CHAPTER 4

Sizing and Structuring the

Sales Force

Decision frameworks and analytics can help companies

size, structure, and allocate sales resources to match
customer needs and potential.

Ty Curry and Pete Masloski

Ty Curry is a managing principal in ZS Associates’ San Francisco

office. He has more than 20 years of experience helping companies
develop and implement sales strategies and improve sales force
performance and productivity. His industry expertise includes high-
tech, media and publishing, and life sciences. Ty has an MBA from
Northwestern University’s Kellogg School of Management and is
also a graduate of the University of California at Los Angeles.

Pete Masloski is a principal in ZS Associates’ Evanston, Illinois,

office. He has more than 15 years of experience helping clients
improve their marketing and sales efforts in areas such as sales
process design, sales force strategy, competency assessment, territory
design, and incentive compensation. Pete has an MBA from
Northwestern University’s Kellogg School of Management and is a
graduate of Princeton University.

Sales Force Resource Decisions and the Impact

of Analytics

Companies change the size, structure, and allocation of their sales forces
for many reasons. They expand sales forces to penetrate new markets,
support new products, or increase their coverage of existing customers.
They downsize sales forces to reduce costs. They restructure sales forces to
increase effectiveness (for example, adding industry specialists for expertise
and focus) or to increase efficiency (adding inside salespeople to cover cer-
tain sales activities or customer segments). Consider some recent headlines
pulled from the business press:

57
58 The Power of Sales Analytics

• “Medical device manufacturer eliminates 50 sales jobs to reduce costs.”

• “Financial services company adds 100 salespeople and reorganizes
around industry verticals to drive growth.”
• “Computer manufacturer reorganizes direct sales force and partner
channels to increase penetration of small businesses.”
Addressing sales resource questions such as those listed in Figure 4-1
is both challenging and rewarding. The ultimate payoff is higher profits
through increased sales, lower costs, or both.
Despite the significant impact of sales resource decisions on company
performance, many companies still rely on the wisdom and experience of
sales leaders for making such decisions. Those who make these decisions based
on intuition alone are unlikely to
optimize sales performance. Sales Good sales force size,
analytics and frameworks enable structure, and allocation
decisions can often produce
a more objective, structured, and revenue growth double that
data-driven approach to sales re- of baseline expectations.
source decision making. Using
analytic approaches increases the odds that the appropriate sales resources
are placed against the best opportunities for maximizing customer value
and company profitability.
However, sales force size, structure, and allocation changes are disruptive
in nature and invariably lead to changes to existing customer relationships,
creating risk to a company’s base business. Such changes can also result in
the relocation or severance of salespeople. Finally, these types of changes
can affect the skills required to perform the job, the sales force’s perception
of the job, and salespeople’s income potential and motivation. In short, it is
critical to get these sales resource decisions right.

Decision Area Key Questions

Sales force size How many salespeople do we need to appropriately

and profitably cover our customers and prospects?

Sales roles and Should salespeople be generalists, or should they

structure specialize by product, market, or sales activity?

Sales resource Are we devoting the right amount of effort to each

allocation customer segment, product line, and sales activity?

Figure 4-1. Sales resource questions

Figure 4-1
 Sizing and Structuring the Sales Force | CHAPTER 4 59

Customer Customer
needs and coverage Sales
potential requirements

Profits

Sales force
size, structure,
Cost
and
allocation

Figure 4-2. A sales force size, structure, and allocation decision framework

Given the business impact of optimizing sales resources and the poten-
tial downside of poor decisions, best-practice companies use frameworks
and analytics to support their decision making. Using a process like the
one shown in Figure 4-2, Figure
they4-2link the needs and sales potential of each
customer to the type and amount of sales force coverage each customer or
segment requires and to the sales and profit consequences of that coverage.
They examine multiple sales resourcing scenarios and choose the one most
likely to produce the best combination of customer coverage and financial
results.
The sales analytics function can and should be instrumental in helping
companies make better-informed sales resource decisions, going beyond
the role of support provider to deliver capabilities that enable the company
to:
• Diagnose issues and opportunities with the existing sales force size, struc-
ture, and allocation
• Design a sales force with the right number of salespeople in the right
roles engaged in the right allocation of sales effort across customers,
products, and selling activities
This chapter shares ideas for using data, decision frameworks, and analyt-
ics to improve sales force size, structure, and resource allocation decisions.
First, it discusses how to diagnose sales resource issues. Second, it discusses
how analytics and decision frameworks contribute to the design of a sales
resource plan that optimizes customer coverage and company performance.
60 The Power of Sales Analytics

Diagnosing Sales Resource Issues

Sales analytics can help companies identify sales resource problems and
opportunities. Four performance diagnostics can evaluate where, how, and
how effectively the sales force is spending its time.

Four Sales Resource Diagnostics

The following diagnostics can provide insights about the quality and quan-
tity of customer coverage achieved with the current sales force size, struc-
ture, and resource allocation.

