SWAPPING ENGINES IN MID-AIR 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY BY BRADFORD THOMAS AND JEFF DEL ROSSA

Transcription

1 SWAPPING ENGINES IN MID-AIR 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY BY BRADFORD THOMAS AND JEFF DEL ROSSA

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3 SWAPPING ENGINES IN MID-AIR 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY BY BRADFORD THOMAS AND JEFF DEL ROSSA

4 SWAPPING ENGINES IN MID-AIR DID YOU KNOW THAT THERE ARE OVER 6 MILLION PARTS IN A BOEING 747? NONE ARE MORE MISSION CRITICAL TO THE TAKEOFF, FLIGHT, AND LANDING OF THE PLANE THAN THE ENGINES. 2

5 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY FOR SALES ORGANIZATIONS, THE PEOPLE ARE THE ENGINES. High quality sales people and sales leaders require exemplary sales talent management practices, which require strong partnerships between sales and HR. In early 2008, DDI surveyed 297 sales and HR leaders to find out just how well the partnership between these two functions is working. Seventy-nine percent of these leaders hold mid- to senior-level positions, providing a unique perspective of challenges at the strategic level. We wanted these leaders to give us a pulse on the relationship between sales and HR. In particular, we wanted to know: > What sales talent management initiatives are the most critical to sales success? > Does HR provide sales the support it needs? > What is HR s true impact on sales? We learned that only 56 percent of sales and HR leaders are satisfied with the partnership. There are clear impediments in key sales talent management areas that can prevent sales from meeting aggressive growth goals in 2008: > Many organizations do not have the right feet on the street. > There is a million dollar gap between the best sales people and the rest. > Organizations struggle to find and prepare emerging sales leaders. Embarking on a new sales strategy with these impediments in place is like swapping engines on a plane in mid-air. YOU SHOULD FLY AT YOUR OWN RISK AND BE PREPARED FOR A HAIR-RAISING RIDE. 3 Development Dimensions International, Inc., MMVIII. All Rights Reserved.

6 SWAPPING ENGINES IN MID-AIR CLEARING A HIGH BAR: HIGH GOALS AND HIGH OPTIMISM FOR 2008 Despite growing concerns over the U.S. economy, sales leaders feet are being held to the fire in 2008 with an average sales growth target of 18 percent. Figure 1 shows that 70 percent of respondents have doubledigit growth expectations this year, representing almost every industry and size of company. The industries with the highest expectations are consulting (27 percent) and high-tech (25 percent). The lowest was hospitality (10 percent). Even with high targets for 2008, the vast majority of leaders are optimistic about meeting these goals. Seventy-two percent of leaders were fairly or very optimistic, compared to only 13 percent who were fairly or very pessimistic. The consulting (83 percent) and manufacturing (81 percent) industries were the most optimistic, while the media (36 percent) industry was the least optimistic. Of course we expect our sales leaders to be optimistic, they have clearly identified the whats to succeed this year. But are the hows as clear? FIGURE 1: 4

7 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY THE PERPETUAL SHIFT Sales strategies seem to change as often as the music in a teenager s ipod. This is partially due to the short average tenure for a sales VP about 18 months. Each new sales leader s role is to renew, replenish, and perpetuate the energy of the sales force, providing a shot in the arm with novel ideas and new strategic focus. For them, the most common shift in strategic focus is moving away from a product-centric sales approach and towards a business-centric sales approach. A PRODUCT-CENTRIC sales strategy typically centers on selling a well-defined product or service to buyers focused on price, features, and benefits. On the opposite end, a BUSINESS-CENTRIC sales strategy emphasizes the client and the impact on their business. For some this is defined in financial terms, such as ROI, but for others it can be measured across the enterprise, such as improved earning per share for a publicly-traded company. This approach relies on building relationships at senior levels, providing vital industry and financial expertise representative of a trusted business advisor, and creatively helping customers realize their long-term business objectives. In DDI s 2004 Building a Winning Sales Force study, 34 percent of sales VPs said that they were shifting towards a business-centric sales strategy (See Figure 2 on page 6). In this year s study we asked another set of sales leaders about their sales strategy. Guess what: over three years later it s the same story only 31 percent of organizations are business-centric today, with 75 percent planning to be business-centric two to three years from now. Essentially they are in the same place they were three years ago, so here again they seem to have the whats top-of-mind, but apparently they are still wrestling with the hows. 5

