Welcome

- The lifeblood of any company is the revenue that you earn from a steady
stream of paying customers. For that, you typically need an effective and well-
managed sales team. That's why in many companies the managers who
manage the sales force are the single most important employees in the
company. I'm Drew Boyd, and I've been in the marketing and sales profession
for over 30 years. I teach sales management to graduate students, and I help
companies improve their commercial effectiveness.
Whether you have an existing sales force or you're starting from scratch to
create a new one, this course teaches you a step-by-step, systematic
process for creating and managing an effective sales team. You'll learn the
tools and frameworks on how to recruit, motivate, deploy, and measure sales
representatives. Like marketing, sales management is an exciting career field
of its own, but it takes talent and dedication. Through the concepts I'll share
with you in this course, you'll begin to develop the skills to become an
outstanding sales manager.

- Before you start you should know that this is a fundamentals course on sales
management, including an end to end process and a set of tools to create and
manage a sales team. To help you practice these tools I'll use an example of
a medical device sales force. The concepts that you learn here will be the
same that you would use in just about any industry. Note that this course is
not about sales operations which would include topics like lead
generation, customer relationship management tools, or sales analytics.
Instead, this course is about the people management side of sales
management. How to create, deploy and lead a competent sales team. This
course is intended for first line sales managers meaning those who have
sales representatives reporting directly to them. But many of the concepts are
just as applicable for any level of sales management whether you're a
regional sales manger or even the Vice President of Sales. You'll still get a lot
out of this course including a framework of how you would want your teams
managed.
This course is not just for sales professionals. If you're in marketing for
example you'll become a better marketer if you understand how sales reps
are deployed and measured. After all they're the ones executing
your marketing strategy. In this course you'll learn how marketing and sales
interact and where you can have an impact on the effectiveness of your sales
team. I hope you enjoy the course. Let�s get started.

What is sales management?

- Sales management is a comprehensive set of activities to create and

manage a sales team. Think of sales management as a cyclical process. It
starts by understanding the commercial marketingstrategy of the firm or
business unit. Marketing strategy answers key questions like: Who is our
target audience? What products or services are we selling? And what must
we do to convince a customer to buy? A sales manager must
understand marketing strategy to be successful.
Perhaps the single most important role of the sales manager is to translate
the marketing strategy into a concise, well defined sales strategy or what we'll
call in this course, the sales task. The sales task defines what specific
customers your team will call on, what products and services they will
feature, what activities they must perform when they are in front of a
customer, as well as the resources the company will provide to support them.
The sales task is a mirror image of the marketing strategy. Without it you and
and your team might be working hard but for all the wrong reasons. Once the
sales task is defined, every decision and every action taken by the sales
manager is shaped by it. For example, the next step of the sales management
process is to create a structure for your sales team. That determines how
many reps you need and how you organize them. Either by account or by
product line.
It depends on the sales task. Sales management is all about people. So you
need to have a competent and well trained team of people who can carry out
the sales task. Great sales managers spend a lot of time recruiting, hiring,
training and motivating great sales people.  It's the old saying, A players stay
A players by hiring and developing other A players underneath them. Great
sales managers hire the best and most qualified people they can afford.
Once you have a team in place as well as a pipe line of new recruits to keep
your team at full strength, you need to deploy them to the front lines. Here is
where you forecast what kind of sales revenues you want to achieve. Then
you create for each rep their own territory and quota to do their part in
the overall success of the team. Sales reps don't work for free so the sales
managerneeds to structure a compensation program that rewards reps for
doing the right things to succeed.
Sales compensation is linked to just about every other aspect of sales
management. So you need to know how this powerful tool works. Finally,
sales managers measure results and they hold their teams accountable for
those results. You expect what you inspect but the key is to measure the right
things that link to the sales task. Ultimately, measuring sales results feeds
right back into your marketing team so they can take these results, adjust the
commercial strategy and start the sales management cycle all over again.

Sales management is not just patting people on the back and telling them to
go out and do their best. It's a disciplined managerial process based on
data and well defined processes to keep your company successful in the face
of stiff competition.
Defining the sales task

