The Future of Sales Roundtable: Growth by Acquisition

Growth by Acquisition - Imperatives for Sales Success and Getting the Expected Outcomes of the Deal

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Mark Donnolo
All right. So let’s get going. How’s it going, Michele?

Michelle Seger
It’s going well.

Mark Donnolo
Good, good. I’m doing well early here on the East Coast 8 a.m., and it’s early for us. I had to get up super early today, Michelle. I had to skip my yoga this morning so my downward dog was down.

Michelle Seger
Oh, they want to know what that looks like. I’m not sure.

Mark Donnolo
So we welcome everybody to the sales glow future sales roundtable. We’re talking about mergers and acquisitions today. I’m Mark Dan, also here with Michelle Seager. And Michelle, this is an exciting topic.

Michelle Seger
Yeah, yeah, we’re really excited about it. I’ve been waiting for this one. So we are ready for you.

Mark Donnolo
All right. Let’s talk a little bit about who we are. First sales. Look, we are a problem solving firm for sales and we solve the toughest sales challenges in areas like sales strategy, sales organization, design, sales compensation. We’ve written a few books, we publish lots of content. So lots of background here if you like it. And we’re going to share a little bit of that today with you and we’ll jump into some of our topics here today.

Mark Donnolo
Michelle Yep.

Michelle Seger
Okay. So we’re going to talk just lay a little foundation for everyone about mergers and acquisition activity across the world and what the sales synergy expectations are and why companies don’t realize those synergies will get into the top M&A challenges for the sales organization. And finally, six takeaways for you. Now, this is going to be a fairly fast and furious session today.

Michelle Seger
There’s a lot to cover when we talk about things and actions that you can take in the short balls of M&A. Please feel free to leave any questions you have in the chat and we will make materials available to you after the session.

Mark Donnolo
And I want to point out one big point here is we’re going to going to you talk about the actions, Michelle. Yes. And that’s what we’re focused on here is things that you can actually do. So we’re going to get beyond the concept. We’re going to get beyond the broad strokes and get into real specifics.

Michelle Seger
Yes. Yes, we are. So what do we know? Some of the things that we know is that in 2021, it was unprecedented for M&A activity and it really doesn’t show any signs of slowing down. We also know that technology acquisitions is leading the way. And also interesting for those of you in sales, there’s a lot of consolidation across many sectors, including sales enablement.

Mark Donnolo
Right. Right. And, you know, while 2021 was hot, 2022 is still very high. We have other acquisitions, mergers that have happened before that. And we’re still dealing with the integration questions on those because a lot of times we see these after the fact. Right. It’s not after the deal is done because there’s all sorts of optimism about getting the deal done.

Mark Donnolo
But it’s after things aren’t working and those things are starting to show up now from even prior years.

Michelle Seger
Yep, that’s correct. So what we know is it takes about 1 to 5 years to realize the synergies and what we also know is that there’s this big race to own this space. Yep. So let’s get into what those expectations are when people or companies are deciding to make a deal, they’re looking at what we call synergies. And there’s three different types of synergies that are the focus of the acquisition.

Michelle Seger
We start with cost synergies. That’s probably the easiest one to explain. You get into things like headcount reduction, redundancies and.

Mark Donnolo
Obviously.

Michelle Seger
Foundations of locations and then we get into the revenue synergies and we’re going to get deep into those because that is about growth. It’s all about growth. But the assumption, right, Mark, is that we’re going to make more revenue or have more growth as to as a combined organization than each organization would make on its own. Right. It’s a really important point.

Michelle Seger
And finally, capital synergies and just think about that as oh, gosh, as a as a larger organization, I can probably get better lending terms or better negotiations on contracts. When I’m making purchases.

Mark Donnolo
So so when you’re looking at the sales organization in a couple of minutes, we’ll get into those first couple that you described, the cost and the revenue, because that’s where sales has the biggest control.

Michelle Seger
Yep, that’s right. Yeah. But what do we also know? Unfortunately, 70 to 90% of M&A activity, it fails to deliver the expected outcomes or those synergies that we just touched upon, which makes us really ask the question why? Yeah.

Mark Donnolo
That’s a great question. So I think what happens is we have a lot of excitement around the deal. You know, when you when you do a merger, you do an acquisition, you want to get it done. There’s lots of optimism and we don’t look at how to actually make all these different things works. Let’s take a look at these areas specifically around, as we mentioned before, the revenue synergies and the cost synergies.

Mark Donnolo
Right. So within revenue synergies, one of the first areas, Michel, is cross-sell. So we have products that we think we can sell to the other products or other other companies customers. Right. So that is probably one of the biggest ones. And you see some of the stats here.

Michelle Seger
Oh, my gosh.

Mark Donnolo
The importance of that.

Michelle Seger
Yeah. So cross-selling, Mark, I need to bring this up. It’s probably the number one challenge that we face when companies come to us and they say, okay, this isn’t working. It’s the number one challenge that we get from sales is we’re not getting the cross-sell numbers. So as we dug a little deeper, this was confirmed through a study in late 2020.

Michelle Seger
McKinsey did a study around cross-sell. And what they found out is that 20% of the revenue synergy expectations are from cross-sell, but yet 19% of companies achieve that goal. That that’s really a big problem.

Mark Donnolo
Yep, big gap there. So I mean, if you just fix that one, that that’s a huge opportunity. New products and solutions or bundles putting things together. Right. So the old peanut butter and the chocolate going together and how do you make that into a better product? You know, hardware, software, services, that kind of thing, geographic expansion. So we are not, say, in Europe or in Asia and we can acquire to get into those new markets or in a similar way segment and sector expansion.

