Building an effective sales force

Sales are the life blood of any company because they generate revenue. However, managing the performance of a sales force is a headache for many companies.

Some firms follow a so-called "Darwinian" approach by assuming that sales employees are money-motivated and self-managing, so they focus merely on providing compelling sale incentives. They believe money alone will be sufficient to retain competent staff, while weak performers will either find a way to improve or leave.  In these cases, the well-known 80:20 rule is applied: management focus falls essentially on 20 per cent of the staff who generate 80 per cent of the company's revenue.

Towers Watson argues that a different framework is required for sales force effectiveness. It suggests that companies should concentrate on the three key elements: the right people with right skills; a focus on the right opportunities; and a highly engaged and motivated sales force.

Right people with right skills

There is a significant impact on both a business and its people if it does not have the right sales-force talent with the right skills. An inability to attract the right talent may result in problems such as uncovered sales territories, lost revenue and an inability to execute growth strategy. A failure to develop the skills and capabilities needed may also result in the wrong approach to customers, delivery of the wrong messages, unproductive selling time and damage to brand reputation and customer relationships.

According to Towers Watson's Asia-Pacific practice director for sales effectiveness and rewards, Jennifer Frei, businesses that are unable to develop the right people with the right skills, while at the same time losing too many sales people, will waste a lot of time on activities that do not generate revenue, such as re-hiring and retraining, while putting their customer relationships at risk.

Sometimes, the actions of companies contribute to the problem. In some cases, sales roles become more complex and sales strategies more sophisticated - such as moving towards "consultative sales" - but recruiting and selection is not adapted to these changes. Some top sales people are promoted to become managers even though they are not well prepared to coach and develop other people, Frei said.

Citing Towers Watson's 2010 Global Workforce Study, Frei said career development and leadership were the top drivers of retention and engagement for sales force employees in most places around the world. "It's not necessarily money," she said.

However, the study showed that the top attraction drivers were competitive base pay and challenging work.

Providing a dual career path can help to retain top sales employees in front-line sales roles, while being able to clearly articulate a compelling career path helps with both recruitment and retention. However, moving up a career path is not the only employee definition of career advancement. The Towers Watson study found that employees rated "making more money" as the most important goal in their career development.

"Ironically, employees want the kind of coaching and development that will help them to obtain the right skills - so they can earn more money," Frei said.

"'Acquiring skills to perform better' was their second most important goal, followed by 'acquiring skills to be eligible for other jobs' and 'achieving higher status and recognition', while 'moving up a well-defined career path' came last."

To deal with these issues, Towers Watson suggests that companies should develop sales-competency frameworks defining the knowledge, skills, and abilities required for successful performance in their sales forces. For sales staff, these competencies may include customer and industry knowledge, relationship management, solutions selling, influence and persuasion and demonstrating value. For sales-support employees, competencies may include customer and industry knowledge, business-process management, customer experience, consultation and implementation.

The combination of a "career framework" (such as using career bands and career levels to organise and align roles across the organisation, with criteria clearly describing each career level) and a competencies approach would provide a robust structure for coaching, development and the creation of career paths.

A sales-competency framework needs to be closely aligned with sales strategies and must be adaptable to changes in strategy, such as when a firm moves from individual selling to team selling and cross-selling; from geographic territory to assigned accounts; from transactional selling to consultative selling; or from order taking to account planning.

Focusing on the right opportunities

This topic covers sales-organisation design and coverage, sales processes, sales-role design, and decision-support tools. Sales-role design is determined by selling strategy and the nature of the sales process.

Companies need to understand how their sales people are selling, and how their customers are buying, their products - because sales-incentive plans drive the focus of the sales team. For example, Towers Watson found a case of a company with an incentive plan that worked on the basis of "all revenues are good revenues". The sales staff focused their attention on existing customers because they were easier targets, which in turn caused the firm to miss opportunities to build future growth with new customers.

On the other hand, a specialty chemicals company increased its operating profit by 40 per cent by re-aligning selling roles according to how customers buy, Frei said.

Highly engaged and motivated sales force

This aspect covers sales compensation, communication, recognition and goal allocation. Motivation is much higher when employees have the ability to influence or control their expectations.

The Towers Watson Global Workforce Study revealed that incentive compensation alone helps to increase the discretionary efforts of sales staff by only 6 per cent. Task clarity with incentive compensation, on the other hand, drives discretionary efforts by 44 per cent.

The firm said sales force rewards had to be designed to motivate and engage the sales force; reinforce strategy and desired behaviour; and attract and retain talent.

In order to motivate and engage the sales force,

_ payout opportunities should be perceived to be "real";

_ the plan should encourage employees to strive for performance improvement; and

_ there should be a compelling upside for top performers.

To reinforce strategy and desired behaviour,

_ performance measures and weights should drive strategic focus (but complexity should be avoided);

_ the pay mix should be aligned with the nature of the selling role;

_ sales crediting should also be aligned to the nature of the selling role; and

_ payout frequency should be aligned with the selling cycle.

To attract and retain talent,

_ base pay and target total-cash opportunities should be market competitive;

_ payout opportunities should be perceived to be "real"; and

_ there should be a compelling upside for top performers.

Towers Watson's senior consultant and lead for sales effectiveness and rewards in Southeast Asia, Simmi Mehta, told the seminar there was no "market practice" for sales-incentive plans. Companies had to understand their own needs and strategies and choose from a range of options.

Speaking to The Nation on the sidelines of the seminar, Mehta said some "hot areas" in the market included the luxury-retailing sector, where many operators were finding difficulties in recruiting and retaining high-calibre sales staff. This is because selling luxury goods is very much concerned with relationships and "delivery." "We have found that customers sometimes follow the salespeople rather than the products", she said.

Moreover, at multi-brand retail outlets such as duty-free shops, cases have been found where brand owners are paying incentives directly to sales staff.

Towers Watson has also received many inquiries from pharmaceutical companies regarding sales effectiveness and rewards solutions.  Mehta said that due to the expiry of drug patents, pharmaceutical firms were finding the need to focus on sales of high-value drugs. Moreover, stricter regulations, such as one prohibiting the offer of free trips to physicians, have reduced the influence of sales people.

[email protected]