by Jay Galasso | Private Equity
Clash of the sales cultures
They say that experience is the best teacher. I’ve been fortunate in my career to have “lived through” and thrived through a number of mergers & acquisitions. I’ve been a member of the acquired company and I’ve been on the acquiring team. Some of these have worked out really well. Others, like the vast majority of the M&A transactions each year, didn’t meet their pre-investment goals.
Sales organizations are the company’s face to the customer. They are often the first place to look for “synergies” in an integration plan. Here are some thoughts on how to make the best of those opportunities.
Practical Thoughts
“In theory, practice and theory are the same. In practice, they aren’t”
When it comes to making the investment thesis come to life, unexpected challenges have a way of hitting us in the face. More often than not, it comes down to cultural issues — company culture, industry culture, and regional cultures. We can get surprised when things don’t go as planned, or when people don’t behave as expected in a changing business environment.
Through the various acquisition integrations I’ve been through, there are two axioms that stand out for me:
- People do what they know, like, and are rewarded for
- People avoid things they don’t like or don’t understand
I’ve seen some really good ideas fall apart once people were involved in implementing them. Here are a couple of examples.
The Parking Lot
There are a lot of industries going through consolidation; it’s a trend that been happening for years and is likely to continue. I worked with a global industrial company that made a number of acquisitions in the same or similar markets. Some of the products were overlapping, but most were complimentary.
A senior executive made an observation while visiting a key account — the company had several salespeople calling on the same customer. Probably several of the cars in the parking lot were on his expense budget. This just didn’t make economic sense. Why not have one salesperson covering a given customer?
Now, this was a large global company with hundreds of salespeople around the world, with many different types of products, systems and services. To this point, they had been using a product-line oriented sales structure. Having a simpler approach seemed to make sense for the customer and the company itself. Surely this would save everyone time and money.
This principle seemed to make sense, but it couldn’t be implemented everywhere at once. This executive started in his home country to make a shift to a key account manager that would bring in product specialists as needed. Everything would be coordinated by the account manager to make sure they were focused on the right activities.
So what happened? Well, there were fewer cars in the lot, but the same number of people calling on the account. They just went together in the same car–and less frequently.
The Account Managers were selected from the groups that had the largest sales volume with the customer–which were the large systems groups. As a team, they pursued the larger projects. They needed to show the big numbers to prove the approach was correct. Unfortunately, those larger projects were highly competitive and had lower margins. The niche products with high margins didn’t get the attention they used to from dedicated sales teams. The high margin products lost market share. They did win large projects but at lower overall margins.
“Hard feelings” developed between the product teams that were losing market share and the account teams that were directly the sales efforts. Ultimately, the approach did not go global. There was greater emphasis placed on coordination on major accounts, but not to the exclusion of teams that were closer the market.
Everybody Sells Everything
Another popular sales integration approach is to “cross-train” the teams on each others’ products. Overall the number of salespeople would remain slightly less than before, but the sales coverage for each product line would be significantly greater. Right?
There were training sessions held to train team “A” on the “B” product line, and vice-versa. These were combined with pretty solid marketing support and sales enablement tools for presenting solutions and quoting.
The compensation plans between the two teams had been different. Now they were harmonized so that everyone was on the same page. There was no penalty for selling one product versus another. It was a pretty good plan.
About a year after this plan went into effect the results were in. While they weren’t organized into “A” and “B” teams any longer, we all knew where individual sales team members had come from. The former “Team A” sale people sold more “A” products and hadn’t sold much of the “B” stuff at all. It was pretty much the reverse with the former “Team B” salespeople.
Despite some really good efforts, it was rare for the salespeople to be effective at selling the new product scope they had inherited. People continued to sell what they knew and were comfortable selling. Even if they weren’t avoiding it, it was more difficult to sell the stuff that was new to them.
Recommendations
The basic logic in both of these examples is sound. I’m sure you can picture sitting around a planning table and thinking it will work. So what went wrong?
Well, knowledge is a key is sales. It’s more than learning about a new product. It’s about the market dynamics, customer expectations, and competitive environment. Years of experience can’t be “cross-trained” in a 1-week course. Have realistic expectations for how long it will take, and provide support for sales to be effective.
It will take a team effort to be successful, not a group of cross-trained super heroes. Designate experts to support specific products & markets. Some of them may be former sales reps that moved into supporting roles better suited to their expertise. Make sure they feel important too.
Reward the team for success, not just an individual. To make either the Key Account Manager system or cross-training work, it takes great teamwork. And don’t be afraid to use outside resources to help in specific areas as appropriate.
Finally, make sure you design in back-ups in your plan. Losing a Key Account Manager that has all the relationships to a competitor is more devastating than in the previous organizational structure. The best approach is to ensure that account and product knowledge are a shared company resource.
