2009-04-01
|
Aligning Sales Resources Tightly to Market Opportunities is Key for Companies in the Downturn
|
Shanghai — Hewitt recently released the 2009 HR Monthly Watch report, and as the current economic continues to unfold, companies are under even greater pressure to look even harder for ways to achieve their top line and to protect their bottom line. Organizations, particularly in certain hard-hit industries, are under significant pressure to control costs and scale back where possible. But for companies that want to succeed in the long-term, the focus is not just on cost reduction, it is about profitable revenue growth and leveraging the sales team to help achieve this.
Based on the responses from 187 participant organizations, Hewitt's February 2009 report revealed that the auto, chemical, electronics, and semiconductor industries are industries that are suffering more along with companies in 2nd tier cities in around the Pearl River Delta region. Not surprisingly, these companies are more focused on export and have seen steep decreases in overseas orders. And when comparing year-over-year revenue in February 2009, the machinery sector witnessed significant decreases, while sectors like pharmaceuticals, medical device, and insurance have actually seen a slight increase.
By the end of February, forecasted salary increase for 2009 was 5.8% (including those who have implemented a salary freeze) — as compared with 6.4% in January. More than 70% of companies from chemical, electronics and semiconductor sectors are controlling their compensation costs, while more than 20% of companies from the auto sectors are freezing salaries for all employees in 2009. And the most common ways to control these costs include reducing overtime salary, reducing end-of-year bonuses, or freezing salaries altogether.
More so now than ever before, companies have to do more with less. Not surprisingly, in organizations where sales employees make up the majority of the workforce and sales cost makes up a significant portion of overall costs, management often decides to look to the sales function for opportunities to ensure and perhaps even to further improve sales force performance to achieve optimal return from their sales investment. It is tempting for organizations that are under sales and profitability pressure to take cost cutting measures such as sales force reduction, bonus cost reduction and training budget reduction to ensure survival. However, Hewitt's research indicates that for companies that want to succeed in this uncertain economy, profitable revenue growth is a key strategy to weather the storm.
Jenny Li, general manager of Hewitt China, commented: "The ability of the sales function to drive growth in this environment is absolutely critical. Now is the time to re-think go-to-market strategies, evaluate channel performance, assess sales force and take some time to re-energize and re-focus the team."
Hewitt has developed the following strategic recommendations for managing sales effectiveness during uncertain times:
- Align resources tightly to market opportunities
- Aggressively manage both ends of talent distribution
- Structure rewards to drive incremental effort
Align resources tightly to market opportunities
When organizations have to do more with less, it is crucial to identify key opportunities to focus on. Companies also need to scrutinize whether their current sales resources are utilized effectively. Going beyond the usual headcount planning exercise, companies may also consider the use of external sales resources such as distributors, who may be better utilized to capture market opportunities. Therefore, before leaping in and making changes to the sales organization, a review of the sales structure and channels is essential in order to isolate the key opportunities to re-align sales resources to market opportunity.
Aggressively manage both ends of talent distribution
Organizations generally have a set of performance metrics to measure and track how well the sales force is performing. Typical measures include sales target achievement, productivity per sales person, new customer acquisition or key customer retention. Therefore, it is very simple to identify who the high performers in the sales force are, just as it is quite easy to identify who are the ones who consistently miss sales targets. However, even when they could list the high and poor performers, some organizations may not fully understand the factors that cause this difference, resulting in weak management of poor performers in their sales force.
Hewitt finds that organizations who devote time to analyzing sales performance variance within and across different sales channels and identifying factors that influence high and low performance stand a much better chance to address the root causes of average or poor sales performance. They are also more confident in taking actions to manage both ends of their sales force distribution. Not only do they differentiate the way they reward, recognize, promote and retain their high-performing sales performers, they are also able to pinpoint, address and monitor specific areas that their poor performers need to improve.
Structure rewards to drive incremental effort
Hewitt's HR Monthly Watch February Report shows that in response to the economic crisis, some companies have decided to slash salaries for all employees and/or delay year-end bonuses. Instead of opting for a decision to cut salary and bonus or defer sales bonus/commission, Hewitt suggests that organizations first examine if the current reward investment is efficient:
- How aligned is the total cost of rewards to the business performance?
- Are variable pay programs self-funded by increases in performance?
- Are reward programs driving the right behaviours?
For example, account receivables may have never been an issue in the past when customers' cash flow was good; however, in the past 6 months, the reality may have changed. Therefore, it will be critical for sales people to negotiate for different payment terms — this, in turn, may require the collection of account receivables as one criterion for bonus payment to drive this new behaviour among the sales force. Similarly, sales cycles may have become longer and the competition even more intense, thus, organizations need to review and decide how can rewards be used to drive incremental performance and what level of reward is required to drive stretch performance outcomes.
Audrey Widjaja, Talent Consulting Director for Hewitt, commented: "While some companies might see the tough economic environment as life-threatening, others could very well view the circumstance as an opportunity of surviving and becoming the strongest in the aftermath. A review of rewards management will help organizations isolate the key opportunities to drive a greater ROI on rewards."
About HR Monthly Watch
To track the impact of the economic crisis on businesses in China, Hewitt has launched HR Monthly Watch, a comprehensive study of how companies are, from an HR perspective, managing their business in the downturn. The study captures data points and insight around sales growth, working hours, compensation, benefits, training, performance, and a host of other factors. HR Monthly Watch provides up-to-date insights on dynamic market trends, and serves as a timely reference to guide decision-making.
The information in this report represents the views and opinions of 187 companies collected between February 1 and February 26, 2009.
About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt consults with companies to design and implement a wide range of human resources, retirement, investment management, health management, compensation, and talent management strategies. As a leading outsourcing provider, Hewitt administers health care, retirement, payroll, and other HR programs to millions of employees, their families, and retirees. With a history of exceptional client service since 1940, Hewitt has offices in 33 countries and employs approximately 23,000 associates who are helping make the world a better place to work.
For more information, please visit www.hewitt.com.