Mark Donnolo
So we need to get into the SMB market or the consumer market or you think about sectors we need to get into legal sectors so we can we can move in there. So lots of synergies you can get from a revenue standpoint. And then if you flip over and you think about cost synergies, what do we get financially?

Mark Donnolo
Well, one of the first ones and this is really arguably a revenue synergy as well as sales capacity improvement. So having more resources to be able to offer what we have to offer and we’ll look at sales capacity more specifically in a few minutes. The big obvious one, headcount reduction. So we see that one coming, you know, pretty quickly in a lot of M&A situations.

Mark Donnolo
So very simply from a sales organization perspective, we’ve got overlapping territories. You got two reps in each territory. We have to figure out we sort them out, how do we do draft day and pick the right people for those for those territories and then streamline processes? So one company has best practices or other types of approaches that can be applied to the other company to create efficiencies.

Mark Donnolo
So if you take revenue, you take cost synergies, you put these things together. These are some of the the levers that you could pull. But the question is, Michel, we know this and concept. How do you actually make it happen in reality?

Michelle Seger
That’s exactly right. And the other point that we should make is that often these decisions are made without the input of the sales organization. So it’s a top down, right?

Mark Donnolo
It’s the deal people are getting the deal done and they may have a chat with sales and then later, you know, the acquisition is done and then sales has to make it happen.

Michelle Seger
And they’re like, whoa, what? So anyway, yep, a a when we ask the question why? Right. What we decide to do was every year we do a survey with World at work. World at work largest one of the largest h.r. Organizations globally. And in this we decided i think it was three years ago now, marc, we decided to add m&a challenges to that survey.

Michelle Seger
Those survey results are available to you. If you ask for that, you can ask again for that in the chat. But what’s important here is we had 410 company participants participate in the M&A section of this. So 56% of the organizations of the 410 had engaged in M&A over the last two years. That is a lot. Yeah, just over the last two years.

Michelle Seger
So over half are very statistically relevant. And the other important point is, although you see technology leading the way at 14%, manufacturing is not far behind at 12 and then health care at ten. We’ve got distribution wholesale, I think also at ten. And then every other sector was maybe at that eight, 7%. So we believe that this is a pretty well-rounded representation of M&A activity.

Mark Donnolo
Yeah. And when you take you mentioned technology, you take technology in particular and ask the question, have you been involved in a merger and acquisition in the past year? It’s well over half of those companies. You said 56%, but even higher than that that are saying in technology. Yeah, we have so very hot area.

Michelle Seger
Yep, it sure is. So what did we learn from that survey? Well, when we looked at the top challenges that they have right at the top and we’re showing you a little bit of a year over year, although the numbers changed slightly, not entirely, but that different role definition alignment across the organizations that does come across as the number one challenge for companies.

Michelle Seger
And what that means is, you know, you you have and will get will solve for a little bit of this today you’ve got different titles that can mean completely different things or a way that a role is executed, an inside sales role, for example, that company could be very different from company B and we’ll give some good examples of that as well.

Michelle Seger
Incentive compensation alignment. Ooh, boy, we are asked to solve for that one all the time as well. Mark. And that just means that the plans are very, very different and often the acquiring organization is trying to figure out, okay, how do we align this thing? Because we’ve got to roll these plans out globally, we’ve got to drive similar behaviors, but yet the plans are nothing in common.

Michelle Seger
Total target compensation and the pay levels across the company, they could be very different across those roles.

Mark Donnolo
Yeah. And that’s going to tie in with the incentive comp, obviously number two and number three go together because especially with the war for talent, you’re running into issues of paying competitively and you know, you get this big difference in a lot of acquisition situations where it may be the same job. Say it’s an account manager or an account executive, and they’re in both companies.

Mark Donnolo
They’re doing the same thing and they’re getting paid dramatically differently. Right. So that can become a really hot area very, very quickly.

Michelle Seger
Yes, it can. And then integration of the sales organization. So let’s not confuse role definition with integration. Role definition and just means that we have a clear understanding for what everyone is doing, the swim lanes that they’re in. Integration means we’re actually pulling those two teams together a lot of companies make decisions that at least in the first year, they’re going to let each team just run on its own right there.

Michelle Seger
We’re going to leave them independent. And what they do is create these unintended consequences of people now getting comfortable with running separately instead of together. And that falls into the next point. There are around the cultural differences, right? So what you end up doing is allowing people to continue with their own current culture. When you do that and it can create more muddy waters than intended.

Mark Donnolo
Yeah, and I think culture is one of the biggest challenges we see in an integration of sales organizations. And so culture means, you know, you might have an organization that is very sales oriented, right? And you might have another one that’s maybe very engineering oriented or there may be other subtleties as well, just in terms of the personality types than a company.

Mark Donnolo
And if you don’t address those cultural differences, that can become a big question. And if you take that culture area and you go further up to the incentive compensation, you think back again to war for talent. Right now, those are two really sensitive areas to make sure we get right because we want to make sure we hold on to people after the acquisition.

Michelle Seger
That’s right. So then we took a look at larger companies to understand what the impact was and what you’ll see. It’s the same top challenges. The other thing you’ll see is that a greater number of those companies are citing them as a challenge, which isn’t any surprise to us. So think about the Titanic, right? It wasn’t built. Oh, you shouldn’t use the Titanic.

