sales operations comes of age with sales resource planning

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SALES OPERATIONSCOMES OF AGE WITHSALES RESOURCE PLANNING

Opspanda White Paper Sales Operations Comes of Age with Sales Resource Planning

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IntroductionThe Sales Resource Planning CycleBuilding the Sales Resource Plan The Future of Sales Resource Planning

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TABLE OF CONTENTS ABOUT THE AUTHORS

BILL SCHNEIDERMANFounder and CEO,The Results Group.

ROBERT GERSTENCo-Founder and CPO,OpsPanda.

Bill Schneiderman is the Founder and Chief Executive Officer of The Results Group, an Operations Management consulting and implementation firm, headquartered in Mountain View, California. His career as entrepreneur, executive, consultant and professor creates a unique set of skills and knowledge for his current roles as Senior Executive and Board advisor, change agent, subject matter expert and teacher.

Robert Gersten is Co-Founder and Chief Product Officer of OpsPanda. He is a highly experienced software executive serving as Chief Development Officer at Hyperion and SVP of CPM (Corporate Performance Management) and BI products at Oracle. As an early creator of CPM products for Finance, he looks forward to expanding CPM functionality to operational teams like Sales.


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Imagine, for a moment, being without your smartphone, unable to instantly connect with important business and personal contacts miles away just by speaking their name to a handheld device. Maybe even losing an important deal as a result. Or being without social networks and getting out of date on where one of your key reference Executives has taken a new position. Unthinkable in just a decade or two after introduction.

Take a walk back in time with those of us around long enough to witness the dramatic changes in the world of manufacturing over the last 50 years. There is much to learn about what is happening with Sales Planning. Leading edge companies were just starting to create in-house Materials Requirements Planning (MRP) applications to take advantage of computerized capability to organize and store data, implement structured process in planning and execution, and calculate with precision, quality and speed. By applying consistent effort and discipline with their new tools, these firms saw dramatic reductions in planning errors such as, insufficient factory capacity to meet demand, needed parts not ordered or not available in time or in sufficient quantity. Productivity jumped! With time these valuable applications added integration with accounting and financial reporting to the core function. They proliferated and were packaged by third parties. MRP evolved to Enterprise Resource Planning (ERP) or even Enterprise Resource Management (ERM) as covered resources grew from just materials to include machines and people, and as domain progressed beyond pure planning to include execution management and measurement. The transformation was so powerful, and so complete, that it is now unthinkable to run a manufacturing firm of even moderate scale/complexity without this kind of automation. The evolution of managing sales pipelines and call centers followed a similar pattern, to the point where it is now also nearly unthinkable to run a company of even moderate marketing and customer-contact complexity without a Customer Relationship Management (CRM) system.

TechnologyShare data and automate

forward-looking calculations

IntegrationConnect with related

functions for business reporting

Execution Management Rapid adjustment from

ongoing analysis of operational variables

ManualIndividual planning of

limited variables

The Evolution of Planning and Management Systems

INTRODUCTION


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Sales resources have not yet seen the kind of widespread and systematic planning focus bestowed upon manufacturing and call center resources. Just like their Manufacturing counterparts, Sales Executives need to know the quantity, quality, timeline and geography of resources needed to hit aggressive revenue targets, under frequently changing conditions along with varying scenarios of parameters like attrition, hiring and time to effectiveness. Sadly, most planning and analysis of Sales resource needs is done with spreadsheet or scratchpad, using “rules of thumb”, such as “what we did last year” as guides. When something important isn’t the same as last year, or doesn’t fit a rule of thumb, these approaches suffer.

Following are several examples of conditions that demand a more careful approach:

• Rapid company growth or added geographical coverage• Market expansion or contraction• More competitive industry structure or commoditization• Entrance or exit of a significant competitor or product• New product categories, kinds of benefits or business models• Decreasing sales productivity

Sales capacity is rarely measured thoroughly or subjected to critical analysis. And although the more transactional dimensions of the sales process such as the crediting and payment of commissions are better developed, it is surprising that Sales resources haven’t seen more thoroughgoing planning and closed-loop management attention. Has this domain received less attention because Sales resource is less critical to company success? That could hardly be less accurate. As David Skok observes in his blog titled “A Shockingly Common Way That Sales Misses Plan” ( http://www.forentrepreneurs.com/sales-misses-plan/ ), “Over the years of doing this, I’ve been shocked and surprised how many times I’ve seen good companies with great product/market fit miss their sales targets for an incredibly avoidable reason: they missed their sales hiring targets. As a result, they didn’t have enough quota carrying sales reps to make their number.”

I’VE SEEN GOOD COMPANIES WITH GREAT PRODUCT/MARKET FIT MISS THEIR SALES TARGETS FOR AN INCREDIBLY AVOIDABLE REASON: THEY DIDN’T HAVE ENOUGH QUOTA CARRYING SALES REPS TO MAKE THEIR NUMBER.


