I recently heard tell of a Fortune 1000 company with a sales force in the tens of thousands that discovered its sales representatives were spending too much time in low potential accounts. It is a “repeat” business, and the sales force was spending most of their efforts on either the big buyers of their products or in places where there was little or no current business. Their research revealed that if the sales force was more focused on middling accounts, those that were only partially penetrated, they could expect better results. How can this be? It seems to imply that sales representatives are acting “irrationally” or against their own interests.
The root causes of this phenomena were not part of my discussion, but I was left speculating about how it might occur. Understanding the behavior of individual sales representatives and the incentives which they are responding to seems a good place to start. Let’s start by restating the problem. The sales force isn’t optimizing its operations to maximize revenue growth, in other words, it’s misaligned with the corporation’s goals. When framed this way, one quickly sees how troublesome a problem this is. The behavior observed was essentially that sales representatives spend more time on accounts that didn’t buy anything from the company or large accounts that were already large purchasers than accounts with partial penetration, when in fact, valid research indicated that effort expended in these partially penetrated accounts yielded better results than the other segments.
Insight into the potential drivers of behavior could account for both the individual sales representatives actions and the outcome of the sales force being focused sub-optimally. In other words, the movement of the overall sales force isn’t optimized for the business while the individual sales representatives are actually acting to optimize their outcomes. Incomplexity science, this is referred to as an emergent property, not unlike the effect of a flock of gulls flying faster in a V formation, but in their case, their forming up makes the whole group go faster. Emergent properties aren’t always good for us, and can just as easily work against the outcomes we seek in ways that aren’t obvious. The sales force is often incentivized to pursue new clients, who would have high initial spend potential and high growth potential in the future. This may be an incorrect assumption, and a tip to where sales representatives make mistakes. We can give great credit to the unknown while the known can seem bleak in comparison. See this recent article from Time Magazine discussing the irrationality of optimism for more on this idea.
If an entire sales force operates like this, it could explain why a companies sales force is operating sub-optimally with respect to a companies objectives. If one were to model the behavior of sales representatives accurately, I think that many companies would find their sales representatives act quite rationally given their perceptions of risk and reward, and this could lead to aligning compensation plans and territory/account assignments more thoughtfully or even in more varieties to achieve alignment.
For more, see the unabridged version of this article at B2BSalesology.
Glenn Donovan, Founder of B2B Salestalk, has over 25 years of B2B sales experience. His focus is to share what he’s learned with others and also provide a place where experienced B2B sales pros can talk with each other. Follow Glenn on Twitter.