Customer Diagnostic: Is the Sales Force Meeting

Customer Needs?
Customer survey results, when combined with profile and transactional
data for those customers, can provide insights into potential sales force size,
structure, and allocation issues. Surveys measure the quality of customers’
interactions with salespeople versus that of competitors, customer aware-
ness and knowledge of products, the degree of sales force responsiveness,
and the reasons for recent wins or losses.
Figure 4-3 shows the results of a customer survey that an energy com-
pany conducted. The findings are broken down into mature versus growth
customer segments. On almost all dimensions, customers in growth mar-
kets perceived gaps in sales organization performance when compared to
customers in more mature markets. One such gap, in technical expertise,
pointed to a possible sales resource solution for the company: add salespeo-
ple in growth markets to increase capacity and consider adding technical
specialists to increase expertise for addressing technical issues.

Sales Skills Diagnostic: Are Salespeople Proficient

in Key Competencies?
Sales force competency assessments made through manager observation,
structured interviews, and self-ratings can uncover sales resourcing con-
cerns and opportunities. Assessments can focus on salespeople’s knowledge
of markets and products and on their competency with key selling activi-
ties. Comparing competencies across groups of salespeople with different
performance levels (for example, high versus low performers based on sales
results) can provide additional insights.
 Sizing and Structuring the Sales Force | CHAPTER 4 61

Satisfaction with Performance

Meets Exceeds
expectations expectations

Fulfillment
Mature markets
Growth markets
Price

Ease of doing
business
Technical
expertise
Responsiveness
of field personnel
Relationship
with salesperson
Business
partnership

Figure 4-3. Customer satisfaction survey results at an energy company

Figure 4-4 shows the results of a sales force competency self-assessment

performed at a business services company. The assessment showed that
many salespeople felt they lacked strong knowledge of several important
industry vertical markets. For two of these verticals — energy and govern-
ment — less than a third of salespeople felt they had strong knowledge.
Figure 4-3
Even among salespeople with a high overall performance rating, self-rated
knowledge of these markets was low. The company felt it was underper-
forming in these markets. Thus the analysis prompted the company to con-
sider adding specialized sales roles to focus on the energy and government
verticals. Industry specialists could bring greater expertise and could better
capitalize on the opportunity in these segments.

Sales Activity Diagnostic: Do Salespeople Spend Time Wisely?

How salespeople spend their time across products, customer segments, and
activities can provide clues about the sales force’s effectiveness (customer
impact) and efficiency (smart use of time). Companies can gather activity
data through sales force observation, sales force activity surveys, and call
reporting or pipeline tracking tools.
62 The Power of Sales Analytics

100 % of high performers

% of Salespeople with Strong Knowledge

with strong knowledge

90
80
70
60
50
40
30
20
10
0
l
n

re

gy

t
e

ria

en
at

io

in
ca

er
st
at

k
st

nm
an
lth

En
du
lE

uc

er
B
ea
ea

Ed

In

ov
H
R

G
Figure 4-4. Self-rated sales force knowledge of vertical markets

Too often, salespeople spend too much time selling to small customers
and prospects that have limited sales potential. Analytics for understand-
ing sales potential at the account level (see Chapter 2) can help companies
Figure 4-4
identify sales efforts that are placed against low potential opportunities,
leading to inflated sales costs and missed opportunities with higher poten-
tial customers.
Another common problem identified through a sales activity diagnostic
is role pollution, that is, salespeople engaging in activities that are not core
to their job of selling. Figure 4-5 shows results from a sales activity analysis
that an industrial products company did to uncover role pollution in its
sales force. In this case, 45 percent of customer-facing time was spent on
technical service and support as opposed to proactive selling. The company
identified a sales force structure change as the solution, creating a lower-
cost technical support organization to address customer issues more effi-
ciently and enabling salespeople to spend more time selling.

Competitive Diagnostic: Does the Sales Force Get Sufficient

Share of Voice?
Competitive benchmarks, in and of themselves, cannot provide answers
to sales resource questions. Yet they can provide insights that highlight
 Sizing and Structuring the Sales Force | CHAPTER 4 63

Effort Allocation Customer-Facing Time

(Hours per Week) (Hours per Week)
50
Sales and
7.7 Travel relationship 7.5
management
40
8.1 Nonselling
Service and 5.5
45% of
30 support customer-
Customer- facing time
18.3 facing selling allocated to
20 and support nonselling
Implementation 2.9
activities

Internally
10
15.2 facing selling Lead generation
and support 2.4
and qualification
0

Figure 4-5. Sales activity analysis at an industrial products company

the need for deeper analysis about sales force size, structure, and alloca-
tion. Given that share of voice with customers will almost certainly have
an impact on sales results, it’s useful to consider the implications of a sales
force sizing decision on the likely level of selling effort achieved versus the
competition.
Figure 4-6 shows a competitive benchmarking
Figure 4-5 analysis for a pharma-
ceutical company. The analysis shows that if the company hopes to become
a major player in a specific therapeutic category, it will need at least 300
salespeople for product launch and 200 salespeople on an ongoing basis to
achieve a competitive share of voice.
When using competitive share of voice to evaluate sales force sizing
requirements, keep in mind that different companies and products have
unique characteristics that influence what sales force effort levels are needed.
It’s a mistake to make sales force sizing conclusions based on share of voice
alone. Supplement competitive diagnostics with other analyses described
in this chapter.