Michelle Seger
Queen Mary. Queen Mary got married, so it wasn’t built in a day. And it’s going to take a lot more to change course on that Queen Mary than it would be on a skipper. Right. So, you know, a lot of those things aren’t as mature in smaller organizations. They’re not as as ingrained into the culture, less flexibility. And that’s so those numbers really didn’t surprise us.

Mark Donnolo
All right. So let’s turn the ship a little bit here and we’ll take a look at some of the things you can do. So we got this idea of synergies that we talked about right on the left hand side, and then you got these results over here. So we say we’re going to get all this stuff, we’re going to have more sales capacity, we’re going to have better cross-sell.

Mark Donnolo
We’re going to more revenue, more cost. And it’s like, okay, well, go ahead and do it now. Okay, well, what do we actually do? And so we picked out six areas that that we work on, most commonly an M&A situation. And we also see working really well in organizations that do it as well. And these Big Six, if you do these things well, you’ll be able to get those kind of results on the right hand side.

Mark Donnolo
So number one, alignment of segments. So making sure that we’re actually working with the same definitions and and alignment of who we’re going to be going after in terms of our customers sales role and talent alignment. So as you mentioned before, Michel, making sure the roles are actually reconciled and they’re the same roles and then bringing those together, mapping those are bringing those together and the talent that goes within them.

Mark Donnolo
Right. So an account manager may not be an account manager. We have to understand the differences between those sales process and cycle definition, particularly as it pertains to cross-sell. So if we have a different sales process, we have a longer short sales cycle that’s going to be harder for us to do the cross-sell correctly, product and service alignment.

Mark Donnolo
So, you know what? What does the portfolio look like and what do people have to offer? And being very specific about that sales capacity, of course, one of the results. So how do we plan fully make sure we’re going to get what we’re looking for in the M&A situation and how do we identify what the levers are to pull to actually get us there?

Mark Donnolo
And then finally, sales compensation, harmonization. So today we’re going to hit on these the red ones here because those are some you can dig into right away. And we can certainly talk with you further about the other ones as well and get into the details on those.

Michelle Seger
Yeah, what I would love to know is if after today’s session, if we should do a follow up and hit on some of those other areas, as Mark and I were talking about, segment, for example, we can do an entire session just on that one alone. So the big point, right, you’ve got synergies, you got these results and there’s an assumption you’re going to get those results.

Michelle Seger
So what we’re are really focused on are the things that we work with companies on really good key actions that they can take so they can actually realize the results of those synergy expectations.

Mark Donnolo
Okay, so here’s the toolbox. Let’s let’s get into a framework for how to look at this. A lot of people have heard about revenue roadmap. This works really well in these kind of situations because we need a place to understand how things fit together. And so what you’ll see is, as an organization operates well, as it performs well from a growth and sales standpoint, it tends to do well in four major competency areas that you see these levels here.

Mark Donnolo
So insight or understanding what’s going on in the business, in the market, the sales strategy, which is basically the action plan to get to the goal, the big go to market plan that includes what we’re selling, who we’re selling to in terms of our our customers, what our value proposition is, our coverage model. So what kind of channels and roles reusing our sales process are deployment or territory feet on the street?

Mark Donnolo
Question And then finally, the enablement layer which supports these other areas. So incentive compensation, people, programs, technology. So if you take a look at a little bit more detail on this in terms of these different areas, what you’ll see is the big six that we talked about here, they sort of hit some of these areas here. So your products and services, the segmentation, your sales structure, your sales process, incentive compensation talent.

Mark Donnolo
So the point is, as you’re working on these, you have to make sure that these alignments are all connecting together. So if I’m working on something like incentive compensation or talent, I have to make sure it’s responding to the upstream disciplines, the ones that you see at the higher levels here. So having to make make sure all these pieces connect together.

Michelle Seger
Yeah, it’s just a really good tool. It helps frame your thinking and it can also help your prioritize because there’s a lot in here, right? So you can begin to understand where do I need to start? And for every company that’s going to be different. So one company may have less challenge with products and services, let’s say, than their sales process or the talent that they have, right?

Michelle Seger
Yep.

Mark Donnolo
All right. So we’ll dig into a few of these here.

Michelle Seger
Michelle Yeah. So let’s get into that second one mark that you mentioned on sales roles in talent alignment. And this challenge or this sentence is basically what we hear from clients all the time. It’s either the organization, the roles, the talent, they’re just misaligned. Even those with similar titles, there’s always a scratching of the head on that one, and we’re not leveraging any of the combined strengths of the organization.

Michelle Seger
So we get this big question and we’re like, okay, we can help you solve for that, right? So what’s the approach? There’s a lot here, but we’re going to break it down. And again, materials will be available after the session. But the first thing is you’re going to understand the sales role dimensions and a sales role dimension, as Mark will discuss shortly, is is simply nothing more than our simply everything that a sales role could be responsible for doing.

Michelle Seger
So understand those sales world dimension that apply to each role. And then you’re going to create this role matrix and we’ll, we’ll get into that. And then you’re aligning titles. So titles that seemingly are the same, you’re going to align them across these different companies and you’re going to group them together by that role matrix that you created.

Michelle Seger
So it’ll be the attributes of the role. That’s the role dimensions and then revenue responsibility. And finally, you can extend that to the deployment of the sales organization and what we call draft day. And that’s putting basically seats or putting people in the right seat.

Mark Donnolo
Yep, yep, yep. So and I think one of the important areas on this too, Michel, is that this is not just making a list of the jobs, but it’s actually doing the detailed mapping here. And we’ll take a look at this first piece, which is the sales role dimensions, which I think this is one of the keys here.

