Harvard Business Review is arguably the most prestigious publication for business leaders and management thinkers. Here’s one of my recent Harvard Business Review articles titled the Why Sales Organizations Fail.
What prevents a sales organization from achieving success? After studying hundreds of sales organizations I have found the answer to this question is directly related to the challenges associated with their development stage.
Every sales organization can be classified based upon whether it is in a “Build,” “Compete,” “Maintain,” “Extend,” or “Cull” stage. The Build stage is when the sales organization is first establishing itself. If successful, it will proceed to a high-growth Compete stage and then to Maintain stage that is contingent upon stable, predictable success. As the sales organization ages, it will either Extend its prior success and enjoy longevity or suffer decline and be forced into the Cull stage where it must reduce its size.
Obviously, the top sales challenge always is exceeding the monthly, quarterly, or yearly revenue target. However, the sales challenges that inhibit a company from achieving revenue growth vary based on the sales organization stage. This is due to the “push” versus “pull’ market characteristics of each stage. For example, in the Build stage a small group of salespeople must push themselves into new accounts and introduce their solution and its benefits. Conversely, a well-known company in the Maintain stage is pulled into new sales opportunities because of its market position. The different sales organization challenges in the Build, Compete, Maintain, Extend and Cull stages are reviewed below.
Build Stage Challenges
The top sales challenge in the Build stage is creating sufficient sales coverage to push the product into the market. It takes time to hire, train, and build a critical mass of capable salespeople who can penetrate new accounts. It is during this stage that the sales model is first established, whether the sales organization will sell directly via outside field salespeople, over the phone with inside salespeople, or through channel partners.
“We are continually learning from every sales cycle and adapting our message to be more effective when we are in front of customers. We are trying to create a repeatable sales process but our product focus is changing as much as our sales model.” Vice President of Sales, Build Stage Company
Compete Stage Challenges
The Compete stage challenge revolves around quickly scaling the sales organization so that it can compete effectively against more established competitors in existing markets or grab as much market share as possible in new greenfield markets. In this stage the sales organization begins to develop its collective intuition of where it can win new business and where it is likely to lose. If these attributes are not instilled into the new salespeople, “organization-thrashing” occurs. The newer salespeople will chase business they cannot win and precious pre-sales resources will be wasted. They won’t make quota and are likely to either be let go or leave on their own merit because they lack a sufficient pipeline of business to make commission. In this situation, there is organization-thrashing because of the continual replenishment of new and under-performing salespeople.
“My biggest challenges relate to scale and growth. We’ve been hiring so many people so quickly that we are challenged to recruit the right people, get them up to speed quickly, and retain them. If we don’t get them up to speed quickly, we will likely not retain them.” Vice President of Sales, Compete Stage Company
Maintain Stage Challenges
The sales challenge changes radically during the late Compete stage and into the Maintain stage. The focus shifts from scaling the organization to maximizing sales productivity by lowering the cost of sale and increasing the average sales price. This may result in moving business from outside sales to inside sales or less expensive partner and distributor channels. Another challenge revolves around the predictability of revenue and the size of the sales organization. Since the sales organization is fully staffed and the territory coverage model is complete, the challenge is where to find the additional revenue to meet the growing annual target. Since territories have been split numerous times, the answer revolves around specialization. The sales force is segmented by size of company to be called upon, national accounts are segregated, and industry vertical sales specialists covering finance, government, retail, distribution, healthcare, etc., are created.
“I have to balance capacity with productivity. What this means is how do we get more leverage from the sales model? When you start a company, it is about going as fast as you can to separate yourself from the pack. Now we have to take the next step as a company and say, “What are the sales per employee? What’s the cost per rep? What commissionable costs are we paying? All of these things become relevant. The only way you can have an impact on those is to increase productivity and lower cost.” Vice President of Sales, Maintain Stage Company
Cull Stage Challenges
In the Cull stage the company has been leapfrogged by competitors who provide superior offerings. How does a demoralized and marginalized sales force revitalize itself? The Darwinian answer is to cull the herd and remove the bottom performers and those with disenfranchised attitudes. The attitude of entitlement must be eliminated for the spark of the competitive spirit to be reignited. Equally important, key existing accounts whose run rate revenue is central to the survival of the company are separated out and placed in “Revenue Care” programs where they receive dedicated account management, customer support, and executive level access.
“The other shift we are making is getting some of our more experienced and seasoned salespeople who really know the industry and solutions well, to be a little bit more provocative in their approaches. We want them to add more value to the sales cycle. We have a successful older sales team that is kind of set in its ways. The business and times dictate that we shake this model up.” Vice President of Sales, Cull Stage Company
The challenges sales organizations face is dependent upon the stage of their development. In this regard, the vice president of sales is one of the most important people within a company because this person is in charge of creating and executing the sales strategy that ensures success.