Historical Results Analysis for Assessing

Sales Resource Issues
Examining historical sales results can enhance understanding of the conse-
quences of sales force size, structure, and allocation decisions.
64 The Power of Sales Analytics

600
Each dot represents
a product. Products
500 are sold by competing
companies.
Product Sales ($ millions)

400

300 New
products

200

100

0
0 100 200 300 400 500
Full-Time Salesperson Equivalents
Figure 4-6. A competitive benchmarking analysis for a pharmaceutical company

Gaining Insight Through Market Penetration Analysis

Many companies know quite a bit about larger accounts but have much
less information about the next tiers of potential accounts. Using analytics
like those described in Chapter 2 to understand account sales potential, a
company can identify gaps in account penetration that may indicate sales
Figure 4-6
resource issues and can use analytics to uncover potential solutions. For
example, one technology reseller conducted an assessment of sales potential
across hundreds of thousands of possible business customers, segmented
the accounts based on sales potential, and then mapped the accounts to
its sales history to create the market penetration analysis shown in Figure
4-7. The analysis showed that the reseller had sold to 82 percent of large
businesses but to a much lower percentage of small and medium-size busi-
nesses. It considered expanding its sales force to reach more opportunities
with accounts that were not current customers, especially in the medium-
size business segment. Additionally, the reseller’s “share of wallet” (that is,
actual sales divided by sales potential of current customers) varied by seg-
ment. Share of wallet was 53 percent in the small business segment, but
was much lower for medium-size and especially for large businesses. Selling
to large businesses involved different dynamics than selling to small busi-
nesses. For example, small businesses typically worked with just one or two
 Sizing and Structuring the Sales Force | CHAPTER 4 65

Segment* Current Customers Share of Wallet

Large business 82% 5%

Medium business 25% 21%

Small business 6% 53%

*Segment by potential based on number of employees.

Figure 4-7. Market penetration analysis for a technology reseller

suppliers, while large businesses would buy from many more suppliers. But
Figure 4-7
even after accounting for this fact, the company felt that there was signifi-
cant opportunity to increase share of wallet at large accounts. It considered
adding product specialists for large accounts to increase sales focus on more
products in its portfolio.

Gaining Insight About Sales Force Size and Structure

Through Natural Experiments
Natural experiments occur in every sales force due to differences in cus-
tomer coverage across territories, account segments, or markets. Some terri-
tories may have a large number of accounts with low coverage per account;
these territories show what would happen with a smaller sales force size.
Other territories may have a small number of accounts and high coverage
per account; these territories show what would happen with a larger sales
force size. Some territories may get coverage from sales specialists; others
may get little or no specialist coverage. By acknowledging territory cover-
age differences and observing how these differences correlate with perfor-
mance, it is possible to develop additional sales resource insights.
An apparel company that was losing retail store customers performed
the analysis shown in Figure 4-8, which looked at the change in number
of customers across sales territories. The company discovered that territo-
ries with a high number of retail stores to cover had suffered the greatest
customer attrition; those with fewer stores, in fact, were gaining customers.
Salespeople in territories with fewer accounts had higher sales effort per
account, leading to better customer retention and higher prospect conver-
sion rates. The company determined that it likely had too few salespeople
to manage its existing customer base.
66 The Power of Sales Analytics

30
Many territories with low store counts
% of Stores Gained or Lost in Year 2

in year 1 added stores in year 2.

15

–15

Many territories with high store

counts in year 1 lost stores in year 2.
–30
0 100 200 300 400
Number of Stores in Year 1
Figure 4-8. Gain/loss in retail stores by territory at an apparel company

Gaining Insight by Analyzing the Sales Pipeline

By tracking progress across different stages of the sales process to under-
stand where and why deals areFigure
stalling,
4-8it’s possible to reveal trends that tie
back to sales force size and structure issues.
A software company analyzed its pipeline using the process shown in
Figure 4-9. It recognized that, at current success rates, it would need to
start with 555 qualified leads for the sales force to achieve its goal of win-
ning 50 deals for the period. Either it would have to add field salespeople

% = historical success rate

18,500 leads
for inside
sales to
qualify x 3% = 555
qualified
leads x 20% = 111
demos x 75% = 83
proposals x 60% = 50
wins

Figure 4-9. Sales pipeline analysis for a software company

Figure 4-9
 Sizing and Structuring the Sales Force | CHAPTER 4 67

to manage this volume of leads, or it could change the role of the inside
sales team, asking it to both qualify leads and generate commitments for
software demonstrations. With the inside team becoming accountable for
more of the sales process, the field sales force would be able to focus on the
downstream activities in the sales process, making it more likely to reach its
goal of 50 wins without any additional head count.

