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How to Best Organize a Sales Team

Sales executives are constantly searching for the ideal structure of the sales team. Should the team be composed only of direct sales people? Should the team be composed only of manufacturers’ representatives? Experience shows that a hybrid sales organization, composed of a blend of direct and indirect sales employees (manufacturers’ representatives), combines optimal performance, cost effectiveness and flexibility.

If one observes several sales organizations over an extended period, she’s able to see that relatively often, sales executives make sweeping changes to those organizations, from all direct to all rep, and from all rep to all direct. Invariably, the observer is able to note that sales management ultimately reverses many of those sweeping changes. Sometimes sales executives benefit from observing changes made by others. Unfortunately, too many sales executives develop the understanding of the benefits of a hybrid organization by making one or more poor decisions and then repairing the organization after problems surface. The most durable of sales organizations are those that use a hybrid technique, employing a mix of both direct sales staff and manufacturers’ representatives. Sales teams composed entirely of all direct people or entirely of manufacturers’ representatives are generally not ideal.

Why “Direct Only” Teams Are Not Ideal

Many CEOs and executive teams believe that the best way to build relationships with customers is with a sales team composed only of direct employees. In this example, sales staff cannot be distracted with unrelated business and other product lines. No one can blame the inexperienced CEO and executive team for thinking this way. A salesperson is able to devote 100 percent of this time to the company. A direct sales team suffers from far fewer distractions than a rep sales team. However, experienced CEOs and executive teams understand that they must thoroughly look at a direct sales team before converting to it. Direct sales teams are quite expensive to train and support. The company must support offices in all major markets. Those offices bring along with them assorted costs: rent, administrative support, office equipment, utilities, etc. A competent manager who can work well and represent the company without direct supervision must manage the office. The company must train and occasionally upgrade each office manager.

When sales are growing, the office manager must hire and train new sales staff. The company must train the manager in hiring and training techniques. The company must also train the office manager in firing techniques, in hopes of avoiding legal problems.

As sales grow, the office must expand to meet growing demands upon the sales office. Cost of sales rises as sales grow. Sales, however, do not grow forever. Ultimately, sales flatten and roll over. Sales usually roll over earlier and more abruptly than hiring plans. Sales may dip at anytime during the year, but hiring plans are usually set at the beginning of each calendar or fiscal year. As a result, hiring is sometimes still underway when industry and office sales are falling. Such dynamics create an environment whereby cost of sales, (as measured by the total cost of running the sales office, divided by the total revenue that the office generates, expressed as a share of sales) rises rapidly.

When a sales office has healthy sales, the company can manage its cost of sales and support them at a predetermined level. If sales grow for a long period, the company can manage the office to cut cost of sales. The sales office can benefit from economies of scale. A sales office supporting 20 salesmen doesn’t need more copiers, fax machines and conference rooms than an office supporting only 10 salesmen. Unfortunately, sales ultimately roll over. It is difficult to cut costs immediately. The office manager must usually see several months or quarters of declining sales before realizing that he must cut costs, including headcount. During this time, cost of sales rises, sometimes well above tolerated levels. The sales office manager and the company cannot cut costs quickly. Which is a chief reason that totally direct sales teams are undesirable.

Why “Rep Only” Teams Don’t Yield Peak Performance

Rep only sales organizations afford a number of benefits to the sales executive. The sales teams are already in place. Hiring and firing of salesmen is not the direct responsibility of the sales executive or his regional sales managers. Manufacturers’ representatives generally hire and fire as sales move up and down. The cost of running a rep only sales organization rise and fall directly with the level of sales. A significant benefit of the rep only sales organization is that cost drops immediately when sales drop. It’s possible to accurately forecast cost of sales as a share of total revenue. Cost can never get out of control by hiring too many salesmen, buying too many computers, or leasing too large an office; not infrequent problems for direct sales organizations.

Manufacturers’ representatives are not always the panacea for companies looking to hire or expand a sales organization. Large customers often demand direct sales staff; not indirect staff from a manufacturers’ representative. Large customers view their largest suppliers as strategic partners, and like the ability to communicate directly with those suppliers. Communications is sometimes slower and less clear when a customer must communicate with a manufacturers’ representative, who in turn communicates with the supplier. Customers may set the style with which they deal with suppliers as part of their purchasing strategy. For example, they may decide to deal with no more than two or three suppliers on any commodity and to deal with those suppliers directly. This disallows conducting business through manufacturers’ representatives. A supplier must recognize and honor such a strategy, or be ready to suffer undesirable consequences. A supplier must never turn a tin ear to a request from a customer demanding direct sales representation.

Large suppliers view their largest customers as strategic partners, and like the ability to communicate directly with those customers. They view the delay when communicating through a manufacturers’ representative as an unnecessary burden. When large suppliers invest management time with strategic customers, they do not want to dilute that investment by sharing management time with manufacturers’ representatives. The incapacity to offer direct coverage to strategic customers is the primary reason that a sales team composed only of manufacturers’ representatives is unattractive.

