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Maximizing Sales Growth and Performance

A Watson Wyatt report on Sales Effectiveness and Compensation
Executive Summary

Companies face turbulent economies, tighter labor markets, expanding performance expectations, ongoing cost management requirements and globalization. To succeed, managing and compensating sales forces to ensure superior company performance and sales growth are key to a firm’s ability to thrive in an ever-changing marketplace.

Watson Wyatt’s 2008 study report, Maximizing Sales Growth and Performance, demonstrates that a $20 billion company with a sales force of 5,400 new business developers (NBDs) and account managers (AMs) can derive roughly $600 million to $700 million in incremental expected revenue by defining roles clearly, allocating time appropriately and guiding salespeople to the right customers or prospects.

This study focuses on how the structure of NBD and AM roles can enhance performance and a company’s growth. To maximize effectiveness, these roles need to be designed, deployed and motivated to emphasize activities such as business planning, prospecting and needs identification. Companies leave millions of dollars in revenue on the table by not organizing, deploying and rewarding sales forces effectively.

Some of the study’s key findings include:

Shifting two hours a week from administrative to selling activities could lead to as much as $225 million in additional sales for a company with 1,800 NBDs.
Companies can derive even greater value from their sales forces by carefully allocating activities between NBDs and AMs. Reallocating time and resources can create more than $600 million in additional sales for a $20 billion company.
For NBDs, sales is a “contact sport” that rewards high touch and persistence. Top-performing NBDs prefer to communicate with clients and prospects in person (other NBDs rely more on the phone) and are more likely to cultivate a prospect over an extended period of time.
Administration creates more than $300,000 in lost expected sales per NBD per year. Pushing nonselling administrative activities downstream from NBDs to AMs, and then from AMs to an administrative sales support role, can increase productivity.
Top-performing salespeople report annual incomes that are 24 percent (NBDs) and 23 percent (AMs) higher than those of other salespeople in the same roles. Sales-related variable pay for top performers represents 90 percent (for NBDs) and 75 percent (for AMs) of this difference.Optimal productivity for sales roles varies considerably based on the company’s level of growth.
During periods of high growth: NBDs should focus on prospecting, qualifying leads, entertaining customers and closing deals. AMs should conduct business planning with customers, focus on needs identification and solution development, handle sales administration and concentrate on professional development.
During periods of lower growth: NBDs should focus on identifying opportunities to expand existing customer relationships, conduct needs identification and solution development, continue to entertain customers and close deals. At this level of growth, successful AMs become more prominent in the business development process, prospect more among existing customers, qualify leads, develop proposals and help close deals.
Highlights of Top-Performing Sales Professionals
New business developers (NBDs) are sales professionals whose skills revolve around prospecting and making sales, and who generate most of their sales growth from bringing in new accounts

Compared with other NBDs, top performers:
Spend about 200 hours more per year on selling activities.
Spend 63 percent more time with qualified leads.
Communicate with prospects and customers in person, and cultivate prospects over extended periods of time. Spend about half as much time on administrative activities.
Spend 35 percent less time writing proposals and 61 percent more time closing deals.
Adjust their activities to their company’s business cycle:
During periods of high growth, they spend more than twice the amount of time versus other NBDs with qualified leads.
During periods of lower growth, they shift their focus and spend more than four times as much time with customer renewals.

Spend 62 percent more time entertaining customers.
Are 45 percent more likely to be measured on total sales from new accounts and almost three times more likely to be measured on revenue from new products or services.
Earn 46 percent more sales-related variable pay, which accounts for almost 90 percent of the total pay differential for NBDs.
Account managers (AMs) are sales professionals whose skills revolve around maintaining business at an account and building customer relationships, and who generally achieve their sales growth through increasing their share of wallet at existing customers
Compared with other AMs, top performers:
Spend 35 percent more time identifying customer needs and developing solutions.
Spend 11 percent less time on product demonstrations and prefer to have sales support roles (e.g., technical representatives) perform them.
Adjust their activities to their company’s business cycle:
During periods of high growth, they spend 16 percent more time on sales administration.
During periods of lower growth, they spend 30 percent less time on administrative activities.

Spend 24 percent less time entertaining customers, deferring this activity to NBDs.
At high-growth firms:
Spend 11 percent less time developing proposals.
Are motivated by metrics reflecting profitable business expansion objectives, and are more likely to be measured on number of units sold, revenue from new products and services and margin growth.

At other companies:
Spend 57 percent more time developing proposals.
Are motivated by metrics reflecting targeted growth objectives, such as revenue from new products and services, total sales from new accounts and sales of specific products.

Earn 60 percent more variable pay.
CONCLUSION
Sales forces make a direct and measurable contribution to a company’s financial performance on a daily basis. However, they must be well organized to enhance performance and drive a company’s growth.

Companies devote much time and money to managing their sales forces. But few examine, at a granular level, how to effectively structure internal sales roles and maintain focus on the highest-value activities. Getting the most from time spent with customers is crucial to strengthening results and improving efficiencies.

By analyzing certain activities down to the value of an hour, companies can help guide their sales forces – specifically NBDs and AMs – to focus on the right contacts, allocate time to the right activities and design compensation plan incentives to promote the highest-value activities (Figure 15).

And the payoff can be staggering. For example, a FORTUNE 100 company with $20 billion in annual sales that reallocates the activities based on the sales role can generate $600 million to $700 million in incremental expected sales revenue based on the role and the company’s level of growth.

The paths are clear. Those companies that improve the effectiveness of their sales force can expect to increase sales growth and profitability with minimal additional fixed costs. Those that don’t risk leaving hundreds of millions of dollars of potential sales revenue on the table.

Figure 15: Framework for Organizing Sales Function to Achieve Maximum Sales Effectiveness

Activity Lead role at high-growth companies Lead role at other companies
Prospecting NBDs NBDs
Lead qualification NBDs AMs
Needs Identification and solution development AMs Both AMs and NBDs
Product demonstration Technical support Technical support
Proposal development Proposal center AMs
Closing NBDs NBDs for new prospects and customers up for renewal; AMs for current customers
Postsale account maintenance AMs for existing customers NBDs for new customers Sales support staff
Customer entertainment NBDs NBDs
Routine business planning Both AMs and NBDs Both AMs and NBDs
Sales administration AMs AMs
Nonsales administration Sales administation support Sales administation support
Travel Both AMs and NBDs Both AMs and NBDs
Professional development NBDs responsible for own, not others’
AMs responsible for own and others’ NBDs and AMs minimize time
Sales manager (nonselling role) assumes responsiblities
For the complete report, visit watsonwyatt.com

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