Finance and Business

The Pressures on Sales Managers

Sales managers, as coaches, also face new, different pressure in the 1990’s. They must upgrade their own training just as aggressively as reps must, which can put lots of pressure on their own families as they take course or are trained away from home.
In an era of downsizing, many companies have thinned the ranks of sales managers, thus widening the manager’s span of control. A manager will have perhaps 33% to 50% more reps to supervise. For instance, a manager might go form having eight to 12 reps reporting to him/her. That means 33% to 50% more expense accounts to sign, more salaries to review, more performance appraisals to give, and more rep training and incentive compensation plans to administer.

It pulls the manager into more territories, often boosting his or her own travel time-and this increases stress as the typical frustrations of living on the road escalate (from late planes, to problem rental cars, headquarter communication hassles, and so forth). Because the manager with more reps to supervise tends to spend less time coaching each rep, there is pressure to do the highest-quality job communicating face-to-face in field coaching sessions. Quality supervision replace closeness of supervision. The manager’s own superiors are probably also putting pressure on him/her to boost productivity.
The sales manager is caught in this tug-of-war between senior management’s goal for maximum output from the field, with autonomy and shared decision making. Successful sales coaches must always balance the need to care about their sales reps as people with business pressures to control them, because they are costly resources.

A sales manager perceived as caring only about business result and carrying out abandoned. They wonder how the manager will function if the business hits rough water. Will the manager help them grow and develop? Should they bet their future on such a leader? This is how reps think when the sales manager works too hard for compliance and control at the expense of maximum output.

Should the sales manager be perceived by superiors as too people-oriented, they become anxious that he/she is too soft on subordinate reps and not focused enough on ensuring that orders flow in and shipments flow out.

More than ever, the sales manager of today has to learn to be both bottom-line committed and a fine coach and employee partner. Learning this takes courage and skill, and few sales manager gets much help or sympathy from above. They could echo the words of Tommy Lasorda, the Los Angels Dodgers manager, who said “ I found out that it’s not good to talk about my trouble. Eighty percent of the people who hear them don’t care and the other 20% are glad you’re having them”.

Redesigning measurements and reward to fit the sales force the 1990s

If there is one area that taxes both the creative and analytical abilities of sales managers, it is designing a performance measurement reward system that stays current with changing market objective and shifting sales force specialization. When one considers the different kinds of reps an organization employs, it is reasonable to conclude that compensation plans based on a “one size fits all” philosophy are bound do fail.
A single compensation plan fails to recognize key differences between a national account rep, a telesales rep, and a territory rep. Each rep probably emphasize different product mixes to suit customers, and each sells to accounts with different buying cycles. Measuring result against one sales quota formula would therefore be folly.
Measurement systems that aren’t given a fresh look inevitably lose relevance over time, because companies may shift emphasis from selling individual products to total customer solutions. Alternately, they may utilize more team efforts where shared sales credits are the only fair way to reflect the sales efforts of the many reps working together.

Individualize your pay plans
With compensation and incentive plans requiring continuous updating, and measurement systems becoming more complex with specialization, are there any general maxims sales managers should follow when designing their rep measurement-reward systems? There are some broad design principles that make sense for the volatile 1990s.
With high market instability marked by wide differences in regional growth rates, industry business cycles, and distribution channel shifts, it makes sense not to put too much of any rep pay plan into a fixed pay plan such as salary. A blended approach that combines some salary (in recognition of rep tasks without immediate or direct sales growth consequences) with some variable pay provide the best compromise between short-term sales objectives and long-term goals for account development and sustained relationship building with customers.