- Defining the sales task is the first and probably most important step in the
sales management process. A well-defined sales task lays down the
foundation upon which everything else is built. It becomes a north star that
guides all of your sales management decisions, such as who you hire, how
you deploy your team, and how you manage them day-to-day. Without a well-
defined sales task, both you and your sales team will struggle to get the job
done. There are four questions you answer to define the sales task.
First is, which customers are we going after? It may seem obvious, but sales
people are more effective when they have a clear target. And the more
detailed you can be, the better. Depending on your business, try to give your
team details like the customer's name, address, and phone number. If you
don't have this information, then give them descriptive details on the types of
customers they should go after. For example, if you're selling medical
equipment to hospitals, your direction might sound like this: Call on
purchasing managers in hospitals with more than 100 beds within these zip
codes.
Next, you need to decide what products and services you want the team to
sell. Once again, the more detailed you can be, the better. Just telling your
reps to sell any product the company has can overwhelm them. Instead, give
your team clear direction of which products and services to sell, to which
specific customers, during which time frames. Using our medical
example, your direction might be: Sell diagnostic equipment to cancer
centers.
Sell surgical equipment to community hospitals, and so on. Now, this is where
you and your marketing counterpart need to have discussions about how
marketing strategy and selling strategy get in sync. Now that your reps know
what they're selling, and to whom, you need to define what activities must be
accomplished. How many calls do you want them to make, and what do you
want them to do when they get in front of a customer? Do you want them to
demonstrate the product, ask customers about their needs, negotiate pricing,
get commitments, take orders, follow up with customers, and so on.
Hey, don't leave it up to your reps to figure it out. Defining what you want done
during the selling process will make them more efficient and more
effective. Finally, what communications do you want your team to have at
your company? Sales reps tend to work independently in most situations, but
they still need to have connections back to certain departments within your
company. For example, sales reps might need to interact with a customer
service center, a shipping department, or perhaps a financing and leasing
team.
It depends on the nature of your business, of course. But sales reps need to
have a clear understanding of where to get support and help to get the job
done. You don't want them running around, trying to figure out who to call to
solve a problem. That takes valuable selling time away from the field, and that
will lower your sales. Using our medical example, you might specify that reps
have regular contact with your medical affairs department, your ordering and
supply staff,and the marketing team, when they get specific questions from
hospital staff members.
Who do we target, what do we sell, how do we sell it, and where do we go for
support? You'll hear me refer to the sales task throughout the rest of this
course because it's such a critical componentof your success as a sales
manager.

Recruiting salespeople

- At this point in the sales management process, you've decided on the sales

task and created a sales structure that will help you achieve your goals. Now,
it's time to start filling those positionswith real people. Recruiting and hiring
sales reps takes much more than just telling your human resources
department to go fill those slots. A great sales manager gets actively involved
in the process. That's because if your company makes a bad hiring
decision, sales will suffer, perhaps for months, or even years, before you get
the right person in the job.
When is the best time to recruit salespeople? All the time. What I mean by
that is you should think of recruiting as an ongoing activity. All companies
experience attrition. Salespeople leave like any other employees, so you need
to have a pipeline of recruits ready to step in. If you wait too long to fill an
opening, your sales in that territory will suffer. Here are the steps you take to
hire sales reps.First, develop a profile of the type of person who can perform,
that's right, the sales task.
Look closely at the sales task and ask yourself, "What skills does a rep need,
or be able to acquire,"to do the job? "Do they need technical
skills? "Quantitative skills? "Presentation skills?", and so on. Also ask, "What
knowledge they must have, "or be able to acquire, to do the job? "Do they
need knowledge about your industry, "or, perhaps, knowledge about a certain
topic, such as, "biology, or engineering?" Finally, "What dispositions and
behaviors "do they need for the job? "Do you want people with high
energy, "or, perhaps, people who are more easygoing "and great at forming
relationships?" Once you have a profile, work with your HR team to create a
job description which includes elements of the profile, along with the job
duties as described in the sales task.
Now, depending on the job, there are lots of sources of potential sales
recruits. Start by looking inside your own company. Sales is a methodical,
technical process that anyone can learn. You might be surprised at how that
quiet, shy engineer could become a superstar salesperson. Your own
employees already know your products and industry, so they're an excellent
source to fill openings. Other sources include referrals, employment
agencies, universities, former military personnel, the internet, and, of course,
traditional newspaper advertising.
As you get people applying for the job, it's time to start interviewing. You'll
need an interview script, so this is a great time to refer to (chuckles), you
guessed it, the sales task. Look at the sales task and understand what you
need to see to assure that a candidate can succeed. There are two ways to
focus the interview. First is, situation- or behavior-based interviews. If the
sales task requires reps to respond to certain situations, ask interview
questions that focus in on those situations.
Here's an example of this type of interview question: "A potential customer
just told you "that you didn't get the order. "What do you do now?" The other
approach is performance-based interviews.Here, you give the candidate
exercises that simulate a selling situation or activity in the sales task.For
example, you might hand a candidate a map with customer locations, and ask
them to plan their sales calls for the day.
When you find the right candidate, make the offer, and be ready to
negotiate. Salespeople want, more than anything, to feel that they are
valued. Send that message from the very start, with a fair, but strong,
employment offer. Great sales managers are successful because they know
how to recruit and hire the A players just like them.