First and Foremost: Do No Harm

Recognizing that something is wrong, many sales executives make bold, sweeping structural changes to their sales teams. Fire all reps and hire a direct sales team. Fire all direct salesmen and hire a network of manufacturers’ representatives. Either approach will certainly repair some problems. More than likely, however, extreme changes are very prone to creating new problems of equal or greater scale.

Why do so many companies replace one poor-performing sales organization with another that destined to yield performance that is no better than the original? The two most common reasons are inexperience and weakness of the sales executive compared to the rest of the management team. Perhaps the inexperienced sales executive has risen through a single company with an all-direct or all-rep sales force. Now, managing the global sales organization, he opts for sweeping change from all-direct to all-rep, or from all-rep to all-direct sales without benefit of understanding thoroughly the benefits and problems with either a pure-rep or pure-direct organization. Alternatively, the inexperienced sales executive may have developed his management skill at a company employing an all-direct sales organization. He may not feel comfortable managing if hired into an all-rep company. No one can fault a sales manager if he sees massive problems and concludes that he must make sweeping change to an all-direct sales organization. Only inexperience allows him to make a major, highly disruptive change.

Another reason companies make dramatic changes in the structure of a sales organization is that the sales executive is weak. If cost-of-sales, expressed as a share revenue is too high, the CEO, the rest of the executive team, or both can apply pressure on the sales executive to affect change and cut cost. If the sales executive lacks the strength to defend his team or the structure of the sales organization, he merely becomes the messenger, not the manager.

The message to the sales executive feeling pressure to make sweeping change in a sales organization is to adhere to the Hippocratic Oath: First, do no harm. Any sweeping change imposed upon the structure of a sales team will initially be disruptive. Make sure to justify the disruption and be very sure that the change, once implemented, is most likely irreversible. Sweeping change brings disruption, higher cost of sales and lower productivity. All of this might be worthwhile. However, if a sales manager imposes sweeping change and then reverses course within a year or two, disruption from the reversal is much greater and more costly. A reversal of an organization change brings with it disruption, higher cost of sales and lower productivity just like the original change. However, an organizational reversal can erode the sales team’s enthusiasm. A company can handle disruption, higher cost of sales and lower productivity if repaired relatively quickly. Repair of an unmotivated sales team takes much more time.

“Hybrid Sales Teams” Work Best

A supplier always looks to optimize its sales organization. If a company continuously focuses on cost of the sales organization, use of manufacturers’ representatives is mandatory. The benefits of manufacturers’ representatives are too great to ignore. However, manufacturers’ representatives may not satisfy the requirements for some customers. Strategic customers demand direct interface, excluding the use of reps. The best alternative then, is to merge some of the best features of both a rep and a direct sales organization. Implement a direct sales team to cover the sales to all strategic customers, while simultaneously bringing about a sales team of manufacturers’ representatives to cover all other customers.

A hybrid sales team benefits from the cost effectiveness of manufacturers’ representatives. The same team can deal directly with strategic customers. The sales executive may take advantage of the non-disruptive flexibility when adding or deleting customers on strategic customer list. A secondary benefit of a hybrid sales organization is bench strength. Well-seasoned, top-performing direct sales personnel represent a talent pool from which from which to draw regional sales managers.

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Why Sales Superstars May Not Become Sales Management Superstars

The following job promotion ritual is repeated in numerous sales organizations every year:

Step 1: A sales management position is vacant due to growth, attrition, or the dismissal of an existing sales manager; Step 2: The top sales representative in the organization (or department) is selected to fill the vacancy; Step 3: The top salesperson doesn’t like to (or is unable to) manage the sales performance of other individuals, so he keeps focused on personal selling initiatives, but in doing so, is failing in his role as sales manager; Step 4: The cycle repeats itself.

Although sales representatives and sales managers both work within the realm of selling, many of the strengths required for success in the roles of sales manager differ than the strengths required for success in the role of sales person. Therefore, few top-performing salespeople will become top-performing sales managers. This is important to know if you’re looking to hire a new sales manager in your company, and you expect this individual to be successful filling that role.

This isn’t a phenomenon that’s unique to selling. There are many highly-skilled and successful physicians, for example who are unable to effectively manage a staff of other physicians. There are many prized athletes who are not able to successfully coach a team of other athletes. There are skilled kitchen designers, plumbers, and attorneys who are unable to manage respective groups of other kitchen designers, plumbers, and attorneys.

Before I offer support for my thesis, allow me to confess that there are two situations where I will not argue with the individual who says the top salesperson in an organization will become a successful sales manager:

(1) The first is where where the new sales manager retains the responsibility for personally generating sales revenue. This individual is, in effect, either a part-time sales manager, or a sales manager in title only; (2) The second is when the sales manager’s role is to be almost exclusively a rain-maker (a generator of new business opportunities). That is a selling role that some sales managers play, but it is not a management role per se.

