by: Michelle Seger
When you hear the phrase “when two become one” what does it call to mind? Marriage? Fred Astaire and Ginger Rogers? Ben and Jerrys? There’s something very human about the drive to unify. Think E pluribus Unum. If it was good for the American colonies, it must be good for business, right? After all, unification is a source of strength, a symbol of power, and a laudable goal.
In the context of business, “when two become one” may invoke the concept of mergers and acquisitions. Ideally, M&A makes one stronger company out of two or more companies that have complimentary attributes. By merging their resources they may achieve synergies and new capabilities that enable the new organization to accomplish what could not be achieved alone. It’s a great story to tell.
Or maybe not.
M&A isn’t easy. According to a Harvard Business Review study, up to 90% of mergers fail to achieve the objectives that were initially established. Yet, that doesn’t stop companies from trying. In fact, this year, SalesGlobe saw an increase in the number of clients asking us for help to solve some of the issues that hindered or reduced the benefits that leadership had anticipated as a result of companies coming together.
What gives? Why are merged companies not seeing the results they were expecting? Let’s take a look at a few of the common roadblocks sales organizations in particular face when two become one.
Although arguably owned at a corporate level, the sales organization has specific communication needs that are not consistently addressed across companies. Although this might seem obvious, many organizations neglect to develop a common language during a merger. Doing so will require interviews, reminders, and repetition. We recommend compiling an on-line glossary – a living document for everyone to use. Include old terminology of key terms and meanings from both companies along with any new definitions. Don’t assume that people will know what certain terms mean. They may mean different things to different groups. It’s important to drive the message especially to senior management, to begin using this common language as well. It may feel awkward at first. Brave through it. Use the new terms and be firm that you expect others to do the same. Be sure to get senior management aboard on this initiative. Communicate about this terminology early and often.
Even if you can’t discuss the details of the M&A activity, you can communicate the reason why things are changing. Talk about the purpose, the philosophy, and the strategy. There’s nothing more inspirational than a sales leader explaining in her own words why the merger has taken place, painting the vision of where she wants the organization to go. On a more tactical level, talk about the key personnel who will be part of the new leadership team. Don’t assume that people will know the reporting structure. Explain it. It may feel uncomfortable to communicate partial messages, but if that’s all you have, it’s better than nothing. And explain that too! “I will tell you what I know – and as I learn more, I’ll keep you in the loop.” At the end of the day, all people are looking for is just a little information, even if you just don’t have the full answer yet.
M&A may look easy on paper. But in reality, different sales teams not only have different products and services, but also different cultures, titles, protocols, territory maps, and strategies. Merging means more than just signing an agreement, moving people around, and reallocating territories. While building a culture takes time and to some extent occurs at its own natural pace, there are some things you can do right away to get started on the right path to alignment.
We recommend that you begin stepping back and conducting a role inventory. This mapping exercise allows you to begin to establish a common understanding of the different roles in the organization. You will begin to understand how people think across the company, and you’ll uncover clues that reveal the culture and current behaviors of the sales team. For example, is it a culture of accountability and are people held to a common standard? Does the management team lead, coach, or sell? Identifying the similarities and, more important, the differences helps to create a baseline of where each team is. This way, leadership won’t have to assume or guess. Without this basic understanding, it is extremely difficult and in some cases impossible to align the teams.
Building a map that ties together similar roles may seem like a no-brainer, and even unnecessary. But overlooking it can be a snare. In our experience, for many sales organizations there is volatility in titles, pay grades, talent, sales process, sales structures, and in the expectations for various roles – even when the titles appear as though they’re aligned.
We recommend that you start by interviewing key personnel to gain a clear understanding of what each role is expected to do as well as how the job is carried out. Don’t assume anything. Pretend that you’re a beginner. Ask questions that seem to have obvious answers, even if it feels a little silly. You may be surprised by what you discover. A strategic account manager (SAM) from one organization may have different expectations, talents, skills and role definition from an individual that carries the same title from another organization. When the sales organizations merge, it’s in no one’s best interest to assume that a SAM is a SAM is a SAM. The easiest way to accomplish this is to talk with a representative sample of people across each role at each company and the management team. Step through their role and what is expected of them. Then work what each one told you into the role map.
