The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

By Susan Dustin, Ph.D. and Ramana Madupalli, Ph.D. Southern Illinois University - Edwardsville

While running a sales organization is never easy, it is certainly much easier for sales organizations to meet their goals when the economy is strong. Even sales organizations that lack a structured sales process or strong selling capabilities see significant levels of success during ideal conditions. These same organizations, however, tend to be the first to struggle as soon as the economy begins to weaken while other sales organizations continue to perform well regardless of economic conditions. How do they do it?

In 2006, the U.S. Gross Domestic Product (GDP) grew at 2.8 percent annual level. Similar GDP growth levels were seen in the U.K. (2.8 percent) and in Australia (3.4 percent).1 Many European and Asian countries saw even more robust growth during this same time period. These relatively strong economic conditions continued throughout 2007. In 2008, the economic conditions in U.S. and many European countries began to decline. GDP growth dropped in the U.S. and in the U.K., while Australias economic conditions remained relatively strong. But by 2009, the economic conditions tumbled dramatically in all three countries. The data from these surveys provide good insight into what it takes to be successful during the challenging economic times that were experienced in most countries in 2008 and 2009. We evaluated whether use of Standardized Sales Process and Strategic Sales Behaviors lead to increased sales effectiveness in the following three areas: Revenue Growth, New Account Acquisition and Average Account Billing. Organizations were also rated on four levels of performance: Best Performing, High Performing, Average Performing, and Low Performing, based on how well the companies scored in each of the three sales effectiveness areas. The results show that across all organizations, the number of organizations

Smooth Sailing through Rough Waters

Why do some organizations continue to succeed in challenging economic times? Do strong sales processes help insulate sales organizations from an economic downturn such as those weve experienced over the past two years? The data from the annual Miller Heiman Sales Best Practices Study provides a unique opportunity to examine these questions as the survey has now been conducted over the past seven years both in good and bad economic times. With 1,500 3,200 respondents each year, the data reflects a wide variety of industries and perspectives from individuals at various levels within the organization. The Miller Heiman surveys are conducted during the fall of the prior year. Thus, the 2007 Study provides data reflective of the economic conditions of 2006.
1

The World Bank, GDP Growth (annual percent), 2010.

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

performing at the Best levels declined dramatically while the number of Low performing organizations increased dramatically from 2007 to 2009. This is not surprising given the weak economic conditions over that period.

Percentage of Organizations in Different Grade Levels (Year Wise)

World Class Grade 3 D C B A TOTAL

Percentage of Organizations in Difference Performance Levels (Year Wise)

PERFORMANCE LEVEL 2 LOW AVG HIGH BEST

2007 2008 2009 2010 Total

3

27.7% 28.7% 25.5% 25.1% 26.9%

41.4% 42.4% 40.7% 43.4% 41.8%

27.6% 26.0% 30.2% 28.4% 28.1%

3.3% 2.8% 3.5% 3.1% 3.2%

100.0% 100.0% 100.0% 100.0% 100.0%

2007 2008 2009 2010 Total

2

17.1% 18.3% 33.2% 62.6% 29.2%

14.3% 13.9% 16.9% 14.1% 15.0%

28.9% 29.1% 27.5% 13.7% 26.3%

39.7% 38.6% 22.3% 9.5% 29.5%

In order to achieve an A grade, organizations needed to score 24 out of 28 in terms of their consistent use of standard sales processes and strategic sales behaviors, a B grade was achieved by scoring 20-24, a C grade was scored by 16-20, and a D grade was scored by 16 or less.

Its in the Sales Process

The results are particularly interesting when the Performance Levels within the World-Class Grade categories are analyzed across all years. Fifty-eight percent of companies with a World-Class D grade achieved only Low or Average levels of performance. In contrast, three-quarters of companies with a World-Class A grade achieve either High or Best Performance Levels. Overall, results show that higher World-Class Grades lead to increased performance at the Best and High Performance levels. The trend is clear: having strong sales processes in place (as measured by the World Class Grades) lead to improved levels of performance.

Performance Level Grades were determined by applying a weight to responses for the New Account Acquisition (20 %), Revenue Increase (60 %) and Average Account Billing Increase (20 %) categories. Grades of BEST (3.6 TO 4.0), HIGH ( 3.0 TO 3.6), AVERAGE (2.4 TO 3.0) and LOW (< 2.4) were the assigned to each organization.

A Closer Look at World-Class Sales Organizations

In the past, the Miller Heiman Sales Best Practices Study annual reports benchmarked organizations against those that were considered World Class. We took that a step farther to find out if increased standardization of sales process i.e., sales process formalization and sales force performance management, and selling behaviors lead to improved performance. Becoming a World-Class Sales Organization takes time and it is important to recognize where sales organizations are in that evolution. An A-D rating scale was used to rate each organization based on how well they scored in their consistent use of standardized process in the following four sales force categories: Selling Activities, Relationship Management, Sales Process Formalization, and Sales Force Performance Measurement. As expected, the results below show that the percentage of organizations in each of the World-Class Grade categories remained fairly stable from year to year.

