Proposal to Correct the Salesperson to Technology Expert Ratios to Recover from Excess Salesperson Hiring

A solution for an issue encountered at a major software company to which I was previously an Advisor.

Author: Christopher Matthew Cavanaugh, Harvard University

Executive Advisor, President, Social Architects and Economists International, LLC

Contact:

Academic: cmcavanaugh@g.harvard.edu, Corporate: matt.cavanaugh@social-architects.international

Phone: +1 559 332 3834

Date: May 9th, 2018

Minor Edits: Thursday, February 27th, 2020

For: John Robinson [Alias, for protection]

President, CommLink Systems Inc, A Division of SecureCorp, Inc. [Alias, for protection]

Current Policy/Practice that is Problematic: Excessive Hiring

The current critical issue that our company faces relates to 2017 hiring practices that were good for the larger company's business, but in retrospect were not advisable for our division. We increased our sales team by 129% in just 3 quarters, in an attempt to reach new company-wide targets, but we did it without clear market justification for our niche. Additionally, as we know, each of our sales teams are composed of salespeople (SPs), and our technical subject matter experts, the solution consultants (SCs). Since we did not hire solution consultants at the same pace (which is not possible due to special expertise requirements), we broke a delicate balance that existed undisturbed in our teams for a long while. We now have an organization with a character quite different from what it was just 6 months ago. It is well understood by senior staff that the SP to SC ratio is critical, and this has become a point of issue. These are the two primary players in our client facing sales teams, and interaction need to be as smooth and effective as possible, with minimal dead weight. SC time is valuable, since they cover many salespeople. SC experience is critical, because without it SPs would have little ability to validate opportunities and align connect client issues to our software offerings. Most other roles in the company play a supporting role to these teams either by providing mentorship, direction, or tools for success. These teams, connected directly with the senior management of our important clients (C-level), are there the key connection point to our market at the highest level. Furthermore, they are involved in every aspect of our organization's mission, and are important to the corporate culture as a whole, because they make up such a large portion of our total staff.

It is well known that the salespeople have starkly different skill sets and experience than our SCs. Salespeople manage the relationships while the SCs, as technical subject matter experts, understand the product and can validate alignment with customer requirements. There are fewer SCs than SPs because their knowledge is very difficult to come by, and their base salaries are high. Many of these employees are nearly (if not actually) indispensable. It is vital that they have a voice in the larger organization, and their opinions need to be sought by management (Ashford et al, 2003). Previously SC organizations had significant influence, and this was recently diminished. This has impacted their perceptions of equitability and this presents a risk that key employees sensitive to this might leave (Green, 2018a; Green, 2018b; Rollins & Judge, 2012). The small SP/SC teams are highly interdependent, and are unlikely to succeed in isolation of one another, and function as a true team versus a mere group (Green, 2018c, p. 14). They make up a unit that connects directly with a client in a dynamic way. Our product offering is very complex, and since SCs each must support many SPs, they cannot devote themselves entirely to all opportunities, and should quickly detect and report unqualified opportunities. Historically this arrangement has been successful and manageable with a maximum ratio of 4:1. Managers and Directors have been careful to control this to ensure the balance was optimal, and this delicate balance has been maintained for many years, creating many satisfied employees and customers.

Now, with the massive influx of sales people, due to top-down decision making from outside our division, in a well-intentioned hiring spree that seems hard to justify in retrospect, we have ratios of 8:1, and even 10:1, converting functional teams to mere groups of people (Green 2018c). This dramatically altered the dynamic of these groups, and has stretched the technical resources thin, leaving SPs with no product expertise to confirm opportunities. Because of the complexity of our working environment, our product, our market, our sales pipeline, and projections, we have encountered unforeseen issues. Even company culture has been impacted—and that requires immediate attention since culture is usually fixed/frozen until key moments of critical importance (Green, 2018e). Once there is disillusionment about company life, many aspects of the company will be called into question that were previously followed without much self-reflection (Green, 2018e).

Firsthand observations within all the teams is key to getting a feel for this situation. I worked in this environment and have made many observations. First, our sales team is becoming desperate because they do not have adequate support from SCs and have few real opportunities in the pipeline. Oftentimes they are unable to tell the difference. They are beginning to cling to unwinnable opportunities and are inflating projections to create hopes in order to buy time. Secondly, since the issue is so common, aggregate projections on quarterly reports are overstated, and quarterly business meetings are reduced to speculation using cooked books. Thirdly, the probability of conversion of many of the opportunities are overstated, because new sales staff are unable to correctly position products to customer needs. Many big deals in our forecast have no chance of success. Of the 200 million projected, I suspect 50 million is possible. Fourth, SCs are more aware of the issues than the rest of the organization, but are scared to provide feedback, because of the power and size of the sales groups. Feedback-seeking behavior is absent in management, and this is a poor sign (Ashford, 2003). Fifth, the SCs are already aware that they will not get paid their commissions because targets will be missed. This has lead to bad morale and foreboding, and with a diminished voice due to the focus on the sales teams, they feel ineffective. They are aware that they cannot make their promised incomes, but worse still, the they know the sales teams will be even more adversely impacted, creating hostility. Sixth, management is working with poor information, since so many salespeople are inventing numbers and misjudging the opportunities. On the technical side, directors and managers complain that the staffing numbers and financial projections don't compute, and that sales estimations are off. However, this information seems to be covered up by the SP teams and management, or ignored with renewed commitment seemingly due to escalation bias (Green, 2018d, p. 38)

There are widespread financial issues stemming simply from excessive on-boarding. This is because those hired are setting false projections, and we will fall far short of expectations and disappoint. We will be unable to pay commissions and will have to report back to corporate that our division is underperforming in relation to the rest of the company. Uncontrolled this problem will only worsen.