As you map these roles, you’ll be creating a “role matrix” that everyone from leadership down to the frontline sales reps can use as a guide to understand exactly what the current inventory of the newly merged organization looks like. Leadership can use the guide to help make decisions on the best sales role types, structure, and processes to support the future go-to-market model. In our experience, if this exercise doesn’t yield a few surprises and “ah-ha’s” you should dig deeper. After all, no two organizations are alike. Your job here is to begin to learn what made the two organizations different.
Next, identify for each role the customer segment and revenue type for which that role is responsible. Don’t neglect to include the revenue type, which is often overlooked in role mapping. This is part of the secret sauce that will help you understand what each role is being compensated for today. It also gives insight into current revenue priorities. As you go through the map, categorize revenue responsibility into one of three buckets: retained revenue (the same revenue that existed in the prior fiscal year), penetration revenue which is an increase in revenue from the same customers year over year, and new revenue which is new business from a new customer.
Once you have these categories identified across each role in the organization, you’ll begin to see similarities of certain roles and key responsibilities without losing site of the differences between the two organizations. You’re also likely to identify discrepancies. For example, that strategic account manager role may have quite different objectives and pay levels from one organization to the next. As you step through this along with people from both companies, you will become aware of why the roles may be different. Remember to make note of the challenges to expect.
You have now created a baseline sales role inventory across both organizations. This is a great start!
I recall working on a global acquisition integration where we found massive pay differences across most of the management roles that existed in the United States. The acquired company was private, and many of the people there had grown up in the organization. Close examination of the pay levels revealed that around the time that the company announced it was preparing itself for a sale, most of the management got pay raises that were big enough to take the sales organization beyond competitive market pay! Conducting some basic analytics and interviews we were able to uncover what had happened and why. In that situation, the company didn’t need to bring the rest of the organization up to those pay levels. Instead it courageously recalibrated levels that made sense for each role and person using competitive market survey data and individual performance results to make intelligent fact-based decisions. Consequently, very few people left the organization, including its high performers.
The most common scenario we see is one company with at least one role that is paid less than the same or similar role at the other company (or across companies). To look at this in a logical way, we ask that you look at the three components of pay to understand where discrepancies might be. Base pay, target incentive, and total target incentive , which is the sum of base pay plus target incentive pay (what a company expects to pay out if someone is “at performance” for the role).
Take an apples-to-apples look at the performance levels across each company. Is the team that is earning much more pay performing at a higher level than the other company? Is the pay difference on the target incentive? If you have answered “yes”, the good news is that you may not have a have pay disparity. But the bad news is that you may have a performance problem. Look closely at both the expectations and the outcomes: if one company expects a significantly higher level of performance than the other, that may or may not mean that one company actually performs better. In order to make a good comparison and ultimately the best decision for the team, you also need to understand:
Let’s say you identify a pay disparity and you determine that pay needs to be increased across some roles. We recommend that you increase the pay based on incentive opportunity and not base pay particularly if you don’t have a turnover problem with the sales team. This allows you to control your cost of sales, and you can better align pay to performance. Instead of a broad pay change, leadership can evaluate performance and implement one-off pay increases based on individual results. A good way to understand if your roles are market competitive to begin with is to calibrate against one of the large survey data companies that includes sales roles. As you compare the survey data and the current pay levels at each company, you can create pay levels within each role as well as across roles and build a clear career progression within the sales organization. A note of caution when using survey data. Dig down deep into what the role is expected to do. As we already noted, titles don’t always mean the same thing across companies – which means the pay levels and job expectations might not either.
Finally, you are going to have to dissect the incentive compensation plan designs. How incentive is earned will help you understand the current behaviors and expectations of each role from each company.
In the great race toward two becoming one, the finish line may be far off, but it’s never too early to map the route so everyone can face the changes together and unify their organizations smoothly.
For more information on mapping and aligning sales roles in a merged organization, download “Mergers and Acquisitions: Considerations for the Sales Organization”