Your sales team structure is the organization of your team. This includes sales management chains and career paths. The right team structure helps ensure you have the capacity your sales team needs to cover all territories and achieve revenue goals (with the realistic expectation that not all reps will hit quota).
If you have a strong sales team structure, you ensure you have the right amount of resources on the sales floor. This means you have enough reps to cover territories and close deals, and you have enough managers to coach and train teams. Most importantly, sales leadership wants to find the right balance or ratio of sales reps to managers.
Sales Team Structure and Balance
The International Coach Federation states, “the average company can expect a return of 7 times the initial investment in coaching.”
However, there are challenges faced by overwhelmed sales managers with too few management layers below them. These managers often have so many reps reporting to them that they are unable to give their sales teams the training, coaching, and guidance they need to meet organizational goals.
When managers oversee too many front-line reps, those reps stop getting the attention they need to succeed. Effective coaching and training is reduced, as is the focus on improving overall sales performance.
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 (You can learn more about building incentives for different roles on your sales team in this Complete Guide to Sales Team Compensation).
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.
So how should you structure your sales team? And at what point do you know you have too many managers? There is no one-size-fits-all answer when it comes to the structure and organization of sales teams, but following are five best practices to keep in mind:
1. Use the Right Data to as Your Guide
Data is one of the most powerful tools for sales organizations in today's competitive business markets. Companies can gain immeasurable perspective into their business and industry, as well as really dive into their sales team performance.
However, the value from that data depends on how you use it. For example, measuring your sales reps’ success based on how many times they make prospect calls doesn’t mean much if those calls conclude with hang-ups.
Another way of looking at it, sales managers should ask themselves, “Out of every dollar I earn in revenue, how much am I spending on base and incentives for my sales team?” If the dollars earned don’t outweigh the cost, the number of layers in your sales team may be contributing to the problem (See how you can improve the ROI of your sales compensation in this guide).
2. Look Closely at Shared Credits
There are about 14 different checks written after the close of a typical sales deal. Consider how many layers are there between the VP of Sales and those tasked with closing. Are all those being compensated contributing to the sale? Spending adequate time reviewing your sales compensation plan can help here.
Knowing the cost of a sale for your company can directly influence how your sales team is structured. Using the data gathered from Xactly Insights, you can look at individual teams, reps, and specific deals to better assess which team members have their hands on a single sale. You need to both reward the contributors, without giving “incentives” to people who never touched the deal.
3. Check if Mid-level Performers are Stagnating
Leaders who are distracted with too many reps fail to give mid-level performers the coaching and training they need to improve. Motivating middle performers is a key way to improve overall sales performance. The first way to remedy this ailment is identify your top, middle, and bottom performers.
Sales representatives who received at least three hours of coaching per month exceeded their selling goals by 7 percent, increased revenue by 25 percent, and increased close rates by 70 percent. Proper coaching has a big effect on performance, but incentives are also important for motivating the stagnant middle. Therefore, it's important to make sure reps fully understand their compensation plan and also are receiving the right amount of coaching from managers.
4. Assess Turnover Among Top Performers
Turnover is a big problem for sales teams, especially when the cost to replace a rep is on average $155K between recruiting and on-boarding a new rep in addition to potential lost deals. Unfortunately, management can sometimes play a factor in turnover rates.
For example, overloaded managers are unable to invest enough time in top performers. When the link between managers and top reps erodes, engagement and productivity suffer. Managers with a balanced team load are better able to check in with reps and assess their morale and potential for turnover.
Luckily, sales managers can take advantage of sales data to further aid in monitoring sales reps. Using Xactly Insights, sales managers can identify performance dips and trends. This allows them to identify reps at risk for turnover sooner than a 1:1 meeting. That way, they can take action faster to re-engage the rep or find the right solution for everyone.
5. Look at Overall Sales
Have sales declined overall? If good managers aren’t pulling typical numbers from their teams, their span of control may be out of control. While increasing the number of sales reps per manager might sometimes seem like a good idea, it rarely makes financial sense.
Finally, if you want your sales teams to be efficient and effective, pay close attention to their size and structure. Use your sales data to determine the optimal capacity number of reps your managers can handle before distraction sets in. The best measure of whether your org chart is working is profitability. Again, it’s the data that will reveal how the numbers of layers in your organization are impacting profits. Use that knowledge to adjust.