Why Growing the Sales Force May Not Be Your Best Investment Strategy for Revenue Growth

In a recent post, I introduced on a common scenario that sales leaders encounter whereby the CEO asks the chief sales officer to substantially add salespeople to the sales force to grow the bottom line. We see this strategy repeated over and over again and, unfortunately, it very frequently leads to deeply disappointing results for the CEO, investors, the board of directors, and the sales leader. Growing the sales force to grow the bottom line seems to make common sense, right?  Well not exactly. Here’s why.

 

What is the desired impact of adding salespeople?

First, let’s look at what impact the stakeholders envision with the “add salespeople” strategy.   Driving increased revenue and bottom line growth is anticipated from more salespeople acquiring more new customers.  These representatives may be deployed in new geography to broaden the company’s footprint, or they may be added within the existing footprint where, with more salespeople, the company can reduce the number of accounts per salesperson with the expectation that those reps will invest more time with each buying customer to sell more offerings (cross-selling) per company.  

 

Why doesn't adding salespeople produce increased revenue and bottom line growth?

There are really three factors for why significantly increasing the number of salespeople often doesn't result in expected financial growth.  These are:

  • Unrealistic timelines associated with the expected results 
  • Unanticipated expenses with adding and supporting salespeople 
  • Unanticipated risks

 

Unrealistic Timeline for Results

CEOs and executive teams are under great pressure to deliver quarterly results.  The fiscal year is an eternity.  So when the CEO asks you to add salespeople, get really clear with as to what increased revenue results are expected by when.  You must provide a well analyzed reality check if the expected results are not realistic.  After all, both of your jobs may be on the line.  Do you know how long it will actually take to hire, train, and deploy the right salespeople?  When will they produce results?  Recently, I've spoken with sales leaders who related that sales managers in their companies dragged their feet in starting the recruiting and hiring process because they really didn't believe that their companies were going to aggressively hire.  They had heard the "let's hire" message from their CEO in the past, only to see that priorities changed.  How ready, realistically, is your company to be able to execute on getting new salespeople selling? 

Hidden costs

In our report, “Uncovering The Hidden Cost Of Sales Support,” Scott Santucci illuminates the massive level of cost in supporting salespeople that most organizations are simply not aware of.  Read this report if you haven’t.  As a sales leader, I never had any idea of all of these costs, and neither do most companies.  For our purposes here, consider all of the overall investments that a company makes to help support a sales organization’s ability to drive revenue; such as salaries (non-salespeople’s), hiring, training, marketing, Human Resources, and a staggering amount of sales support resources that span many departments.  Has this been factored in?  If these costs are not considered within the financial modeling that form the CEO’s and board’s expectations, then there is trouble ahead.

Unanticipated Risks

  • Hiring - What is your company’s track record in hiring the right salespeople?   If you want your new salespeople to sell to executives, or specific roles, how will you identify whether they have the necessary characteristics to successfully gain access to those buyers, have successful conversations, create shared vision, and present winning business cases?  What if the wrong people are hired in the rush to expand the sales force?  How would the cost of attrition impact financial results within the CEO’s results-timeframe?How well developed are your hiring criteria?  How confident are you in the effectiveness of your hiring workflow? 
  • On-boarding - The interval from hiring to productivity means increased cost to revenue ratios for a period of time.  Has this been considered into the CEO’s plan?  How rapidly does your organization take new salespeople from date of hire to being fully productive.  We speak with hundreds of companies and there are few if any that claim to effectively on-board salespeople. Before you sign up to add legions of new salespeople, what is your program for rapidly getting salespeople productive (see Timeline for Results, above).  What are the milestones?  Who will be involved?  What are the criteria to determine whether a salesperson is successfully on-boarded?  How much of this burden will fall on sales managers, and what is their role?
  • Deployment - What are your criteria to ensure proper alignment of the right salespeople to the right accounts and desired types of buyers? With changes in territories or account assignments, how will you manage disruption to current customer relationships so your company does not lose business?

