7 sales organization models for your organizational structure

7 sales organization models for your organizational structure

December 3, 2019 11 By Luis Garrison


Welcome everyone. My name is Greg Alexander and I am the CEO of SBI, a sales and marketing consulting firm committed to helping you make your number. You are watching SBI TV. This is a monthly web TV show featuring guests just like you, executives trying to grow their revenues. By tuning in each month, you can peek behind the scenes and watch your peers discuss their strategies for making their numbers. On today’s show, we have a very unique guest. Tony Capucille is the Chief Sales Officer of Heartland Payment Systems and Tony is responsible for the sales organization’s strategy and development. He reports directly to the Chief Executive Officer and Tony fosters close working relationships with internal and external stakeholders to ensure the sales organization’s efficient operation and success. Heartland Payment Systems is a Fortune 1000 company and one of the largest payment processors in the United States which does $2.3 billion in annual sales, employees almost 4000 employees, 1300 of which are sales people. I described today’s guest as unique. So what makes Tony unique? Well at age 35, Tony is the youngest Chief Sales Officer inside the Fortune 1000. The reason I asked Tony to be on the show is to discuss the seven dominant sales organizational models. Are you wondering if you should go with a Hunter/Farmer Model or perhaps maybe you want to specialize on vertical industry or maybe roll out a new product overlay team? Is the geographic proximity of a sales rep to an account still relevant? These are all great questions and we will answer these and more during today’s show. Let’s welcome Tony to the show. Tony: Hey, Greg. Greg: Nice to see you Tony. Tony: Thanks for having me. Greg: My pleasure, have a seat. Okay so today we’re going to talk about organizational models. Our experience is we’ve done about 100 sales organizational design engagements over the last few years. We’ve seen 7 dominant org models that are used by maybe 90% B to B sales organizations in the world, none of them which is perfect. There’s no such thing as a perfect org model. Tony: Completely Agree What might be right for you might be wrong for me. What’s right for you today might be wrong for you tomorrow. So, I thought we would go through each of these and have a pros and cons review. Get your perspective on it, okay? Alright, so the first org model is what we call stratification and this is defined simply as assigning sales teams based on size of market. So typically you kinda have a pyramid. At the very top of the pyramid, you have your biggest accounts and they’re called on usually by your most capable sales people. In the middle is your bread and butter, mid-sized accounts. That’s called on usually by the largest percentage of the population of the sales force. At the bottom is lots of smaller accounts that might be large in number but might spend just a small amount of money each month with you, and that’s usually called on by some type of inside sales channel or some virtual channel. So, Let me review the pros. In that model, what we typically see is that sales expense is proportional to contribution margin, so that’s a plus. Each segment receives a focus. Everyone’s clear as to what it is they’re supposed to do. You can put the best reps on the accounts with the most potential. Those are in the plus category. Tony: Sure The negative category is that industry knowledge may suffer because you’re industry agnostic in this case. There’s a large geographic dispersion. Proximity could possibly be a problem. Market trends can throw your org model into chaos. If a small company becomes a big company pretty quickly, those types of things can be problematic. What is your opinion on the stratification model? Tony: I’m going back to the first point you made about it shifts, it changes. It’s not always going to be the same. That’s one thing we’ve definitely seen. The stratification model is really interesting and when you get to put a top sales rep on an upper end account, it’s most profitable as you mentioned earlier. It’s a huge benefit. That being said, what I found so often with the changes in the marketplace and its rapid growth, that challenge actually oftentimes overweighs because that small merchant could turn into one of your most profitable clients very quickly overnight. The sales talent at all three levels really has to maintain what you’re bringing to the table because as somebody moves through that stratification, a 10 location can turn into a 400 location franchise overnight. Greg: Quickly. Tony: Yeah, all of a sudden it makes a big difference. You definitely get an advantage to it but on the con side, you have to treat every customer as if they’re going to grow into that most profitable customer. Greg: In your business, have you experimented with stratification? Do you use it now? Tony: Yeah, it’s actually one of the seven. It’s what we’ve done least but we have that and the buyer-centric. We really did look particularly in the micro-segment because we did find that we really couldn’t address the needs of that market as well as we could when we had a specific inside team. It took us a while to get there and that’s really where we started saying, “This