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Conducting sales training

- If you're like most companies, you'll need to train new salespeople, and

perhaps do refresher training for existing reps. Now, to create a sales training
program, I like to use the classic framework of who, what, when, where, how,
and why. Let's start with why. Why you train salespeople is so they can
perform the sales task. Take your sales task and break it down into an
exhaustive list of specific skills, knowledge, and behaviors they must acquire
in training.
Now, you did something similar during the recruiting process to create a job
description and a hiring template, but this time you want to make the list as
complete as possible. So think of it this way: If you hire people with some
existing skills, knowledge, and behaviors, then your training program is
designed to reinforce those as well as fill in the gaps. You want people
walking out of your training program ready to perform the sales task. Here's
an example for a rep selling surgical instruments.
Skills would include call planning, giving presentations, demonstrating
products, gaining commitments, taking orders, and filling orders. The
knowledge would include human anatomy,surgical procedures, operating
room protocols, and the surgeon's profession. And the behaviors would
include self-motivated, professional, organized, timely, engaging, and
persuasive.
Using these lists, create a series of training modules designed to deliver or
reinforce each item.Now that we know why and what we're training, we still
have more questions. Who should deliver the training, where and how should
it take place, and when should it occur? Now, you have a lot of options for
selecting faculty for your training program. The most obvious source is to
select one of your star performing sales reps. But be careful here. When you
take a great rep out of the field to give training, it could impact your sales.
Other options include sales managers, marketing managers, your technical
teams, or even your customers. Look at each module and determine who is
most qualified to do the job. In some companies, it makes sense to
create internal positions as sals trainers who do it all. You might even
consider hiring outside sales training specialists. Now when and how you
deliver training depends on the nature of the job. It's likely that most of it will
occur when the rep is hired.
But, not all of it has to happen immediately. It may make sense to have the
rep do some time in the field before they learn other skills. How you deliver it
depends on what's being trained. Most sales training programs involve some
type of role-playing so reps can practice the exact skills expected of them in
the field. The key is to make training an experience that translates directly to
what they'll have to do in the field. Now where you deliver training is another
key question. It may seem obvious that you would deliver sales training at the
company's headquarters, but it doesn't have to be.
Consider each module, and ask yourself: What location would make the most
impact on learning?For example, would it make sense to do training in the
field? Perhaps on a customer's location, or at a distributor of your
product? More and more companies are delivering training online. For
example, take a look at the course Sales Fundamentals, here at lynda.com A
great sales training program motivates your reps and it shows the company's
commitment to their success.
Most importantly, it gets them off to a fast start to go out and build your
business.

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Motivating salespeople

- For most people, the idea of being a salesperson is a scary proposition. But

believe me, sales is a rewarding and exciting career. I've seen many former
corporate colleagues of mine, as well as my students, go into the sales
profession and they never come out, they like it that much. But the hardest
part of the job is how to stay motivated, and that's where you, the sales
manager, come in.Creating competency means hiring and training great
salespeople, but it also means keeping them motivated.
Now, why motivate? It creates enthusiasm for the job, and reduces job
turnover. Motivated reps are more productive, and more confident in their
ability to accomplish the sales task. Motivated reps get less frustrated, and
they stay on track to get the job done. The most successful sales managers
use a combination of intrinsic and extrinsic rewards to motivate
salespeople. Intrinsic rewards include giving reps autonomy and freedom to
do their jobs, reminding them that they're selling interesting and useful
products that help their customers, and giving them a sense that the company
is loyal to them.
Extrinsic rewards can be both financial and non-financial, and these include
salary and bonuses,sales awards like rings and plaques, special titles like
Senior Sales Rep, and just a good old pat on the back. Sales reps are very
motivated by recognition as it reinforces their choice to work hard.Sometimes
the lack of recognition can be just as powerful when a rep sees his colleagues
winning sales awards and he hasn't.
Schedule regular events to recognize successful reps in front of
others. Arrange to have the senior leaders in your company, especially the
CEO, take the time to visit with the top reps and thank them. Reps want to
feel useful, important, and worthwhile, so get them involved in things like your
training programs. Invite them to important sales planning meetings, have
them mentor newly hired sales reps, or perhaps ask them to be part of a sales
advisory council for your company.
Another great way to motivate sales reps is to conduct sales contests. These
are short-term incentive programs that award prizes to reps that achieve
specific sales targets. A contest should have a clear purpose, and they're
usually designed to have the sales team do something they're not doing
now. Perhaps something outside of the sales task, but important to the
company. These might include getting new accounts, selling certain
products, or gathering specific types of information from the market.
For many reps, the best motivation of all comes from customer feedback. It's
very powerful because it reminds the rep of the direct impact of his or her
efforts. Now here's a tip, next time you have a sales award meeting, invite the
winning rep's customer to the event to say a few words about the rep, and to
personally hand over the award. Now that will put a smile on the rep's face for
sure. Oh, and there's another important benefit to motivating your sales reps.
If you've selected and trained talented salespeople, keeping them motivated is
the best way to assure your success.

