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October 6, 2011
In my previous posts, I have outlined a three-phased approach to Sales Force Sizing:
In Phase 2 – Determine New Size, there are a few popular but incomplete techniques that are worth discussing.
- Same old, same old. One incomplete method of Resource Planning attempts to keep sales costs at a constant percentage of gross revenues. This sizing approach focuses on cutting costs and not profitability. When sales are down, the sales force is reduced. Maintaining a cost-to-sales ratio can lower costs, but it doesn’t necessarily maximize profits. For smaller-share companies, their cost-to-sales ratio may need to be greater than their larger competitors. If not, they risk being outshouted in the marketplace.
- Get leaner and meaner. Another half-baked approach to Sales Force Sizing looks to reduce headcount by becoming more effective. A company may initiate a training program or install a new CRM to improve effectiveness by 10-20%. They then cut their sales headcount accordingly assuming a more effective sales force can do more with less. This approach ignores the potential upside of the improved capacity of the sales force. Sales Force Effectiveness enhancements plus more sales heads can actually increase topline revenue. Sometimes, doing more with less works makes sense. But often, doing more with more is the right choice.
- If it ain’t broke don’t fix it. An often employed, but short-sighted method to resource planning goes something like this… “If it worked last year, keep it the same this year”. This is a very tempting approach for the sales leader, especially if he/she hit their number last year. Why make any changes? Change is disruptive. Unfortunately, this attitude completely ignores market dynamics.
Key Takeaway: When resource planning to properly size your sales force, avoid the temptation to focus exclusively of cost and affordability. The best techniques are market-based and consider market dynamics in their analysis.