Mark Donnolo
So a sales role is defined by six different dimensions and some of them are present in a role. Some of them are not present, some of them vary in terms of the level of intensity. So if you look at each of the sales roles in the organization, you can ask these six questions here. So what is it? Sales strategy, responsibility.

Mark Donnolo
So there’s a sell to new customers. Does it sell to current customers? Is it doing retention or service responsibilities or does it do all of those things right? Product responsibility, especially if we’re talking about cross-sell. So does it sell a specific product? Does it sell a whole portfolio? Does a sell a certain category? And the more you answer yes to any one of these questions, the more that particular job has to do, and the more the bandwidth gets wider on that job, broader net job, and gets tougher for that for that job to accomplish market marketing and channel responsibility.

Mark Donnolo
So does it have any responsible body in terms of how it’s going to be going out to pre market, what it does and in what kind of segments is it working with? So is it working with major accounts, middle market accounts, small accounts, certain sectors, you know, financial services, health care, that type of thing. Again, the more sectors a job is covering, the harder it gets for that job sales process.

Mark Donnolo
Is it end to end? So do they generate a lead and take it all the way to close, or do they pick it up after the lead’s been generated? Do they handed off after it’s been closed? And does somebody else implement that? The marketing responsibilities, technical responsibilities, does it have technical expertize around a product? So, you know, imagine you’re working in a high tech company and you say, well, this particular job has to understand the products to a certain level of depth versus they have an SC to help them, a systems engineer to help them.

Mark Donnolo
And then finally managing responsibilities. You have some jobs that are selling sales managers so they don’t just sell, they also manage people. Right? So you can imagine if you said, yeah, they do that. Yeah, they do that. And you said yes. And every one of these you get a pretty expansive job and then you get a job that’s really hard to execute, right?

Mark Donnolo
Number one. Number two, if you ask these questions about all of these jobs in your combined organizations, you can start to align them and find the points where they’re misaligned and start to bring those together and do some consolidation.

Michelle Seger
That’s right. So this is a great starting point. Or we would say it’s the starting point by looking at sales road dimensions and asking some key questions. Now, where do you get this from? You get this from not just the job description and getting whatever documentation from h.r. But you need to talk to people. So talk to sales leaders, talk to managers and understand what people are really doing and where they’re spending their time.

Michelle Seger
So I’m going to take a quick Segway before we go to the next one and give an example of marketing responsibilities. We were talking to a company very recently about marketing responsibilities of the team, and they had a brand new hire, a really talented individual who said, I got to tell you something, I don’t feel like a salesperson.

Michelle Seger
I feel like an event planner, real words out of that person’s mouth. So we had to look at some alignment on that. So don’t make assumptions. Just know that you got to ask some questions of the people that are doing the work. So now let’s get into this role matrix that you’re going to create. Once you know what the sales road dimensions are, you’re going to take all the different job titles across the different companies.

Michelle Seger
You’re going to put them down in a in a workbook, right? So you got to document them. And I got to tell you, it can be a weighty experience. I remember a recent another recent acquisition that took place, and we had over 98 different titles that we were reconciling. Now we ultimately got those into six different job categories, which will be part of this whole mapping, but know that you can have a lot of titles there.

Michelle Seger
And what you want to understand are a few key things sales, road dimensions we’ve already covered, and you’re going to build on that and say, Well, what’s their revenue focus? It’s going to be very important to know if someone is responsible for new business versus contract renewals. For example. It impacts things, everything from what they’re doing to how they’re being paid.

Michelle Seger
You’re going to look at the attributes of that role. So Mark just brought up different talent and skill required. It’s if you’re in a technical sales role, you might have certain certifications that are required or are years of experience. And then what the key objectives are and then really importantly, how they do it. And why do you want to know all this?

Michelle Seger
Because that’s really going to help inform if titles, are they really doing the same thing? Those job roles that you’re hearing about and the next step is you’re taking you’re going to group them into this is harmonized roles. Now I just mentioned to you that we had this example of that company I was just discussing the global company.

Michelle Seger
They had over almost 100 different unique job titles or so. We thought they were unique. We got them down to about six different job categories we’re showing for right now. And we looked at, you know, things like you’ll see that one of the companies that’s there in Green, they do new customer wins. That’s the focus of the job all the way down to one that might be responsible for technical sales or just contract renewals.

Michelle Seger
So you’re going to create a mapping and let’s see what that tells us across those different job titles. What’s going to pop out? Well, what popped out of this one is account managers have very different revenue responsibilities. So an account manager at one company, they’re out there winning new logo business only an account manager at another company is responsible for growing the account base.

Michelle Seger
So what we’re selling within an existing account, growing more of that year over year and in another case, that account manager was actually the technical sales role and lived, if you will, lived on site at their clients where, you know, when we talked to them, they actually said, well, our client really doesn’t know the difference between us and themselves because we we basically live on site.

Michelle Seger
So account manager, which has a lot of assumptions, can actually have very different revenue responsibilities, which translates into very different responsibilities.

Mark Donnolo
You know, one of things I find too, Michel, when you do an exercise like this, which you can see, it’s pretty rigorous and it’s pretty logic based, is that a lot of times the managers, the leaders that are involved in the process have different understandings of what their jobs do.

Michelle Seger
Yes, they.

Mark Donnolo
So in particularly like if you’re working with managers from different parts of the country, you’ll find out that even in the same company, they’re using those jobs differently. So it’s a really great exercise just to get alignment overall, even beyond the M&A situation.