Designing the Sales Force

Sales analytics and decision frameworks can play a central role in making
decisions about the size, structure, and resource allocation of the sales force.

Sales Force Sizing

Sales analytics should go beyond commonly used financial decision rules
for determining sales force size. A customer-focused approach that exam-
ines the linkages between customer coverage and sales results leads to
­better-informed and more profitable sales force sizing decisions.

Problems with Commonly Used Financial Decision Rules

The financial decision rules that many companies use to determine sales
force size fail to explicitly recognize the most fundamental driver of sales
resource needs: the customer. They also treat the sales force as a cost rather
than an investment, often leading to suboptimal decisions.

Simple Financial Ratios. Ratios such as sales per salesperson and sales
costs as a percentage of sales (cost-to-sales ratios) are straightforward met-
rics that companies commonly evaluate relative to company or industry
benchmarks. However, these metrics are disconnected from customer cov-
erage requirements and provide little insight into the profit implications of
adding or cutting sales personnel. Although it’s seemingly counterintuitive,
when a sales force is undersized, adding salespeople increases the cost-to-
sales ratio but also increases profitability. A company can always reduce the
cost-to-sales ratio by cutting personnel, but the impact on profitability is
positive only if the sales force was too large to begin with. Maintaining an
industry average cost-to-sales ratio is especially damaging to small-share
companies that want to grow. Sustaining a historical ratio can also result
in excessive downsizing during a business downturn, leaving a company
poorly positioned for success when business conditions improve.
68 The Power of Sales Analytics

Earn-Your-Way Strategy Profit-Maximizing Strategy

Sales 380 380 380 380
force
size

350

320

Current +1 +2 +3 Current +1 +2 +3
year year years years year year years years

3-year $301 $351

contribution
($ millions)

Figure 4-10. The financial consequences of alternative sales force sizes at a

pharmaceutical company

Earn Your Way or Pay as You Go. This “wait and see” approach views the
sales force as a cost item justified by sales, rather than as an investment that
drives sales. An earn-your-way, Figure 4-10
pay-as-you-go strategy is some- Look at financial ratios
times necessary in markets with (such as sales force cost-to-
sales ratios) as a check for
high uncertainty or when a com- affordability, but don’t rely on
pany is cash-strapped. But when them as the primary criterion.
companies take this conservative
approach when they have a high likelihood of success and available financ-
ing, they undersize their sales forces and forfeit opportunity. A pharmaceu-
tical company’s overly cautious expansion strategy, shown in Figure 4-10,
resulted in too little support for a new product launch, costing the company
17 percent of profits over three years.

Using a Customer-Focused Approach

Effective sales resource analytics establish the relationship between sales
force effort and the incremental sales and profit that will likely result. By
understanding the relationship between the costs to cover a given customer
or prospect and the likely revenue and profit stream driven by that selling
effort, companies can determine which customers are profitable to cover
and what type and amount of sales resource will be optimal. These analytic
approaches examine the two key linkages shown in Figure 4-11:
 Sizing and Structuring the Sales Force | CHAPTER 4 69

1. How customer needs and sales potential affect customer coverage

requirements and therefore costs of coverage
2. How customer coverage impacts sales results
Combining these two linkages allows companies to estimate the overall
customer coverage achieved and the profit impact of different sales force
sizing decisions.

A Four-Step Approach. Determining how much to invest in the sales force

and how to allocate that investment across customer types, products, sales
roles, and activities involves the following four steps:
1. Determine account sales potential and segment accounts. Start by
developing an understanding of account level needs and sales potential
for existing customers as well as prospects, and segment accounts into
meaningful groups (see Chapter 2). The accounts in each group should
be similar in terms of how the company should approach them from a
sales resource standpoint. In addition to having comparable sales poten-
tial, accounts within each segment should require similar types of sales
activities and levels of sales effort.
2. Determine coverage requirements and the sales force sizing and cost
implications. Next, understand the baseline effort required to execute the
sales process for each segment. Start by evaluating historical sales efforts or
data obtained through sales force activity surveys. Then incorporate expert
judgment that acknowledges the coverage impact of future changes to
the selling environment. Evaluate linkage 1 in Figure 4-11 by estimating

