Harvard Business Review
The full version of this article is available on Harvard Business Online (subscription required).
The Idea in Brief
Bob Brody leaned back in his chair, frowning. Corporate wanted another 8% increase in sales from his division this year, and guess whose shoulders that goal would fall on? Ah, for the good old days, when he could just announce a 10% target, spread it like peanut butter over all his territories, then count on the sales reps for each region or product line to deliver. Sure, some would fall short, but the real rainmakers would make up the difference. Today, the purchasing departments of Bob’s customers used algorithms to choose vendors for routine buys; pure economics often trumped personal relationships. For more complex sales, purchasing wanted customized end-to-end solutions. There’s no way one person could close those deals, no matter how much golf he or she played. Most of the time, you needed a team of product and industry experts, not to mention rich incentives and a lot of back-office support.
The fact was—he knew he’d have to face it sooner or later—Bob was overwhelmed. Nothing about the sales process was as simple or predictable as it used to be. Eight percent growth? He wasn’t even sure where to start.
If this little fable sounds familiar, it’s because managers often face similar problems. Over the past few years, we have worked through these sorts of challenges with dozens of senior executives in Brody’s position. Even though the world around them was changing, they were still handing down targets from higher management and religiously putting more feet on the street, hoping that some of those new reps would once again save the day. Even arbiters of best practice such as General Electric can recall the wing-and-a-prayer style that, until recently, characterized their sales efforts. The company would give each individual his or her patch and say, “Good luck, and go get ’em,” observes GE’s Michael Pilot, who started his career 22 years ago as a salesperson at the organization and is now president of U.S. Equipment Financing, a unit of GE Commercial Finance.
Today, the savviest sales leaders are dramatically changing the way they run their groups. They are reinventing their sales approaches to respond to new market environments. They are expanding their lists of target customers beyond what anyone had previously considered. They are boosting their sales reps’ productivity not by hiring the most-gifted individuals but by helping existing reps sell more. (See the exhibit “More Reps, or More Productivity?”) As a result, their companies are growing at sometimes startling rates. Pilot’s division—a large group in a mature industry— added $300 million in new business (about 10% organic growth) in 2005 alone, an improvement he attributes specifically to a reinvention of the operation’s sales process. Similarly, SAP Americas, under president and CEO Bill McDermott, has more than doubled its software license business in three years, increasing its market share by 17 points.
What these leaders have in common might be called a scientific approach to sales force effectiveness. It’s a method that puts systems around the art of selling, relying not just on gut feel and native sales talent—the traditional qualities of the rainmaker—but also on data, analysis, processes, and tools to redraw the boundaries of markets and increase a sales force’s productivity. The goal isn’t to replace rainmakers but to narrow the gap between the top 15% or 20% and the rest of the sales force. Companies that use the tactic well have found that, while even top sellers do better, reps in the lower quartiles show dramatic improvement, with productivity jumps of 200%. Such increases enhance the performance of the sales team as a whole and enable a company to reduce the expense of hiring new reps. Some firms using the approach have seen their average sales per rep increase by as much as 50% in two or three years, though most gains cluster around the 30% mark.
First published in settembre 2006