Michelle Seger
You know, Mark, you make a really great point because often, you know, the question becomes from clients. So you want to talk to the sales leadership. Well, you want to get down to the front line. And I’m not saying that in an organization of 2000 people, you need to talk to all 2000 people. But you can get good representation from front line management that typically understands what’s going on.

Mark Donnolo
Yeah, I mean, I think of a situation where we’re working with a company. They said, we need you to go out to the field and understand what our people actually do because they had all the titles, but they really didn’t know what they did. And what was happening in California was different than what was happening in Maryland as an example, in terms of those jobs.

Michelle Seger
Yep. And again, what happens is all of that is underestimated.

Mark Donnolo
All right. So sales process and cycle definition. So if you’re going to do cross sell, you have to know how the sales process is going to work. You have to know how the rolls are going to work. And we might hear a challenge like this, Michel Our sellers on cross selling because something isn’t aligned.

Michelle Seger
Right near it all the.

Mark Donnolo
Time. And then we look and we see stuff like, well, is we ask questions, is a different buyer? Is the cycle different? You know, do they know how to sell it or is there a risk? So let’s take a look at some key questions you can ask in this in this particular area here around what you can look at around the sales cycle.

Mark Donnolo
So we have six different areas here to take a look at the buyer. And for your sales process, ask these these questions for each of the situations is the same buyer for the cross-sell. So I can think of a situation, Michel, where we’re working with a shipping company. This is a while back and they were moving into the financial services business and well, we can offer, you know, receivables factoring and we can offer all sorts of other financial services around our shipping products.

Mark Donnolo
And our people that sell shipping are going to go in and they’re just going to offer that to our customers. Right. And so they acquired a financial services company to do that. Well, lo and behold, the shipping people need to get to a different buyer because it’s not the same buyer. The buy shipping that buys financial services big.

Mark Donnolo
Yes. You know, underestimation of the difference between those.

Michelle Seger
Right. You know, what we see, we see all of these assumptions that because I have a great relationship, it may be your one of your top ten strategic customers. Right. Because I have a great relationship. We got a great customer there. Yeah. They’re going to have the buying is not really going to be a challenge, but you may be starting from.

Mark Donnolo
Somebody completely different, right? Yep. The offer. So do you have different offers is one offer commodity, the other specialized is one more of a capital purchase. The other is maybe more of a service this cycle. So you may say we’re going to cross-sell, but we have different timing. One is a long, more complex sales cycle. The other one maybe is a faster, more transactional sale cycle.

Mark Donnolo
The role you just mentioned roles. So the roles mapped, are they are they integrated well? Talent. Okay, this is a great one to kind of like what I just mentioned before. Do the salespeople have the talent to recognize the opportunity for the cross-sell, to ask the right questions, to communicate the value proposition, to bring in somebody from the other organization, perhaps at the right point to help with that cross-sell?

Mark Donnolo
Or are they going to try to take it down themselves and end up losing it? Right. Which we see that. Yes, we.

Michelle Seger
Do see that happening.

Mark Donnolo
And then finally, this one comes up a lot of risk. Right. So I’ve had these accounts for a long time. I’m an account manager and the last thing I want to do is introduce something new that’s going to introduce risk, or I’m going to bring some guy or some some gal in from this other organization that I don’t know into my customer and they’re going to mess things up.

Mark Donnolo
So I don’t want to create risk. So the benefit to me is not as big as the risk of messing something up. So six big check points, you can look at here. And and again, we can go deeper into this as a follow up, if you like, by just saying some things you would look at around the sales process and the cycle definition.

Michelle Seger
Right. Just being aware of these things, we tend to so we just talked about earlier on that the decisions around these synergies are made right up here, right at the DEALMAKER level. And they’re not really thinking about the salespeople may not may not really want someone else in their account. For example. So, you know, these are just really big good considerations for you to have that you can address.

Michelle Seger
And again, pretty practical approach that we know works.

Mark Donnolo
All right. And then one of my favorites myself, sales capacity. Yes. Okay. So this is probably one of the most important things we do, the most foundational things we do in every M&A situation is we develop the sales capacity model because we have to be able to manage to that. So the challenge we hear is we don’t know exactly how we’re going to get the growth synergies or what levers to pull or manage to.

Mark Donnolo
Okay. So let’s look at what the solution might look like here. So you need to prove out the growth plan. What I mean by that is it’s not generally this is not that we’re going to have these synergies, we’re going to cross-sell stuff. It’s I want to see exactly how we’re going to be able to get to this in terms of which resources are going to do it, what they’re going to sell, how long it’s going to take, revenue per person, all those kind of things.

Mark Donnolo
And then you have to manage to that sales capacity model. So you’ve got to prove it out, you got to manage to it and you’ve got to know the levers to pull to exceed your integrated goals. And what I mean by that is, do I need to do something different in terms of the this the staffing, what people are doing, the sales process or the sales cycle, how they’re doing it?

Mark Donnolo
So there are different levers that we can pull there. Okay. So let’s take a look at some of the the details behind this and I’ll just give a broad view here initially. Okay. So the big idea and this is what we call the quarter success model, this is in the book quotas, as you can see on the upper left if you want to go into detail on this.

Mark Donnolo
So you’ve got two big pieces here. You’ve got market opportunity, see right there. And the market opportunity, you’ve got your segments, you got your offers, you got your macro market environment. So there’s a certain amount out there, right? So say we’re talking about the United States as an example. There’s a certain amount there in the U.S. There’s a certain amount out there in the in the regions, in the geographies and within those different sectors.

Mark Donnolo
And the point we want to look at here is with sales capacity, how do we get that? So sales capacity is going to be made up of elements like the roles. Yes, the staffing in those roles and the level of talent, the time that people are spending on selling. And we know, Michelle, from our our research work that people spend about half their time selling.

