7472674e967a46889d0086731ff4828e

CONCLUSIONS FROM THE COCOCO SALES EXCELLENCE STUDY

ADDING SCIENCE TO THE ART OF SELLING

www.quartzco.com DENMARK Ryesgade 3A 2200 Copenhagen T: +45 33 17 00 00

SWEDEN Birger Jarlsgatan 7 111 45 Stockholm T: +46 (0)8 614 19 00

NORWAY Inkognitogata 35 0256 Oslo T: +47 22 59 36 00

EXECUTIVE SUMMARY

Nordic companies' sales organisations are not yet geared for the economic slowdown – there are still important untapped sales force effectiveness gains

• Profitable growth is high up on any company’s wish-list these days. Studies show that for the vast majority of companies there are huge untapped potentials within sales. Through a more systematic and structured approach to sales, companies can realise significant improvement in sales force effectiveness.

• The economic slowdown has already made its mark on performance. While 56% of the companies surveyed believe that their turnover growth during the last 3 years has outstripped that of their closest competitors, only 44% believe that this has been the case during the latest 12 months.

• Nevertheless, 60% of the sales directors surveyed still believe that their sales forces are more effective than those of the companies with whom they compare themselves – although they do acknowledge that there are still many areas that could be optimised.

• The big question is whether the current economic climate will allow sales directors to take a ‘wait and see’ approach to some of the more complex and political performance improvement challenges. Now is the time to make a step change in sales force effectiveness.

• According to senior sales managers, the major challenges during the next 12 months will be to develop and execute the right sales strategies, to organise and manage sales, and to recruit, develop and retain high performing salespeople.

• Many CEOs and CSOs consider salespeople to be the weakest link in their sales force effectiveness equation.

Nevertheless, this study concludes that the ‘raw material’ is not the most important driver of sales force effectiveness.

• The most important drivers of sales force effectiveness are related to organisation and management of the sales effort.

The factors most closely associated with sales force effectiveness are: – Clarity of roles and responsibilities – Easy access to relevant information for salespeople – Performance-based pay for salespeople – Strong cooperation between sales and other departments – Salespeoples’ ability to up-sell and cross-sell – Consistent sales coaching • This study takes a closer look at these six factors and what distinguishes the ‘excellent sales organisation’ from the ‘good sales organisation’.

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INTRODUCTION TO THE STUDY

The sales excellence study aims to uncover the factors that distinguish the ‘excellent sales organisation’ from the ‘good sales organisation’

Objective and background

Method

• For more than 5 years, Quartz+Co has been working with a number of international companies headquartered in the Nordic region with a view to streamlining their sales efforts and improving their ability to achieve profitable growth.

• The sales excellence study was carried out from March to June 2008.

• As part of our work to improve performance of sales organisations, we have developed a framework – the Quartz+Co Sales Excellence Diagnostic tool – which consists of the following 6 focus areas: – Sales Strategy; Organisation; Performance Management; Processes & Systems; Sales Management Competencies; Salespeople Competencies • With a view to creating an even stronger and more balanced foundation for streamlining sales operations, we have carried out a study to establish which factors within the 6 focus areas distinguish the 'excellent sales organisation' from the 'good sales organisation'.

• The study is based on a questionnaire and interviews with senior sales managers in some of the leading companies in the Nordic region.

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• Interviews were conducted with senior sales managers – typically CEOs and CSOs – in 20 companies in Denmark, Norway, Sweden and Finland.

• In addition, a questionnaire was distributed in which a further 20 senior sales managers answered 50 questions about their sales organisations.

• The companies in the study were predominantly from: – Banking & Finance – Media – Services – Transportation – Fashion & Lifestyle Products • The vast majority of the companies operate in the field of business-to-business sales (~65%) or a combination of business-to-business, business-to-retail-to-consumer, and business-to-consumer (~20%).

INTRODUCTION TO THE STUDY

Although many CEOs and CSOs consider salespeople to be the weakest link in the quest for sales force effectiveness, salespeople competencies are often the last stop on the journey

Objective and background • Studies show that, for the vast majority of companies, there is a huge unrealised sales potential. By taking a more systematic and organised approach to sales, companies would see a significant improvement in the effectiveness of their sales departments.

