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The East African : Apr 19th 2015
The EastAfrican 42 BUSINESS APRIL 18-24,2015 MANAG E R supplier they want and the price they will pay before a salesperson sets foot through the door. In this competitive environment, the premium on finding, training, motivating and retaining star salespeople has never been higher. Yet because firms measure on- ly past sales performance, they have limited insight into how a salesperson will do. As a result, many firms overvalue their poor performers and undervalue their stars. Failing to forecast a sales- person’s future value (SFV) can lead to costly misallocation of training and incentive dollars. Worse, it can allow undervalued but top-flight salespeople to slip through your fingers and take valuable customers with them. We define SFV as the net present value of future cash flows from a salesperson’s customers after accounting for the costs of developing, motivating and retaining the rep. Comparing SFV for different time horizons allows managers to optimise training and incentives to achieve short- and longer-term goals. In our research, we forecast reps’ SFV at one year and three years. A three-year horizon is typical for managerial decision-making. Like most companies, the firm we worked with had been using revenue generated as the main metric for valuing its salespeople. Reps who brought in the most money were considered “stars.” An SFV analysis, however, revealed that this blunt measure was neither an accurate gauge of a rep’s current worth nor a good indicator of Who’s you≥ most valuable salespe≥son? C ompanies have become savvy customers, often determining the solution they need, the must also take into account managers’ time-frame goals: Training strategies that maximise short-term performance may be different from those that lead to the best long-term outcomes. Managers must also deter- mine which salespeople will respond best to different types of incentives and adjust the incentive structure as needed. Career development and re- tention: Salesperson segmentation and future value calculations allow managers to understand why the profit potential of one salesperson is climbing while another’s is plateauing or falling. Not all underperforming salespeople should be cut loose, obviously. In many cases, our research suggests, performance problems may reflect misapplication of training and incentives. The problem, in other words, is managerial. Profiling and recruitment. COMMENTARY V. KUMAR, SARANG SUNDER AND ROBERT P. LEONE “As selling becomes more complex, the role of the sales force as a source of competitive advantage grows.” his or her potential. What training and incentives will bring out the best in a high achiever or help a promising rep improve? We defined two classes: train- ing-driven reps, influenced by instruction and learning; and incentive-driven reps, motivated by monetary and other rewards. Most sales training is task related, focused on improving knowledge and skills involved in selling. Growth-related training helps reps identify and develop needed task-related skills. After gauging the impact of the training, three findings emerged that have important implications: One, more isn’t necessarily better. Two, time frame matters such that training effects in general are greater in the long term. However, the impact of long-term training on SFV is much more pronounced among training-driven reps. Finally, training types are mutually reinforcing. Growth-related training, which focuses on adaptive and problem-solving skills, can enhance a salesperson’s ability to apply information and tactics developed in task-related training. The benefits of the synergy between the two types is greater in the long term than in the short term. When it comes to extrinsic motivators, salespeople respond quickly and enthusiastically to monetary rewards and recognition. Monetary rewards are more powerful for all types of reps in the short term. Finally, monetary and nonmonetary rewards have a greater impact on SFV when combined — in both segments and in both the short and long term. With SFV metrics in hand, managers can segment the sales force, identifying those sensitive to training, incentives or other factors. Then, managers can make data-driven decisions about investments in training and incentives, career development and even hiring and firing. Training and incentives in- vestments: Managers should determine each salesperson’s sensitivity to different types of instruction and monitor both assigned and opt-in training accordingly. Training decisions The SFV measurement allows a firm to profile top performers in a given segment and then recruit and optimally train and motivate others like them. Our study found that incentive-driven reps were generally older, had more experience (more than 10 years) and were more self-confident than training-driven reps. Training-driven reps tended to engage in more cross-selling and so sold a wider breadth of products, but their revenue per transaction was lower. Finally, training-driven reps were more likely to sell to smaller but rapidly growing clients, while incentive-driven reps tended to attract larger and more stable customers. As selling becomes ever more complex, the role of the sales force as a source of competitive advantage grows. Measuring and managing the sales force according to future value metrics can deliver greater efficiency and profits and increase competitive advantage. Harvard Business School Publishing Corp Afte≥ change management, g≥eate≥ ≥etu≥ns on investment BY MICHAEL HOLZMANN Special Correspondent IN PWC’s recent Africa CEO Survey, 59 CEOs of financial services organisations in 17 countries report that change programmes are under way or completed in several common areas. However, some 75 per cent of change initiatives fail. To understand this high failure rate, let’s examine change management at a practical level. Organisations are doing two things to change: communicating and training. Communication tends to focus on the value of the initiative to achieve greater buy-in. Training addresses the detail and requirements. However, without a clear understanding of the problems, neither communication nor training will sustain long-term change. Change management supports business transformation effectively when it is clear which problems need to be solved. One way to approach this is to apply a simple test to any proposed change: How will it improve the client experience and profitability? Within financial services organi- sations, change initiatives tend to be driven by market demands e.g. the need for new products or outreach to new customer segments. The underlying issue may be how to differentiate the company from the competition. Introducing new products or greater efficiency in an itemised way will not achieve this outcome and constant segmentation of customers may eventually lead to diminishing returns. Comprehensive change management will, therefore, reveal insights to drive transformation through a changed customer experience while maintaining a careful eye on profitability. The CEO may not need to have a personal view of what the client experience should be, but he should task his managers with understanding it. Increasing market share or improving customer retention is more about having people volunteer and identify what they need to do. Their efforts are visiondriven, but the responsibility for driving the initiative forward does not need to reside with the Daydreamer-in-Chief at the company. 75pc How can organisations think differently about transformation? First, they can agree upon the key characteristics of the customer’s experience now and in the future. They can empower teams to identify the critical customer experiences that drive the business in terms of market share, profitability and cross-selling. They can identify the experiences that drive customer decisions and behaviours with regard to extending or expanding their relationship with the business—or leaving for a competitor. A clear view of what needs to get The percentage of change initiatives that fail done to achieve that new experience should also include a way of tracking progress towards it as benefits accrue over time. The interdependence between various stakeholders within an organisation will also lead to a sense of co-ownership transcending silos and departmental structures and hierarchies — trust is an essential ingredient in change management: trust within members of the organisation, and trust that the organisation has earned among its customers. Organisations that successfully manage change view it as a capability to be developed—not a cost to be managed. They are agile, changeready and more competitive. Agile organisations accept that customer focused change is an ongoing feature of organisational life. Organisations that have experi- enced managed change and learned from those efforts are more likely to realise a greater retrun on investment on future change efforts. Michael Holzmann is the Direc- tor of PwC Kenya’s People & Change advisory consulting practice.
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