How One Bad Sales Manager Costs You Millions

 

Most people today accept that great sales managers are critical to a healthy sales force. You get effective coaching, healthy pipelines, motivated sellers, accurate forecasts, and rampant revenue growth, not to mention that it makes your life as a sales leader generally pretty good. But what happens when you have a handful of low-performing sales managers?

The Price of Bad Management

Recent research by Vantage Point Performance reveals that the cost of poor sales management is huge. In a study of 518 sales managers across a dozen Fortune 500 sales forces, we found that the top 25% of managers achieved an average of 115% of their team’s revenue targets. But the bottom 25% performed at only 76% of their goals.  In other words, low-performing sales managers underachieved their top-performing peers by a whopping 39% in revenue attainment.

To quantify the financial impact of this underperformance, we further observed that the managers had an average of 9.1 salespeople reporting to them. If we assume an annual quota of $1 million for each sales rep, this yields a gap in sales manager performance of $3.5 million per manager. When you consider the total number of sales managers across these organizations, the real opportunity costs of poor sales managers is mind-boggling.

 

 

But the more important question is, how much is bad sales management costing you?  To assess your own revenue shortfall per manager, simply multiply the performance gap between your own top- and bottom-performing managers by the number of reps reporting to them and the average quota for their reps. We know one company that calculated its lost revenue to be more than $10 million per manager. It was an eye-opening (and sobering) realization, but it was also just basic math.

The Impact of Focused Investment

The good news is that there is legitimate hope for your managers at the lower end of your performance spectrum. Additional research we conducted with the Sales Management Association demonstrated the remarkable significant impact you can make on sales performance when you invest in your sales managers. In fact, the research revealed a pretty amazing insight about the leverage of sales management training.

We asked 161 companies to describe the relative investments they were making in training their sales managers versus training their frontline salespeople. More specifically, we asked them what percentage of their total sales training budgets was allocated to their managers versus their sellers. We then correlated their answers with their company’s actual performance against revenue goals. The more companies invested in their sales managers, the more they exceeded their revenue goals.

 

 

As you can see from the chart above, companies that allocated greater than 50% of their sales training budget to managers exceeded their revenue goals by 15% more than companies that allocated less than 25% to this important population. Interestingly, only 18% of the companies could muster the nerve to spend more on their managers than their salespeople, but the results were unmistakable: When you invest in your sales managers, you realize greater returns than when you invest in your sellers.

The Takeaways for Leadership

There are two key takeaways for senior leadership. First, sales managers are the key point of leverage in your sales force — both positive and negative. When you have low-performing sales managers in your ranks, each one costs you millions of dollars in lost revenue. Your actual cost depends on how bad they are, how many salespeople they affect, and how big your quotas happen to be. But our research suggests that large companies are missing out on tens of millions of dollars in revenue because of poor sales management.

Fortunately, the second takeaway is much more inspiring. Sales managers also represent the greatest opportunity for improvement. When you invest heavily in your sales managers, you get big returns for your effort. Furthermore, it’s been our experience that most sales managers are starved for training on how to do their jobs better. When they finally receive it, they love it. And they use it. And research shows that it makes a huge difference in the performance of their teams.

So somewhere in your sales force, you have millions of dollars in lost revenue that’s hiding in plain sight. Your sales managers hold the keys to recovering that revenue, but you will only realize it if you invest in training them to do their jobs better. Once you make the commitment to develop your managers, you will surely discover healthier pipelines, more accurate forecasts, and greater revenue growth. If you want to have a truly outstanding sales force, then you need to build a team of truly outstanding sales managers.

When you invest in your sales managers, you realize greater returns than when you invest in your sellers.”

Jason Jordan | Partner, Vantage Point Performance

Learn More

The 7 Sales Skills That CAN’T Be Taught By Dan Ross,
Sr AVP, Commercial Sales, Salesforce
Why It’s Now or Never for Social Selling with LinkedIn’s Mike Derezin Interviewed by Laura Fagan,
Product Marketer, Sales Cloud, Salesforce
Making the Tricky Transition from Sales Peer to Sales Manager By Keith Rosen,
Author of "Coaching Salespeople into Sales Champions"
 
 
 

Podcast

Share

Created by Salesforce