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Planning represents the start of a successful management process. An effective and complete management process also includes monitoring progress to plan, making adjustments to plan and executing them as conditions demand. The elements of planning, monitoring and adjusting may appear serial and linear, but in practice they are interdependent. For example: a firm not seeing an expected ramp in revenue implements better product and sales training for representatives. Partially due to the improved training, they then discover that the buying process wasn’t quite as anticipated; there are more customer functions involved than expected and a higher level of sign off for purchase. The company then tweaks the training to fit the buying process, while also measuring sales cycle as an indicator of whether the revised training and its’ application are working. The plan is synchronized to more realistic productivity and cycle parameters. Planning, monitoring and adjusting are all involved in improving performance. And it all works so much better when measurement, implementation and re-planning are done quickly, forming a rapid feedback and closed-loop Sales Resource Planning Cycle.

THE SALES RESOURCEPLANNING CYCLE

For firms that depend upon direct selling efforts to influence purchase behavior, the effectiveness, capacity, and productivity of Sales resource has become more important in recent years, not less. As companies have outsourced parts or all of Manufacturing, Customer Support, and various Administrative functions – leverage for profitability and growth has become more concentrated in Sales, Marketing and Product Development. Why not plan and manage Sales resource with the same level of attention as material, labor and capital?

Planning and analysis for Sales resources is the new frontier for forward thinking companies looking to gain an edge in performance. This frontier is just beginning to be explored beyond in-house applications in the form of cloud-based software as service for Sales Resource Planning (SRP). These SRP applications take a modern and systematic approach to answering the “how many”, “where and when”, variety of scenario questions posed above.


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Plans become old almost as soon as they are published, driving the need for monitoring and adjustment. Too many practitioners monitor only bookings or revenue. And while these are the broadest and most important outcomes, they are lagging indicators that can’t tell you what is wrong when making plan numbers isn’t happening. Is it that turnover is higher than anticipated, or are new Sales people taking longer to come up to speed than expected? Is the deal mix unfavorable or is hiring behind plan? If your plan is systematically built on these kinds of parameters, and you are monitoring them, you know where things are going off track, and in a quantitative way. This insight usually helps find the right adjustments to get back on track to achieving targets. Good plans have structure to link top line performance with metrics to monitor, and provide clues to the best adjustments. And thus a good plan links to the complete Sales Resource Planning Cycle.

Sales Resource Planning Cycle

PLANS BECOME OLD ALMOST AS SOON AS THEY ARE PUBLISHED, DRIVING THE NEED FOR MONITORING AND ADJUSTMENT.


7.Flexible Rigor in Plan Fundamentals

A Sales Resource Plan is not an end in itself. It is a useful means of expressing how a company expects to hit a Sales Target. This target is usually set by the firm’s Executive management and approved by the Board of Directors. While the target often has a top-down flavor, it is best set with a quantitative tie to measurable opportunity, such as the number of potential buyers with demonstrated need or regional growth trends. When targets are validated with such a tie, they are more likely to be achieved, and commitment to achieving target is increased among those responsible to execute.

Many elements can go into building a Sales Resource Plan to meet target. Although the list is long, not every element warrants extensive detail or even representation, in every plan. Detail can add credibility to key parts of a plan, but too much detail, where not warranted, can make planning too cumbersome. Pick where to focus efforts on gathering and validating supporting detail. A good SRP application should allow for a mix of top-down and bottom up approaches to the following quantifiable factors:

• Geographies, deal types, seasonality• Sales roles• Salespersons on board, prior productivity, by role, experience level, etc.• Attrition among Salespersons• Planned hiring, lag to hire, learning curve• Quotas• Quota attainment

BUILDING THE SALESRESOURCE PLAN


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The elements above are synthesized to a plan using the basic logic of Resource X Quota X Attainment = Revenue. The degree of detail is basically about how many variations of that equation need to be considered and calculated. For example, deal types could represent size of deal, product versus service, license versus subscription, or even some combination of these. Does that mean that we need to plan distinct parameters for attrition, hiring and learning curve by each deal type? The answer lies in deciding where the most risk resides and where meaningful and important variation can be brought to bear in managing the risk. Maybe single parameters across deal types would do the trick. On the other hand, a company entering a new part of the world for the first time would likely be well advised to identify parameters separately for the new geography. The right amount of detail is the minimum needed to inspire reasonable confidence in the outcome, and to manage the largest risks appropriately, in your situation.

Some of the elements underlying the Plan are relatively straightforward and objective. For example, the Salespersons on board and their characteristics may even be accessible in a Human Resource or commission system. A good SRP application would have flexible means of importing these kinds of objective data. Seasonality, prior period quota attainment rates, attrition and the like are also subject to first approximation quantification based on information your company likely already has. However, these often change as an industry expands, matures or shrinks or other important environmental characteristics change. Hence the need to exercise judgment in choosing values for these parameters in a plan.