group needs to focus on that particular segment and we’ve had a little bit more success in that.” I will tell you, it’s not been the dominant model of Heartland. Greg: Great. That’s one, let’s move on to the second one and this is called the Hunter/Farmer Model which this has been around for a long time. Basically what this means is that you have two distinct sales organizations. You have one group called hunters and all they do is open up new business. You have another group called farmers, and all they do is grow existing accounts. Pretty straightforward, it’s been around for a long time. Let’s just talk about a quick pros and cons of this one. The pros are great role clarity. Everybody knows what they’re supposed to do when they show off at work at Monday morning. The next is that typically the results are improved by focusing on the critical activities. If I’m a hunter rep and all my job, my value to the organization is opening up new accounts, and through that focus, I get really good at it. Same thing on the farmer side. Those are the pros. The negatives are is that sales expenses can go up quite a bit. In some cases, they can double because if you have two sales forces, you also need two chains of command and the sales management ranks first line, 2nd line, 3rd line, etcetera. It can get expensive. Then lastly, the customer can get confused. Tony: Right, absolutely. That’s the big deal. Greg: I’m your rep. We work together, you become a client and then I hand you off to this other person. That can be confusing. What’s your opinion of the Hunter/Farmer Model? Tony: We actually did this to the end of ’08, really ‘04-’08. We really focused on this model and what broke down was that customer experience. I would even say the customer intimacy broke down and when that becomes one of your corporate strategies, all of a sudden you have this segregation. Instead of going deep into the customer relationship, yeah you have that expertise and that
that specialists that can come in and grow the relationship can provide a level of service, can introduce new products. Interestingly, we didn’t see a huge spike in it. I do understand the concept that can work in a lot of different industries. It didn’t necessarily work in ours but the idea of that farmer really going in depth, again as a sales leader, oftentimes that particular channel doesn’t get nurtured as much but then you need to be as strong as the hunter channel and really drive that in-depth relationship. We did have two different organizations actually in 2012 when I took over my current position. That was when we shut down for just that reason. It just didn’t make as much sense with our market strategy and particularly with our buyers. It added too much complexity and confusion to them when we could really carry the ball with a one primary sales person. Greg: One thing I love about your company is you guys have tried everything. Tony: It’s good and bad, right? No, I think it’s great. You tried it. It wasn’t great for you. Your customers didn’t respond well to it so you moved on to the next thing. Tony: The customers might have responded well but to your point earlier about expense too, it wasn’t sustainable going forward and we didn’t see enough of a lift out of that investment to really say, “This is the one we’re going to go forward with.” It’s an interesting one. Greg: Okay, great. Do you read the SBI Magazine? Tony: I do. I get it. Great, that’s fantastic. The reason why I’m asking you that question is that we just came out with our new magazine and I wanted to bring the audience’s attention to this magazine because if you are enjoying this show, I think you’re going to enjoy the magazine. I would encourage you to subscribe to the SBI magazine. In it are articles about people like Tony discussing strategic issues like this one. You can get a free subscription by going to salesbenchmarkindex.com/the-sbi-magazine. We need to take a short break but after the break, I’m going to ask Tony his opinions on the next two organizational models, the geographic model and the vertical industry model. Come right back. Your finish line is your number and the only way to reach it is to make certain everyone is pulling their weight and headed in the same direction. That’s why SBI uses proven techniques to bring everyone on your team on board with successful standardized sales programs, enabling victory at the turn of every quarter. Welcome back my name is Greg Alexander
and I am the CEO of SBI you’re watching SBI TV I’m joined today by Tony
Capucille. Before the break Tony and I were discussing the pros and
cons of the seven dominant organizational models in b2b sales today
during this segment I would like to turn our attention to two additional models
the geographic model in the vertical industry model. So let’s start with the
geographic model I think everyone knows what this is but if not it is simply
assigning its sales resource to a geographic region and having them sell
all things to all people. So I understand that you use a geographic model. Tony: It’s been our dominant one. That’s correct. Greg: So let’s just discuss the pros and cons on this and get your opinion on these. The pros are it’s a low sales cost model because you have an efficient geographically deployed organization. Also the plus is lots of customer contact. So in your case with client