Performance of Organizations In Outcomes and Their Drivers (All Years)

World Class Grade D C B A Total
PERFORMANCE LEVEL LOW 39.5% 29.8% 19.8% 17.8% 29.2% AVG 18.6% 14.9% 12.4% 7.3% 15.0% HIGH 23.0% 26.9% 29.3% 20.0% 26.3% BEST 19.0% 28.3% 38.5% 54.9% 29.5% TOTAL 100.0% 100.0% 100.0% 100.0% 100.0%

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

To answer the question posed in the beginning of this article whether having a strong sales process in place helps to insulate organizations in challenging economic times we analyzed data by individual year. We find that while the downturn in the economic conditions had a negative impact on performance across companies in all four World-Class Grade categories, organizations with higher World-Class Grades fared better. For example, when the economy was relatively strong in 2007 and 2008, less than 30 percent of companies with a World Class Grade of D scored low on performance. However, in 2010 the percentage of D graded companies that scored Low on performance jumped to 72 percent. In contrast, organizations with strong sales processes in place (scoring an A or B on World Class) had the highest percentage of performance in the High or Best categories during the economic downturn. During the worst economic period (data from the 2010 study), almost half of organizations with a World-Class Grade of A continued to have either High or Best levels of performance, compared to only 16 percent of organizations scoring a D and 23 percent of organizations in all levels of World Class Grades. These findings validate our premise that strong sales processes do have an insulating effect during challenging economic times. See Table 5. Plotting the performance trends over the four years, it was apparent that organizations that scored an A on the World-Class Grading Scale performed consistently better regardless of the economic conditions. ORGANIZATIONS WITH INCREASED OVERALL PERFORMANCE
GROWTH WORLD CLASS GROWTH

We also assessed whether any of the four sales process attributes (Selling Activities, Relationship Management, Sales Process Formalization, and Sales Force Performance Measurement) that were used to determine the World-Class Grades had a greater impact on performance than the others. The following graph compares the performance of A Graded companies in these categories to all other organizations. Successful implementation of any of these four World-Class attributes will lead to higher performance but implementation of selling processes appears to provide the greatest insulation against economic downturn.

WORLD CLASS IN DIFFERENT CATEGORIES AND BEST OVERALL PERFORMANCE

BEST SA RM SPF SFPM

72.6% 65.7% 61.9% 59.0%

61.4% 59.5% 56.0% 54.2% 39.3% 44.0% 41.0% 36.5% 32.8% 22.7% 23.8% 17.4% 16.4% 13.8% 9.5%

40.7%

2007

2008

2009

2010

92% 69%

Finally, we looked at organizations whose average sales size is 86% 68% 66% 50% $1 million or more and those whose average sales size is $100,000 or more. Once again, the performance of those organizations 47% 23% scoring best in World Class (A Grades) was compared to all other organizations. World-Class Sales Organizations performed consistently better than other organizations across time periods and in both categories of average sales size. Furthermore, the results show that for organizations with an average sales size of

2007

2008

2009

2010

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

$1 million or more, half of those scoring an A in World Class achieved the highest performance levels during 2010, the most challenging economic year. From this, we conclude that strong use of standardized sales processes, while critical to organizations of both categories of average sales size, proved particularly beneficial to organizations with an average sales size of $1 million or more.

What do these numbers tell us?

The short answer is that implementing standardized sales processes have a positive performance impact on sales organizations. Efforts in this area can also help sales organizations weather difficult economic times. The findings from our analysis are good news for organizations that have implemented or are in the process of implementing sales processes. The task of putting in place a sales process into a sales organization that has little structure can be daunting. Fortunately, each step toward achieving an A grade on the World-Class Grading scale will reap benefits in terms of performance. We recommend that organizations look at sales process implementation in terms of continuous improvement on the road to achieving and maintaining World-Class status.

About the Authors

Susan Dustin, Ph.D. Susan Dustin is a management professor at Southern Illinois University Edwardsville. She teaches courses in organizational behavior and conducts research in the areas of compensation, motivation, and social/professional identity. Prior to her academic career, Susan worked for more than 15 years in a variety of sales and marketing management positions. Ramana Madupalli, Ph.D. Ramana Madupallis a marketing professor at Southern Illinois University Edwardsville. He teaches courses in personal selling and sales management, marketing research, database marketing and product management. His research interests include sales management, customer equity, call center management and marketing research.

