Trim the Fat

When the CEO slashes the sales budget, the first knee-jerk reaction of many sales managers is, “Cut the sales force by – how much?” Two percent? Five? Ten? More? How much is enough? What size sales force will produce the most profit? When is a sales force genuinely right-sized? “Optimization of sales force size is the biggest issue we see these days. We are asked about it all the time,” says Sam Reese, CEO of sales training company Miller Heiman in Reno, NV. “Two years ago,” he adds, “nobody had any interest in this question. Now it is top of mind.” Well of course. Times are tight. And the sales force with fat has to trim down. So how do you determine the right size for your company sales force? That depends on a few follow-up questions.

Is it better to attack the market with a well-honed, small team of top-notch pros? Or are there more profits to be made, more easily, by throwing an immense sales force out into the field and then waiting to see what it drags back home? Or maybe the best sales force is somewhere in between: a midsize group that, theoretically, delivers some of the best of both extremes.

These are questions that keep sales managers up at night, and for good reasons. Two years ago, business was so brisk that everywhere the attitude was that the optimal sales force size was bigger, always bigger. Now, in the midst of a persistently sluggish market, sales managers are routinely confronted by bosses who want to knock down the cost of sales, who want deadweight trimmed, and who – loudly and often – are demanding that productivity per salesperson be goosed ever upward. Nowadays, agrees Bruce Dahlgren, vice president and general manager, North America, for the Printing Solutions and Services Division of Lexmark International, “We all have to balance revenue against expenses. There’s no secret about that.”

There may be no secret, but that doesn’t mean it is always simple. “Three years ago it was tough to tell who the good reps were, it was so easy to make quotas,” says Gary Guerts, national sales manager for Extreme Logic, a leading e-business solutions provider based in Atlanta. “Now things are so tough it can be hard to tell who the bad reps are because many people – including good ones – aren’t necessarily making quotas. That’s making it harder to optimize the size of a sales team.”

Guerts isn’t facing that problem alone. It’s epidemic among sales managers who know this coin has two sides: have too many sales reps and that can put a company out of business, but have too few and that can just as certainly be fatal.

Steve Schiffman, president of New York-headquartered sales training organization DEI Management Group Inc., elaborates on this thorny dilemma. “With too few salespeople you are spread too thin,” he says. That means opportunities will fall between the cracks, potentially lots of opportunities. But have “too many reps in too-small areas and they will be bumping into each other,” warns Schiffman. That’s an annoyance to customers and prospects, and of course there also are the costs of maintaining those reps. “You cannot afford to carry too many reps. Nobody will argue otherwise.”

The inescapable conclusion: Right-sizing the sales force is a must-do in 2003. But that remains hard for many sales managers to put into decisive practice, says Al Davidson, president of sales consulting firm SS&M in Farmington, CT. “Most sales managers aren’t very good at looking at the crucial staffing metrics,” he adds.

Just what metrics matter when it comes to sizing a sales force? Davidson pinpoints several:

“Are you losing accounts?” If business is heading down the road to competitors that may be a tip-off that the sales force isn’t paying enough attention to established customers – meaning staffing is too slender to cope with the marketplace.

“Are you developing enough new business – that’s another critical metric,” says Davidson. When a sales team is peddling fast just to keep abreast of the current sales volume, new business – prospecting, lead qualification, going out on calls – sinks down the to-do list. Adds Davidson, “Many sales forces in fact are adequately staffed only to handle current business. They don’t have enough people on board to pursue new business.” How does your team measure up? Davidson offers a quick yardstick: “Do you know how many new business calls your people went out on during the last week?’ Know that, and you are on the fast track to knowing if the current sales team is the right size.

But that is just the beginning of any effort to optimize a sales team’s size. Sam Reese points to another sensitive spot: “As part of this process you must go back to the job descriptions. In many sales organizations, salespeople are busy doing everything but selling.” In those companies, sales reps may be furiously busy – meeting with marketers, massaging unhappy customers, working up long-range forecasts – but if they aren’t hitting the organization’s quotas, it’s not necessarily because more reps are needed. What may be needed simply is greater focus on selling, suggests Reese. “Whenever you begin to optimize a sales force’s size, always go back to the job descriptions. Are the right people doing the right jobs?”

From there, Reese suggests close eyeballing of three key metrics: “Is productivity per salesperson going up?” If it is, don’t necessarily applaud says Reese. In this treacherous economy, rising productivity per salesperson may in fact be a sign that “you have more business than your people can handle,” says Reese. Of course, maybe it is simply a sign that people are working harder and smarter, Reese concedes, but either way when you see that flag, move in for detailed scrutiny.

The second thing to look at, says Reese: “Are you losing market share?” In a tough economy, sales may stumble, but theoretically market shares of all players ought to stay about the same. So if your market share is on the wane, that may be a tip-off that staffing has indeed become too lean to grab up the business you deserve, says Reese.