intimacy being a strategy that’s a good thing deep relationships the negatives are is
that sometimes smaller accounts can consume lots of sales resources. Also
industry knowledge can suffer because you’re you’re going horizontal not industry
vertical and then lastly each geographic region requires
dedicated resources so there’s no ability to pool resources. So
what’s your opinion on the… Tony: We obviously love that model and it’s what we’ve gone after. I go to the cons of it just always trying to improve but the fact of the matter is a couple of the cons you mentioned, we always want to attend towards that verticalization because we lose that. You don’t have that specialist in the area that can provide and even more maybe client intimate environment. You have to wait until your product suite I think is large enough to build and actually go into the verticals. And your saturation points also have to get to a point where you almost can’t demand that maturity I think that’s a step in
maturity and any other side of it is you do find your sales organization using a
lot of their energies on the small accounts yeah and that’s a big deal
because you’re always trying to focus on profitability and making sure that the
right doors but whenever you’re putting them in a
geographical area every customer matters I know is talking earlier about that any
customer could turn into your most profitable but at the same point a lot
of them aren’t and so trying to figure out how to deploy each individual sales
person so they have a mindset to overcome that that con if you will is
a big issue but overall it gives us a lot of advantage to go market Greg: So the pluses outweigh the negatives in your case. Tony: For us they do our primary sales channel that little under a thousand over 1,300 is deployed in that fashion. Greg: yeah. Interesting. Let’s move on to the next model which is the fourth one out of the
seven and this is the vertical industry model it’s ironic we’re talking about
this one right after geography the other end of the spectrum so just quickly the
pros and cons here so the pros are domain knowledge of the industry drives a consultative sales approach… Makes sense Deep relationships are established
because I know your industry and that allows me to have common things to talk
to you about. Referrals tend to spike because most industries are very
tight-knit groups and if you and I were in the same industry probably know some of
the same people in referrals can go up so these are the pluses the cons of the vertical industry are:
it’s expensive you know you need multiple sales forces
is about 10 dominate macro vertical industries so if you went across all of them you might have If you went across all of them, you might have 10 sales pluses. Multiple people can call on the same account for a business that might be in multiple vertical industries. I mean how do you
handle something like GE right as an example and adjacent industries can get
ignored so if you decide not to go out to all industries you’re basically walking away
from some business so in your opinion as a organizational design principle what
do you think of the vertical industry I Tony: I love this approach and I do think it
does come as an opportunity cost. You’re saying that it’s a con that adjacent industries can get ignored. I think until you can cover that sometimes that’s a good way to go
about it because you’re focusing and you know making sure you’re actually
getting a problem from the right segment was just doing everything and therefore
doing nothing. So overall the vertical’s a step in maturation I kind of
referred to it earlier the geographical approach once you get enough market
saturation and once you can more or less afford to do this take the principles you had from
your sales organization and then deploy it more vertically we actually did this
for a very brief time but we kind of went all in on verticalization and it was
interesting I don’t think we’re quite ready for it. Again I love the pros to
being able to walk in and have a full suite of products you know you are that
specialist you can talk about that particular industry and really win
the client in a stronger way but I again I think it’s more of a once you
have certain market saturation point your product suite has developed enough
and then I think it becomes incredibly intriguing Greg: So the two things that you
mention that I thought were interesting so you talked about it being on your kind of
maturity scale and the way that you’re measuring maturities wanna make
sure I get this for the audience is product suite so how wide and how
vertical vertically relevant your products are right and then the second
one is. Tony: More or less, I would say my second one was market share. If I’m starting up a new company, I might actually say, “No let’s go the verticalization route but let’s be targeted. Let’s not worry about that adjacent market that we’re going to miss.” And we have to be Okay with that. But in our situation
when we have a chance to credibly large customer market opportunity I can gain
a lot right now going to market and more of the geographical approach but once I
hit a certain point yeah we’re gonna stand up new channels and your point is
going to cost us but once you know restaurants are a great one for us. We will eventually have a restaurant specialist because of what