Straight commission plans make it difficult for reps to focus on anything but next mount’s sales quota. Long-term growth in new products or new account development almost always suffers because such activities have reproach in the company’s accounting system. This is often unrealistic when the sales are to national distributors shared between several reps, and especially when such distributors ship to their other branches from a central purchasing center.
The supplying company’s sales are reported in accounting reports in one region, when they may ultimately take place in several territories where the distributor operates. To alleviate measurement problems, sales are often pooled. But these system can be problematic when reps are paid 100% on commission. Arguments frequently ensue between reps about who get what credit for the distributor’s total purchase.
Providing more than 65% of 70% of a rep’s pay in salary leaves a company vulnerable if total market potentials or regional potentials between reps shift. The company will be caught with fixed expenses despite a variable part of compensation, make for high ongoing costs. For every dollar in salary, the company incurs another 15 to 25 cents in benefit costs (pensions, life insurance, health care). Putting more pay into a variable part of the plan makes reps realize they must re-earn their money every year.
The watchword in pay plan design should be flexibility. By paying a rep a portion of his or her total income in salary, a manager retains the control to guide reps in fulfilling all the sales basics required for total account service, including account retention. The “plus” portion of planned income that is variable can be customized to specific performance goals. For some reps it can be fine-tuned to pay for finding new accounts, while with others it can be adjusted to pay for upgrading business existing customers
The “extra compensation” can be paid differently, depending on a rep’s territory or sales tenure. So, if the rep’s growth prospects in a territory are poorer than those of other reps, the plus part of the compensation package can reflect lower growth expectations of the manager.
From a sales manager’s perspective, the concept of blended plans is simple to communicate to reps. The rep quickly learns that his or her base rewards day-in, day-out total selling function, including duty a trade shows, keeping an eye on competitors, or making multiple calls over time to crack key accounts. The rep knows that the additional variable compensation is a customized, personalized  issue that reflects his or her skills, workload, assigned region/account and experience level.
Such system ring fair and comprehensible to reps. Should a company want to shift to a more variable pay scheme, it should boost the percentage of the total planned income that will be paid over and above the salary for sales target attainment. For instance, it could move from 30% extra compensation to 35% to 40%. If the company wishes to have the plan even more closely linked to profit result, it could pay compensation for performance based on total gross margins generated by the rep’s results.
Another variation involves paying reps a portion of bonus compensation based on a mix of objectives up to some target sales quata. Once a rep moves beyond this quota, another piece of his or her income could be paid based on gross margins for volumes beyond the targets set. Paying extra compensation form incremental margins ensures that the scheme is self-liquidating. If sales managers do not wish reps to know gross margins, they can structures the payout based on the reps ability to secure orders as closely as possible to “list prices”. This encourages reps to sell without discounting prices and often accomplishes what payouts based on margins do, since premium prices are frequently a proxy for gross margin targets.

Selling Porspective Reps and Screening Them

Just as sports coaches sell top athletes on all the benefits of joining their organizations, sales managers should recruit top prospective sales reps, who are often wanted by many companies. Astute sales managers, having selected the top two or three candidates, should sell this short list of prospects on all the company`s strengths, from its future growth prospects, new products or services, ethics, and concern for employees to its financial health, track record in community affairs and environmental and safety issues, and geographic scope and ambitions.

Many of these are not of direct concern to the rep candidate. However, in making judgements about where tp begin a career, a candidate does care deeply about the vitality and health of the company he or she is joining, its treatment of its employees, and its beliefes about its social and community responsibilities. And this is a two-way street.

Sales managers need to take great pains to hire only those people who will fit into their company`s culture. Sales reps have to buy into a set of shared values that will guide their actions in selling. If the manager believes the rep can live those kinds of values everyday, his or her chances of success are much higher.

In screening the final candidates, it is a good idea to get other senior managers who are not directly in the sales manager`s line of business to interview them and make some judgements about their suitability. In this way the sales manager gets a second or third opinion from people not subject to the same sort of pressure to fill a vacant sales job.

There is always a great risk that sales manager will hire a rep based on the prospect`s immediate abilities to bring in orders rather than his or her long-term potential. Because of pressure for results, the sales manager may overly weigth the importance of a candidate`s past sales experience at the expense of other important prerequisites to long-run potential, such as education, integrity, and the ability to shoulder more responsibility in the future.