Avoiding the Sales Scapegoat

Because of its emotional component, the sales function is often vulnerable to faddish, silver bullet solutions—claiming that all you need is this new incentive plan or organizational structure. But saying nothing more than "focus on the customer" is as crudely one-dimensional as saying "cut costs" or "improve effectiveness." The sayings gain value only when endowed with specific content.

How often have you heard about a sales force full of failures? Despite all sorts of management initiatives—revised incentive plans, software investments, new training classes and account management processes—the sales numbers keep slipping. Nothing succeeds. As figure 1 shows, the sales organization plays a crucial role in your company's relationship with its customers. So if customers refuse to buy from these salespeople, the situation comes to resemble that of a slumping football team: You can't fire the fans (or customers), so you fire the players and the person who deals with them directly—the coach.

Yet how often do these disgraced salespeople go on to succeed elsewhere? How often have the new employees, plugged into existing sales strategies, failed to reverse the decline? In short, how often has a sales organization been labeled the scapegoat for deeper strategic problems?

In our experience, the failure is less likely to be the people in the sales organization than the design of their sales processes. Such failures can't be addressed by either a change in personnel or quick-fix tactics such as new incentive plans, training programs or ad hoc software investments—because new people and new tactics can still remain disconnected from strategic effectiveness. Instead, the root of the problem is the failure to align the sales organization to a business strategy that focuses on customer needs. Conversely, the route to sales success is business process reengineering focused on the company's strategic imperatives.

When we talk to companies about strategy and the sales organization, one of their biggest fears—and it's certainly justified—is failure. So we decided to look back at our interactions with different types of companies in different industries and ask: How do sales organizations fail? Our analysis showed that these failures come in four basic types. In fact, we like to think of them as archetypes, the idealized models that drive so much of the world's literature and culture.

This article discusses the four archetypes of failure in the sales organization, which are summarized in figure 2 on page 42. We focus particularly on ways that we worked with companies to overcome these classic challenges to align their sales organizations with their strategic goals. In every case, the new strategic focus led to improvements in revenues, profits and (or) market share.

The Wayward Explorer
He has a solid ship, a strong crew and plenty of supplies—but no map of where he's sailing to.

As times change, new customer segments evolve and the sales organization has to work to keep up with what these new customers need. Think about what happened to the music recording and auto insurance industries when the Internet arrived on the scene. Some companies—such as Apple and GEICO—moved quickly to adjust their business models to embrace new distribution channels and deal with start-up competitors. Others—such as Sony Records and Farmers Insurance—slowly declined. Should that decline lie on the shoulders of the sales staff? Or were they like sailors tacking valiantly if ever more desperately through uncharted waters?

One of the most volatile business environments of the past decade has been the U.S utilities industry. Several years ago, deregulation appeared to be just around the corner, and in anticipation, many utility companies sought to win the favor of the regulators by minimizing rate increases and improving their customer service. Then the long-promised deregulation proved to be a mirage, as if the map that had pointed to it was no longer accurate.

We worked with one utility company at this crucial moment. Building an energy services  company to sell nonregulated products outside its traditional markets was not an option. Potential customers in new markets had no experience with the company's brand, and the Enron implosion had created jittery customers. Meanwhile, the company faced a profit squeeze. Selling electrons was no less expensive than it had ever been.

"We were facing the very real possibility of reduced rates in the next few years," recalled the CEO. "If we were going to make up an expected profit shortfall of $300 million, we had to act quickly. But how? We didn't really have a marketing department, let alone a marketing strategy. We didn't know who our customers were, or what they needed from us. And we didn't have a sales force to speak of."

It's tempting in this situation to blame sales. The CEO had to admit that his salespeople had become order-takers, sitting by the phone waiting for customers to call them. He could have lambasted their lack of initiative and given them a kick in the pants to get out and pound the pavement. Instead he also admitted the importance of his own role. The sales organization needed a strategy to guide their activities. (What's a crew to do when they have no direction to sail?) They needed services and products to sell, a series of targets, and support to reach those targets.

The company made a series of strategic decisions, including focusing on its home market and cultivating its priority customers. It identified target segments among industrial, commercial and residential customers, using comprehensive sales and marketing approaches to develop "value-for-value products" for each segment. For example, for its commercial segment, the company created a comprehensive property owners' package that offered better public lighting for safety, simplified billing, reduced power costs when units were not rented, and premium service in the event of power outages. For its midsize processing customers, the utility offered a manufacturing protection package designed to minimize power outages and optimize  energy use in the plant through cutting-edge technology and preventive maintenance.

The strategy required complex cross-silo maneuvers. Before launching the products, the company lined up capabilities cutting across its generation, transmission and distribution services, and across key functions such as pricing and customer service. Led by the CEO, the executive team developed plans for cost-effective product delivery, redesigned and restaffed marketing, and upgraded the sales and customer service organizations. The sales force received training in the new offerings and engaged in strategic account planning in conjunction with marketing. Then the salespeople were given ambitious growth goals and incentives to meet them.