Recommended Solution and Benefits: Return to Our Previous Team Compositions

My recommended solution is to gradually restructure our many teams to resemble what existed and worked previously. This focus on renewing our previous team structure will allow us to address the over-hiring issue without adversely impacting everything else that matters. We should work towards teams that have the following properties: 1) Team ratios that are not greater than 4:1 for SPs/SCs. 2) Ensure that both the SPs and SCs are knowledgeable about their markets by sharing information and working on training. 3) Expect fast and honest feedback from everyone with an emphasis on expanding the influence of solutions consulting to improve management's data, since their feedback has been absent (Ashford et. al, 2003). This should correct our quarterly business meetings and allow us to plan with real numbers in place, rather than double to triple those numbers.

As you will notice, a strict 4:1 ratio is not possible now, with a sales staff of 240, and technical sales staff of 30. We can approach the previous structure, with a 6:4:1 ratio, providing only indirect solution consulting support to junior sales members who should be training with senior sales. Thus, they can shadow, and still get SP support, while receiving minimal SC support. They will receive disappointing commissions, but that is inevitable given poor opportunities they have to pursue. Clearly, we cannot sustain even this, but that is due to the imbalance from hiring that cannot be fixed without some attrition. This is also a strategy to remove sales staff who are not contributing or working hard to find a place. It must be done in the least damaging way possible, either by offering incentives to leave, or by some other method to be described in a separate process. Either way, the goal is to protect the locus of our success (our many sales teams of SPs/SCs), with the expectation that excess hires will ultimately leave the organization. This is important because we need to admit and cut losses, rather than to continue to trend of falling into cognitive dissonance, trying to justify our original hiring decisions, and escalation of commitment by doubling down on irrational projections of the salespeople (Green, 2018d).

Most of the benefits of this solution relate to preservation and damage control instead of business growth. While this is disappointing, the result of this solution will be an intact business that remains in operation with less severe impacts. Using this approach, the long-developed company culture will be preserved. We will be able to address the problem itself gradually, while re-establishing what previously worked in the organization. The best part of this solution is that it is being called for by senior managers, particularly directors who have been employed by the company, some for well over 10 years. It will result in a cultural reaffirmation that everyone has bought into, and that everyone still supports, and would be uncomfortable changing (due to still being “frozen” (Green, 2018e, p. 42). People are not yet disillusioned about the prospects of reverting back to the former models and are still hopeful that leadership will listen to this advice. This makes implementation realistic, versus introducing something entirely new.

Structured Implementation Plan

This solution can be implemented with the following approach:

Phase I. Validation Phase: While I'm confident that this matches the data and the life of the company, I think it is important for leadership to take steps to confirm using sound methods of getting real feedback from key employees, and end the culture of silence impacting those who are risk averse (Ashford, 2003; Green, 2018d, pp 43-53).

Phase II. Management Buy-in Phase: Communicate to managers and directors the nature of the issue and the desire to follow their recommendations to get back to a team structure resembling the ones we had before. Be matter of fact and not alarmist and remain hopeful about the future. Acknowledge them for their commitment, their past successes, and ask for their help, to recreate out teams. Support them in how to communicate the information downwards.

Phase III. Team reformation (minor), Placing New Hires in Periphery: Have management reform the teams to earlier structures, making special effort to gain buy in from seasoned staff members and those who are especially skilled and knowledgeable. Support the team reformation phase by announcing it at the next scheduled all-hands meeting.

Phase IV. Graceful Handling of Employee Exits: Under this plan it is expected that many employees will become dissatisfied. These employees will have a case for exiting based on non-realization of commissions. Plans for employee layoffs or company exits will be outlined in a separate recommendation from this document. This process will certainly cover the importance of containing dissatisfaction, and for decreasing the visibility of employee layoffs. We must plan carefully about how non-exiting employees will perceive these changes, and minimize impacts to perks, benefits and compensation, and offer termination compensation if it is cost effective.

References and Resources

Ashford, et al. (2003). Reflections on the Looking Glass: A review of Research on Feedback- Seeking Behavior in Organizations. Journal of Management, 29: 773-799.

Green, Paul. (2018a). Rewards and Punishment: Motivation II. [PDF Presentation]. Retrieved from Canvas. Website http://canvas.harvard.edu. Boston : Harvard University.

Green, Paul. (2018b). Week 5 Course Lecture: Organizational Behavior. [Video Presentation]. Retrieved from Canvas. Website http://canvas.harvard.edu. Boston : Harvard University.

Green, Paul. (2018c). Groups: Team Effectiveness and Structure. [PDF Presentation]. Retrieved from Canvas. Website http://canvas.harvard.edu. Boston : Harvard University.

Green, Paul. (2018d). Choices: Decision-Making II. [PDF Presentation]. Retrieved from Canvas. Website http://canvas.harvard.edu. Boston : Harvard University.

Green, Paul. (2018e). Week 14 Course Lecture: Organizational Behavior. [Video Presentation]. Retrieved from Canvas. Website http://canvas.harvard.edu. Boston : Harvard University.

Robbins, Stephen P., & Judge, Timothy A. (2012). Organizational Behavior, 15th edition. [PDF Edition]. Retrieved from Amazon.com. Prentice Hall.

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