salesforce structure

Defining a sales force structure

- Once you've defined the sales task your next major role is to create a
structure for your sales team. And for that you have to decide how many sales
reps you need and how to organize them.Now there are two ways to decide
how many reps you need. A top-down approach means you take your total
annual revenue goal and divide it by the averages sales per customer. That
tells you roughly how many customers you'll need. Then determine how many
times you need to call on a customer to get a sale and how many calls a sales
rep can make in a year.
For that look at your sales task. For example, if your goal is $1,000,000 the
average sale is $1,000 and you need to call on these customers at least five
times a year. You need to have enough reps to make 5,000 sales calls in
total. If the average rep can make 500 calls a year, which is about two per
day, you'll need at least 10 sales reps. The other approach is from the bottom
up. Look at the total number of customers or accounts you have in your
geographic area, then decide how many calls you need to make on each one
to generate a sell.
That tells you how many sales calls need to be made For example, if you
have 1,000 customers in your area and they need to be called on five times a
year, that means your sales team needs to do 5,000 calls. Then just like
before divide that by the total number of calls one rep can make in a year.That
gives you the total number of reps needed to cover all those customers in
your geographic area. So as before if the average rep can make 500 calls a
year, you'll need at least 10 reps to cover this area.
Forecasting sales performance

- Once you've decided on how many reps you need, it's time to divide your
sales geography into separate territories. These are assigned to each rep or,
in some cases, a team of reps. Now, to create territories, you first need to
forecast both the "Market Potential" and the "Sales Potential" in your
areas. "Market Potential" is what you, and all the companies like you, expect
to sell in that area. It's the potential sales for your entire industry in that
area. "Sales Potential" is what your company expects to earn out of the total
"Market Potential".
In other words, it's your share of the market. Forecasting sales performance
involves many variables, so good sales managers use different approaches to
improve accuracy and validity. Let's look at your options. Forecasts can be
based on "Objective" data or "Subjective" data. "Objective" methods look at
past historical data as an indicator of future performance. For example, you
might look at the last several years of company sales.
This would tell you if the company sales are growing, staying flat, or perhaps
declining, and based on that, you'll have to decide whether those trends will
continue, or if there's something you're planning to do that will change those
trends. "Subjective" techniques are based on the opinions of "Experts". These
could be individuals or groups responding to a survey and face to face
interviews.These "Experts" might be: your customers, your sales reps, or
perhaps distributors. In other words,they have to have some insights about
your industry and any economic or consumer trends that might affect future
sales results.
Once you decide on the sources of data for your forecast, you need to decide
on what approach you want to use. The two options I recommend are the
"Top-Down Approach", and the "Bottom-Up Approach". With the "Top-Down
Approach", you start at the national economic level to assess the overall
condition of the economy. Is the economy growing, or shrinking? "Why?" you
ask? Well, it can affect sales in your industry. Next, take a look at the industry
potential.
Are there factors affecting your industry, positively or negatively? Are there
new foreign competitors, or new regulations that might hurt sales? From
there, estimate your share of the industry pie. That is your company's "Sales
Potential", and that you'll break down further into territories. The "Bottom-Up
Approach" is just the opposite. With this approach, you start by asking each
sales rep to estimate how much their territory might produce overall given the
number of customers, how loyal those customers are, and how strong the
competition is.
You take all the territory forecasts and roll them up to a company level "Sales
Potential". So, which method is best? Truth is, you want to use both, if
possible, with a combination of "Objective" and "Subjective" data. A sound
forecast helps you create the right structure of your sales force to go out and
get great results.

Creating sales territories

- Creating Sales Territories takes a lot more than just drawing lines on a

map. Well designed Sales Territories, can make your customers
happier, reduce selling and travel costs, and keep your reps motivated and
productive. There's a lot at stake. To create Sales Territories, I recommend
two approaches. The Build-up method, or the Breakdown method. It's a little
bit like the forecasting methods of top-down and bottom-up. Let's see how
these work. With the Build-Up Method, you start at the level of the individual
rep to understand their work-load capacity, and how frequently they need
to call on customers to succeed.
Here are the steps. Start with the Sales Task. What kinds of customers are
we calling on, and how many of them are there in our area? What products
and services are we selling? Given that, what does a rep need to do with
customers to generate a sale, and how long does that take? Let's use our
medical device example from before. We're selling diagnostic machines to
hospitals, clinics, and doctor's offices. There's about 1,000 of them in our
area.
Given the complexity of selling this equipment, reps need to spend a lot of
time during each sales call. Given how spread out customers are, our reps
can call on about two per day, or about 500 calls per year. We did these same
calculations when deciding on how many reps to hire. Now we need to draw a
geographical boundary for each rep, so that each of them have about 100 of
these customers. The Breakdown Method is the opposite. Look at your
forecast for overall company sales potential, divide that number by the
number of reps you have.
That's what's expected of each rep. Then create a geographical territory wit

