A couple of weeks ago I wrote a post about annual planning and how crucial it is for the business to have a clear set of objectives, a set of strategies carefully deliberated against all other options, and a resource roadmap to execute.
Now it’s time to execute. Namely, it’s about knocking out a set of non-negotiables: capacity planning and capability development. Why are these important? If you’re operating a growth business there are two types of headcount you’re considering.
First, there’s the backfill headcount. Let’s be honest, market dynamics are such that the proverbial “War for Talent” is real. Your competition is looking to poach your best people. If you’ve been running a sweatshop with no reprieve you’ve also created an environment where people are looking around. Whether you like it or not, whether you’re running your business well or not, there are real forces tugging at the strings for your human capital. Flight risk is real.
Think of attrition in two categories: non-regrettable and regrettable. Regrettable attrition is far more insidious and corrosive to an organization. The task of succession is made more difficult when your elite talent leaves. In the short run you lose production, but more importantly you also lose a sizable chunk of your cultural standard bearers. The non-regrettable is more transactional in nature. Putting human emotion aside, if a non-regrettable attrition occurs there’s not much to worry about. Why? Because it’s quite frankly built into the model. If you’re in Revenue Operations and you’re partnering with Finance then you’ve probably seen variables built into the model accounting for expected attrition loss. The flaw of each of these models is that they average out performance. There’s little risk to your model when non-regrettable occurs because it’s very likely that their performance removes low quartile performance from your average and strangely enough raises your average. It’s somewhat inhumane to say it, but in these instances it can be addition by subtraction. This is one of those times when the rational brain leads one to be heartless.
The second type of headcount is the accretive headcount. Let’s say last year’s plan was for 50 headcount and you ended the year with 45 butts-in-seats with five To-Be-Hired positions. What you have is a 90% fill rate against your previous year’s plan. But this year you’ve approved an organization with 75 headcount. Now you could look at this and think that your incremental headcount is 35 versus last year, but that would be a misnomer. Just because you have 45 people in-seat now, doesn’t mean that your plan increased 30. That’s a lie. What you have is an open fill of 5 seats and a go-get of 25 new seats for the year.
A useful tool for headcount planning and execution is what I call the Three C’s (3C): capacity, coverage, and capability. In this article, we’ll focus on the first two. Developing an understanding of capacity all along the funnel will better equip operations teams to better-supporting Marketing, Finance, and Customer Success. Covering all of the areas below would take an entire book, so we'll focus on a small sliver geared towards earlier stage companies.
I have a simple framework called the 3Cs. Capacity, capability, and coverage. These three planning considerations not only help to cover the existing customer base, but also helps to fuel expansion via net new customers and upselling into the existing base. Today I’m going to cover the first two: capacity and capability.
The First C: Capacity. Much like the floor of a manufacturing facility, the goal is to find the perfect balance of capacity and throughput. The key focus for sales teams is to perform the necessary activities to yield maximum revenue within a stated boundary for capacity. That’s a notable distinction. If you had the enviable opportunity for infinite headcount then you would have infinite capacity. Therefore you would not need to optimize for necessary activities. Most businesses do not have this luxury. There’s only so many people that can be interviewed, reviewed, hired, trained, and managed. All along the way bringing in new resources consumes resources across sales management in the form interviewing, HR in the form of recruiting and coordination, enablement in the form of onboarding and certifying. Additionally, based on your customer segment, technology stack, and processes there’s a natural ceiling to how many calls, emails, meetings, and planning sessions your team can endure. So you have to get your model right. You also have to build tolerance within your model to account for both downside and upside risk. Some considerations for real worl activities when building a capacity model: headcount, time management, territory size, and lead volume.
Headcount
Sales leaders need to know they have sufficient bench strength to achieve targets. Key factors to consider are expected attrition, ramp time, and time to hire. People leave their roles for various reasons, including finding better jobs, moving away, or getting promoted. This is the nature of business and should never be ignored. Backfilling critical roles is important because it takes time to post a requisition, interview, offer, and ramp-up new hires. Revenue Operations helps to build out a headcount planning model factoring in these considerations. Aside from looking at roles in a silo, the headcount number will also require a look at supporting casts such as overlay roles and managers. Depending on which benchmarks are used, AEs-to-SDRs can range from a 3-to-1 to a 2-to-1 ratio. Sales reps-to-managers can sit between the 8-to-1 to a 6-to-1 ratio. Span of control matters. Bringing in the right people is important, but make sure you assemble the right team around them. Imagine a basketball team with an entire team of five centers. You’d have a hard time bringing up the ball to the frontcourt and you’d have a difficult time defending the perimeter if all you have are lumbering 7 footers. Assemble a quality cast in addition to bringing in raw quantities of people.