As new salespeople are added, how much of your front line sales managers’ time will be redirected from supporting top performers to hiring new salespeople and getting them up to speed?  How will this impact the productivity of current salespeople?  What percentage of new salespeople will become top performers? Considering that, how will managers be directed to invest their time?

Your Alternatives

When the CEO wants you to substantially grow your sales force, it’s time to thoughtfully consider your options.  I’m talking about whether to just start hiring, or do some business analysis and provide critical thinking your CEO needs in order to make well informed decisions and set appropriate expectations for the board of directors and investors. Many sales leaders are hesitant to push back on CEO initiatives to grow the sales force. However, as a member of the executive team, the CEO and the executive team needs this leadership and critical thinking.  The following survey from my last post on this topic is not statistically significant, but does illustrate how sales leaders say that they have responded to the CEO's order to add salespeople:

 

How to Conduct the Analysis

The challenge is, even if a sales leader stops to consider whether they should not just follow orders and instead conduct analysis, how does one go about this.  There are complexities to be discovered that most organizations (and CEOs) aren't aware of.  As sales leaders, we need to get out of our silo, and be leaders within the cross-functional system that is sales enablement. Your organization needs you to provide thoughtful business analysis. When our clients use our Sales and Marketing Effectiveness Model scenario planning tool to compare alternative investment (e.g. equipping salespeople to increase revenue per transaction by 20% vs. growing the sales force by 20%) adding salespeople is almost always more expensive and less positively impactful to the bottom line of an organization than enabling the current sales force.

Clients of our Sales Enablement Leadership Council use our Sales and Marketing Effectiveness Model to conduct their analysis by working with their colleagues in finance, HR, sales training, sales operations, IT, marketing and product management, and operations (i.e., facilities) to capture relevant information about the dynamics of revenue production at their company.  You could do this on your own as well .  Look at ramp up time, the length of sales cycles, revenue per sales transaction, etc., and costs incurred in supporting salespeople (e.g., salaries, travel, training, marketing, etc.) and deeply understand the expected bottom line impact of alternative investment strategies for growing revenues. 

Summary

Your organization needs you to help make well informed decisions regarding which strategies for revenue acceleration and bottom line growth will deliver the best investment return.  While adding salespeople seems like the most logical way to add revenue, more often than not, the best investments to improve the top-line are to improve your cross-functional sales enablement resources to affect better performance in your existing sales force before adding more sales head count.  Let me know if you need help with this analysis or if you would like to use our Sales and Marketing Effectiveness Model to conduct your own analysis.

What are your thoughts?  How would you engage your peers to help you analyze investment alternatives for growing sales?  What can we do to help you?

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Comments

Tools vs. hiring

Mark, I enjoyed your post. I work for a company called The TAS Group. What are your thoughts towards adding sales effectiveness tools at a cost lower than hiring new sales people to increase your bottom line? Essentially, make what you have better.

I would agree - making the

I would agree - making the most of the people you already have - through proper support and enablement - rather than going to the expense of adding new, relatively unknown sales staff.

One advantage might be if the CEO is also transforming company these new people may have a better cultural fit in the new organisation.

CEO Directives

Having worked with Middle Market and Fortune 500 companies for over 20 years I have not been in very many discussions where the CEO along with the CFO asks for more heads. The discussion is usually on why the number isn’t being made with what you have or with less for that matter.

An evaluation of the sales force, how the customer wants to buy, tools provided for effectiveness, sales processes, territories, front line sales managers, etc. should be done before throwing on more heads.

Terry Stidham
Excellence in Sales and Business Development

It is interesting to talk

It is interesting to talk with large companies in 2013 who have added hundreds of salespeople recently, while two layers below the CEO there is ready admission that they do not have effective hiring practices, or an effective process (or capacity) for getting salespeople on-boarded effectively, nor a clear process for getting the right salespeople aligned with customers in an effective way. Yet it appears that no one wants to tell the emperors that they have no clothes on. Yes, CEOs are making these decisions. It is really happening.

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