Quota and quota attainment rates are especially important parameters that require careful thought and the application of seasoned judgment in building a plan. These variables, taken together, have significant leverage on the revenue a plan predicts. They also have important effects, when implemented, on Sales Management and Salespersons. On the human side, quotas that are too low don’t motivate top performance, and quotas that are too high are demoralizing and lead to turnover. On the financial side, neither of these situations is good for optimizing profitability, business performance and plan realization.

The notion of sales capacity is highly related to quotas and attainment rates. Low quotas imply excess capacity, and too much excess capacity has as much downside as not enough capacity. The right risk profile on capacity depends on the nature of your business and the stage of the growth and maturity cycle impending. Firms with a short window to build increased market acceptance expected to pay dividends over several years might be well advised to lean toward risking too much capacity rather than too little, for example.

SEASONALITY, PRIOR PERIOD QUOTA ATTAINMENT RATES, AND ATTRITION OFTEN CHANGE AS AN INDUSTRY EXPANDS, MATURES OR SHRINKS. HENCE THE NEED TO EXERCISE JUDGMENT IN CHOOSING VALUES FOR THESE PARAMETERS IN A PLAN.


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Building a good plan is an iterative process. It involves trying out values for the various plan elements listed above. At some point the plan needs to converge to meeting the target. Beware the plan that merely rubber stamps the target. The parameter values in the plan must be realistic and achievable if the plan is to be executed – and the target is to be met. Serious consequences always ensue when plan and target are missed. But what about those times when you’ve built a plan on realistic parameters, and you just can’t meet the target?

The value in building a plan lies in uncovering opportunities for growth and improvement, often by challenging assumptions and coming up with a better way. Let’s consider a fast growing company that just can’t seem to build enough Sales capacity to meet rapidly expanding demand. With realistic quota and attainment rates we just can’t get there. Historical learning curve suggests that it takes six months to full selling proficiency; even though we plan for a bunch of new hires, they can’t become productive fast enough. What if we could reduce six months learning curve to three, would that close the gap between plan and target? How would we make that real? Would we assign one of the best Salespersons to full time mentoring for a multiplier effect (and compensate them well for it)? Would we invest in more robust and intensive training? Would we incent established “stars” in a closely related industry (shorter learning curve but more costly) to hire on? The point here is that a good planning process with highly visible inputs can lead us to challenging our assumptions, examining tradeoffs and evaluating new ways to build a better plan that realistically meets target.

THE VALUE IN BUILDING A PLAN LIES IN UNCOVERING OPPORTUNITIES FOR GROWTH AND IMPROVEMENT, OFTEN BY CHALLENGING ASSUMPTIONS AND COMING UP WITH A BETTER WAY.


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Building a plan is not only iterative, it is also a collaborative process. Collaboration is now the norm; it is happening in multiple industries, across time zones and countries, and across multiple business functions.A good SRP application should facilitate collaboration and effectiveness by:

• Inspiring confidence among collaborators as the shared source of truth • Promoting shared vision of target achievement and breaking down silos• Raising the likelihood of achieving Sales targets and business performance goals• Enabling both top-down and bottom-up “what if” simulation• Enhancing the visualization of outcomes• Making inputs and parameters visible and accessible

The Interplay of Planning and Management

MONTHS FROM HIRE

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WHAT IS OPSPANDA?

OpsPanda helps leaders in sales, sales operations and finance set accurate targets and optimize teams to hit them. The application is purpose-built for sales resource planning and makes it easy to be rigorous in sales capacity forecasting, headcount planning and quota assignment. Based in Palo Alto, California, OpsPanda was founded in 2014 by sales and engineering veterans of the Enterprise Performance Management (EPM) software industry. OpsPanda is backed by TDF Ventures, PivotNorth Capital and a leading private university.

Learn more at www.opspanda.com or contact us at [email protected]

The leverage of Sales resources on business success continues to increase as the world moves to shorter product life cycles, greater outsourcing of Administrative functions and a more competitive environment. Businesses must now move beyond legacy approaches such as spreadsheets and rules-of-thumb to plan Sales resources with the level of attention commensurate with their degree of importance.

The limitations of legacy approaches are being replaced with the emergence of SRP applications. SRP is about creating a planning environment that supports flexibility of method, visibility of planning logic and outcomes, and active collaboration across the world with a platform to challenge assumptions and to rapidly adapt to the unexpected - all in the service of better business results.

Effective selling has always been a key part of business success, and it will remain so for years to come. SRP has the promise to deliver both strength and agility to this endeavor. The fulfillment of this promise will make it unthinkable to run an Enterprise of even moderate Sales complexity without this process and technological advantage.

THE FUTURE OF SALES RESOURCE PLANNING

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sales operations comes of age with sales resource planning

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