According to most respected economists, the health of a nation’s economy can be directly correlated to their income inequality distribution curve. This blog post is not a politically charged piece, rather it intends to draw an analogy between the importance of the economic middle class and the sales middle class.
The International Monetary Fund conducted deep research on income inequality and it’s impact on the economy (http://www.imf.org/external/pubs/ft/fandd/2011/09/Berg.htm). The resulting research paper focused on various economies in the world over a 50+ year period and concluded that a 10% reduction in economic inequality had a positive corollary affect of increasing the expected duration of economic growth by 50%.
Now transitioning to the sales analog…Is it fair to assert that top performing sales organizations have a larger and healthier “middle class” of sales performers than their peer organizations that aren’t growing revenues at the same rate? I’m going to provide empirical data that substantiates the assertion, along with anecdotal evidence to corroborate the importance of a healthy sales middle class.
The Corporate Executive Board (CEB) conducted a study on the impact of sales coaching, or investing in your sales team and the corresponding affect on revenue growth. The study was published in the Harvard Business Review (HBR: http://blogs.hbr.org/2011/01/the-dirty-secret-of-effective/) and concluded that the highest return on a quality sales coaching investment was on the middle 60% of your sales performers. In fact, the impact was as high as 19%! Think about it, what if you could grow the revenues of 60% of your sales teams sales/revenue by 19%?
The anecdotal evidence is intuitive and logical. Suppose you have a sales team numbering 100 sales reps (this will also make the math easier:-). Each sales rep has a $1M per year quota. Your top 15% of sales rep performers average 120% of quota achievement per year, or $1.2M annually each or $18M annually as a group. The top sales performers are already executing strongly, consistently and display best practices that you’d like to propagate out to the sales team at large to improve their overall performance. The CEB study showed that you can increase the top performers sales/revenue performance by 6-8% through a quality sales coaching investment (aka: strategic sales enablement). Let’s follow the model through and suppose that the aforementioned top 15% of your sales performers through a quality sales enablement investment would now achieve 127% of their $1M annual quota. This would result in $1.27M annually each or $19.05M annually as a group. The delta is $1.05M in additional revenue for your company.
Now let’s apply the model to your sales middle class of the middle 60% of your sales performers. The middle 60% of your sales performers average 80% of quota achievement annually which translates into $800K each, or approx. $48M annually as a group. Applying a conservative 10% sales growth through a quality sales enablement investment (as opposed to CEB’s research findings of 19% sales performance improvement) against this same sales middle class results in 90% quota achievement. This would translate to $900K each sales rep revenue annually or $54M as a group for the middle 60% of your sales performers. The delta is $6M in additional revenue or almost 6X more than the return on a quality sales coaching investment in your top 15% of sales performers.
It’s fair to assume that your bottom 15% of sales performers won’t benefit much, if at all, from a quality sales coaching investment. This sales class typically involves a performance plan and Human Resource’s involvement as they fail to effectively sell your products or solution. The final 10% of your sales class would be the new sales team members (less than one full year of employment with your company) that need to be ramped up and will ultimately perform and fall into one of the prior three sales classes (i.e., top 15%, middle 60%, and bottom 15%) based on their fully ramped sales performance.
Why you should invest in building a stronger and healthier sales middle class is logical and empirically supported by research data and anecdotal evidence alike. So, what is the problem? Most companies and sales managers invest a disproportionate amount of their time with the top 15% and bottom 15% sales performers. Then they scratch their heads and are mired in befuddlement gazing at their spreadsheets and Salesforce.com revenue reports, wondering why they can’t grow revenues at the pace of industry peers or at the rate they think they should. Context matters. Spreadsheets and Salesforce.com are devoid of context. Ask insightful questions of your sales management to determine where they are investing their time. You really do reap what you sow, particularly in sales and sales management!