• While many CEOs and CSOs (including those who took part in this study) perceive salespeople as being the ‘weakest link’ in the sales force effectiveness equation, salespeople competencies are often the last stop on the sales excellence journey.

• Through our work with improving performance of sales organisations, we have identified six overarching focus areas that have an effect on sales force performance. The six focus areas are illustrated in the figure to the right.

• The objective of the current study was to establish which of the factors within these six main focus areas have the greatest impact on sales force effectiveness and sales performance. In addition, the study set out to clarify how well the companies perform in each of these areas.

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Sales strategy

Salespeople competences

Organisation

Sales excellence Sales management competences

Performance management

Processes and systems

DRIVERS OF SALES FORCE EFFECTIVENESS

Even though the economic slowdown has left its mark on the performance of companies, 60% believe that their sales force is more effective than that of the companies with whom they compare themselves • More than half (56%) of the participating companies consider their growth in turnover in the last 3 years to have been greater than that of their competitors – which also tallies with their actual growth rates reported by the companies.

• However, the economic slowdown has already made its mark and only 44% of companies believe that their growth in turnover during the latest 12 months has exceeded that of their closest competitors.

Growth in turnover in the last 3 years in relation to competitors 0%

20%

Much higher

40%

Higher

60%

80%

About the same

100%

Lower

Growth in turnover in the last 12 months years in relation to competitors Much higher

Higher

About the same

Lower Much lower

• Despite the relative decrease in growth, 60% of the companies surveyed still consider their sales forces to be more effective than those of the companies with whom they compare themselves.

• However, from the interviews it was clear that the senior sales managers are well aware that there are many areas that could be optimised: “I am completely convinced that I can get 40% more out of my salespeople if I remove some of bumps in the road.”

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Effectiveness of the sales force relative to companies with which we compare ourselves Much more effective

More effective

Equally effective

Less effective

DRIVERS OF SALES FORCE EFFECTIVENESS

According to senior sales managers, the challenges in the coming year lie in developing and implementing the right sales strategy, organising and managing the sales, and recruiting, retaining and developing talented salespeople – with an emphasis on the latter

What are the biggest challenges facing sales in the next 12 months?

• 50% of those questioned indicate that the challenges related to development and execution of the company’s sales strategy would take up a lot of the strategic agenda in the next 12 months because of uncertainty about the consequences of the economic slowdown in the market.

• Roughly the same number (47%) expect that organisation and sales management would take up a lot of the strategic agenda.

• Despite the slowdown, 35% still expect to have to fight to recruit and keep the best salespeople. A further 32% place training and development of salespeople high up on the strategic agenda for sales.

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0

10

20

30

40

50

60

DRIVERS OF SALES FORCE EFFECTIVENESS

Closer analysis of the responses reveals that the most important drivers of sales force effectiveness are mainly of structural character

Effect and performance by driver/question Closer analysis of the quantitative answers given by sales managers shows that the following six factors are closely associated with the sales force effectiveness:

2. Easy access for salespeople to information on customers and products 3. Performance-based pay for salespeople

2 Performance

1. Clear roles and responsibility descriptions

High 1

4 6 5

3

4. Strong cooperation between sales and other departments 5. Salespeople who are good at up selling and cross selling 6. Consistent sales coaching

Low Low Impact on sales force effectiveness

7

High

DRIVERS OF SALES FORCE EFFECTIVENESS – 1. Clear descriptions of roles and responsibilities

In general, companies are good at ensuring clearly defined roles and responsibilities but they are seldom dimensioned based on hard facts There are clearly defined roles and responsibilities for salespeople 0%

20%

40%

60%

80%

100%

• Salespeople must have a clear framework for their roles and what is expected of them in order to perform. The study shows that there is a clear link between clarity of roles and responsibilities and sales force effectiveness.

• In general, companies reckon that they are good at providing clear descriptions of roles and responsibilities. Only 14% think that they are poor at providing clear descriptions of roles and responsibilities.

To a great extent

To some extent

To a limited extent

Roles are dimensioned based on calculations of expected time consumption 0%

20%

40%

To a great extent To some extent

8

60%

80%

To a limited extent Not at all

100%

• However, a large proportion of the companies allocate customers and work tasks to salespeople on the basis of gut feeling rather than hard facts. Almost 50% responded ‘to a limited extent’ or ‘not at all’ to the question whether they dimension roles based on calculations of expected time required to perform the activities of a given role.