we’re doing what we’re innovating in that particular area so what I’m saying for our organization might be different than a maybe a new startup or company that says “No we want to dominate
the healthcare industry, let’s be vertical specialist.” Greg: Very good. Tony do you have one
of these? Tony: Yeah of course. Greg: It doesn’t leave your side, right? Tony: That’s right. Greg: Do you ever commute or do you travel? Tony: I actually don’t. Greg: You’re lucky. Do you exercise? Tony: I exercise. Greg: The reason why I’m bringing this up is that we publish a weekly podcast. It’s basically an interview like this one but its audio
instead of video and what I found is that our audience is really enjoying the
podcast because when they are commuting when they’re working out when they’re
traveling they can turn this nonproductive time into productive time
by listening to the podcast so I want to draw everyone’s attention to that and
have them consider the podcast so if our viewers are watching the show wanna
listen to our podcast go to salesbenchmarkindex.com/sbi-podcast and subscribe. We’re going to take a quick break when we come back we’re
going to talk about the final three organizational models: the product
overlay model, the buyer role model, which is a new one and then the dreaded hybrid
model to stick around and come right back. This is not a table, it is a stage where your performance is measured in numbers. If you reach them, you get an encore. If you don’t, it could be curtains. That’s why you need the well rehearsed proven sales and marketing strategies of SBI. Welcome back everyone. I am Greg
Alexander CEO of SBI you are watching SBI TV today my guess is Tony Capucille
Chief Sales Officer at Heartland Payment Systems. Before the break I made you a
promise and that promise was we would discuss the remaining organizational
models which are known as the product overlay model, the buyer role model, and
the hybrid model so let’s get to it. So Tony the fifth of the seven models is
the product overlay model and this is described simply as a sales team
dedicated to each product line so quick review of the pros and cons okay. So the pros are- clear accountability for each products revenue, faster sales
cycles due to a self-sufficient sales force cause they really know the
product, and tight alignment between the product teams and the sales teams so the
pluses outweigh the negatives are the sales teams can get costly especially
when a product reaches maturation, geographic dispersion can reduce
customer contact and customer intimacy and then the cross sell oftentimes
suffers because we have products silo set up. So if I’m a sales person responsible for
product A I might not be focused on cross-selling product B so what’s your opinion of the product overlay organizational model Tony: This is something that I completely agree with the pros. it’s a really strong model because of that
accountability I think accountability of the product groups, a tight relationship
there, understanding what the market needs really does trump and you get
that fast sale cycle and we’ve seen this in some of our key products when we
spun them off recently in 2013 We set up a completely new product specific channel
that was at this product overlay model and it’s taken off compared to a decade
before and so I’ve definitely seen the fruits of this particular approach. To
your point I think that if you if you have the silo starting to develop I think
that really falls on the shoulders of the sales leadership because yeah it’s
gonna show up if you don’t ensure that you’re getting them to work in synergy
across product channels. I think that’s one of the big errors in this model that can really be overcome because you can create channels that are stronger together right and
so if you let them silo up and do their thing and not worry about and think
about it or provide the synergies across channel you’re creating more trouble
than I think you’re getting the benefit but I think that’s something that sales
leadership should focus on and say we’re gonna do this and spend up different
product channels let’s figure out how to make sure we win together. Greg: You just did it back basically in 2013 and you’ve had great success did you do it for one
product? Have you now expanded beyond that Tony: So we did it with one product with our
payroll SPA model which is functioning say we’re going after payroll and we’ve
now set up for billing building products and we’re going to do it with other
products in the future Heartland Commerce obviously had some
acquisitions that have led us down the road of saying do we want everyone to
sell POS or do we want to focus on particular channels and so I think that
recipe and again as the sales leader in my leadership team we’re seeing that
this is very scalable going forward but getting them to interwork together with
a theme of strong together I think that’s where I have learned from lot of
predecessors my peers I you know in conversation with groups like yours asking what did what did you guys do
wrong when he stood up his multiple product channels and really the biggest
sin if you will is is not getting them to work together and in getting VP
clashes or SVP clashes and that just that doesn’t help Greg: ok very good so that’s the product
overlay model let’s now move to the sixth model which is a relatively new one it’s