Linkage 2

Customer Customer
needs and coverage Sales
potential requirements

Linkage 1 Profits

Sales force
Cost
size

Figure 4-11. Two key linkages that determine sales force size

Figure 4-11
70 The Power of Sales Analytics

the average selling capacity expected per salesperson and calculating

how many salespeople are required to meet coverage requirements. Then
translate coverage requirements into costs using financial data that reflect
fully loaded estimates for the average cost of a salesperson.
3. Estimate revenues and gross profits. Next, estimate expected revenues
for each customer segment and product (linkage 2 in Figure 4-11) by
looking at average historical deal sizes in each segment and historical
advance rates through the sales process. An account segment that has very
large deals but infrequent wins may be less attractive to cover than a seg-
ment with moderate-size deals but a high win rate. Again, historical anal-
ysis can provide insight into future revenue opportunities, but it will not
address anticipated changes to the market and competitive environment.
Accordingly, it is imperative to collect structured judgment from experts
about how win rates and deal sizes will evolve going forward. Translate
revenue estimates into gross profits by factoring in product costs.
4. Construct financial models. Evaluate the economic outcomes of differ-
ent coverage scenarios across products and account segments. The key
factors driving model outcomes are the estimated revenues and gross
profits from account coverage and the selling costs associated with cover-
age. The bottom line is that some customer segments will be profitable
for certain products but not others, some segments will be profitable
across the portfolio, and some segments will just have too little opportu-
nity to justify sales force coverage. Any decision to eliminate field cover-
age of accounts should be made purposefully, based on the economics.
Shifting select customer segments to more efficient channels, such as
inside sales, often substantially improves financial performance.
Two examples illustrate this analytic, customer-focused approach to
sales force sizing.

Example 1: Activity-Based Analysis for a Retail Merchandising Sales

Force. A retail merchandising sales force conducted an activity-based anal-
ysis to determine the right sales force size. The merchandisers performed a
well-defined set of service-focused activities. The analysis focused on link-
age 1 in Figure 4-11: determining how many salespeople were needed to
produce the levels of service that customers required.
As shown in Figure 4-12, the company segmented accounts according to
their sales volume (a good predictor of merchandising needs), determined
the annual requisite coverage time for accounts in each segment (calls per
 Sizing and Structuring the Sales Force | CHAPTER 4 71

Sales-
Segment: No. of Calls/ Hours/ Total people
Retail Stores Accounts Year Call Hours Needed

Over $75K 112 12 2.0 2,688 2.0

$35–75K 784 6 2.0 9,408 7.1

$15–35K 2,543 4 2.0 20,344 15.4

Under $15K 6,559 3 1.0 19,677 14.9

Total retail 9,998 — — 52,117 39.4

Hours per salesperson per year = 1,325

Figure 4-12. Activity-based sizing analysis for a retail merchandising sales force

year times hours per call), and estimated the number of salespeople required
to perform the work. By summing the call time across segments and divid-
ing by the average number of calls a salesperson can make in a year, the
company determined how large the sales force should be.

Example 2: Profit-Based Pipeline

Figure 4-12Analysis for a Medical Device Sales
Force. Most sales forces will want to supplement activity-based analysis
with analysis acknowledging linkage 2 in Figure 4-11: the impact of cus-
tomer coverage decisions on sales and ultimately on bottom-line results.
The sales force sizing analytics illustrated in Figures 4-13 and 4-14 are for
a sales force that sells medical devices to hospitals. The approach involved
four steps:
1. Segmenting accounts according to their sales potential and coverage
needs and mapping out the sales process steps for each segment.
2. Determining the number of leads entering the sales pipeline each year
and estimating the time required and the success rate for each step.
3. Summing the time required to execute all steps to produce an estimate
of the number of salespeople required to cover each customer segment.
4. Evaluating deal sizes and advance rates to determine the sales and profit
implications of covering each customer segment.
In combination, these analytics enabled the company to evaluate the
return on investment (ROI) impact of different sales force sizing scenarios.
 Sales Process

Leads entering Qualify lead

pipeline .5 hr. per account
1,240 accounts x 90% success rate

Assess customer needs

7.5 hrs. per account
x 35% success rate

Develop value
proposition
3.75 hrs. per account
x 70% success rate

Service and support

10 hrs. per account

Sales time required Hours per salesperson

13,192 hrs. to get ÷ per year
273 accounts 1,250 hrs.

Salespeople required
= per year
10.6

Figure 4-13. Sales force sizing analysis for one customer segment (segment A)
of a medical device company

Field Value of Cost to Profit with

Salespeople Figure 4-13
Field Sales Cover with Field Sales ROI of
Customer Required Coverage Field Sales Coverage Field Sales
Segment to Cover ($ thousands) ($ thousands) ($ thousands) Coverage