8 SWAPPING ENGINES IN MID-AIR FIGURE 2: The survey shows that many sales organizations are playing catch-up in the migration to business-centric sales. Only 9 percent of the organizations with over 1,000 sales people are currently business-centric, but 71 percent wish to move in that direction. Other late adopters with plans to shift include media (from 0 to 73 percent), financial services (from 21 to 69 percent), consumer packaged goods (from 24 to 72 percent) and pharma (from 25 to 72 percent) companies. One hold-out for the migration is hospitality, where 18 percent are currently business-centric and only 27 percent anticipate shifting to that approach. 6

9 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY DO YOU HAVE THE RIGHT FEET ON THE STREET? It s one thing to roll out a grand vision to boost sales revenue, but you still must have sales people and sales managers who are motivated and capable of executing the vision. This is particularly true when you are shifting to a business-centric sales strategy. We asked leaders what percent of sales people and district sales managers have the skills to execute their future sales strategy. According to them only about 57 percent of sales people and 64 percent of district sales managers can cut it in their new sales environment. These statistics raise a significant warning flag to anyone who is considering a new sales strategy. Financial services organizations have the most prepared sales people (67 percent) and sales managers (72 percent). Amazingly, organizations with over 1,000 sales people are the least prepared: > 48 percent say that less than 40 percent of their sales people can handle the shift. > 53 percent say that less than 40 percent of their sales managers can handle the shift. 7

10 SWAPPING ENGINES IN MID-AIR HOW DO YOU MAKE THE SHIFT AND TRANSITION YOUR SALES STRATEGY? As our research indicates, some firms have made the shift (31 percent) while the majority are still attempting to do so. When undertaking a shift in your sales strategy, you need to think about re-tooling your sales talent management processes. Consider how you put new talent in place, and how you determine the capability and desire of the sales talent currently in the role. Here are several critical questions to ask yourself: > Am I too biased toward the numbers, and not balanced enough toward developing talent? > Are my sales leaders also mentors who coach for development? > Do I really know what talent I need, who I have, and who can make the shift? > Can I identify what skills need to be developed, and how to develop them to accelerate the shift? > What impact does this shift have on our hiring, development, and performance management processes? > Do I know the profile required to be a successful sales professional and sales leader? 8

11 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY HOW IS YOUR COMPANY GOING TO HIT ITS NUMBERS? Once an aggressive growth goal is set and new sales strategies are drawn up, sales organizations need a plan to hit the numbers. Sales leaders typically rely on two tried and true methods to catch those big numbers: building a better mousetrap or adding more cats. The leaders in our survey are using a combination of both methods. EIGHTY-SEVEN PERCENT ARE ADDING MORE CATS Go to any job board and you will see a large number of open sales positions in many parts of the country. In April, there were over 4,400 sales job postings on Monster in New York City, 3,100 in Los Angeles, 1,800 in Boston, and even 580 in Indianapolis. We are seeing these numbers because the vast majority of leaders 87 percent plan to support their growth strategy by increasing head count over the next two to three years. In fact, 63 percent of organizations anticipate growing head count by over 10 percent. Only 13 percent anticipate reducing or maintaining head count over the next few years. Figure 3 contains the average sales force growth rates by industry. The highest growth industries continue to be high-tech (28 percent) and consulting (27 percent), while the lowest growth is in hospitality (6 percent) and manufacturing (12 percent). FIGURE 3: 9

12 SWAPPING ENGINES IN MID-AIR Several of our clients in these high-growth industries have shared their frustrations over the fierce competition to find highly capable sales people and sales leaders. They essentially see a reverse musical-chairs game going on out there not enough qualified people to fill the seats. The frustrations are amplified particularly in high-tech and consulting where complex products and solutions require a different kind of sales approach. Sales people in these industries typically have domain and business expertise; reach senior decision makers, manage a long sales cycle, and demonstrate higher-level business value. Not only do you have to pick the elite sales people out from the crowd, but you also have to make sure that your open seat in the musical-chairs game is more desirable than all the others. EVERY HIRING DECISION IS WORTH MILLIONS The minute that you have an open position either from an increase in headcount, promotion, or from turnover the meter starts running. Hiring managers put a lot of pressure on recruiting departments to find them acceptable candidates as soon as possible. In many situations, this pressure to fill open positions leads to hasty hiring decisions. While filling an open position may only take a couple of months, the impact of that decision lasts for years. So what is the impact of a poor hiring decision on the typical sales organization? We asked leaders to tell us how much sales revenue the typical sales person brings into their organization and then to tell us how much sales revenue their top quartile delivers. What we discovered was that an A performer closes $2.2 million in sales, while the average performer only closes $1.1 million. This million-dollar disparity represents a 90 percent gap in sales productivity between the best and the rest. Figure 4 shows that a significant revenue gap persists across every industry group in the survey. Remarkably, retail, business services, hospitality and consulting all have over a 170 percent gap. The lowest gap 53 percent in pharmaceuticals is still significant because it represents an $860,000 difference in sales revenue. These productivity gaps explain why a high percentage of sales reps do not make quota 40 percent according to the leaders in our survey. Leaders in the media, business services and high-tech industries all acknowledge that less than half of their sales reps make quota. 10

