The 2020 Mid-Year Economic Update_long

The Secret to Right-Sizing Your Sales Force

Ratios and sales levels should be just part of the equation in determining the size of your sales force.
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A recent Harvard Business Review blog tells readers to look beyond financial decision rules to determine how large their sales forces should be.

According to the authors, companies often look at factors such as whether there are enough sales to pay for that person, whether it’s time to split a territory based on sales hitting a certain level, and whether sales force costs are at a certain percentage of sales – a tactic which can be especially dangerous in a downturn.

Instead, distributors should consider other factors, including signs the sales force is undersized: customers’ complaining about service or sales activity focusing more on order-taking than prospecting, for example. Or if it’s oversized: such as customers avoid returning salespeople’s calls or salespeople complaining they don’t have enough opportunities.

The blog provides two more recommendations, including segmenting customers and how you can best meet their needs – which inevitably will lead to clarity about the type and size of sales force you need.

When I spoke with Jonathan Byrnes back in 2010, he talked about how one size doesn’t fit all in customer relationships. His focus is on service differentiation, ensuring you are dedicating the right resources to meet customer needs. He explained: "If a customer wants to have a highly integrated relationship but doesn't have their act together internally it will be a massive headache for operations and sales. What you want to do is sit down with the operations people and salespeople together to decide what kind of account it should end up being. If they're not ready for it now, you can migrate them from arms-length to highly integrated, building their capabilities to partner with us."

Another factor that distributors may want to keep in mind when looking at the size of their sales force: Quality may be just as important as quantity, and compensation, when designed correctly, can have an impact, as well. Brent Grover, author of The Little Black Book of Strategic Planning for Distributors, says that distributors with a smaller number of more highly compensated people often do much better than firms with a larger number of lower-paid staff.

Financial ratios should be the final step in determining how big a sales force should be, according to HBR. The idea is that by shifting lower-value customer segments to other sales avenues, it may be possible to improve ratios without giving up market coverage.

Read the full HBR blog here.

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