There is a Dutch town called Drachten that has a population of about 44,000 people. Here, the local government did something that would surprise most of us—they removed traffic lights and signs at an intersection that was handling about 22,000 cars a day. The result? An INCREASE in safety and efficiency at the intersection. What can we learn as sales leaders from Drachten? That monitoring people closely and telling them what to do isn’t always the best way to get the right behavior. Sometimes it’s best to let people manage their own risks by forcing them to think about what risks they are actually taking. And this is exactly what we found in this year’s work, that leading organizations create a climate of “guided rep judgment”. And as part of that, we found one company taking an interesting approach to doing what Drachten did—letting their people manage their own risks, by forcing them to think about them.
We’re calling this organization Alpha Company (a pseudonym). How did they approach increasing “guided rep judgment”? Well, they did it from a sales coverage and metrics perspective. Here are a few highlights of Alpha’s approach:
First and foremost, Alpha’s main goal wasn’t about increasing autonomy (while that’s a part of it), the critical driver is one we all have—growing PROFITABLE business. Revenues had been increasing, while profits remained flat. Their belief was they could deliver disruptive insights, “unteaching” their customers while growing those profit margins. The organization decided to shift to “market teams”, away from regional sales teams. Here’s a brief comparison:
|Regional Teams||Market Teams|
|Standard management hierarchy:Account Executives report into a Frontline Sales Manager, who reports into a Regional Sales Manager||P&L Management structure:Account Executive, Project Manager and Development Specialist report into an Area P&L Manager. Sales Manager does not have direct authority—but is a resource to the market team, as an innovator.|
|Deal authority rests at management level||Deal authority rests at the Market Team level|
|Pipeline managed by Account ExecutiveResult: pipeline shape = “The Wedge”||Pipeline managed by Market TeamResult: pipeline shape = “The Nail”|
|Revenue metric||Basic P&L metric|
Alpha has given significant control to these market teams. All three members must be unanimous in their decision to pursue opportunities. If there are discrepancies, then management steps in. In order to help the market teams make informed decisions, Alpha gave the teams tools and support such as cost and pricing guides; creating transparency in the true cost of resources and additional support. Additionally, they must meet with a financial controller; a mini-CFO if you will. This ensures they are pursuing profitable opportunities and can help calculate costs associated with opportunities.
What has Alpha seen as a result of taking a market team approach? Here’s a few:
- Decrease in cost of sale – by 37.5%
- Increase in gross margin – by 21%
- Increase in deal size – by 113%
- Increase in forecasted revenue – by 55%
This is how Alpha removed controls for their sales organization and increased rep-judgment, while still achieving the critical goal of growing profitable business. How will you allow for increased judgment? Alpha and the town of Drachten found something that worked.
CEB Sales Members, read the full case study and listen to the webinar on how Alpha company structures their market teams to simultaneously provide greater rep accountability and judgment. Also, read the key findings from our latest research, Driving Sales Transformation.