• Naturally, this increases the risk of suboptimal utilisation of the sales force and of the individual salesperson being forced to down-prioritise important customer-oriented activities due to lack of time.

DRIVERS OF SALES FORCE EFFECTIVENESS – 2. Access to information

Sales force effectiveness is dependent on salespeople having easy access to relevant information, but companies still struggle to raise the level of use of systems and tools Salespeople have easy access to information on customers/products 0%

20%

40%

60%

80%

100%

• An effective sales organisation requires transparency when it comes to the company’s customers and products.

Consequently, there is a clear link between this question and the effectiveness of the sales force.

• 74% of the senior sales managers reckon that their salespeople have easy access to the information they need.

Only 26% think that their sales force has limited or no access to the necessary information on customers and products.

To a great extent

To some extent

To a limited extent Not at all

We have implemented tools and systems to support sales 0%

20%

To a great extent

9

40%

To some extent

60%

80%

100%

To a limited extent Not at all

• A well-functioning customer and sales management system (for example, a CRM system) can be an important tool in ensuring easy access to relevant information.

• Almost 70% of companies have implemented systems and tools that support their sales efforts. Nonetheless, in a great many cases these systems are still vastly underused.

• As one of the sales directors puts it: “The data discipline is not good enough. Generally, internal sales takes care of entering data into the system – the salespeople either cannot or will not get to grips with it”.

DRIVERS OF SALES FORCE EFFECTIVENESS – 3. Performance-based pay

It is no surprise that there is a link between performance-based pay and sales force effectiveness, but nearly half of the companies do not use this instrument At least 25% of the salesperson’s pay is performancebased 0%

20%

40%

60%

80%

• Although it is widely recognised that performance-based pay is an effective tool for influencing the sales force behaviour, there are still far too many companies that do not use it.

100%

• Only 45% of companies have taken the step and operate an incentive system whereby performance-based pay constitutes 25% or more of the salesperson's total pay. At the other end of the scale, almost 30% of companies use no form of performance-based pay whatsoever.

To a great extent To some extent To a limited extent Not at all

At least 30% of the salesperson’s performance target is shared with the rest of the company 0%

20%

To a great extent

10

40%

To some extent

60%

80%

100%

To a limited extent Not at all

• While incentive systems can be an effective way of driving the individual’s behaviour, they can also have a flip-side. As one of the sales directors puts it: “Sub-optimisation occurs since the salespersons are measured on their own results and consequently they decide to hang on to their own leads, despite the fact that it might be better to pass them on to another division”.

• Almost 2/3 of companies combine individual performance targets with performance targets for the whole company, while just over 1/3 stick primarily to individual performance targets.

DRIVERS OF SALES FORCE EFFECTIVENESS – 4. Co-operation with other departments

Sales effectiveness is dependent on good cooperation between departments, but this is still lagging behind in comparison with cooperation within the sales department

The sales department works well with other departments 0%

20%

40%

60%

80%

100%

• In general, the companies believe that their sales departments cooperate well with the other departments.

Thus, nearly 80% believe that there is good cooperation.

• From the interviews it appears that cooperation was stronger in those companies in which sales and marketing reside under the same organisational umbrella and refer to the same director. Here, the cooperation was characterised by a desire to help each other.

To a great extent To some extent To a limited extent Not at all

There is healthy cooperation between external and internal sales 0%

20%

To a great extent

11

40%

To some extent

60%

80%

• In most companies, there is strong cooperation between the internal and external sales departments.

100%

To a limited extent Not at all

• The interviews show that the internal sales functions are used in very different ways by different companies. In some places they function as a back-up to ease the pressure on the external salespeople, while in other places, cooperation is very limited.

• During the interviews it became apparent that there are huge potentials for some companies if they increase the use of internal sales, in that the salespeople could spend less time on administrative tasks and more time with customers.

DRIVERS OF SALES FORCE EFFECTIVENESS – 5. Salespeople's ability to increase sales

Only very few sales managers believe their salespeople are good at up-selling, cross selling and acquiring new customer but ultimately this can be traced back to management’s ability to organise the sales effort and coach salespeople Salespeople are good at up-selling and cross-selling to existing customers 0%

20%

40%

60%

80%

100%

• On the whole, none of the sales managers think that their salespeople are really good at up-selling and cross-selling.