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

Table 1: Industry profiles

What industry does your company primarily operate in? What industry does your company primarily operate in? NA Business services Construction Consulting and Professional services Consumer Products Education Energy Finance and Insurance Government Healthcare Hospitality and Food service Industrial and Chemical Manufacturing Media Pharmaceuticals Technology and Software Telecommunications Transportation Utilities Wholesale Total 2007 1.0% 10.4% 1.7% 10.2% 2.5% 1.7% 3.2% 7.0% 2.3% 11.0% 1.9% 3.3% 8.8% 1.1% 2.1% 21.5% 5.9% 3.0% .7% .7% 100.0% 10.9% 2.2% 12.7% 1.8% 1.8% 1.9% 7.8% 2.2% 7.4% 1.5% 3.7% 8.4% 1.7% 1.8% 21.6% 7.7% 3.0% .8% 1.0% 100.0% 11.5% 2.0% 13.4% 2.6% 1.7% 3.4% 7.9% 2.0% 7.8% 1.4% 3.2% 9.1% 1.8% 2.6% 17.1% 7.3% 2.8% .7% 1.7% 100.0% 9.6% 1.8% 12.4% 2.9% 2.7% 5.2% 6.8% 1.6% 8.3% 1.5% 3.0% 10.6% 1.1% 2.4% 18.8% 6.7% 2.6% .8% 1.2% 100.0% 2008 DATA YEAR 2009 2010 TOTAL .2% 10.8% 2.0% 12.3% 2.4% 1.9% 3.2% 7.5% 2.1% 8.5% 1.5% 3.3% 9.0% 1.5% 2.2% 19.8% 7.0% 2.9% .7% 1.2% 100.0%

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

Table 2: Location of the Organizations (%)

Location North America Europe / Mideast / Africa Australia Asia South America Others Missing TOTAL 2007 1810 (72) 418 (17) 86 (3) 115 (5) 27 (1) 39 (2) 19 (1) 2514 (100) 2008 2038 (69) 393 (13) 93 (3) 123 (4) 104 (3) 169 (6) 52 (2) 2977 (100) 2009 2037 (64) 790 (25) 81 (3) 136 (4) 61 (2) 0 (0) 87 (3) 3192 (100) 2010 903 (60) 402 (27) 71 (5) 67 (4) 29 (2) 0 (0) 30 (2) 1502 (100)

Table 3: Salesforce Size

Number of Salespersons in the Organization (%) # of Salespersons 1-9 10-24 25-99 100-249 250-499 500-749 750-999 1000 or more Missing TOTAL 2007 801 (32) 398 (16) 456 (18) 269 (11) 140 (6) 75 (3) 51 (2) 254 (10) 70 (3) 2514 (100) 2008 986 (33) 529 (18) 516 (17) 283 (10) 165 (6) 100 (3) 35 (1) 258 (9) 105 (4) 2977 (100) 2009 1017 (32) 548 (17) 568 (18) 369 (12) 178 (6) 92 (3) 46 (1) 280 (9) 94 (3) 3192 (100) 2010 462 (31) 230 (15) 276 (18) 176 (12) 94 (6) 53 (4) 15 (1) 137 (9) 59 (4) 1502 (100)

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

Table 4: Job Function/Level

Which job title most accurately reflects your current position in your organization?

Which job title most accurately reflects your current position in your organization? C-Level Executive President/GM Sales VP/Director Sales Manager Sales Representative Marketing Training Human Resources Business Development Account Management Sales Operations Customer/Client Service Total

2007 5.1% 5.3% 22.1% 17.7% 16.2% 4.5% 2.0% .6% 12.7% 10.1% 2.6% 1.2% 100.0%

2008 6.2% 6.8% 24.6% 17.9% 12.5% 3.9% 3.5% .7% 11.1% 8.8% 3.0% 1.1% 100.0%

2009 6.4% 7.2% 21.6% 18.4% 14.0% 4.6% 3.1% .6% 12.2% 7.9% 2.6% 1.6% 100.0%

2010 7.2% 7.8% 26.4% 19.0% 9.4% 3.2% 2.9% 1.0% 11.9% 6.4% 3.9% .9% 100.0%

Total 6.1% 6.7% 23.3% 18.1% 13.4% 4.2% 2.9% .7% 12.0% 8.5% 2.9% 1.2% 100.0%

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The Performance Value of a World-Class Sales Process

A Multi-Year Comparison during Both Strong and Weak Economic Conditions

Table 5. Performance of Organizations in outcomes and their drivers (Individual Years)

PERFORMANCE LEVEL LOW 2007 World Class Grade D C B A Total 2008 World Class Grade D C B A Total 2009 World Class Grade D C B A Total 2010 World Class Grade D C B A Total 26.6% 17.0% 9.6% 3.8% 17.1% 28.5% 17.8% 9.4% 6.2% 18.3% 46.9% 34.3% 21.1% 24.5% 33.2% 71.5% 65.2% 52.8% 46.7% 62.7% AVERAGE 19.5% 14.9% 9.3% 3.8% 14.2% 18.5% 13.2% 10.6% 7.4% 13.9% 20.8% 17.1% 14.4% 10.0% 17.0% 12.2% 14.1% 16.8% 6.7% 14.1% HIGH 29.0% 29.5% 29.3% 17.7% 28.9% 28.2% 30.4% 29.5% 18.5% 29.2% 19.5% 28.2% 34.2% 20.0% 27.5% 8.0% 13.5% 17.8% 26.7% 13.7 BEST 24.8% 38.6% 51.9% 74.7% 39.7% 24.8% 38.6% 50.5% 67.9% 38.6% 12.8% 20.4% 30.3% 45.5% 22.3% 8.3% 7.2% 12.8% 20.0% 9.4% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

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