A 10.6 24,706 2,650 22,056 832%

B 2.6 3,972 650 3,322 511%

C 5.8 4,882 1,450 3,432 237%

D 1.6 832 400 432 108%

E 1.6 420 400 20 5%

All 22.2 34,812 5,550 29,262 527%

segments

Field salesperson cost ($ thousands): $250

ROI target: 200%

Figure 4-14. Financial sizing analysis for a medical device sales force

72
 Sizing and Structuring the Sales Force | CHAPTER 4 73

ROI for segments A, B, and C (see Figure 4-14) exceeded the company-set
threshold of 200 percent; these segments were assigned to the field sales
force for coverage. For segments D and E, ROI to cover with field sales
fell short of the threshold; these segments were assigned to more efficient
inside sales and Internet channels, which would produce a more favorable
ROI.
The columns in the table in Figure 4-14 are calculated as follows:
• Field salespeople required to cover = (results from analysis in Figure
4-13)
• Value of field sales coverage = (number of accounts closed from anal-
ysis in Figure 4-13) times (average deal size) times (product margin
percentage)
• Cost to cover with field sales = (field salespeople required to cover) times
(field salesperson cost)
• Profit with field sales coverage = (value of field sales coverage) minus
(cost to cover with field sales)
• ROI of field sales coverage = (profit with field sales coverage) divided by
(cost to cover with field sales)

Sales Force Investment Dynamics

The best sales force sizing and allocation analytics acknowledge the follow-
ing sales force investment dynamics:
• Sales force investment has diminishing returns. Greater investment
drives more sales, but at a diminishing rate as the marginal salesperson
hired will have to dig deeper into the universe of customers to drive
sales.
• Sales force investment has multiyear impact. This year’s sales force
effort affects sales this year — and in future years. It is critical to consider
the future revenue stream resulting from sales force effort. Otherwise, a
financial model will understate the optimal sales force investment.
• Sales force investment can be optimized through resource alloca-
tion. Analysis that looks at economics across an entire product port-
folio enables understanding of the optimal allocation of sales effort
across products, as well as customer segments and sales activities, at
any given sales force size. Often, it’s possible to significantly improve
financial results simply by reallocating sales effort to the right products,
74 The Power of Sales Analytics

200
One-year
sales
175
Three-year
150 discounted
contribution
$ millions

125
Three-year
optimum
100 One-year
contribution
One-year
75 optimum

50
100 150 200 250 300
Sales Force Size

Figure 4-15. Financial sizing analysis for a pharmaceutical sales force

customer segments, and sales activities without changing the size of the
sales force.
Figure 4-15
A pharmaceutical company conducted a sales force sizing analysis that
acknowledges all of these dynamics. Figure 4-15 shows the results. The
analysis involved analyzing historical data to understand the relationship
between sales force effort and sales for each of the major products the sales
force sold, estimating product and sales force costs, and measuring year-to-
year carryover sales for each product. The analysis provided insight about
the one-year and three-year profit impact of alternative sales force sizing
decisions.
These examples of sales force sizing approaches are among the many
approaches that are appropriate in different situations. For more detail
on how to implement these and other customer-focused sales force sizing
methods, see Sales Force Design for Strategic Advantage by Andris A. Zolt-
ners, Prabhakant Sinha, and Sally E. Lorimer (Palgrave Macmillan, 2004).

Sales Force Structure

Designing a sales force structure requires determining what sales roles and
responsibilities are appropriate for meeting customer needs effectively (with
high impact) and efficiently (for less cost). Structures can include many
different sales roles, including field salespeople who are generalists, product
 Sizing and Structuring the Sales Force | CHAPTER 4 75

specialists, or technical specialists, as well as inside salespeople and key

account teams.
Determining the right sales force structure is complicated. It’s easy to
make costly mistakes that create unnecessary customer disruption, reduce
morale, and increase sales force turnover. Companies increase the odds of
choosing the right sales force structure when they use decision frameworks
to organize and reduce bias in their thinking. Frameworks can help com-
panies engage in rigorous scenario analysis and debate about the customer
coverage and financial consequences of structure alternatives. In addition
to helping with designing a structure, analytic frameworks can help with
understanding the costs and benefits of structure modifications and with
managing any of the disadvantages inherent in a given structure.

Generalist or Specialist Sales Roles?

Should salespeople be generalists who sell all products and perform all activ-
ities for all customer types? Or should they specialize by product, market
segment, or selling activity? The decision framework shown in Figure 4-16
can help companies answer this fundamental sales force structure question.
Whether and how to specialize depends on two factors:
1. Bandwidth of salespeople relative to the diversity of customer needs
and sales process complexity. Consider the sales process at IBM. Many
complex and diverse competencies are required for selling the company’s
broad line of computer hardware, software, and services to a wide range
of businesses all over the globe. A single salesperson, no matter how
intelligent or hardworking, could never master all of these competencies.
To deliver the needed expertise to customers, IBM must have a highly
specialized sales structure that includes dozens of types of market, prod-
uct, and activity specialists.
2. Company strategy. A strategy to drive growth and penetration within
an industry segment might suggest the use of industry specialists. A
strategy calling for focus on one product within a broad line might sug-
gest the use of product specialists. A growth strategy that requires devel-
oping many new customers might suggest a “hunter” specialist role. A
strategy calling for maximal efficiency may suggest using generalists. A
solution selling strategy may be best served by using account managers
who have overall customer responsibility plus specialists to provide focus
and specific expertise.
76
Sales Process, Customers, Company Strategy
and Salesperson Bandwidth Specialization (Examples)

