What Your CEO Needs to Know About Sales Compensation by Mark Donnolo

Author:Mark Donnolo [Donnolo, Mark]
Language: eng
Format: mobi
Publisher: Amacom - A
Published: 2012-12-09T14:00:00+00:00

Strategic Value

Another method of defining a strategic account is by understanding its overall importance to the company. Strategic value could encompass a number of factors, including revenue potential. Some of the important aspects of strategic value are how well the customer aligns with the mission as a company, how significant that customer could be to the growth plan, and how well the company’s expertise and competencies match that customer’s needs.

Determining where to draw the line for strategic accounts is one of the most common pitfalls. While some companies select a handful of strategic accounts for focus, the more common situation is including far too many. This happens when there’s a lack of process or clear definition and unrealistic expectations of sales capacity.

We recently evaluated the global account program at a technology company. As a first step, we ran an analysis of the distribution of revenue, distribution of profit, and distribution of sales potential within the company’s top accounts. We basically asked the question: What percentage of revenue comes from what percentage of the accounts? (This is sort of a modern twist on the Pareto rule, which says that roughly 80 percent of the effects come from 20 percent of the causes. In the case of sales, often 80 percent of the revenue comes from 20 percent of the accounts.)

As we expected, a sizable portion of the revenue came from these global accounts. In fact, approximately 80 percent of the company’s revenue was represented by 15 percent of the company’s accounts. Because the company had classified its global accounts by revenue, there were numerous Global 2000 accounts that fell below the cutoff line that could have been considered global, if we examined their full potential and not just current revenue.

One of the big findings was that while global accounts represented about 80 percent of the company’s revenue, the global accounts included a group of more than 125 unique companies, which is a large number for any global account program. The sheer size made it hard to have a truly focused program and focused resources. What was surprising was that when we started to remove accounts from the 125, starting with the smallest and working up, the percentage of revenue and potential didn’t change much. After carefully paring the list, we found that about 30 accounts of the original 125 represented about 90 percent of the original 80 percent of the company’s revenue and potential—or about 63 percent of total company revenue and potential. From a focus and resource allocation standpoint—including headcount and compensation dollars—we could see that the company was spreading its limited global account sellers across far too many accounts. Very simply, the company had drawn the line too low for global accounts. It had become a program that was diffusing focus from those top few accounts that, if they were more highly penetrated, could help the company grow significantly.

We solved the problem by tightening up the definition of global accounts and developing a true global account program that would provide the company with a stronger value proposition for those customers.

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