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The above excerpt is from the opening editorial of the special Sales Issue of HBR (Jul-Aug 2006). Whether you agree with Tom Stewart or don’t there is substantial and, in our opinion, irrefutable evidence that a significant transformation of sales is overdue. In that same issue we presented in the featured research report many of the pressures and disconnects facing business-to-business (B2B) sellers today. This white paper, the first of two, provides additional support based on data from our 2007 Sales Performance Optimization report (data gathered in Q4 2006 and released 3/15/07) and goes on to provide a new model for how we feel sales needs to grow.
But first, the numbers. In other articles and presentations we’ve described the benefits that accrue to companies that can accurately forecast future sales. Among these benefits are better resource allocation, improved expense to booking ratios, higher market capitalization on the exact same revenues, etc. Like the Wil Rogers line: “Everyone talks about the weather but nobody does anything about it,” everyone talks about forecasting and improved forecast accuracy but very little has been done.
For the past three years the outcome of forecast opportunities (i.e., not pipeline but deals projected to close) has been 50/30/20. Averaged across all companies—more than 1,000 each of the past four years—one-half of forecast deals have actually been won. Thirty percent have been lost to the competition and twenty percent have gone to the market leader: No Decision. Think about this for a minute. With all the time, energy, money and resource that goes into sales forecasts the same net result could be achieved by flipping a coin!
In 2007 the numbers are worse. Won deals have declined to 48% while no decision rates have increased to 22%.
People, Process, Technology, & Knowledge
The holy trinity in the Customer Relationship Management (CRM) world for the past decade has been people, process and technology. Starting four years ago, to this triumvirate we added knowledge. Consultants have consulted upon, CRM vendors have variously promised and cautioned about, sales management and their teams have invested in better managing these four areas of resource. And yet the numbers continue to deteriorate. Following are examples in each of these areas. People: When the “irrational exuberance” abated and the tech bubble burst companies were once again looking at laying off revenue producing positions. In 2003, there were 200 qualified sales reps for every genuine sales position to be filled; this was a dramatic turnaround from eighteen months earlier when every qualified sales candidate (even with limited experience) had multiple job offers from which to choose. Since that low point, demand for sales talent has continued to grow. From 2004 (data gathered Q4 ’03) through 2007 (data gathered in Q4 ’06), two-thirds of firms plan some increase in the size of their sales force.
This becomes much more dramatic when you combine this incremental growth in headcount with replacing reps due to turnover during these same years. Total turnover, both voluntary and involuntary, was 49% in 2004 (the first year of things getting better), 38% in 2005 and 35% in 2006. Combined, two-thirds of firms are recruiting, hiring and ramping up anywhere from half to all of their sales force every couple years. This is bad enough but the actual reported performance in this most important resource area— people—is much worse.
The time it now takes to get a newly hired sales rep up to full productivity (i.e., parity with peers) has increased 32% during the past four years. This is not entirely surprising given the concurrent increases in product complexity, product line breadth, entry into new markets and competitive activity reported by survey respondents during this same period. Process: Okay, finding, hiring and training good people has never been easy but today we have processes in place to make successful practices more consistently replicable—don’t we? Short answer: no. After all that has been said and done about sales process and the investments in sales methodologies, a lot more has been said than done.
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