A healthcare industry sales executive recently told us that as part of a continued effort to cut costs, her company had reduced the number of first-line sales managers from 66 down to 30 over a period of several years. This meant that management span of control had more than doubled from an average of 5-6 salespeople per manager up to 12-15 per manager. Certainly, the move saved costs, but was it a good idea?
The average span of control for U.S. sales forces is 10-12 salespeople per manager, but there is wide variation around this average. At an energy company that sells to large utilities and industrial organizations, sales teams work with customers to deliver technically complex, custom solutions; sales managers each supervise an average of 6-8 strategic account managers. At the other end of the spectrum, at a consumer packaged goods company, part-time merchandisers perform activities such as stocking shelves, setting up displays, and conducting inventories in retail stores. The merchandising force operates with an unusually high span of control of 50 merchandisers per manager.
Span of control decisions affect sales management efficiency and effectiveness. If sales managers oversee too few salespeople, the sales force incurs high costs and underutilizes management talent. Managers may micromanage their people. They may get overly-involved in customer management tasks that salespeople should do themselves. And they may spend too much time doing low-value administrative work. Sales management is inefficient. Alternatively, if sales managers have too many people reporting to them, they can’t spend enough time coaching and supervising each person. Salespeople will have unequal skill and quality, and will execute the sales process with varied success. Managers won’t have enough time to spend with key customers or to develop strategies for driving long-term business success. Sales management is ineffective.
The best way to figure out the right span of control is to first understand what sales managers do, what they should do, and how much time it takes to execute the responsibilities that can’t be delegated. Management tasks fall into three categories.
- People management. This includes hiring, coaching, supervising, and conducting performance reviews. Our recent survey of sales leaders indicates that most sales managers spend 30-55% of their time with people management, but the percentage varies with the span of control as well as with the amount of time it takes to manage each salesperson. Time per salesperson depends on the specific people management tasks, as well as on the complexity of the sales process, the knowledge and experience of salespeople, the quality of sales support (e.g. information systems, onboarding, and training), and the extent to which salespeople are empowered to act without close management supervision.
- Customer management. Thisincludes account planning, customer visits, and assisting salespeople appropriately with important sales process steps and key customers. Our survey indicates that most sales managers spend 25-40% of their time with customer management, but this percentage varies with the number of customers managers are responsible for, as well as with the nature of manager selling responsibilities and the size and needs of each customer.
- Business management. This includes sales meetings, budgeting, complying with administrative requirements, and other activities that keep information flowing between headquarters and the field. Our survey indicates that most sales managers spend 20-35% of their time with business management. The percentage does not vary significantly with the number of salespeople or customers that managers are responsible for, but it does vary by situation. For example, business management time is often greater when sales managers control local budgets and resources, or when they must adapt sales strategies to local needs.
Understanding how sales managers spend their time often highlights productivity improvement opportunities. Additional findings from our survey include:
- Too often work with low value to customers and the company creeps into the sales manager’s job. This includes many easy but time-consuming administrative tasks. The urgent nature of these tasks prevents managers from performing higher impact (and usually more difficult) duties.
- Although some business management activities are important for long-term success (sharing market insight, developing local business plans), the business management role is too often a manager time trap. Most managers spend too much time on administrative business management and too little time on people management. The sales leaders we surveyed indicated that on average, sales managers should shift a half day each week from business management to people management.
- By eliminating low-value work, or delegating it to less-expensive resources, some sales forces have opportunity to increase span of control while focusing managers’ attention on higher-value activities.
So was the healthcare company better off operating with 5-6 salespeople per manager or with 12-15 per manager? The answer is not driven by costs alone; it also depends on management effectiveness. A company needs enough sales managers to ensure that all key people, customer, and business management tasks get executed well. At the same time, a company must ensure that non-critical, administrative tasks aren’t polluting the sales managers’ role. Finally, a company must understand how the role is changing so it can build a sales management team that can drive success today and in the future.
Copyright (c) 2014 by Harvard Business Publishing. Reprinted with permission.
This blog originally appeared on the Harvard Business Review website: (http://blogs.hbr.org/2014/04/does-your-company-have-enough-sales-managers)