Mark Donnolo
And so there’s a lot of extra capacity in there because they’re doing service and operational things. So right there, you know, there’s an opportunity to get more capacity and workload. Workload is how much time does it take you to sell a new customer as an example or manage your current customer? And, you know, a hint there is to sell a new customer.

Mark Donnolo
It’s not just, you know, it takes X hours to win the new customer, but how many hours does it take to work with all the prospects in the pipeline that fall out along the way? Right. So we have attrition rates. So this is kind of the big picture on the model, but we’re going to take a look at some details here.

Michelle Seger
Yeah. So there’s work to get to that sales capacity model and you’ll see you’ll see one right behind us here. But it involves doing things like the TIME study that you talked about. It involves doing things like understanding what people are doing and what workloads are. But this particular one, and Mark’s going to get into some of the detail was probably one of the favorite my favorite sales capacity models.

Michelle Seger
It was we were working with a health care company that was setting up a new structure and we were building new roles. So we went through this role mapping process. We went through two companies that had merged, but we’re also adding brand new roles into the mix, and it was really on the pipeline development side of it.

Mark Donnolo
And this one looks a bit like wallpaper, doesn’t it? Because there’s so much up there.

Michelle Seger
It does.

Mark Donnolo
But you’re not supposed to read this, right?

Michelle Seger
No, no, no.

Mark Donnolo
We’re going to show you a few snapshots here. But but do not try this at home. It could be dangerous. So get expert help. Okay.

Michelle Seger
So, okay.

Mark Donnolo
So we’re going to zoom in on just a couple of pieces there. So one piece is the goal that you have, right? So you have to know what is it I’m going after in terms of of the goal. And this is a particular slice of this organization, just a piece that we’re showing you. There’s a certain growth rate on that goal.

Mark Donnolo
And what doing, as I said before, exceed your objective, exceed what you’re looking for. So we’re overshooting the goal in this particular situation here. So there’s your goal. Okay, addressable market opportunity, showing you a super high level here, but a lot goes behind this. So there is a size of the market. Now you’ll notice here we start breaking things out.

Mark Donnolo
You’ll see you’ve got up here, new logo and then you’ve got client sales, current client sales. So you’ve got new new customer and current customer basically. And then we’re breaking that out into different tiers of customer. Okay. So sales capacity. Okay. So one of the first things we’re going to look at here is the amount of time that we have to sell.

Mark Donnolo
You’ll see a cute little thing here behind Michelle called Sales Time Optimizer her the slide over there. There you go. Okay that’s all tool use that that runs on runs on the phone here at Sales Globe. And that basically is a time sampling tool that the sales team can use. So you can know exactly how they’re spending their time in terms of sales time, non sales time broken out by sales process, step products, customer types, that type of thing.

Mark Donnolo
And it’ll give you a lot of good inputs for sales for your working sales time. So how much sales time you have right divided by the workload is going to tell you the capacity you have in very basic terms. So again, you can see it’s broken out by new customer, current customer and tiers. So and then we’re going to start breaking it out by jobs here in a second and then down to your workload.

Mark Donnolo
Okay. So workload, we talked about new customer and we talked about current customer and we look at things like pipeline flow, the number of accounts they’re carrying through conversion rates. And then we look at hours per sale and all the way down at the bottom, which you’re not going to see here, but all the way down at the bottom, you can see the total staffing required to be able to hit those goals.

Mark Donnolo
So in short, what it’s going to tell you is it’s going to tell you exactly what you need in order to get to your goal. And then the good thing is, once you build this, Michele, then you can go in and you can start saying, okay, we actually need more people in this role and fewer people in that role.

Mark Donnolo
And these people, we need to get their sales time up. And how do we do that? Oh, well, you know what? Maybe they’re doing too much time doing demos on something and maybe we can move that. Deb, those demos to a demo team to free up some sales time. Right. And maybe we can decontaminate their job by shifting some of the service activities out so, you know, all the levers to pull and you can actually manage to the machine here instead of broad strokes, which becomes extremely powerful in terms of being able to get to your goals.

Michelle Seger
Yeah, that’s why I really love the the sales capacity models that we build. And this one in particular gave a great example of roles. And if you add or change the different roles, how that impacts the end result, what your quotas are, what the what the revenue impact will be. I mean, I just think it’s a really great tool.

Mark Donnolo
Yeah, it takes out a lot of guesswork.

Michelle Seger
It does. Yeah.

Mark Donnolo
So sales comp harmonization.

Michelle Seger
Yes, sales comp harmonization. So here’s what we hear about sales comp again every single day we hear things like we’re not getting the right behaviors. The integrated company, the company that we bought it doesn’t align with our own strategy. We’re not getting the ROI we expected from the team. And again, you know, the first question is, is it back on the comp plan?

Michelle Seger
And it could be driving turnover and we do find that it does drive turnover because of pay and equity or or C pay in equity or they’ve made some sort of change to the plan that people just don’t understand. And it does create some conflict within the organization, particularly when you just do nothing.

Mark Donnolo
Yeah, right.

Michelle Seger
Yeah. So what’s the approach? We use a method again to align comp to the strategy and we’re going to ask you to take a step back. And first look at the sea level goals, which Mark will be getting some of that with me. And then you’re going to put what we call the sales compensation diamond. We’re going to put that thing to work.

