Article: The Sales Factor: Opportunities and trends

Strategic HR

The Sales Factor: Opportunities and trends

India's growth story lies in the immense potential of its growing domestic consumption, its 'demographic dividend' and its burgeoning middle class, which is an opportunity for retail products and services
The Sales Factor: Opportunities and trends
 

Innovation in sales force management will play an important role in drafting the future of this industry

 

Quick revenues are needed to justify the huge investments made in the business in terms of infrastructure and capital requirements

 

 India’s growth story lies in the immense potential of its growing domestic consumption, its ‘demographic dividend’ and its burgeoning middle class, which is an opportunity for retail products and services. The challenges companies in such industries face include extreme cost pressures driven by consumer price sensitivity, affordability of products and services for the local buyer and brutal competition between both domestic companies and entrant MNCs. As a result, domestic industries require superior talent in their sales teams to be able to sell aggressively and justify the promise of consumer growth.

The reality however, is very different with limited flow of talent towards retail salesintensive industries, which have traditionally been poor paymasters when compared to export-oriented industries and B2B sales roles. In this story, People Matters focuses on providing a snapshot of current sales structures, talent challenges and opportunities in building successful sales teams in FMCG, Consumer Durables, Telecom, Banking, Financial Services and Insurance (BFSI) and Pharmaceutical industries.

Life insurance products are not bought but sold. The insurance company’s sales force play a crucial role in the sales process as he/ she needs to generate a need in the buyer, build trust, and lead to a business closure. Insurance is more difficult to sell than say a tooth brush or a pre-paid recharge, as one would need to buy these goods anyway. Considering it is less than 10 years since private insurers jumped in the fray, this young industry is grappling with many unresolved questions - from distribution channels, to model of sales structures, to compensation structures by primarily deepening the link between revenue drivers and incentives for sales teams. As companies experiment on what model will work best, innovation in sales force management will play an important role in drafting the future of this industry.

Two things are common between selling soap, tooth paste or socks - the product should be available and should be visible to the end buyer. In this process, the clients of FMCG industries are traders and retail aggregators used as distribution channels. A salesperson’s job is to ensure these basics are executed impeccably in every outlet, anywhere in India.

In a market with more than 93% pre-paid users of phone services, telecom companies have a daily challenge - to get the user’s attention every time he or she recharges the phone. In this highly competitive industry where investment in fixed costs are huge, speed in sales and the ability to up-sell, cross-sell, and create a brand impact, are mandatory for the long-term success of the organization. The job of the sales team, over and above managing the partner channel, is to pick valuable market information and create a seamless feedback mechanism to create a compelling offering.

Selling drugs is not only about targets, but also about ensuring that the process of sales complies with regulations and company policies. After all, these products are designed to save lives. Like in FMCG, reach is important but unique to this industry is the fact that sales and distribution are separate. While decision makers and doctors influence the prescription, the product is available at retail chemist shops. Hence distribution does not belong to the sales team like in FMCG, telecom and BFSI sectors.

Buying a TV or an AC is not a lifetime purchase anymore. The frequency of purchase of consumer goods in one household in one life time has increased significantly, and the potential for families moving into the ‘middle class’ to buy these products for the first time, is exponential. Today the consumer durables industry focuses on achieving increase in sales by increasing network and penetration across channels while innovating on affordable products.


The sales profession is highly challenging, yet a highly rewarding career for motivated individuals, with a superior understanding of the human psyche. For organizations, it is the critical X-factor, especially in consumer-focused industries like FMCG, consumer durables, telecom, BFSI and pharmaceuticals. The success of such industries is
rooted in aligning the goals of the organization with those of employees and teams in the sales function, managing purpose-built sales channels.

While each industry has its nuances with regards to the sales process, there are loads of commonalities in terms of the skills and attitude that make sales teams mobile across these industries. When the telecom revolution started, it needed large numbers of people on the field to gain penetration and generate large revenues early on; it hired sales people from FMCG industry. Later, when insurance and financial services industries grew, they in turn, hired people from the telecom industry. One may argue if the core skills of product or service knowledge are secondary to the role of sales, or if companies just have to hire available talent and balance any misfits with a strong investment in training.