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Creating sales territories

- Creating Sales Territories takes a lot more than just drawing lines on a

map. Well designed Sales Territories, can make your customers
happier, reduce selling and travel costs, and keep your reps motivated and
productive. There's a lot at stake. To create Sales Territories, I recommend
two approaches. The Build-up method, or the Breakdown method. It's a little
bit like the forecasting methods of top-down and bottom-up. Let's see how
these work. With the Build-Up Method, you start at the level of the individual
rep to understand their work-load capacity, and how frequently they need
to call on customers to succeed.
Here are the steps. Start with the Sales Task. What kinds of customers are
we calling on, and how many of them are there in our area? What products
and services are we selling? Given that, what does a rep need to do with
customers to generate a sale, and how long does that take? Let's use our
medical device example from before. We're selling diagnostic machines to
hospitals, clinics, and doctor's offices. There's about 1,000 of them in our
area.
Given the complexity of selling this equipment, reps need to spend a lot of
time during each sales call. Given how spread out customers are, our reps
can call on about two per day, or about 500 calls per year. We did these same
calculations when deciding on how many reps to hire. Now we need to draw a
geographical boundary for each rep, so that each of them have about 100 of
these customers. The Breakdown Method is the opposite. Look at your
forecast for overall company sales potential, divide that number by the
number of reps you have.
That's what's expected of each rep. Then create a geographical territory with
this level of volume.Be prepared to have to modify these boundaries based on
territory differences. For example, the geography of each territory will
have different driving distances, and that affects how many accounts a rep
can call on in a day. Territories might have different competitive issues, or
supply issues, that might cause you to modify its size, or even its shape. Now
here are some tips when creating sales territories.
First, try to use geographical boundaries that already exist. You can create
sales territories aroundexisting state boundaries. For example, you might
create a territory that includes all the states in New England. You can also use
county, city, or even zip code boundaries. This makes it perfectly clear where
a rep is supposed to sell, and where they're not supposed to sell, where they
might interfere with another rep. Not every territory will be the same size and
shape, rather, you're trying to create equal territories in terms of sales
potential, not physical size.

Now be sure you're financial and IT systems are set up so they capture
sales based on customers in these geographical boundaries. You need to
measure results at the territory level to assess progress. And finally, be
prepared to Setting sales quotas

- Once you've forecasted your market and sales potential, and created your
territories, you need to set a quota of how much you expect each rep to sell in
their territory. Quotas are an important sales management tool. Setting quotes
links the sales rep directly to the firm's strategy and to the sales task. They
help focus resources on high-potential areas, but most importantly, quotas
motivate. Let's look at how you do it. Step 1 is to Collect Data. Look at each
territory's potential market sales vs the rep's sales history.
Be sure to gather data for a time period that is comparable to the quota
setting period. One year, for example. You need to assess whether the rep is
at, above, or below the potential of the territory.Also, be sure you understand
seasonality and other factors that might have affected past sales.Next step is
to Understand Territory Differences. Not all territories are created equally, and
when you designed the territories, you should have noted things like different
economic conditions, the competitive situation, and travel times within the
territory.
With this information, it's time to set a quota for each rep, but adjust it, upward
or downward,based on current penetration and individual rep ability. For
example, in low penetrated areas, you might ask the rep to get more growth
next year, but if your company already has high penetration,meaning high
market share, it would be appropriate to keep the quota flat for that rep. After
all, there's just not enough new business for the rep to capture if you already
have most of it.
Now, here's an example: Not every rep will have the same quota or the same
level of difficulty achieving the quota. Your most talented performing
reps should be expected to produce more.Reps in shrinking territories will be
expected to produce less. Your quota should be for the entire year, but it's
also good practice to break the annual quota down to quarterly or even
monthly quotas. This brings more focus.
Setting quotas is a bit of an art, backed by good data and even better
judgment. That's why it's critical to do a reality check here. Does the quota
seem fair and reasonable? Will it motivate the rep? Or, is there a chance it
might backfire and cause the rep to just give up if it's set too high?Finally, you
need to communicate the quota to the rep. Make quotas clear and thoroughly
explainhow quotas were determined. Be sure to announce quotas prior to the
effective time period.
Quotas are so important because they send a key signal to your rep, and that
signal is how much confidence you have in their ability to succeed. Quotas
are like a contract between the sales manager and the rep, so set them
carefully, and watch the sales results roll in.