Public utilities are traditionally seen as slow-moving. But within 12 months, this utility launched new products and services across all of its target market segments, and achieved both its revenue and EBIT goals. More recently, it met a three-year goal of producing $50 million annually in incremental EBITA.

The Straight-Ski Skier
She's an intermediate downhill skier who works hard at carving turns. But when her friends head for the black diamond territory, they all have the "shaped" skis that make beautiful turns effortlessly.

Sometimes a sales organization doesn't have the right capabilities to reach revenue or profit targets so it needs realigning. Consider, for example, Johnson & Johnson's purchase of Pfizer's consumer health division. J&J is known for its outstanding sales capabilities, which is the essence of its drive for continuous growth. It is likely that Pfizer's salespeople will barely have time to meet their counterparts on the other side of the merger before they will be handed "stretch" targets. In other words, it will be time to hit the black diamond terrain, even though the equipment is not perfectly suited to the terrain.

We worked with a company in a similar situation, a global manufacturer of commercial products facing competitive threats, stiffer  customer requirements and rising costs. The company was a result of the merger of three large companies, and shareholders were demanding growth as well as improvement in both top and bottom-line performance. Yet post-merger integration had virtually ignored sales, simply combining the sales organizations in each country. "We didn't invest in world-class selling capabilities and no one really looked at how business was being done," recalled the CEO.

The result of this neglect was that sales costs ballooned to 6 percent of total revenues—double the best-practice benchmark of 3 percent.

The easy temptation would be to look at these high costs and figure out how to cut them. And indeed, the company had launched an aggressive companywide cost-cutting initiative. But this management team was prepared to take a different approach. Rather than just cutting costs to benchmark levels, they performed an analysis across the spectrum of sales performance drivers, discovering that the problem was less about costs and more about ineffectiveness.

How ineffective was sales? Customers didn't feel like they were getting the required level of service. Distributors felt frustrated by a lack of coherent planning and support. Salespeople were unproductive and felt demoralized—dragged down by a basic lack of infrastructure for sales planning, complex and outdated processes, inadequate performance tracking systems and incentives, and the barest support from marketing. If the company had responded with a mere cost-cutting initiative, it would have followed a classic recipe for sales failure. Reduced resources would have further irritated customers and distributors, resulting in more lost business, diminished brand equity, new rounds of internal recriminations, and the potential to send the company into an irreversible downward spiral.

Instead, the manufacturer developed a comprehensive plan for aligning sales with its customer strategy. Beginning with its two largest global markets, the company segmented its end users to find the most attractive prospects—and then redefined its selling model to focus more resources on those prospects. The new selling model included placing more marketing support and training in the field, instituting field-based service reps, revamping the sales incentive program, and making strategic investments in marketing, sales planning and sales support tools.

Do some of these sound like the tactical fixes we derided above? Yes, but here they were tied to specific strategic goals. For example, the company first established the goal of focusing resources on attractive prospects, and then revamped the incentive program to support that goal. The objective was not merely to turn up the heat, but to provide support and resources to help salespeople, who were, after all, eager to contribute to the company's growth.

Today, just one year after the project launch, the company's profitable revenue growth is outstripping its already aggressive plans. Led by strong performance in its two largest markets, the company is on track not just to inch ahead but to hit growth rates of 15 to 20 percent. The sales effectiveness program is being rolled out globally.

The Letter Writer
She writes great letters: knowledgeable, articulate and wise. But she refuses to learn email, fax or instant messaging.

Market discontinuities arise when competitors go to market in ways that better suit customer needs. The sales organization must then change its approach.

In the 1990s, IBM manufactured great personal computers and didn't worry much about Dell. But Dell sold its computers through a direct-to-consumer sales model, and  consistently refined both its go-to-market approach and its internal operations in ways that maximized the benefits of its new philosophy. For the potential computer buyer, it was as if Dell had included the same information in an email instead of snail mail: "This got here quicker and more reliably—and cheaper since they didn't have to pay postage." It wasn't that IBM's computers had declined in quality—only that it owed much of its market power to the mastery of an "old" distribution channel. Without a stake in the old channel, Dell was more nimble, and thus could exploit the market discontinuity. This is how kings are toppled. We know in retrospect that IBM's delay in responding eventually pushed it out of the personal computer market entirely. But at the time, IBM faced an impossible dilemma: how to participate in the new channel without destroying the old.

We worked with a global brewery caught in this sort of discontinuity. Facing growth and profitability problems in one of its major European markets, it had responded by cutting operating costs and increasing advertising. But it didn't realize a key source of those problems: The company was letting an array of powerful, local distributors take over relationships with its on-again off-again trade customers, and losing the clout that should have been connected to its prestigious global and local brands.

