In a previous post, we talked about the challenges faced by overwhelmed sales managers with too few management layers below them. These managers often have so many cats to herd that they aren’t able to give their sales teams the training, coaching, and guidance needed to meet organizational goals.
On the other end of the spectrum are sales managers with too many management layers below them. This scenario results in inefficiency and waste, as well as an unnecessary increase in the organization’s compensation costs.
Ultimately, the goal of leadership should be to strike a balance — management should be lean enough to be efficient and cost-effective, but not so lean that engagement and productivity are affected.
How many layers should your organization have, and at what point do you know you have too many managers? One formula doesn’t work for every company, but, fortunately, your sales data should be able to tell you everything you need to know.
Follow these three steps to strike the right balance:
- Use your data to answer this question: Out of every dollar I earn in revenue, how much am I spending on base and incentive? If the dollars earned don’t outweigh the cost, the number of layers in your sales team may be contributing to the problem.
- Take a close look at shared credits. In this post, we told you that there are about 14 different checks written after the close of a typical sales deal. How many layers are there between the VP of Sales and those tasked with closing, and are all those compensated contributing to the sale?
- Analyze the information so it can be correctly applied. Don’t make the common mistake of applying across-the-board decreases in sales staff without using data to guide you.
In the end, the best measure of whether your org chart works is profitability. Study your data to reveal how the numbers of layers in your organization are impacting profits, and use that knowledge to make adjustments.
How many layers does your organization have, and how did you figure out the right balance? Tweet your answers to @XactlyCorp.