A last Reese metric: “How much face-time are your people spending with customers?” This may be a slippery number to grab, but Reese suggests it may well be the most telling. When face-time is falling, quite probably sales will too. And again, this may be a warning that too few salespeople are pounding the pavement.

Too Much Is Too Many

What metrics tell you that you have too many salespeople? The big one, says Lexmark’s Dahlgren, is when profit per sale is eroding. “For us, that’s a key measure and the key in determining bonuses. We take it very seriously.”

A kindred metric: Keep an eye on the cost of sales, says Craig Edward, executive vice president for sales at Precision Response Corp. (PRC), a Plantation, Florida-based operator of call centers from Pennsylvania to India. “When your costs are rising, you know you have too many salespeople.”

Patti Branco, a Ventura, CA, sales trainer, offers a last, intangible-but-worrisome indicator that a sales force may be too big: “Are you losing your best salespeople? They won’t stay in an organization where opportunities are thinned out among too many people. In the minds of the top salespeople, overhiring is a powerful negative.” And, warns Branco, this concern is all the more palpable today, as even the shrewdest sales executives are struggling to earn bonuses.

Sort through that advice, and there’s plenty to mull over when thinking about sales force size, but probably the most targeted advice is this from Davidson: “Start by knowing what your people are really doing to fill their days. That will usually tell you if you have too few or too many.”

Resizing for Profits

Metrics take a manager far when it comes to saying what the optimum sales force size is, but are they the whole story? Not according to Ira Altman, vice president, sales, for Coverall Cleaning Concepts, a Ft. Lauderdale, FL, provider of outsourced janitorial services to business. “The number of salespeople depends heavily upon where the company is in terms of its development. Are you in a growth mode? Or a profitability mode?” Altman, who heads up a 200+ sales force split between inside and outside reps, explains that when a company is bent on growing fast – on seizing market share – it will ramp up its selling team to make the most of the opportunities that are out there. “In our industry, there is no leader. It’s a lot of mom-and-pop janitorial firms. But this is a $60 billion business, and we want to emerge as the leader. So we are tending to invest heavily in our sales force, to make sure we don’t miss opportunities.”

A related vision is offered by PRC’s Craig Edward. “The best sales force size depends upon the ultimate size of the target,” he says. Go after a big and growing market, and that’s a prescription for beefing up a sales team. On the other hand, when a target is contracting and there’s no end in sight, that means it’s time to shrink.

In other words, whether it’s better to go big or winnow down to a small staff hinges on the sectors where a company sells.

Cutting the Cord

“It’s all relative” may not be a fully satisfying answer, but press the experts and they won’t commit more specifically on the “Which is best – big or small” question. But there is another question that prods them into volubility, and it is this: Can all your people be stars?

Face it: A team of all-stars is a much more probable reality with a lean sales force. Go big – extend into a sales team numbering in the thousands – and it gets ever harder to put only all-stars out on the streets. The cold reality is that, person for person, a small, well-chosen sales team almost always will be better than a sprawling one. But not necessarily better for this company, in this market. Given opportunities may dictate assembling a sizable force composed of individuals of varying talents.

But that said, an inexorable fact is that it’s up to the manager to continually cull the flock in an ongoing effort to make it ever better. “You simply have to deal with underperformers, no matter how big or small your sales force,” says Eric Meerschaert, head of the Denver office of Charter Consulting Inc., a management-consulting firm. “Eliminate your bottom tier, and that instantly frees you to bring in new people who want to help you grow.”

Of course nobody likes cutting folks loose, particularly in a stumbling economy. But when managers don’t take those steps, the risks only multiply, says PRC’s Edward. “What gets me worrying are unmotivated people. They can do so much damage to a company” – and this, says Edwards, is harm a manager might not see because it is nearly invisible. It happens this way: A prime lead comes in. At PRC, this would be, say, a lead for setting up an outsourced customer service center for a major corporation. That’s potentially a multimillion-dollar sale – or more – and Edward knows he cannot waste those leads. But toss a prime prospect to an underperformer, and if that salesperson boots the lead, there may never be a second chance. “Ask yourself, how much are the unsuccessful salespeople on your team costing your company in lost leads, fumbled prospects,” asks Edward. “You have one shot to make the right impression. You have to get it right.”

Adds George Cloutier, president of Waltham, Massachusetts-based consulting firm American Management Services, “What really matters in sizing any sales force is accountability. Are you setting standards for your people and holding them accountable for meeting them?” Do only that, says Cloutier, and you have taken a huge step toward having a top-performing sales team where, at the very least and no matter the size of your group, every rep is genuinely carrying his or her weight.

Reach that state of near Zen-like perfection and, guess what, your sales team is the perfect size, and that’s true if the headcount is 10 or 10,000. “When you have a well-disciplined sales team, where every member has specific accountability, you have the ideal size group,” says Cloutier. “It’s not easy to get there, but you will never get there if your organization doesn’t insist on accountability for every member. Achieve that, and you have what really matters.”