Only 3% fully agree that their salespeople are good at upselling and cross-selling to existing customers.

• It appears from the interviews that many salespeople are not good enough at thinking about up-selling and cross-selling but instead focus on generating repeat sales (e.g. contract renegotiations).

To a great extent

To some extent

To a limited extent

• There is a clear link between the salespeople’s ability to upsell/cross-sell and sales coaching. So ultimately, the finger points at sales management and the time and effort they spend on coaching salespeople.

Salespeople are good at identifying and winning new customers 0%

20%

40%

To a great extent To some extent

60%

80%

100%

To a limited extent Not at all

• Sales managers were even less positive about their salespeople’s abilities to identify and win new, attractive customers.

• The interviews showed that the sales managers think that the salespeople are a bit too comfortable in visiting the existing customers and sticking to the same routines rather than finding new customers for the company.

• Some of the most effective sales organisations split their sales force up so that a group of salespeople are only responsible for identifying and winning new customers.

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DRIVERS OF SALES FORCE EFFECTIVENESS – 6. Consistent sales coaching

Consistent sales coaching, for underperformers in particular, is an important tool for driving sales force effectiveness and the economic slowdown will only make it even more so Sales managers define consistent action plans for underperformers 0%

20%

To a great extent

40%

60%

To some extent

80%

• Consistent sales coaching of underperformers is an important lever in underpinning the company’s sales drive.

100%

To a limited extent Not at all

• Only 9% of companies completely agree that their sales managers define action plans for underperformers consistently with clear requirements for development and results, while further 66% say that they partly agree with this statement.

• 24% reckon that their sales managers display limited consistency when it comes to managing underperformers, but the economic slowdown may force these companies to take a tougher stance.

At least 30% of the sales manager’s time is dedicated to sales coaching 0%

20%

To a great extent

40%

60%

To some extent

80%

100%

To a limited extent

• The most effective sales organisations state that, in general, their sales managers spend 1-2 days a week (or 20%-40% of their time) coaching salespeople.

• There is also a clear link between the time that sales managers set aside for sales coaching, the salespeople’s ability to generate up-sell/cross-sell, and the company’s ability to implement its sales strategy.

• Almost 75% of the companies reckon that their sales managers set something like 30% of their time aside for sales coaching, but a closer inspection places a question mark over this assertion (see the next page).

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DRIVERS OF SALES FORCE EFFECTIVENESS – 6. Consistent sales coaching (continued)

Although frequent, structured 1-to-1 follow-up meetings are a cornerstone of effective coaching of salespeople, in the majority of companies this happens a maximum of once a month

• Companies in which there is a follow-up meeting between sales manager and salesperson a maximum of once a month are still in the majority (55%).

• Several companies stated that follow-up activities are incorporated into team meetings. However, team meetings are most often less effective for coaching the individual.

• During the interviews it also transpired that in several places, individual follow-up meetings were planned but that, unfortunately, they did not always take place: “It is often the sales meetings that are first to fall by the wayside when you’re busy, even though this is a very short-sighted solution”.

How often are 1-to-1 follow-up meetings held between sales managers and salespeople?

0%

20%

40%

More than Twice per month twice per month

60%

Once per month

80%

100%

Less than Ad hoc once per month

• Furthermore, it also transpired that it was often the same managers who frequently cancelled their follow-up meetings.

• Individual follow-up meetings seem to happen more frequently between sales managers and their superiors, even though the need for coaching and the effect of coaching is just as great (or greater) at salesperson level.

How often are 1-to-1 follow-up meetings held between managers and managers of managers?

0%

20%

40%

60%

80%

100%

• Sales coaching can be done in a variety of ways, but frequent, structured, 1-to-1 meetings to follow up on performance and results is one of the cornerstones of effective sales coaching.

• One of the respondents described their system of following up on sales efforts as follows: “Our salespeople have a meeting with their sales manager every 14 days. The day after, the sales manager has a meeting with his sales director and the day after that, the sales director has a meeting with me. That way, we ensure that opportunities and issues are raised to the relevant level”.

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More than twice per month

Twice per month Once per Less than Ad hoc month once per month