The following is a list of strengths (skills) that are required to achieve phenomenal success as the manager of a sales team (or any team, for that matter). However, none of these skills are substantially required for phenomenal success in front-line selling. This doesn’t mean that a top sales performer will never be a top sales management performer, but it means that the strengths required to fill the two roles are substantially different.

Strength #1. Delegating.
The sales manager certainly cannot do the front-line sales activity for his entire sales group himself. Meeting a sales quota requires the contribution of all members of the sales team. The successful sales manager must possess the ability to delegate responsibility to others so the group can achieve its goals. Delegating is quite a different skill than, say, closing skill, which is required of top sales performers, but the skill of delegation is not a skill which is typically required for top sales performance.

Strength #2. Willing to give up the top spot.
Top sales performers who become sales managers must be entirely willing to give up the position of top performer in a sales organization. For those who can’t, disaster awaits. Sales managers must be willing and able to put their top salespeople on pedestals so their egos can be adequately fed, while also keeping their own egos in check for the sake of the advancement of their team. In a larger organization there is still opportunity for competition between several or many sales managers, but a top sales manager has to be able to point to his top performer and give her credit for being the top salesperson in his group. He also has to encourage other non-top-performers to become top-performers. Since many salespeople have been ego-driven in their successful sales careers, this transition from achiever to encourager is critical. The skill of allowing someone else to be the top dog is not a skill required for success in selling, and in fact, can be antithetical to it. Many sales managers who have previously been a top sales performer who have been driven throughout his entire career to achieve “pedestal” status will not work tirelessly to put another individual on this same pedestal.

Strength #3. Focusing on others.
Sales management requires an outward focus on others’ sales performance, whereas successful selling requires an inward focus on one’s own sales performance. Being in control of your own sales is one thing; but it’s impossible to be in control of an entire team’s sales. Therefore, a loss of direct control of the sale is required in favor of a focus on the sales manager’s team members.

Strength #4. Supervising.
Sale managers must possess front-line supervisory skills. They need to know how and when to step in to discipline or change behaviors in an employee. They must possess wisdom about when to support subordinates versus when to discipline them. Top sales performers do not need supervisory skills to achieve top dog status.

Strength #5. Managing.
The key skill of the manager is to utilize every subordinate’s special strengths to achieve the goals of the sales group. Weaknesses in employees exist, but assembling a group of team members who have strengths in the right areas, and knowing how to put those strengths to work, is not required of top sales performers. It is, however, required of sales managers who wish to achieve top sales performance. These management concepts are described by Marcus Buckingham in his book “The One Thing You Need to Know About Great Managing, Great Leading, and Sustained Individual Success” (Simon & Schuster, 2005).

Strength #6. Coaching, training, mentoring.
Successful sales managers should be able to coax salespeople to improved performance, both in one-on-one coaching events and in classroom training environments. Although there may be some of these elements present in all selling top performers, these elements are crucial for top sales management performance.

Strength #7. Leading.
According to Marcus Buckingham, again in “The One Thing You Need to Know,” successful leaders have two key attributes: (1) They have the ability to create a vision for the future; and (2) They have the ability to get subordinates lined up within this vision, so that individuals’ efforts will support, and not hamper, the group’s progress. Successful sales managers have these leadership attributes. Leadership skill is not required of top sales performers.

Strength #8. Filtering directives.
The sales manager will receive many directives from her superiors. To be effective, she must know when to filter out or adjust these directives, and when to take them on with reckless abandon. This is a delicate balance, and not knowing when to do which one can wreak havoc in a sales organization. The wisdom to know when to embrace upper-management directives, and when to subtly give them secondary attention, will help determine the success of the sales manager’s team, and therefore, the success of the sales manager.

Strength #9. Hiring and Firing.
Top-performing sales managers must make be able to accurately predict sales performance during the interviewing process, and must leverage that ability in their hiring of subordinates. Without this ability, sales performance will suffer. Top sales performers do not need this predictive skill. Successful sales manager must also know how and when to remove an employee from their team so that negative repercussions are minimized.

Strength #10. Deciding.
There’s no question that making good decisions is important in successful selling. But in a sales management role, all decisions are magnified because each decision affects more than one individual. The sales manager’s decisions affect an entire staff of sales professionals and their customers. This means decision-making skills are vital for the sales manager.

There are many skills required for sales success. Among them are the ability to prospect and create business opportunities, the ability to identify prospects’ needs, and ability to close the sale. But the sales management qualities listed above are not substantially required for individual selling success.

While there’s some overlap between the required skill of the peak-performing sales manager and the peak-performing sales person, here’s my advice: if you’re looking for a sales manager who will succeed, hire one that possesses the strengths of a sales manager (those listed strengths above). Many peak-performing salespeople don’t possess those strengths.