Edward Deming said: “In God we trust. Everyone else brings data.”
I’ve observed many sales and marketing leaders make strategic or structural organizational decisions based on personal experience, or confidence in other’s opinion from personal experience. Perspective from reservoirs of experience of what has worked in similar organizations or situations in the past can be helpful in framing alternatives and evaluating what could go wrong.
Unknown said, “The ability to make good decisions comes from experience. And experience comes from making bad decisions.”
One of our technology services clients uttered that they felt they had too many salespeople, which was resulting in smaller sales pipelines and won revenue. In other words, not enough opportunities for everyone to make a living. They believed that could increase organizational performance by cutting sales headcount and giving salespeople bigger territories.
They were ready to move forward with their plan, however, we suggested a brief pause to conduct an analysis. For background, they have about 400 clients, and most of their salespeople had been in their roles at least three years. Their sales cycle is about six months.
Here is what we discovered from the data:
1. A small group of salespeople with the highest revenue and quota attainment – each sourced 75% of their revenue from a handful of large clients, and they had a blended win ratio (dollars) of about 35%.
2. The salespeople they were considering for headcount reductions – most sourced less than 10% of their sales pipeline from current clients, and they had a blended win ratio (dollars) of about 10%. This group had an average deal size about a third lower than the high-performing group.
3. 80% of sales came from three geographic regions, the balance from the other three regions. They deployed a geographic sales territory model, yet their ability to deliver on all geographies was limited by facility locations and technical resources (e.g., data centers and deployment resources).
4. Salespeople managed about 50 of the 400 clients – the balance was managed by inside account managers (incentive comp focused on maintaining a book of business) or operations.
Up to this point, they had the same key data points as above, yet were ready to embark on a potentially disastrous org structure change. Why?
It turns out that one of the influential sales leaders had come from a competitor that had a smaller sales organization, yet achieved about the same amount of revenue as my client. The company was relying heavily on the sales leaders experience.
Our recommendation based on the data was straightforward:
1. Allocate a cross-section of high potential accounts to salespeople with few current accounts.
2. Shift sales resources to regions with more operational capabilities.
Within nine months they had increased total sales by 30% versus the prior year; average deal size increased by 12% and blended close ratio increased by eight percentage points.
Next time you are considering a strategic change, start with data.