The pressures that new industries face, specially early entrants like telecom and BFSI, are huge as there are constraints in local pricing which limits their capacity to attract talent at affordable salaries. Also, competition for the customer is fierce, and pressures on top-line growth are very high. Quick revenues are needed to justify the huge investments made in the business in terms of infrastructure and capital requirements.

Traditionally, FMCG and pharmaceutical are sales-oriented industries in India that are driven by reach. Reach beyond cities, to rural areas across India, be it shops or doctors, is the clear driver of business. Telecom, being
a relatively new industry, has seen massive investments in infrastructure and licenses - hence speed of penetration, ability to acquire customers quicker than competition, and agility to implement innovation, are key drivers for their success.

BFSI requires a different set of talent - people who are more inclined to appreciating the financial needs of customers and is, arguably, the only industry where products are not sold, but bought and hence sales people require that indefinable soft trait of resilience. Being highly regulated industries, compliance plays an important role in pharmaceutical and BFSI, and this is fast gaining importance in telecom too.

This story focuses on the challenges retailfocused industries face in India, the common trends and the key requirements to build successful teams for the future.

The Talent Challenges
Attrition, low productivity, and spiraling wage bills, are outcomes of a combination of factors from shrinking qualified talent pool, lack of measurement of talent performance and poaching within the industry and across industries. Productivity in these industries is largely a function of the collective sales capabilities which most companies are struggling to address. The talent challenges facing these industries are grave because of the direct correlation
between lack of sales talent and loss of business outcome (revenue, penetration and reach). If organizations are to take advantage of the growth prospects that local consumer industries offer, they must address the challenges
faced in managing sales teams.

1. Finding the Right Fit

Talent challenge is not unique to sales alone. Shortage of sales talent is at all levels and is exacerbated by the fact that the better talent has options outside the profession that provide better immediate pay,
more comfortable (less hostile) working conditions and are socially more acceptable. Also, the peculiarities of selling to retail consumers – one which includes working undefined odd hours, like in insurance – adds to the problems
as women, as a talent group, do not prefer such roles that demand odd working hours or the need to meet clients even at their residence, due to safety and security concerns.

As a consequence, candidates available for sales jobs are like the ‘flotsam and jetsam’ of the employment market. More often than not, it is either the highly motivated and skilled individual or the complete misfit for lack of anything else, that ends up opting for sales as a career path. This often lands the industry with ‘wrong fits’ who are not motivated to sell and choose selling as a career for lack of a better option. As Rajiv Krishnan, MD, DDI puts it,
“These wrong-fits are one of the main reasons for resultant attrition and subsequent failure”. Besides looking for crucial aspects like skills, competencies and motivation in sales talent, there is also a need to identify people with the right culture fit. A less effective or ineffective sales person in a crucial sales role often causes considerable harm to the company’s sales, team morale and reputation.

2. The leaking pipe

Attrition continues to be one of the highest contributors to productivity loss. Cost of attrition not only includes cost of hiring and subsequent training costs, but also includes intangible costs such as increased work burden on peers and resultant low morale. This is true to sales people, both at the entry and supervisory level, regardless of their performance. Attrition is highest in the first 3 months of joining as a result of inability to perform at the expected level, and later after one or two years, when many sales people feel a lack of career opportunities within the organization and those that are easily satisfied by a competing organization. “Typically a front line sales person knows he or she has 20 private insurance companies to get a job from” says Anuraag Maini, Executive VP-HR, DLF Pramerica.