Managing Sales Team

Understanding sales compensation

- A sales manager does four things. Define the sales task. Define the

structure. Create competency and measure results. But hey, what about
paying the sales team? Isn't that important? It certainly is. Your sales rep
compensation program touches all four major roles of the sales
manager. Let's explore it in more detail. Managers have a variety of sales
compensation schemes to use. The key is to select one that is market
competitive, and that drives the right behaviors in your sales reps.
Compensation can affect the number of sales calls a rep makes, the quality of
that sales call, and how much time a rep devotes to the job. So what
behaviors do we want? By now you should know,we want to directly link our
sales compensation program to the sales task. Who do we call on?What
products do we sell? What activities do we want to succeed? And what
interactions do reps have with others in the company? Compensation can
drive behavior in all four areas of the sales task.
Creating a sales comp program takes a lot of work. So it's important to get
help from others within your company, such as your finance and human
resources departments. A good sales comp program is simple, fair, flexible,
affordable, and competitive. To design a sales compensation plan,you first
have to assess your current comp program, and determine how well it's
working. What are it's strengths and weaknesses? Be sure to look at both
quantitative as well as qualitative data.
Is the comp plan aligned with the strategic direction of the firm? Is the plan
affordable, within your company's overall business model? Is it competitive
with other firms that you compete with? Is the program too volatile in terms of
how reps make their money? Be sure to get diverse input when you do this
assessment. You should get feedback from your senior management, sales
managers, sales reps, and sales support groups. But also include feedback
from marketing and other departments,especially ones that are directly
impacted by the activities of sales reps, such as your manufacturing team, or
customer service groups.
There may be things happening between these departments and your
reps, that you're not aware of. A well designed compensation program can
affect these interactions by eliminating them, or perhaps promoting them. You
may even want to ask your customers what they think about your reps and
how they're performing. What would they like to see changed? How can you
use compensation to address that? You should also assess how simple and
easy it is to administer the current plan. Are there ways to streamline it and
make it even more efficient part of your sales management tool kit? What can
you do to make it more flexible and nimble when addressing special
situations that might arise in the marketplace? A great sales compensation
plan links all aspects of sales management.
The best sales managers, are the ones that take the time to design the right
one. Let's learn how to do that next.

Designing sales compensation programs

- To design a sales compensation program, follow these four steps. First,

determine the total amount of money you want your reps to earn
annually. Take a look at their past performance, and decide if you want to
make adjustments up or down to that total for the coming year. For example,
you might add in a cost of living adjustment. Make sure that the amount you
pay is competitivewith the rest of the industry. If you underpay your reps
compared to what competitors pay, you'll start to see people leave, and join
those companies instead.
Next, determine the method you want to use to pay your reps. You could use
a straight salary program, a variable commission program, or a combination of
the two. Straight salary programs are simple, easy to administer and
control, and easy to tie to the sales task. But, there's no incentive to work
beyond what's expected. Variable commission plans are great because
they're directly linked to the sales generated. The more you sell, the more you
earn.
But that creates a lot of risk for the sales employee. Their income can be
erratic, and that makes it tough to pay the bills each month. Most companies
use a combination. A combination program works by giving the rep a base
salary, of say, 75% of their projected target earnings. Then, they have to earn
the remaining portion of their salary from commissions. They may earn less,
the same as, or well above the targeted salary.
It's all up to how hard they want to work. Combination programs give you the
best of both worlds.The security and stability of having a base salary, plus a
strong incentive to acheive more, and accomplish the sales task. The next
step is to set thresholds on how the rep earns the variable portion of their
income. You can pay a straight dollar amount or percentage of sales on each
unit sold. Or you could vary the payments, based on reaching certain quotas.
Here's an example. Let's imagine a medical device rep gets paid $3,000 on
each diagnostic machine sold for the first 10 units, but then that amount
increases to $5,000 when she sells units 11 to 20.That gives her a lot more
incentive to sell that first 10 units. Now some companies like to impose salary
tax. In other words, they specify a maximum amount a rep can earn, no
matter how much they sell.
I reccomend avoiding caps. It sends the wrong signal. Hey, if a rep wants to
blow it out and work hard, so what if they make more than your CEO. They're
bringing in business to keep your company growing. The CEO won't mind that
at all. Finally, you need to test your comp program before you implement
it. Here's a tip. Take your new program and run it through last year's actual
sales results. I create an excel spreadsheet that tells me how much each rep
would have been paidundner the new program, using their past sales results.
Then ask yourself, did each rep earn what you wanted them to? Will the new
program drive the desired sales behaviors? Is there enough upside and
downside for the rep to really motivate them?Did you get the right split
between fixed salary and variable commission? Most importantly, is the new
program simple, and easy to understand? A well designed sales
compensation program links all the elements of sales management. The sales
task, the structure of your territories and quotas, and how you motivate a
confident sales team.
Now that's a recipe for success.

