Major disruptions will continue to challenge SBI 100 companies in 2016 and for years to come. Businesses that want the future to look much like the recent past must step out
of their comfort zone. If not, sales forces will suffer from an outdated worldview.
The macro trends that affected the world’s largest sales forces last year included six major areas: Employment, finance, geography, industry, service versus product, and productivity. This article reviews the major trends impacting enterprise sales forces.
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The most represented industries on the SBI 100 list of the world’s largest sales forces are pharmaceutical manufacturing (11 companies, average sales force numbering 8,900); software (9 companies, average sales force numbering 8,500); and medical equipment (7 companies, average sales force numbering 4,800).
When it comes to profits, business services lead at 29 percent, followed by semiconductor manufacturing at 27 percent, pharmaceutical manufacturing at 23 percent, and software at 21 percent. In revenue growth, commercial real estate leads at 26 percent, followed by drug wholesalers at 21 percent, commercial health insurance at 17 percent, and scientific and technical instruments at 16 percent. The industries lagging in revenue growth are diversified industrial, at –16 percent; chemical manufacturing, at –8 percent; and oil and gas exploration and production, at –7 percent.
The highest sales productivity is enjoyed in oil and gas exploration and production, at $89 million revenue per sales head; drug wholesalers, at $43 million per sales head; commercial health insurance, at $19 million per sales head; diversified electronics, at $18 million per sales head; and semiconductor manufacturing, at $15 million per sales head.
The drivers of revenue growth vary. In industries, such as business services, software, and telecommunications, the driver is sales head count. Productivity per sales employee drives growth in industries such as semiconductor manufacturing and diversified electronics. Commercial real estate and oil and gas exploration and production exemplify another type of industry, driven mostly by market prices.
Service versus Product
Among the world’s largest sales forces, 30 SBI 100 companies offer services only, 49 offer products only, and 21 offer both products and services. In 2015, the 30 services-only companies averaged $30 billion in revenues. They grew at 5.3 percent, with 5,800 salespeople, $5.6 million revenue per sales employee, and 13 percent profit margin.
In 2015, the 49 products-only companies averaged $62 billion in revenues. They grew at 1.6 percent, with 5,700 salespeople, $14.6 million revenue per sales employee, and 14 percent profit margin. In 2015, the 21 hybrid companies offering both products and services averaged $57 billion in revenues. They grew at 0.3 percent, with 11,300 salespeople, $9.8 million revenue per sales employee, and 13 percent profit margin.
When it comes to growth, the services only companies excelled last year— more than doubling the 2.5 percent growth rate of the full SBI 100 list. These services-only firms tend to be smaller and generate lower average productivity per sales employee than other SBI 100 companies. Services are harder to sell and harder to scale. Yet services-only companies maintained comparable profit margins to the rest of the SBI 100. Product-only companies lead the pack in productivity because their R&D investments to build winning products enable greater revenue per sales employee.
Hybrid companies struggle to grow. While they offer overall solutions, the lack of a clear identity makes it difficult to go to market. Should they go to market like a services company, a products company, or something in between? A comparison proves the point: The average hybrid company has 11,000 salespeople and 0.3 percent revenue growth compared to an average of 5,750 salespeople and 3.5 percent revenue growth across product/service-only companies.
In the last three years, productivity declined for the world’s largest sales forces. Only 41 SBI 100 companies increased productivity per employee. This is surprising as companies optimized cost structures over the last seven years following the 2008 recession. In 2012, productivity per employee averaged $731,000 compared to $684,000 in 2015. This is an average productivity decline of 2.5 percent over three years, or a growth rate of –0.8 percent. Considering their average growth is expected to lag GDP again in 2016, SBI 100 companies appear to have the opportunity to drive much greater employee productivity.
When it comes to sales productivity, the whole group averages $10.9 million in revenue per sales employee, with the median sitting at $4.3 million. The average is skewed by five companies exceeding $50 million per salesperson, primarily in the oil and gas exploration and production industry: ExxonMobil (No. 78, $147.4 million); BP (No. 46, $78.3 million); Chevron (No. 77, $73.2 million); Royal Dutch Shell (No. 30, $58.5 million); and McKesson (No. 61, $51.9 million).
On the low end, eight companies fell at or below $1.5 million in revenue per sales employee: Paychex (No. 60, $751,000); Salesforce.com (No. 38, $1.0 million); Cintas (No. 48, $1.0 million); Automatic Data Processing (No. 8, $1.1 million); Oracle (No. 4, $1.3 million); iHeart Media (No. 43, $1.3 million); Citrix Systems (No. 95, $1.5 million); and Pitney Bowes (No. 85, $1.5 million).
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In last week’s article we reviewed the first three macro trends of employment, finance, and geography. Together these six macro trends represent the major forces impacting the largest sales forces.