3. Reward for variability in performance

The effectiveness of sales incentive lies in the balance between cost and outcome. If the costs of the sales incentive plan are too high, companies usually resort to alternative plans (alternative distribution channels) to suit their affordability. If the outcome of the sales efforts is too high in relation to the incentive payout, it quite often leads to dissatisfaction and attrition. The major issue in an incentive plan is its ambiguous and complex nature which dilutes the whole purpose of driving performance through incentive programs. The recipient, who is the sales person, finds it difficult to calculate his expected payout against his achievements. The success of an incentive plan also depends
on the frequency of its payouts. Incentive plans across industries vary in the ratio of variable and fixed pay, and in India, are more skewed towards the latter. Industry professionals opine that incentive payout forms around 20% of the base cost of sales employees in industries like BFSI, telecom or FMCG, which is quite low compared to global benchmarks.

4. Managing careers, not jobs

In most cases, the sales profession lacks a structured career management process as organizations tend to concentrate primarily on training for the present role. There is inadequate planning in both horizontal and vertical growth prospects for sales people. On the contrary, the new generation employee with growing aspirations and high ambition, needs a fast-track and well-articulated career path. At the very least employees today need to feel secure in the understanding that the organization truly cares for their career path and transition. Sales-centric organizations need to cope with the challenge to provide the right platform to meet employee aspirations lest competitors allure their best talent with more lucrative roles and offers.

5. ‘Alexander or foot soldiers’ approach

Sales teams bifurcate sales people into three categories in terms of their performance: ‘A’ players who consistently outperform their peers by 25 to 30%; ‘B’ players who perform up to 90 - 100% of the target; and laggards, who constantly fail to meet their sales targets, and are gradually moved out. To optimize productivity, organizations need to adequately manage ‘A’ and ‘B’ category. Most companies tend to focus only on the ‘A’ players, and leaving ‘B’ players feeling ignored, thereby actually disregarding a huge potential that can otherwise drive sales targets if incentivized in the right manner.

6. Scalability and reach

Success for these industries is dependent on their ability to reach and penetrate local markets before competing organizations do so. The direct relationship between reach and business outcome requires organizations to ensure there are adequate people on the ground to ensure scalable reach. Additionally, organizations face the challenge of maximizing reach without increasing the cost of talent. Lack of talent and pressures of maintaining cost efficiencies has further led organizations to use alternate workforce models like Direct Sales Agents (DSA) and staffing organizations to deliver sales results. These models, in turn, bring in a different set of complexities as they are short-term in nature and can have major repercussions on engagement, motivation and
‘alignment’ required to drive sales.

The Success Formula
Great sales teams are a product of organizations that have a strong vision, and the right strategy to achieve that vision. Organizations that structure their activities around that vision which is then translated into sales targets and
objectives cascaded down, will see increasing sales performance that meets business requirements. The targets then linked to desired sales incentives and Rewards & Recognition (R&R) programs will result in required sales excellence. To make this core process a reality in achieving sales objectives in these organizations, there must be adequate emphasis on the following action-points that organizations can simply not ignore:

Hire right (Success profile)
Focus on identifying the ‘success profile’ for the target role. Define the set of competencies, personal attributes, skills and knowledge that will make a candidate a successful sales person in your organization and industry. Train HR and sales management responsible for talent acquisition in appropriate interviewing skills and use of suitable assessment tools which provide in-depth information about the individual candidate.

Identifying people with the right sales disposition is crucial as presence of mediocre and poor performers in a team can have a huge negative impact on the sales force’s morale and therefore, sales revenues. A solid interview process with specialized tools toassess appropriate competencies is important.Building a successful sales organization begins with hiring the right ‘hungry’ talent. As Shiv Agarwal, CEO, ABC Consultants rightly points out, organizations need to “hire for attitude and train for skills”.

Induct and train right
To optimize sales productivity, organizations are obligated to provide the right knowledge and environment for sales people to perform and therefore must pay special attention to on-boarding processes and training in the initial 2-3 months. Most attrition happens within the first 3 months as sales people who are not able to perform feel the pressure and decide to move out. So emphasis on the first week and first month is crucial. The training spectrum includes product training, negotiation training and field training with managers. The second aspect of training is to focus on training managers who in turn can train their subordinates, to enhance the collective gain of sales efforts across levels. A combination of classroom, on-the-field and e-learning training can provide the right combination of investment, effectiveness, and motivation, to impact business outcomes.