13 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY FIGURE 4: INDUSTRY SALES REVENUE GAP BETWEEN HIGH AND AVERAGE PERFORMERS Retail...333% Hospitality...278% Business Services...232% Consulting...174% High-tech...113% Consumer Packaged Goods...106% Media...97% Manufacturing...77% Financial Services...67% Pharmaceuticals...53% So what can you do to ensure that you are not losing millions with every hiring decision? > Schedule regular check-ups. If your business and sales strategy change, the skills, experience, competencies, knowledge, and personal attributes required for success in the role change as well. You should regularly perform a systems check-up on your competency models to make sure they are keeping pace with the needs of your sales strategy. > Hold the line. Once you define the critical components, you need to ensure that your hiring process rigorously assesses candidates against them. A few years back, one of DDI s clients implemented a phone assessment as part of their hiring process for sales reps. Many sales leaders within their organization resisted adding this step into the process because it screened out too many qualified candidates. After conducting a study, they found that when they hired people with solid scores in each of the competencies in the assessment, those individuals were almost two times more likely to achieve or exceed sales objectives. > Don t hire in your image. Many sales managers fall into the trap of hiring the salesperson that closely resembles themselves, or the image they have of the ideal rep. Then the sales manager, not wanting to recognize a hiring mistake, spends far too much time with this person instead of balancing their time equitably with the rest of the team. Once again, the cost of poor hiring decisions far outweighs the investment necessary to build the right profile and to execute the right assessment process. It truly is not a matter of will your business stall or fall off, it is a matter of when. 11

14 SWAPPING ENGINES IN MID-AIR BUILDING BETTER MOUSETRAPS Building a better mousetrap is about boosting sales productivity getting more sales revenue or higher profit margins from the same resources. A variety of strategic and operational improvements will achieve this. We already addressed strategic improvements, such as adding new products or solutions, expanding into new markets and shifting sales strategies. Operational improvements address organizational structure, key HR processes (i.e., hiring, development, leadership training, and retention), and sales support processes (i.e., sales methodology, performance incentives and reporting, geographic coverage, CRM, or wireless devices,). We asked sales and HR leaders which of these improvements were the most important to reaching their sales goals in As you can see in Figure 5, this is one area that sales and HR are relatively on the same page. Improve sales training is the top operational improvement across all respondents with 49 percent. At 56 percent, the quality of sales training was by far the top improvement cited among HR leaders. For sales leaders, Upgrade the quality of frontline sales management slightly edges Improve sales training for the top spot (45 percent compared to 44 percent). The least critical improvements were around upgrading technology to support sales such as new CRM systems and portable devices. There are two opposing forces that make improving sales training so critical. On one side is the need to make sales training more effective. You must provide more engaging content that changes behaviors and leads to better sales metrics. On the other side is the need to reduce the amount of time that reps spend out of the field, because the numbers don t go away while they are sitting in a classroom. 12

15 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY Sales effectiveness training is made even more challenging in highly-regulated industries, such as pharmaceuticals where over one-third of training time can be dedicated to education about federal compliance laws. Upgrading the quality of frontline sales management is also critical because district sales managers are responsible for the rubber meeting the road. That is, they are the ones who take the corporate game plan and make it happen through mentoring and coaching. There were some interesting differences in priorities across the level of leaders, size of sales organization and industry. Retention of sales reps was an issue for 52 percent of leaders from companies with more than 1,000 sales people. Recruitment of sales reps was the key issue for retail (60 percent) and consumer packaged goods companies (50 percent). Recruitment was also critical for 42 percent of frontline leaders. This is because aggressive organization-wide growth goals ultimately get pushed down to them. If they are down one or two sales people, they know they will never reach these goals. FIGURE 5: 13