Mark Donnolo
All right. Let’s check it out. All right. So sea level goals, Michelle, I think the first thing to mention on sea level goals is this gets way above the compensation plan. Yes. And where we started to work on this was was years ago with a little company, little Fortune 500 company up in Boston, which will go unnamed for the moment.

Mark Donnolo
But there was this guy, Bob, who was CEO and he was notorious for tearing up sales comp plans and they can never get comp plans to work with. Bob. And what we figured out with Bob and other CEOs is if you could ask them five questions, you could get enough to be able to design a plan that was really going to work.

Mark Donnolo
So we asked these, these five big questions here.

Michelle Seger
Yeah. So we start with the customers. So what are the customer priorities and what’s important? Are you looking at getting new logo business, for example, or retaining and growing the base that you have?

Mark Donnolo
Yep. And it could be even the type of customer within the customer. So yeah, you know, I remember old Bob said, well, we want to sell at a more senior level in the organization. So we’re kind of selling to procurement. We need to get to the sea level product. I remember one thing Bob said was, we need to actually sell our full portfolio of services.

Mark Donnolo
So that was an M&A situation. They had acquired a digital company that expanded on to their their premise based physical company and they said we need to sell the whole portfolio. Problem was always people didn’t know how to sell everything.

Michelle Seger
Yeah, that’s a big challenge, isn’t it? So taking a look at the product priorities and then how you enable them and that leads to coverage. We just discussed that some companies have a very different go to market strategy. I’m thinking about a global technology company that they did most of their set well, all of their sales through an inside sales team, very highly tenured, very highly skilled with a lot of certifications.

Michelle Seger
And the company that acquired them inside sales team that they had, which was several hundred people, it was an entry level role to a field sales role where they had to manage that one, you know, because of of assumed assumptions around that inside sales role was now suddenly going to be a role that wasn’t quite as as important as it was before.

Michelle Seger
So anyway, you need to look at what those the coverage model is and the channels that are the priorities and that leads to the talent that you need. So I just described entry level versus highly experienced. What are the priorities there? What do you need to to actually go to market and meet those other sea level goals?

Mark Donnolo
Right. And then finally, your your financials, right. Yes. And what’s important to the CFO. So you’ve got to make sure that you can line up to what you’re looking for, for productivity, what you’re looking for for revenue, what you’re looking for, for profit. Yeah. Okay. So if so, when you ask those questions, it might be, well, why do you need to know those things for compensation?

Mark Donnolo
Well, it’s not that you just want to know the answer to those questions for the business. You want to know what does that mean for the compensation program in this particular situation? So what does that mean? If you want to get, you know, to a certain level in terms of the product portfolio or a certain place in the customer, what does that mean for the company and how does that translate?

Michelle Seger
Yes, that’s.

Mark Donnolo
Right. Okay. So let’s dig into the details then of what you might look at around the compensation plan. So if you were going to go into the specifics of how to look at compensation, this is where you would start. This is what we call our sales compensation diamond. And you’ll see, Michelle, it does not start with the first thing that comes up in every comp conversation, which is the mechanics of the commission rates.

Mark Donnolo
That’s actually step number seven here. It starts in the middle with those sea level goals. So if we know what the priorities are and you talked about the rules before, if we have the roles established, those roles become the foundation or the platforms upon which we designed the compensation program. Right? And so then we can look at these areas that you see on the upper right, the framing of the plan.

Mark Donnolo
So your target pay levels, your pay mix, your upside potential, which is for your top performers, your threshold or entry points in the plan. We can then also look at the lower rate, how you linked pay and performance together. So what kind of measures are we using? What are the weights of those measures or priorities? Are those measures are we paying at an individual level or are we paying at a team level?

Mark Donnolo
But we know there’s a lot more focus on individual level measures now and then. How do the mechanics work? So how do you connect, pay and performance together in terms of commission rates or goal based scales, that kind of thing? And then how do you align the team and financials? So how do we set goals? How do we make sure the plans are congruent on the plan?

Mark Donnolo
Congruence When you talk about your sales roles, you need to make sure those roles are going to work together the right way in the sales process. So once you’ve done your integration of the sales roles, you have to make sure the comp plan is going to motivate them to do the right things. And then finally, how you operate the plan on the upper left, your your governance, your policies and how you evaluate the plan.

Mark Donnolo
So when you’re evaluating the plan, you’re going to take one spin around on this. And then when you’re designing, you’re going to take another spin around this. So this is pretty exhaustive in terms of all the major areas to look at. But within M&A, there are some specific areas. One.

Michelle Seger
Oh, yeah. But first, I just want to say and this really works, so we have this diamond, you know, again, it’ll be in the deck. There’s a little bit more detail that goes behind it. But we highly encourage you, instead of jumping down to the mechanics or instead of saying, gosh, we just need them to be on our plan, right?

Michelle Seger
This acquired organization kind of take a look at these different components and then figure out how you get that stepwise approach there. So now to make this practical, let’s talk about and get into some of the things that we definitely see within M&A and not solely within M&A. But we see this all the time and it starts with the biggest point at the top, which is, hey, philosophy differences, right?

Michelle Seger
And we run into that a lot and that can be anything from I want to, you know, me as a or us as a company. We want to be a top payer in our industry because we want to attract and retain the best talent to others that may say, you know what, we’re okay being middle of the road because middle of the road or an average payer because the value proposition that we offer and there’s a whole lot of other things that go around pay philosophy as well.

Michelle Seger
Yeah.

Mark Donnolo
And think back to the culture question to Michel, which is if we have a sales culture, we might have a different pay philosophy than if we have more of an engineering or operations culture. You bring those two together, you’re going to have a clash right there.

