Building Self-Managed Sales Forces8 Dec, 2009 By: Steven Power imageSource
Building Self-Managed Sales Forces
If sales management is to move beyond managing into leading, they must
reengineer their management processes toward building self-managed sales forces.
While the idea that a self-managed sales force sounds like nirvana, and could
lead to less job security for sales management; the outcome is to increase sales
and be able to lead larger sales teams—two of the most securing results a sales
manager can produce.
Reengineering sales management begins with a shift in attitude from controlling,
managing and directing subordinates to supporting, coaching and consulting
independent producers. If you have hired self-managed, independent producers;
you must realize that they have the maturity, judgment and motivation to carry
out their responsibilities. They should be treated as business partners, not
Let’s take a traditional management function like establishing quotas as an
example. In my career as a sales manager I assigned many quotas and designed
compensation programs to drive salespeople to meet their quota. The problem with
quotas is that they are generally set by a manager with very little input from
the salesperson resulting in very little or no personal ownership by the
I have seen many quotas which resulted in inhibiting salespeople from optimizing
sales production because the quota was a finish line and was set well below what
the salesperson was capable of producing.
Personal Income Planning
In my career as a management consultant I have advocated and helped clients
implement personal income planning as an alternative to quotas. The personal
income planning process engages salespeople in setting their own sales
production targets according to their desired earnings.
I offer here a simple plan by which you can coach a salesperson to determine
their own income goal for the year and then compute the sales production
required to meet that goal.
Income planning requires a nuanced mix of art and science. The art element has
to do with picking an income goal which is realistic based on the salesperson’s
commission program, sales abilities, market share potential and a variety of
related factors including pricing, competition and market conditions.
The science element of income planning is easier to get your arms around if your
salesperson has experience in their sales position. A sales performance track
record over time will yield valuable information upon which you can develop a
practical formula for determining key activity and sales performance ratios (key
performance indicators or KPIs) upon which the salesperson can build a
predictable income plan.
The key to effective income planning is much the same as the key to improving
golf scores or investment portfolio results. Each involves setting goals,
establishing key performance indicators, and measuring progress in each KPI.
In golf, key performance indicators include; fairways hit off the tee, greens
hit in regulation, and the number of putts per hole. In sales, KPIs often
include prospect development (marketing contacts), number of initial sales
appointments, number of proposals/offers delivered, number of sales closed,
average revenue generated per sale and average commissions earned per sale.
Obviously the key performance indicators for a typical income plan are going
to be relative to the specific sales position, compensation plan and activities
for which the salesperson is responsible. For example, if your salespeople are
required to personally generate their own prospects, one of their KPIs may be
the number of new prospects engaged each month.
You may want to go a step further to include the number of marketing
approaches such as sales letters, telemarketing calls, and referrals it takes to
generate a new prospect engagement. Again, if your salesperson has some tenure
in the sales position you should have some historical data or at least a frame
of reference from which you can help them develop a formula based on known or
somewhat predictable ratios.
Generally the elements (KPIs) for creating a personal income plan include:
• Desired total income for month, quarter, year
• Less salary or guaranteed income
• Sales revenues/profits required to achieve desired income
• Current average transaction value of each sale (average revenue per sale)
• Number of closed sales therefore required to meet desired income
• Number of new prospect engagements necessary to generate one new sale
• Total number of new prospect engagements required to meet desired income
Here you’ll find an example income plan based on a salesperson that is: paid
a ten percent commission on sales revenues, has a salary of $36,000 per year,
and sells a product for an average selling price of $20,000. In this example,
the salesperson’s marketing approach ratio is 1:10 (one prospect generated per
every ten marketing approaches) and a closing ratio of 1:3 (one sale closed per
every three new prospect engagements).
EXAMPLE PERSONAL INCOME PLAN
• Desired income for year $150,000
• Less salary <$ 36,000>
• Commission target (10% of sales revenues) $114,000
• Sales revenues required to meet target commissions $1,140,000
• Current average transaction value $20,000
• Number of sales required to meet annual goal 57
• Number of new prospects required to generate one sale 3
• Number of new prospect engagements annually to meet goal 171
• Number of marketing approaches required annually 1710
In this simple example, in order to meet the income plan goal, the salesperson
needs to close 4.75 sales per month, generate six new prospects per month and
make 143 marketing approaches per month or 36 per week. (This example is based
on a 48 year week with holidays.)
Also, in this example, the key performance indicators are based on tidy numbers
and the assumption is that marketing approaches, new prospect engagements and
closing ratios are based on historical data or fairly predictable assumptions.
In my experience coaching salespeople in income planning, it’s been oftentimes
surprising and refreshing to find that many salespeople actually set income
goals which require substantially higher sales production than a quota assigned
by a sales manager would have set. When salespeople have authorship in their
income plan, they will be more likely to take ownership in the plan.
Income planning requires a collaborative effort from both the coach and the
salesperson. It may require a couple of coaching sessions over time while
available data is gathered and filtered. Of course, you will need to facilitate
the discussion but be careful not to dominate the process. Let your salespeople
get their fingerprints all over the plan. If you want to increase sales and lead
larger teams, lose control! Stop managing and start coaching. I think you’ll
find it very liberating.
Steven Power is the president of Sales & Marketing Solutions and the author of
Power Selling and the $50 Ice Cream Cone. This article is an excerpt of his
upcoming book to be released in December; Life Guard Off-Duty, Save Yourself
-the Independent Producer’s Guide to Self-Sales Management.