More nimble competitors were working with the distributors to cultivate customers. They partnered with the distributors for new go-to-market approaches. But this brewery—knowing it made good beer but refusing to acknowledge the emerging market discontinuities—got caught in a vicious cycle. Despite exorbitant spending on national advertising campaigns, it continually lost business at the point of sale.

Beer drinkers buy what's on tap. This brewery sold a lot of beer through "daily bars" with a regular daily clientele, but the daily-bar owners thought that the company was ignoring them. The only time they ever saw a sales rep was when a broken tap needed to be fixed. The company's salespeople weren't talking to the bar owners about what beer to sell, and ever more frequently its brands weren't available at the point of sale. The brewery had failed to recognize that the emergence of distributors had changed the rules of the game.

Once it understood the discontinuity, this brewery moved quickly to devise a strategy to overcome it. It identified target customer segments and defined new account relationships and management plans for each. It always included the distributors as a partner—for example, by collaborating on joint promotions and having company representatives and distributors visit daily bars together.

Rather than waiting to be toppled, the brewery refined its strategy to take full advantage of the new market structure. Across every target channel, it identified where in the customer purchase process it could most influence behavior by maneuvering pricing, brand positioning, promotional programs and customer service. For example, working with pizzerias, it realized that the pizzeria owners were key buyer influencers—a sort of adjunct sales force—who would more fully embrace a promotion when the promotion didn't just push a brand of beer, but linked beer loyalty and pizzeria loyalty.

Again, the brewery used familiar sales organization improvement tactics-in the service of a well-defined strategy. In this case, the redefined processes, roles, metrics and incentives followed the breakthrough of the "selling through the distributors" philosophy. And again, the initiative had quick positive results. The brewery increased its premium brand sales by more than 30 percent in the first year alone.

The Nice Guy
He's earnest, sweet and smart. So why does he always finish last?

Sometimes companies are losing share because their sales organizations simply don't understand, anticipate or respond to customer needs.

In today's complex world, global companies must coordinate across business units that sometimes serve the same customers. When sales efforts are not coordinated, customers might wonder what's wrong with the organization. And when salespeople from multiple units call on the same customers—or even compete against each other for business—the customer might like and respect each one, but still be exasperated at the collective lack of purpose.

We worked with a leading high-tech products company that had customers complaining about too many calls from too many salespeople. It was also—and this was hardly a coincidence—losing share. The salespeople were frustrated with the internal competition, which posed challenges to developing good customer relationships. They recognized that customers needed multiple products and services that their company could provide. But when they tried to work together across divisions, they soon ended up with a huge cast of players and a cumbersome set of processes. Meanwhile, their competitors could paint prospective customers an integrated picture, offering suites of products geared to meet customer needs and a clear road map for future enhancements.

Besieged with complaints, the CEO performed an intensive, division-by-division review of sales and marketing plans, and a thorough examination of sales performance with regard to the company's top 10 customers. The plans looked good on the surface and included all the currently fashionable tactics. But each was internally oriented, and so would miss shifts in customers' strategies or needs. Worse, each was oriented only to its own division, and so would miss opportunities to prioritize activities or to approach customers in a strategic, coordinated fashion. These sorts of plans, well-meaning though they might have been, didn't provide a cohesive solution to what the customers wanted. The CEO knew that customers would see no difference in the company's approach, and so revenues would continue to decline.

The CEO decided to pursue a more strategic approach, segmenting the company's customer base and identifying customer groups in which a cross-business-unit approach would be particularly powerful. Sales managers used segment-specific value propositions to help them develop solutions tailored to the industry and company.

The company launched cross-division sales teams whose members learned a new "C-level" approach that helped them sell to CEOs, CIOs and CFOs. They mapped business needs for each member of the customer buying team to help anticipate solutions and strengthen value propositions. The resulting tailored solutions were more attractive to customers—and the approach explicitly reflected the company's strategy. When a salesperson delivered a solution, it conveyed the company's vision of product evolution and strategy—a vision that was tied to customers' developing needs.

A once moribund sales organization now reported a 50 percent increase in meetings with high-level decision-makers. Sales teams improved their close rates by 40 percent, and overall the company increased its revenues by 30 percent.

Overcoming Failure

We've met some executives whose idea of strategy in the sales organization delves no deeper than "customer centricity." They would not see four archetypes of failure here, but just one—losing focus on the customer. In the case of the sales organization, it is not enough to tell salespeople they need to work harder and focus more on the customer. What's needed is to integrate the sales organization into the company's business strategy.

As you set that companywide strategy, you need not be overwhelmed by a fear that the sales organization will fail. Rather, you need to set strategies (and, subsequently, arm salespeople with tactics) to overcome the archetypal failure situations they might face. In this way, you will be able to transform your vision and ideals into profitable growth.

Consulting Authors

Mary Larson is a partner in the firm's Toronto office and can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Donna Stella is a partner in the firm's New York office and can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .