A key new human capital risks theme is that of enhancing sales performance.

Mark Edelsten and Rema Sood discuss how companies are rising to the challenge

Enhancing sales performance is a never-ending challenge. It is particularly difficult within the current economic climate where cost cutting (as opposed to investment) is the rule of the day. Companies across all sectors are struggling to retain their market share, increasingly looking internally to identify factors to improve performance, particularly in the area of sales effectiveness.

Some critical questions companies are asking are:

  • how do we get the best from our sales people?
  • should we change or expand our sales and distribution channels? If so, which ones, when and how?
  • how could we improve our customer relationships?
  • how can we make the most of the opportunities we have?
  • how do we attract and retain high-quality sales people?
  • are we ensuring pay is tied to performance?

    Companies respond to these challenges in different ways. Recent Mercer US research shows that firms have taken, or are planning to take, a variety of actions to better manage their sales force in a difficult economy. These include:

  • reviewing/changing the pay mix of existing compensation plans
  • increasing commission opportunities by freezing salaries and lowering sales goals or quotas to ensure that pay is tied to performance
  • using discretionary/special bonuses for top performers to retain these employees.

    Mercer's findings in the US are mirrored by our experiences with UK and European companies, especially in the IT and high-tech sectors that, arguably, have been hit the hardest by the increasingly difficult economic climate. Interestingly, the majority of survey participants do not manage to a predetermined cost of sales compensation ratio and, therefore, may lack the tools and information necessary to make informed investment decisions.

    Effective approach
    Companies do not plan to reduce their sales force size much further. Instead, the most effective approach has been for them to alter the pay mix for their sales team and provide special bonuses for top performers. Companies that do not take an integrated approach find no improvement in business results simply by changing the sales compensation mix. The key points to address are:

  • creation of harmonised sales structures across all geographies
  • consistent means of performance management
  • proportionate mix of financial and non-financial performance measures
  • consistent sales performance measurement criteria, and target setting process
  • clear sales roles with targeted accountabilities.

    At the same time, it is essential to clarify sales roles and responsibilities. Increasingly, global companies are viewing this approach as best practice to increase sales performance.

    Additional methods
    Most firms are able to attract and retain talent. However, nearly a third of companies say that finding qualified sales staff remains difficult. Manufacturing companies reported the lowest turnover among sales staff. About 25% to 30% of firms in the technology, financial services and telecommunications industries report turnover of more than 20%.

    The US study indicates that companies that have little trouble attracting qualified sales staff tend to be more ready to pursue non-cash approaches to managing sales force attraction and motivation. Conversely, companies struggling to find qualified sales staff are using cash-based tactics as enticements. Organisations deploying longer-term, strategic approaches to sales force investment may be more successful in attracting qualified sales staff.

    Mark Edelsten and Rema Sood are consultants, Mercer Human Resource Consulting, E-mail: Mark.Edelsten@mercer.com , Rema.Sood@mercer.com

    Case Study 1 - European FMCG company
    A leading European FMCG company experienced declining sales in the first quarter of 2002, despite having a huge range of products, which previously appeared to cushion it from the economic downturn. The sales director identified the key issue. Sales representatives across Europe spent most of their time on commercial relationships with the intermediates – the department stores and specialist retailers – without paying sufficient attention to the end user customer experience.

    As a result of this finding, the targets for sales representatives were completely revamped. Staff were encouraged to spend more time training shop floor staff in the use of the products, ensuring the product range always had prime position in all outlets, and emphasising the size and the breadth of the product range. The sales representatives are now urged to think about how to sell through to the end customer and not just the intermediary.

    Case Study 2 -
    A UK manufacturer sells home fixtures and fittings through its own brand chain of retail outlets across the UK. Despite a good year in 2002, it has become clear that, to maximise sales and profit in future years, it will be necessary to change its market position slightly and go up-market. This involves a significant investment in stores across the UK and the introduction of more flexible store layouts and computer-assisted home design plans. In addition, the skill sets of store staff will need to be enhanced, particularly in the new stores. The customer experience (the sales process) also needs to be enhanced, to move from a straight product sell to a customer service based approach. Finally, to reinforce these changes, new reward systems will be needed to emphasise customer service and promote the up-market offering.