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Communicating sales compensation

- Now that you've designed your sales compensation program it's time to
implement it. There are 3 key steps, communicate, administer, and
measure. Let's look at each one. The best compensation plan can fail if not
properly communicated. Timing is important here, it may seem obvious, but
you want to announce the program before it's actually in place. If your new
sales cycle starts January 1st be sure reps understand the new plan
sometime in December. That's because sales reps can get a bit nervous if
they're not sure how they're going to get paid.
I recommend having a formal written document, or online website, that
describes exactly how the plan works, how it compares to industry market
rates, and the method and timing of how reps earn their money. Be sure to
include examples. Reps will share this information with their spouses, so it's
essential the family fully understands how that mom or day sales rep will be
bringing in the income. By the way, be sure to share that written description of
your plan, with other internal departments like finance, and human resources.
They need to know it too. I also recommend verbal presentations, both to the
entire sales force, as well as one-on-one meetings between the manager and
the rep. Try to involve your senior leaders, such as your CEO. It really helps
when reps see that the big boss is behind this plan. After the group
presentation hold individual meetings that can be more customized to a reps
individual situation.You might have to deal with special situations, such as
when a reps compensation is likely to dropunder the new plan.
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Communicating sales compensation

- Now that you've designed your sales compensation program it's time to

implement it. There are 3 key steps, communicate, administer, and
measure. Let's look at each one. The best compensation plan can fail if not
properly communicated. Timing is important here, it may seem obvious, but
you want to announce the program before it's actually in place. If your new
sales cycle starts January 1st be sure reps understand the new plan
sometime in December. That's because sales reps can get a bit nervous if
they're not sure how they're going to get paid.
I recommend having a formal written document, or online website, that
describes exactly how the plan works, how it compares to industry market
rates, and the method and timing of how reps earn their money. Be sure to
include examples. Reps will share this information with their spouses, so it's
essential the family fully understands how that mom or day sales rep will be
bringing in the income. By the way, be sure to share that written description of
your plan, with other internal departments like finance, and human resources.
They need to know it too. I also recommend verbal presentations, both to the
entire sales force, as well as one-on-one meetings between the manager and
the rep. Try to involve your senior leaders, such as your CEO. It really helps
when reps see that the big boss is behind this plan. After the group
presentation hold individual meetings that can be more customized to a reps
individual situation.You might have to deal with special situations, such as
when a reps compensation is likely to dropunder the new plan.
They need to know why. Individual meetings help you reinforce the
message of what you expect and how the comp plan is tied to the sales tasks
and their quotas for the year. After you've communicated, it's time to put the
plan in place. The best compensation plan can also fail if it's not properly
administered. Here are some key success factors. Be sure to give continuous
feedback to each rep on how they're earning under the new plan. Include
clear documentation on the calculations used to figure out their earnings.
It's critical that you pay reps with strict adherence to defined pay schedules
and that you resolve any mistakes or issues in compensation. Our reps
motivation will drop if they aren't paid the right amount, on time. Finally, be
sure to measure how the compensation plan is working. What were the
objectives? What metrics tell you if these objectives are being met? It is it
sales? Profits? Or market share? And what are the actual results of those
metrics, versus the plan.
Finally, is the plan as as simple as expected? It's essential that you measure
continuously. Just waiting until the end of the year, only to find out that the
plan wasn't quite working is unacceptable. Great sales managers are
proactive in everything they do especially in keeping track of how their
reps are getting paid.

Managing underperforming reps

Managing sales people is a rewarding but sometimes challenging leadership

role. Especially when you consider that every rep is different. Each have their
own skill levels, and each have their own ambitions and career
direction. That's why I always tell managers, you don't manage your team as
a group; rather, you manager it one person at a time. Let me share with you
some tips on how to deal with specific issues you may face with your
team. First of all think of your sales team's talent along a spectrum from over
here, where you have your very best talent, all the way over to here where
you have your worst performing talent.
Each rep fits somewhere along this spectrum and the issues you face are
different at each point.For example, your very top reps are likely to be the
most demanding on your time and energy.These are your thoroughbreds and
your high performing, top producing reps who are likely carrying the load of
meeting your team quotas. They need constant nurturing and attention. Go
back and review the video on chapter two on motivating sales reps for ideas
on how to recognize and reward these top performers.
If you ignore them you'll likely see their production slow down. At the other
end of the spectrumare your underperforming reps. You need to understand
why they aren't performing. In my experience there are only two reasons that
sales reps fail. They don't know how to perform the sales tasks or they don't
want to. They lack the skill or the will. For each rep you need to figure out
which one it is. If a rep doesn't know how to do the job it could be for a variety
of reasons.

Perhaps they lack training, or perhaps the sales task has changed and they
didn't realize it. Go back to your training profile that outlines these
skills, knowledge, and behaviors needed to succeed in this job. Which one of
these does the rep lack and can they acquire it? If not, they're in the wrong
job and you'll need to replace them. If a rep knows the job but is still not
performing,then they're simply not doing enough work to get the job done.
Here again there could be lots of reasons for that. It might be a pay issue,
maybe they're just notmotivated day-to-day to do the work. Or it could be a
personal problem at home. As their manager you need to help them turn the
situation around. But set limits and deadlines on when you and the rep will
agree that the issue is resolved and performance will improve. If those
deadlines aren't met, you'll need to find a new rep for that territory. As you can
see, managing sales reps takes a lot of conversations.
So how do you do this if your sales team is spread across the country? Well
first, you have to use the data available to you about your team's
performance. Look at sales call reports and sales results. Are reps going to
the right accounts and doing the right things in those accounts? Then create a
communication plan where you and each rep have regular
conversations, either by phone or online with tools like Skype or Adobe
Connect. As a manager you also need to get out to the fieldand ride with your
rep to them in action with a customer.
As the old saying goes, You can expect what you inspect. Now you see why a
front line salesmanager is a such an important job. A sales team's success is
only as great as the manager behind them.