Michelle Seger
Yeah. The next thing that we see and this is the next to create a lot of consternation. The first one is that whole pay level variation. Now, remember, we covered a lot earlier, this raw mapping matrix. And what we have found is if you do that properly and you align the roles properly, if people understand that, you’ll find out in many cases that the pay level variations may not be as great as you expect it or as they appear on the surface, only because what hasn’t happened is the jobs haven’t been aligned.

Michelle Seger
And that’s not to say that there aren’t differences. We go into a lot of organizations where there are and then there’s a method for how you can help get them there. The next thing would be around the pay mix inconsistency now and again, this goes back to the pay philosophy. So do I. People to have more of a pay for performance plan where I might have greater incentive compensation.

Michelle Seger
And that just means that based on what I sell, that’s how I earn or in other companies, there are some companies that just pay a complete base salary and a bonus based on corporate meeting, corporate objectives. So, you know, that also can pay a fall into that pay philosophy, but it really is inconsistent pay mix. And then on upside potential.

Michelle Seger
So upside potential, what is that? That is basically are you looking at that? I thank you, Mark Eddy. Anyway, what we’ll have is different views on that. So you know, Mark, you always like to take this back to a question and the question on upside. It goes into that pay philosophy, but it says something like this.

Mark Donnolo
Yeah, I mean if you okay so could your and you could ask each organization.

Michelle Seger
Yes.

Mark Donnolo
Should your top performing wrapper could your top performing rep earn more than the president of the company? And so you get a visceral reaction there. Which when are you when you ask that question and somebody might say, well, of course, we’d love to see that, or the other organization might go, Well, no, that would kind of violate our pay bands and our pay policies, right?

Mark Donnolo
Yeah. Well, right there you have a big cultural difference in terms of how they think you might have a pay philosophy difference, and that’s something you got to watch out for. So that hits on your philosophy and your upside.

Michelle Seger
It does. And then just to be clear, upside is what that anything above what the target incentive is that you would expect out of those that meet their goal. So 90th percentile your top performers typically would be the earners of that upside. And then we get into measures and priorities. Gosh, that’s a whole nother thing. Misalignment on that.

Michelle Seger
Let’s think about a mature company, right? That that buys a cutting edge, smaller company that’s out there just wanting to grow market share. Right. So it could be all about just as as many accounts as you can get, as much as much revenue as you can get. Profit may not be very important for that. That company, that up and comers.

Mark Donnolo
Right. Right. Or even the question of we pay account managers on bookings or we pay account managers on invoiced revenue. Right. Very different. Right. And you put those two together, you got a big a big delta between them.

Michelle Seger
So taking a look at not just what the measures and priorities are, but then the why behind that, because there’s usually a rationale and there’s a way to get where you need to go. And then, of course, we have the mechanics, right? They’re not well understood. That happens a lot, right?

Mark Donnolo
Yeah. So one company might pay on a commission, the other company might pay on a goal based plan. And they have almost kind like, you know, philosophical views on why that is the most important thing to do and you can’t bring them together.

Michelle Seger
Yeah, we’ve got really great tools when we think about things like the plan calculator, there are tools and things that you can do as proof sources to help people understand as you do change those mechanics that that ends to take that that fear away. And then there can be a whole misalignment on quota setting, not only how they’re set, but what the the quotas need to be, what they look like for each person.

Michelle Seger
In some companies, they’re a hard target to incentive. In others, it’s a guideline.

Mark Donnolo
Yeah. So I’m thinking of a difference between two companies. That was, you know, one company’s quotas were twice the size of the other companies quotas. But then there were different assumptions that went in there in terms of what they were selling, because the product portfolio was different for you to put two account managers together from the different companies and ones got double the quota in the other and they’re paid roughly the same.

Mark Donnolo
That could be an issue.

Michelle Seger
It’s a real problem. And then of course, the lack of governance or administration, this extends well past M&A. Governance just means that you’ve got a very clear policy for oh gosh, let’s say a bluebird deal. So it’s a really big deal, what we call them. Well, deals, right? So just having the right governance and administration, that’s very consistent.

Michelle Seger
That’s what you want to be looking at. So again, these are the top eight things it seems like a lot, right? The top eight. But the eight things that we see across M&A that is an issue, some greater issues than others. But all that need to be looked at and what our our purpose today is to provide you a framework to begin to solve for those challenges so you get the outcomes that you expect.

Michelle Seger
So with that, Mark, we have concluded our first M&A overview for everyone that’s listening here today.

Mark Donnolo
I think it’s a wrap.

Michelle Seger
I think it is a wrap.

Mark Donnolo
Good news is we got some actions.

Michelle Seger
We do, yes. So we want you to listen to us on the Rethink Sales podcast. Please like us there, we’re on Spotify and anywhere that you listen to podcast, you’ll see Apple up there as well. But we did a recent podcast on M&A and you’ll get additional information there. We also did write a white paper on that too, so be sure to ask for that.

Michelle Seger
Get our books right. So you see those books that over there, we’ve got quotas. What your CEO needs to know, incentive compensation. Those are two really good guides to help you through your M&A. And then you know what? Reach out to us. Just talk to us for advice. Any action that you can take, there’s a lot of detail behind the information we shared with you today, but we sincerely hope and believe that we’re giving you some good takeaways to give you a good start on successful acquisition and merger integration of the sales organization.

Mark Donnolo
Yeah, thanks, everybody, for joining us and great talking to this morning and have an awesome day.

Michelle Seger
Yes. We’ll see you the next time.

Mark Donnolo
Thanks.

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