelter-in-place orders have forced sales resources out of their familiar routines and surroundings. Executives and sales leaders are managing sales forces on a day-to-day cadence and are often at the mercy of governmental decrees and supply chain health. Nevertheless, distributors are confident that a return to normalcy is inevitable, possibly soon in some end-markets.
Alexander Group has conducted four surveys over the past few weeks in order to gauge trends and prevalent practices as leaders across industries deal with COVID-19. Findings fall into two categories: immediate actions and longer-term tactics. All data cited below are from manufacturing and distribution respondents only.
Immediate Actions: Protect the Team
As the magnitude of the crisis quickly escalated, estimates of the overall dip intensified. In our March survey, only 20% of distributors anticipated a revenue decrease of greater than 15%, compared to 37% of respondents in our April survey. Clearly, distributors are forced to consider immediate actions to contain losses.
It is imperative for distributors to protect their talent. This can be accomplished in two ways: managing headcount and updating sales compensation plans. In our March survey, only 5% of respondents were reducing headcount. That number jumped to 22% in our April survey, with furloughs included in this figure. Most distributors (67%) are suspending new hire plans, up from 32% in March. Commentary around headcount reductions indicate that cuts are being made only when absolutely necessary — sellers in end-markets that have closed (e.g., hospitality, aerospace) or low performers that have been declining prior to the crisis.
Coming off of a historically hot hiring market, distributors should consider where to adjust headcount and hiring plans. Even prior to COVID-19, sales models have become increasingly inside and digital-focused. By making deep cuts in these areas, leaders risk undoing the recent progress made in diversifying sales coverage. Once the crisis passes, distributors quicker to ramp up hiring may be able to access talent unavailable only months prior.
Responses pertaining to sales compensation and quotas are particularly interesting. In our March survey, only 8% of respondents planned to provide quota relief to sellers, while April data showed a curious trend — fewer distributors (4%) gave quota relief. Most distributors (85%) indicated that it was too early to adjust quotas or planned no adjustment at all. The overarching feeling was that leaders are managing the business on a day-to-day or wait-and-see level, and reserved the right to change quotas if certain triggers were activated.
Similar to the quota trend, sales compensation guarantees became less relevant as the crisis progressed. In March, 37% of sales organizations said that they would not provide guarantees to sellers. That figure jumped to 48% in April. Root causes may lie in end-market diversity — some markets (e.g., grocery, PPE) have been positively impacted, so caps are more relevant than guarantees.
Long-term Tactics: Building for “Business as Unusual”
Over the past few weeks, distributors have begun to think beyond the dip and consider the best avenues for growth after the crisis. Consistent themes have emerged as to where distributors may focus investments moving forward.
- Converting competitive customers: distributors who have protected their core customers well during the dip may have an opportunity to capitalize on competitors caught flat-footed. Lead generation resources, tools and processes will likely become more valuable as distributors look to gain entry to previously inaccessible buyers.
- Continued virtual selling: many sales leaders and sellers are learning that customers are more amenable to phone or digital engagement than they previously thought. Many activities (e.g., order status check-ins, account planning meetings, new product introductions) may continue to be handled virtually, leading to a recasting of the field sales role and a reallocation of headcount.
- Fortifying predictive analytics: anecdotally, distributors with robust revenue (sales) operations teams have been nimbler to respond to the crisis by adjusting headcount, redeploying resources to work virtually, or adjusting sales compensation. Going forward, distributors may build out revenue operations teams and predictive analytics competencies so that response times are shortened for future disruptions.
While it’s clear that there is not a one-size-fits-all approach for the new normal, there are steps distributors can take to protect the now and prepare for the after.
Andrew Horvath is a principal at the Alexander Group, a management consulting firm specializing in revenue growth. He leads the Distribution practice, monitoring trends and creating strategies to help growth-focused organizations stay on top of a rapidly changing market. For more information visit alexandergoup.com.