Measuring sales performance

- Sales managers hold their team members accountable for achieving results
given the sales task.But to do that, you first have to measure results. Here's
how. First, be sure to measure both the outputs of your sales reps, as well as
the inputs. The outputs include things like their sales revenue, number of units
sold, gross margin, and number of new accounts. Inputs are the rep's
activitiesthat go into achieving the sales task. These include things like the
number of calls they make each day, the number of days worked, the actual
selling time per call, as well as things like number of phone calls made to
prospective clients.
Inputs are what reps do to generate outputs. But the most effective way to
measure is to look at ratios of those inputs and outputs. Here's an
example. Imagine you're evaluating two sales reps.One of them has made
100 sales calls this month, and the other has made only 90. So, which rep is
doing the better job? Well, if you look at just the total calls, it would appear the
first rep is working harder. But, when you consider the number of days
worked, the picture changes.
Look at this example. Let's assume Rep A performed 100 calls in 20 days for
an average of 5 calls per day. But, Rep B performed 90 calls in just 15 days
worked for an average of 6 calls per day. Now viewed this way, Rep B is
working harder. Now, here's a tip. Look at this example of how these ratios
can be used to create a Sales Effectiveness Index. Sales Effectiveness =
(Calls/Days Worked) x (Orders/Calls) x (Sales/Orders).
When you evaluate your reps using this index, you're going to see exactly
who's getting the most output for the amount of input they make to the
job. Now be sure to evaluate only those factors that you would take action
on. Don't just measure something because you happen to have data.Your
reps might feel you're micro-managing if you measure an activity but don't
expect them to do anything differently because of it. Measure the things that
matter.
Also, be sure to measure continuously. Don't wait until the end of the year to
find out something is wrong. Do it often so you can take corrective
action. Also, make sure your reps know how they're being evaluated. Don't
surprise them with something you're measuring, and they're not aware of
it. You'll lose their trust. Finally, be sure to set standards of
performance. Don't measure something and tell them they've done a good job
or bad job, if there were no criteria to assess them.
The best sales managers know that it's really all about the conversations you
have with the reps that matters most. Measurements of performance are just
an indicator. When you combine thoughtful conversation with good, accurate
data about their work, it shows the rep that you care about helping them
succeed, and that's the most rewarding part of the sales manager's job.

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Next steps

- Sales managers are highly sought after because of their ability to manage

one of the company'smost important assets, it's sales force. The most
effective sales managers generate the most effective sales results. For many
companies, the first line sales manager is the most important jobin the
company. In this final video, I want to share with you some guidelines on how
to continue developing your career in sales management. When i give career
advice I remind people to never let a year go by without developing some
part of your professional skill set.
Here are some tips. First, look for opportunities to broaden your skills and
experience. I believe the first move you should make outside of sales
management is a position in marketing, as either a product manager, market
development manager, or perhaps a role in new product development.You
need to learn how a company develops strategy, how it identifies new
opportunities, and how it brings together resources to go after those
opportunities. Never forget that with your experience as a sales manager you
bring tremendous value to these marketing roles, but you also need to see
this as an opportunity to "get schooled" on marketing concepts.
Take advantage of it. Also, be opportunistic when considering other
roles outside of marketing. For example, you should consider a position
overseas to build your global and cultural acumen. Or perhaps you might want
to take a temporary position on a special project team, perhaps related to a
company merger. These all help develop your business acumen. Always think
of yourself as a lifelong learner. Stay on top of new technology, read about
what other companies are doing, and always looks for best practices in other
industries that might help you improve how you approachmanaging a sales
team.
If you consider yourself a sales professional than I advise you to join the
community of practice, get out there and engage in organizations, like the
Sales Management Association. Attend one of the many sales management
conferences held each year, join sales related groups on LinkedIn, attend
networking events, and get to know other sales management
professionals. Learning is a process of taking an action, reflecting on what
happened, learning from it, and then improving for the next time.
You want to learn at a rate faster than the rate of change. That means you
need to experiment,practice new sales management techniques while
perfecting the old ones. And finally, keep a strong ethical base when
managing sales teams. So much is at stake when you consider the livesand
careers of the sales professionals working for you. You have to constantly
balance the needs of the business with the needs of the individual.
Always communicate honestly. Build trust. And don't cut corners just to make
your sales number.Great sales managers earn respect from the people below
them, above them, and from their peers,based on their ethical approach to the
job, not on how many awards they won. Congratulations on completing the
course. Now I want you to go out there and build and manage great sales
teams.