Time management
Let's face it: humans aren't robots. We need to sleep, eat, and have lives outside of work. Sales productivity is, therefore, limited by the finite hours available and the activities we can perform within that time. Using time wisely is paramount for sales success. Every call, in theory, would feature research, call preparation, and a meeting structure. But that doesn't always happen. I’ve seen sales orgs throw wave after wave of fresh recruit at their lead base in the hopes of finding diamonds in the rough. That may not be called a sweatshop but it sure sounds like one to me.
Introduce a Time Audit to the business periodically. A time audit is exactly what it sounds like. Survey the organization to find out where your people are spending their time. Without this audit, how will you know what to fix? How will you know what to streamline? Breaking down sales rep calendars between selling and non-selling activities will usually result in one of two hypotheses.
The first is that selling activities are too voluminous to provide a high-quality sales motion. In this case, segmentation is key. You have the option of cutting out the lowest performing leads from ever reaching your sales team. You have the option of beefing up low touch qualification activities such as automated qualification tools such as progressive profiling campaigns, programmable chat bots, or building out a lower cost sales development organization.
The second outcome is that non-selling activities may be overly cumbersome. Keying in on process improvements such as system automation can give time back to sales reps.
In either situation, the Time Audit can and will lead to deeper personalization for enterprise selling motions. For transactional motions, it will provide thawed out call blocks.
Territory size and lead management
Sales reps can only focus on so many accounts within a year without compromising their effectiveness in outreach. Managers will often find shallowly developed account plans for their team’s top tier accounts. A lack of preparation in these areas is a canary in the coal mine for whole batches of accounts lacking attention. Sales reps simply cannot service the size of the territory given to them. This is a huge miss for the business. If a sizable percentage of your addressable market isn’t outreached to at the top of the funnel, then you’re leaving the door wide open for competition.
Revenue Operations can help recalibrate territory construction for example. Another example is to co-develop effective call management to best address leads. Enablement, management, and operations can work together to build out a repeatable process to research, prepare, and execute each call or meeting effectively. Typically, the larger the organization sought after, the more front-end work is needed. SDR managers will find themselves examining how many leads are simply too many for anyone SDR to reasonably handle. Revenue Operations provides an evidence-based capacity assessment. A solution to consider is to increase the size of the team or prioritize leads so that only the ones of highest priority are pursued.
The second C is Capability. Enablement truly shines here. If you were to work backwards from your ideal timeline for when a rep should be fully ramped, what would that entail? First it would require a clear definition. What does “ramped” even mean? For companies selling enterprise cycle deals it may not be realistic to hit a fully ramped quota in year one. Imagine if your sales cycle was 300 days. How do you expect a rep to hit quota in year one? You can adjust with a lowered, ramped quota offset with a guaranteed commission. That’ll soften the blow for any rep who takes the risk of leaving their existing situation to joining yours. But at the same time, you do need leading success indicators. Perhaps it’s passing certifications, generating meetings with key personas, and generating the necessary pipeline within an expected timeframe. For companies selling to the SMB it may very well be a much condensed version. Perhaps it’s a three month ramp with conversion milestones reached in months one to three. Whichever it is, set up your success metrics backed by historical research.
The second piece of capability is all about developing enablement programs. Choose the format that makes sense: on-demand or group sessions. Set the program in stages to progress your people to develop the skills they need. I’ve seen so many companies develop two week bootcamps with the expectation that their reps and SDRs are ready to take on the world. That’s simply unrealistic if you ask me! I love bootcamps, but I’m a huge fan of sales certification programs. You pass, you move on. You don’t pass, well you also move on in a way. The program can be broken down into developing what Skills and what Knowledge you’ll need for success. In terms of skills you’re looking at key sales characteristics. The goal isn’t to develop carbon copy sales teams, but to develop a baseline by which you assess your organization. Sales skills such as qualification, empathy, adaptability, preparation, and intelligence. These sound fuzzy but they can each be tested and evaluated upon. Do this enough times and you’ve developed a system.
Mark Roberge talks about uncovering the characteristics of a successful salesperson in his book The Sales Acceleration Formula. He lists four easy steps:
Establish a Theory of the Ideal Sales Characteristics
Define and Evaluation Strategy for Each Characteristic
Score Candidates against the Ideal Sales Characteristics
Learn and Iterate on the Model while Engineering the Sales Hiring Formula
If you’re still running a Sales Apprenticeship model then it may be time to start investing in enablement.
So that’s a wrap for today. We covered capacity and capability. If you’ve enjoyed my content so far consider subscribing to the podcast, or subscribing to my weekly Substack at revengine.substack.com. For those revenue operators looking to get an edge up consider joining my Patreon at patreon.com/revopsrehab. It’s a very small group with whom I share best practices with.
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https://www.revopsimpact.com/roi-playbook
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