We have built sales organizations like the US Army has. They are very hierarchical and laden with many, many levels of management. There seems to be an accepted rule that a single manager has a span of control of five to seven reps. But, that rule is killing us. Worse than that, we often violate this rule and assign managers a span of control of only three. And don’t get me started about the organization that sometimes has a manger with only direct report.
Let’s do the math. If we have one hundred reps with a rule of five, we have twenty line sales managers and four second-line managers. That gives you four people between the CRO and the customer. That’s a lot! And, if we are lucky enough to grow to one thousand sales reps, we will have two hundred first-line sales managers, forty second-line sales managers, eight third-line managers and two fourth-line managers. Yikes! And by this time we often have multiple overlay sales organizations and a bunch of overhead teams that we have convinced ourselves that we need.
Not only is this scenario heinously expensive, we all know that heavily laden organizations become less customer-focused and often transform from nimble to lumbering, slow organizations. If the CRO wants to talk to a customer, there could easily be five levels of management that must get involved. I know this because when Google Cloud got big, if I phoned a rep, all my managers would get mad at me for skipping the chain of command. Chain of command. WTF? That’s crap. If you get there, you better have monopoly type market share or incredible long term product advantage because customer focus and sales excellence will no longer be a hallmark of your organization.
We all know that layers are bad. We have read the books and the HBR case studies. So why do we keep doing it? In short, because we don’t know another way. Sales continues to be too much of an art form, so layers of management are needed to ensure that things get done correctly. Our great sales people get promoted to be great first-line sales managers, but then they get promoted to second and third-level sales managers who spend all their time in meetings and making PowerPoint presentations. We turn our great sales people into project managers and trackers. To make it worse, we give them weak systems, large amounts of data, but little information. If you don’t believe me, sit through a territory, pipeline, or deal review. Managers with pens and notepads will be sifting through data and gathering opinions to try to determine the path forward. Our CRM systems are not enough. They don’t arm our managers with transactional history or data-driven comparisons. So, managers are forced to rely on their memories and their judgment to help guide the way. Given the lack of information and insight; is it any wonder that we have a span of control of only five direct reports? Managers are making it up as they go along, recreating data and flying by the seat of their pants. In this situation, it is only responsible to limit the span of control to make sure we get things right.
What if there was a better way? What if we could arm managers with data-driven insight and AI-driven conclusions? What if our managers had broad forward looking visibility, rather than only backward facing data? What if managers had data to show which deals were truly on track, so there was no need to over-manage deals that will almost certainly close? What if managers could focus only on deals that are off track but savable? What if we had true visibility into pipeline value and we could build reports that would alert us to areas that needed more prospecting? What if we could easily identify which reps struggle at a specific sales stage, and we could call out individual training paths for them? What if we could see which products were selling well, and which products we are underselling? We then would have the information we need to get the product teams involved to improve products, and to help reps address product issues. What if we could alert sales managers to under-covered and over-covered territories, so that territories were evenly allocated and no account was left uncovered?
With the advent of big data and AI, these realities are within our grasp. With AI and machine learning doing the heavy lifting of calculating the true value of pipelines, revealing insights about deals, reps, regions and products, we can focus reps on the deals that will affect the bottom line while cultivating pipeline for next quarter. With this insight, sales managers can be more effective and increase their span of control. Sales leadership can focus on improving sales performance through training and focus. Finally, it is easier to identify and focus on issues with specific customers or prospects.
With big data and AI, the modern sales organization can get there.