Reward right
As a rule, good sales people are driven by both remuneration and public recognition. A good R&R policy should have the optimum mix of cash incentives, bonuses, and formal recognition programs such as time with the CEO and senior leadership team. Incentive plans must be transparent and simple so that sales people are able to decipher the exact reward implications of their sales achievements. Phasing out payouts of rewards over an extended time period can aid sales talent retention. Incentive and bonus programs should reward top performers disproportionately. For example, a salesperson hitting 105% of his target should get 110% of his maximum bonus. Equally, incentive plans should reward only a minimum acceptable level of performance and those who consistently underachieve should be managed out. There is also a need for the right balance of variable and fixed components to drive sales performance. “For insurance, cost of sales is very important when looking at business profitability. In majority of Western countries, insurance traditionally has a very high ‘at risk’ component and low ‘fixed pay’.

We did not see this in India traditionally, but the trend is increasingly changing. Last year we were the first company in insurance that made 40% of the fix component variable over and above the incentive plan,” says Maini of DLF Pramerica.

Manage career and expectations
Managers must work to help individuals identify career paths based on their strengths. Some sales people may have the potential to move to managerial or leadership roles while others will not have either the abilities or the inclination. Some top sales performers are perfectly happy continuing in front-line sales roles because they enjoy the constant sense of achievement and competition.

Existing job inflation in these industries require organizations to actively manage sales careers so that they have ready-talent to take on managerial roles to supervise and own teams. Companies must identify those who are not necessarily the best sales people but have the capability to manage teams, to communicate, and coach others, to build a sustainable business. Managing careers and expectations of sales people will also address employees’ increasing aspirations and shortening attention span in a particular job.

Lead right
Managers must develop their teams’ self-confidence through constant on-the-job coaching and leading by example. Once a good saleperson tastes success s/he will develop the confidence to win increasingly tough and complex sales challenges, creating a self-feeding upward spiral.

Alternative Options
Organizations can use alternative options like temporary (temp) staffing to ensure effective sales deployment to drive business imperatives. This is gaining acceptance in these industries and gives organizations access to job-ready candidates who have gone through entry gate assessments, outcome and skill specific training along with certifications. This enables organizations to have the right person for the right job with better fitment and hence higher probability of longevity and higher productivity at an affordable cost. The ‘temp staffing’ organization takes complete responsibility for the sales people it provides, thereby reducing the burden on the client company that need not worry about engagement or retention aspects of such a sales force. Temp organizations have a combination of centralized and decentralized support for the associates deployed on their rolls to help them stay in close touch with the company for their day-to-day employment needs.

The Trends Ahead
Building effective sales teams, while being a crucial element for business excellence, continues to be a challenge across industries. To optimize the exponential growth opportunity in retail-focused industries, the organization’s core objective will be to focus on maximizing reach and local penetration in order to maximize market share. Where ‘people on the ground’ hold the key to business excellence and resultant increase in market share, managing sales talent is a business agenda that must be anchored by the top management. Going forward, organizations that will make appropriate talent investments in sourcing the right talent, training and managing new talent aspirations, will stand to win.

The complexity of sales incentive plans in India will prove counter-productive if organizations do not make the required amendments as it will nullify the implication of the ‘pay for performance’ rule on business outcome. Therefore organizations that can introduce a simple and transparent incentive plan will see much higher gains
in sales as more users (sales people) will be able to identify the direct correlation between achievement and reward.

Along with these, effective sales teams will emerge stronger with the right support from HR, IT and marketing teams that will need to work in tandem to make the sales process successful. Managing sales targets, using the right sales measures and metrics, and developing strategies for distribution and trade relationships, are clear trends we foresee these industries taking up. Automation of the sales and distribution process led by the IT team will prove to be the required anchor for sales organizations to enhance scalability and reach of their products in the local market.

Topics: Strategic HR, C-Suite, Performance Management

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