Straightforward Within
sales process bandwidth • Sell broader solutions
Homogeneous Efficiency Generalist • Drive efficiency and
customers possible control costs

• Drive growth of a key

Complex sales Exceeds Specialist: product or market
process bandwidth Market Product • Achieve effectiveness
Diverse Effectiveness Activity Hybrid advantage over
customers challenge competitors

Figure 4-16. A framework for designing sales force structure

Figure 4-16
 Sizing and Structuring the Sales Force | CHAPTER 4 77

The questions listed in Figure 4-17 can help companies assess sales force
structure considerations. The assessment will help the company evaluate
sales force structure alternatives on different dimensions to help determine
the right combination of generalists and specialists to effectively and effi-
ciently execute the critical selling activities for each target segment.

Key Account Management and Inside Sales Roles

Over the past several years, increasing complexity of the sales function has
contributed to growth in the magnitude and importance of two specific
types of sales roles: key account management and inside sales.

Control and Motivation

• Will important products, customer segments, and selling activities

receive sufficient selling effort?
• Does the structure have attractive roles that enable talent acquisition
and retention?

Effectiveness

• Does the structure align with the company’s sales strategy?

• Does selling certain products require specialized skills and knowledge?
• Will customers get the expertise they need for addressing their business
needs throughout the buying process?
• Does the structure align the best talent to the highest-value opportunities?
• Does the structure enable effective sales coaching?

Complexity

• Does the structure encourage role clarity and clear reporting relationships
and accountabilities?
• What coordination requirements and execution complexities does the
structure introduce?

Efficiency

• Does the structure increase the cost of sales, e.g., multiple salespeople
calling on the same customers?
• What are the territory size and travel implications of the structure?
• Are there specific products, customer segments, or selling activities that
could be performed by lower-cost channels, such as inside sales?

Flexibility

• How much disruption to customer and sales organization relationships will

the structure create? How can the disruption be managed?
• Is the structure adaptable to future events?

Figure 4-17. Key questions for evaluating sales force structure

Figure 4-17
78 The Power of Sales Analytics

Key Account Management. Large, strategically important, and typically

complex customers require and warrant focused attention from the sales
organization. These customers represent a disproportionate percentage of
company revenues and are commonly major drivers of sales growth. Key
account sales structures vary widely across companies based on a number of
factors such as account needs, buying processes, geographic span, and sales
potential. Several objectives can underlie key account approaches:
• Assign the best salespeople to strategically important customers.
• Achieve better coordination for the highest-potential customers who
value a streamlined purchasing process and a single point of contact.
• Develop more comprehensive solutions for customers who have broader
needs spanning a seller’s full product and service portfolio.
• Develop strategic partnerships with key customers, often including joint
business planning, mutual investments to create innovative solutions,
and shared accountability for success.
When the objectives involve broader solution development or strategic
partnerships with key customers, key account management is much more
than a sales force structure decision; it is an organization-wide business
strategy for driving growth. Given these stakes, it is critical to address key
account management through fact-based, comprehensive approaches.
Sales analytics and decision frameworks can contribute to the design of
key account management teams by:
• Selecting key accounts. Companies need consistent criteria and an
objective process for deciding which customers to include in a key
account program and occasionally which ones to remove. Decision cri-
teria such as account potential, purchasing history, customer needs and
buying processes, and geographic footprint are useful for determining
which accounts are truly “key.”
• Articulating and supporting the key account team structure. Given
the added complexities of key account selling, it’s critical to think com-
prehensively about the details underlying the key account team struc-
ture (including reporting relationships, accountabilities, coordination
requirements, and authorities) and to provide the planning tools, pro-
cesses, and metrics for supporting that structure.

Inside Sales. Increasingly, companies see inside sales as an important com-

ponent of the sales force structure decision. Inside sales has always been an
 Sizing and Structuring the Sales Force | CHAPTER 4 79

efficient structure option and has more recently proven to be an increasingly

effective channel in certain situations. Three primary factors are behind the
momentum inside sales has gained in recent years:
• Sellers feel competitive pressure to cut costs and thus are seeking more
efficient ways to sell.
• Buyers are becoming more comfortable purchasing and collaborating
remotely; they use the web to research product information, are com-
fortable communicating and collaborating with sellers through email
and conference calls, and in fact prefer these methods over face-to-face
communication for some sales tasks.
• Technologies such as easy-to-use online web conferencing and video
tools make it possible for inside salespeople to create customer intimacy
without field interaction.
Inside sales teams can drive improved sales force performance in the fol-
lowing ways:
• By executing the entire sales process at accounts that don’t justify field
sales coverage due to low sales potential, a remote geographic location,
or a preference for buying over the telephone or Internet.
• By performing select stages of the customer engagement process. With
certain types of accounts, inside sales may execute activities at differ-
ent stages of the sales process (for example, lead generation or customer
renewals), allowing more expensive field sales and key account team
resources to focus on activities that benefit most from a face-to-face
approach.
• By selling select products or services. Certain offerings and solutions
with lower buyer risk lend themselves to more transactional selling that
can be accomplished by inside sales, allowing more expensive field sales
and key account team resources to focus on more complex products and
services that require a consultative approach and customization.
The sales analytics function can play a key role in identifying those cus-
tomer segments, selling activities, and products that can be moved to
inside sales to drive efficiency improvements, often with little or no loss of
effectiveness.
Increasingly, field salespeople are leveraging email, social media, and web
and videoconferencing to maximize their own productivity and enhance
the customers’ experience. In this regard, the line between field sales and
80 The Power of Sales Analytics

