Most executives today acknowledge that great sales managers are critical to a productive sales force. With great sales managers, you get effective coaching, healthy pipelines, motivated sellers, accurate forecasts, and aggressive revenue growth. In short, if you’re lucky enough to have a sales team full of great managers, life is pretty good.
But what if you also have a group of low-performing managers on your team? What if many of your salespeople are not getting the clear direction and coaching they need? What if entire regions of your sales force are underperforming due to a lack of effective leadership? If you could quantify the impact of bad sales management, how much do you think it’s costing your company?
$3.5 Million… At Least
Recent research by Vantage Point reveals that the cost of poor sales management is enormous. In a study of 518 sales managers across a dozen global sales forces, we found that the top 25% of managers achieved an average of 115% of their team’s revenue targets. Meanwhile, the bottom 25% performed at 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 staggering.
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 top and bottom performing managers by the number of reps reporting to them and the average quota for their reps. One company we know calculated their 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.
How to Get that Money Back
The good news is that there is legitimate hope for your managers at the lower end of your performance scale. Additional research we conducted with the Sales Management Association demonstrated the remarkable 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 business-to-business companies about 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 were allocated to their managers versus their sellers. We then correlated their answers with their companies’ actual performance against revenue goals. And what was the amazing insight? The more companies invested in their sales managers, the more they exceeded their revenue goals.
Companies that invested the least in sales management training – less than 25% of their overall budgets – just barely exceeded their revenue targets for the year. Companies that allocated between 26% – 50% of their sales training budgets toward management exceeded their revenue targets by 6%. And companies that steered more than 50% of their overall budgets to sales management training surged past their goals by more than 15%.
Interestingly, only 18% of the companies could muster the nerve to invest more in their managers than their salespeople, but the results were unmistakable. The 18% that spent more money training their managers grew substantially faster than their peers who instead focused on their sellers. It appears that when you invest in sales managers, your money comes back to you many times over.
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 most large sales forces are missing out on tens of millions of dollars in revenue by enduring poor management.
Fortunately, the second takeaway is 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. Remarkably, it has 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 our 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.