16 SWAPPING ENGINES IN MID-AIR SETTING UP SALES FOR SUCCESS Now that we know the areas most critical to the success of sales organizations, the whats and hows, the question becomes Are sales and HR working together well enough in these areas? Unfortunately the news here is not good only 56 percent of respondents are satisfied with the partnership between HR and sales. HR leaders are slightly more satisfied (58 percent) than their counterparts in sales (52 percent). More concerning is that 22 percent of sales leaders were dissatisfied, compared to just 16 percent of HR leaders. Aside from retailers (90 percent satisfied) and consumer packaged goods companies (68 percent), most industries had lack-luster partnership ratings. In fact, consulting, financial services and hospitality all had less than half of respondents satisfied. The other significant difference in perception was among the leadership levels frontline leaders were more satisfied with the partnership between sales and HR (62 percent) than mid- and senior-level leaders (54 and 55 percent respectively). Senior-level leaders also had a much higher level of dissatisfaction 22 percent. WHAT IS HR S TRUE IMPACT ON SALES? The degree to which individuals feel they can directly measure the impact of HR practices on the sales organization is partly to blame for these low numbers. The differences in perceptions here are amazing just over half of HR leaders feel they can measure their impact on sales, but only 38 percent of sales leaders agree. Hospitality and retail are both over 80 percent in agreement, while consulting (29 percent), pharma (36 percent), media (36 percent) and financial services (39 percent) all have low levels of agreement. The main problem is that 46 percent of the organizations in the survey do not have any measures for evaluating the impact of HR on sales. Fifty-eight percent of those organizations that have measures in place focus almost exclusively on turnover. Only a handful of organizations described tying HR processes, such as hiring, and sales professional or leadership development, directly into their performance management systems. At the end of the day, HR processes should be accountable for the same results sales people are attaining sales quota, improved close rates, and reduced cost of sales. 14

17 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY WHERE IS THE DISSATISFACTION WITH THE HR PARTNERSHIP COMING FROM? We now know that HR and sales do not have a particularly solid partnership and that sales in particular cannot measure the impact of HR. But can we pinpoint specific sales talent management areas causing the friction? Figure 6 shows how satisfied HR and sales leaders were with critical sales talent management areas. A couple of patterns emerge from this table: 1. These are not stellar endorsements of sales talent management processes. Satisfaction was under 50 percent for over half of the areas. The highest rated area quality of hiring decisions still had only a two-thirds approval rating. 2. HR tends to have a rosier view of sales talent management. The two biggest eye-openers are the level of dissatisfaction with time-to-fill open sales positions, and three areas related to upgrading the quality of frontline leaders how they are identified and developed for future roles, and the skills training they receive to become better coaches. FIGURE 6: 15

18 SWAPPING ENGINES IN MID-AIR THE EMPTY BENCH SYNDROME If frontline sales leaders are so critical to the success, why are so many sales organizations struggling with identifying emerging sales leaders and preparing them? This problem has not gone unnoticed. The emerging leaders themselves feel they are not prepared for new roles. Only 37 percent of the 425 sales leaders in DDI s Sales Leadership Forecast felt they possessed sufficient leadership skills upon assuming their first leadership position. More telling is that only 15 percent of these leaders said they were groomed for their positions in a planned development program. This means that 85 percent of sales organizations suffer from Empty Bench Syndrome a lack of processes for identifying, assessing and developing emerging sales leaders. So which parts of the job can new sales leaders handle and which parts do they struggle with? Over the past five years, DDI has conducted several hundred in-depth assessments of new and emerging sales leaders. Distinct patterns come into focus when looking at these assessments: > First, emerging sales leaders are fairly solid at aspects of the job they owned while a salesperson namely sustaining customer satisfaction and interpersonal skills, such as relationship building and communication. But naturally, without good assessment data to determine their propensity to lead, they have difficulty stepping out of their former role and thinking more broadly. Only 54 percent were proficient at promoting organizational interests with their teams and only 48 percent were proficient at creating a strategic plan for their sales unit. 16

19 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY > Second, while they are good at going through the motions of coaching, the end results do not necessarily lead to increased performance. For example, while 84 percent of emerging sales leaders were proficient at identifying improvement opportunities and 94 percent were proficient at clarifying expectations, only 55 percent were proficient at raising expectations and 52 percent were proficient at guiding team progress. One of the primary challenges from a coaching perspective is the amount of time that frontline managers have to spend with the individuals on their team and their span of control. The respondents in the survey told us that the frontline sales leader manages just under 11 sales people and spends about 44 percent of their time out in the field. This translates into 0.88 days of face time per month per rep. With less than a day spent with each sales person, sales managers really only have time to focus one or two critical coaching areas to motivate and to drive performance. They re forced to choose between managing the numbers and staff development. Development gets wait listed and, very often if not most times, it s simply dropped. Pharma does the best job of getting district sales managers out in the field 55 percent of the time for an average of 1.2 days of face time with reps per month. The industries with the least amount of interaction between sales managers and sales people come in media services (25 percent or 0.58 days per rep per month) and financial services (41 percent or 0.63 days per rep per month). Knowing specific areas where emerging sales leaders tend to struggle can help you prepare an overall game plan for getting them ready. But this alone can not solve the three process deficiencies identified in this study: 1) Identifying high-potential sales people with both the desire and aptitude to lead. 2) Developing them for future roles. 3) Arming them with appropriate leadership and coaching skills. Avoiding Empty Bench Syndrome requires a thorough assessment of each individual s strengths and development areas, and using the information to tailor development plans to prepare them for the future. With specific development plans in place, emerging sales leaders need regular interaction and support from their sales leaders. From a coaching skills standpoint, they need to learn how to balance the skills for driving the numbers with setting solid development initiatives for raising the bar of their teams. 17