inside sales is blurring, and the sales analytics group is in a position to help
the sales force adapt to optimize its efficiency and effectiveness.

Using Analytics to Evaluate Sales Force Structure

Every sales force structure has costs and benefits. Developing a scorecard
that evaluates the sales productivity impact of these costs and benefits helps
narrow down the choices and highlight the best one. A medical device
company developed the scorecard shown in Figure 4-18 to evaluate the
expected costs and benefits associated with moving from a generalist to a
specialist sales structure. In this case, the company expected the benefits of
the specialist structure to more than offset the increased costs.
Following implementation of a new sales force structure, it is useful to
track metrics that reflect the extent to which anticipated costs and benefits
are realized. Figure 4-19 shows some sample metrics.

Managing the Disadvantages of a Sales Force Structure

Every structure carries with it some advantages, but also some disadvan-
tages. Companies must recognize this and can use analytics-enabled sup-
port systems and processes to sharpen and leverage the advantages while

Specialist Versus Generalist: Estimated Impact

Increased
Current structure sales
productivity level effectiveness
Benefits
from
specialized
Greater travel structure
Costs and
requirements
risks from
specialized Improved
structure resource
Disruption due to
structure change allocation
Increased sales
overhead
Figure 4-18. A scorecard for evaluating sales force structure at a medical
device company

Figure 4-18
 Sizing and Structuring the Sales Force | CHAPTER 4 81

Benefit Activity Customer Company

or Cost Metric Impact Metric Result Metric

Customer Implementation Customer Sales change in

disruption due of relationship satisfaction in disrupted
to structure transition disrupted accounts
change program by accounts
targeted account

Increased Increase in sales Greater aware- Sales growth for

focus on effort for ness and product A
product A due product A knowledge of
to product product A
specialists

Greater Increase in sales Greater aware- Sales growth in

success with effort on segment ness and interest segment B
segment B B accounts among segment
due to B accounts
industry
specialists

Lack of Number of joint Customer Products sold in

coordination planning sessions satisfaction in accounts with
across accounts with multiple sales
specialist roles multiple sales specialists
specialists

Figure 4-19. Metrics for assessing the impact of a new sales force structure

reducing the impact of the disadvantages. For example, a risk in a generalist

sales structure is that salespeople may undersupport a key product that is
difficult to sell. A well-designed sales compensation program (see Chapter
Figure for
7) and a dashboard with key metrics 4-19the product (see Chapter 9) can

reduce this risk and keep sales effort appropriately focused. Figure 4-20 on
page 82 shows some common sales force structure disadvantages, along
with strategies for minimizing their impact.

Conclusion

Sales force size, structure, and allocation are high-stakes decisions that
have significant impact on customer coverage and on a company’s financial
results. Sales analytics and decision frameworks can play a key role in the
82 The Power of Sales Analytics

Common Ways to Minimize the Impact

Structure Disadvantages of the Disadvantage

Generalist Nonoptimal effort • Goals, incentives, metrics, and

allocation to coaching aligned with strategy
products or • Information and tools to improve
customer segments customer targeting

Insufficient product • Better product training, information,

expertise and sales tools

Product or Customer confusion • Joint planning sessions with sales-

activity and lack of people who share customers
specialists coordination • Clear team roles and responsibilities
sharing • Sales specialists reporting to common
customers managers
• Information and tools (e.g., CRM) to
support coordination
• Territories aligned to facilitate coordi-
nation (e.g., mirrored alignments)
• Team-oriented salespeople and a
teamwork culture

Lack of cross-selling • More cross-selling incentives and

(with product team rewards
specialists) • Better cross-product training

Poor geographic • Inside sales, generalist, or hybrid roles

coverage for outlying areas

Any Disruption (with • Realignment of territories using a

change) structured process that builds sales
force commitment
• Customer relationship transition
program
• Bridge compensation for salespeople

Figure 4-20. Sales force structure disadvantages and strategies for minimizing
their impact

diagnosis of sales resource issues and the design of a sales force that sup-
ports the execution of the company’s sales strategy. Sales analytics can help
advance the sales organization from4-20
Figure intuition and gut feel to fact-based,
data-driven, and comprehensive decision making that will lead to increased
sales effectiveness and higher sales and profits.