20 SWAPPING ENGINES IN MID-AIR ABOUT THE RESPONDENTS 18

21 2008 SALES TALENT MANAGEMENT BENCHMARK STUDY ABOUT THE AUTHORS BRADFORD THOMAS is a manager in DDI s Sales Talent Practice. Brad has more than 15 years of business development, consultative sales, and marketing experience, working with companies such as Phillip Morris, Pepsi, and Marconi. He is the co-author of five research studies on sales talent management. Brad is frequently quoted and published in leading industry publications, including Newsday, the Associated Press, the Montreal Gazette, Velocity and Sales & Marketing Management. He has presented at the Strategic Account Management Association Conference, the Frost & Sullivan Sales Executive MindXchange and the WorldCom Conference. Contact him at brad.thomas@ddiworld.com. JEFF DEL ROSSA is the Worldwide Director of DDI s Sales Talent Practice. Jeff has over 25 years of experience in sales and sales leadership. He assists clients, including many Fortune 500 companies, in boosting sales performance. Prior to joining DDI, Jeff worked with Kodak and Océ North America. At Kodak, his leadership of District and National Accounts earned him their highest sales honors working with several large clients such as UPS, Home Depot, Allied Signal, McDonald s, and many others. Jeff presented at the Frost & Sullivan Sales Executive MindXchange. Contact him at jeff.delrossa@ddiworld.com. 19

22 SWAPPING ENGINES IN MID-AIR WHY DDI SHOULD BE YOUR SALES TALENT PARTNER For more than 37 years DDI has helped hundreds of clients build highperforming sales forces. Our proven expertise and tools help you identify and select successful sales professionals and executives, transform your good sales performers into great ones, and groom those with high potential to become your next generation of sales leaders. Our areas of expertise include: > Defining Success Profiles SM (skills, knowledge, and abilities) required for extraordinary sales forces. > Tailored selection and assessment systems designed to help you make better hiring, promotion, and development decisions. > A wide range of courses, activities, and programs to produce more effective sales leaders. DDI gives you the means to put the right sales reps, managers, and executives in place: Sales professionals who will execute your sales strategy, and deliver the numbers; sales leaders who will create an organization with a sustainable competitive advantage. 20

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24 THE AMERICAS WORLD HEADQUARTERS PITTSBURGH MEXICO CITY TORONTO Other offices include Atlanta, Calgary, Chicago, Dallas, Detroit, Monterrey, Montreal, New York, San Francisco, Santiago, and São Paulo EUROPE/AFRICA DÜSSELDORF LONDON PARIS Other offices include Johannesburg, St. Petersburg, and Warsaw ASIA-PACIFIC SHANGHAI SINGAPORE SYDNEY Other offices include Auckland, Bangkok, Beijing, Brisbane, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Mumbai, Perth, Pune, Seoul, Taipei, and Tokyo ABOUT DDI. It s a grow-or-die marketplace. And having the right talent strategy is crucial. Development Dimensions International will help you systematically and creatively close the gap between today s talent capability and the people you will need to successfully execute tomorrow s business strategy. We excel in two areas: :: Designing and implementing selection systems that enable you to hire better people faster. :: Identifying and developing exceptional leadership talent critical to creating a high-performance workforce. DDI is all about giving you the kind of business impact you want over the long term that s what we call realization. The work we do together is tied to your organization s strategies and becomes part of your business and your culture. And if your business is multinational, DDI has precisely the kind of global resources needed to implement your talent initiatives effectively and consistently worldwide. Take a closer look at TO LEARN MORE: INFO@DDIWORLD.COM *MCQ9* MCQ9 MKTSTMIS Development Dimensions International, Inc., MMVIII. All rights reserved.