called the buyer role model and this is where sales resources are assigned to a
specific buyer type so for example you and I might work with the same company
and I sell to the CFO you sell to the CIO and Bob over there sells to the head of operations It’s new, but it seems to be getting a lot of
traction right now because we’re in this world of hyper specialization so let’s
do a quick pros and cons analysis of this- the first is that if I’m
dedicated to a buyer as a salesperson I’m really gonna have a deep
understanding of their needs and I’ll be able to relate better to the buyer my reference network is going to go up
exponentially because in this use case I call on CFO’s I’m going to know a lot
of CFO’s so my billion generate referrals goes up and also it provides the product
team an early warning system for changes in buyer behavior you know I can go back
to the product team and say hey the CFO again in this case is now having this
problem can we develop something solve that ok so those are the pros the negatives
are is you can have multiple people calling on the same account which can
result in account ownership turf wars and things of that nature it’s very
expensive and it’s really difficult to deploy globally right? I mean how do you do this across the universe so I don’t think you guys have experimented with this. Tony: This is the one we haven’t. Greg: But, theoretically speaking how do you react to it Tony: I love the concept. When you can understand a buyer persona and you guys
do a lot of good work in that area and get really specific and targeted it’s very intriguing right it is a very academic approach from my
perspective and I think that you’re going to see some good companies I think
you and I were talking the service industry that they can start deploying this
effectively I think they’re going to be a little more cutting edge on how this comes together
there are a lot of conflicts that like you said multiple people calling on the
same customer working those things out of the sales leader will be something
really intrigued to to work out that puzzle and I guess it really does
depend on what type of market you’re going after the sales cycle the
complexity but it’s interesting that that intimacy you can gain with that
buyer persona and I think that you have the right product suite, it’s intriguing. Greg: Keep that one on your radar screen. Tony: I will. I got a lot of them working there right now. Greg: Let’s go to the 7th and final organizational model. This is the hybrid approach. and this means just simply combining two
or more of these approaches into a go-to-market so the pros on this are is
that executive teams who can make the tough call on picking one and being
really good at it can deploy this to please everybody the
cons are is usually doesn’t work I mean Our benchmarking database when we looked at this a ton of times would tell you that organizations that deploy a hybrid model
underperform those that have a pure bred model do you deploy hybrid model and do
you agree or disagree with its effectiveness Tony: So I understand that a pure
model might work most effectively right I think that there’s a reality a lot of us that are actually deploying
models figuring out shifting from one to the other I would say there’s a
predominant model that we’ve used over time and we do have hybrid- our
national team is going to be different than our our payroll or product
particular channel so I guess to your point, it usually isn’t. Can’t maybe optimized but we have been guilty of pulling different models together to your point
I think the more we can focus on who we are and understand that clear identity
and we’re trying to accomplish, you’re gonna be better at achieving those
goals but I think a lot of us out here in the less academic world
say okay how do you move from point to point what what should we do? Do we
shift strategy and shut something off or do you let things coexist while you’re working
things out and I think that’s more or less where we are. We know we got results
again could we optimize them more if we said no this is that we know it sure but I think that’s less of a
reality for us and maybe others Greg: I mean you’re a multi-billion dollar
company of thousands of employees right so I think as your organization scales
ok it becomes more difficult to be single model and it becomes more
appropriate when you address a large swath of the market when you have
a broader product line it becomes more beneficial to be hybrid. One thing you’ve done
which appreciate is you are hybrid but you’re not what I mean by that is that
within a channel you might have multiple channels
National, Small, etcetera but within that channel your pure bred in that chanel. Tony: Yeah, I think that’s a really big distinction. within channels we now start
understanding our identity we know what we’re trying to accomplish and when you
acquire a new company, and we’ve got a lot of acquisitions understand what
they’re trying to accomplish and figure out what they’re going to be and so that
is something that we do but we have again different channels within. Greg: Well, we’re at our time window. I opened by introducing you by saying that you were a unique guest and i
will tell you that you have lived up to the billing. You really have. Your perspective on this complicated topic which is
organizational design is a very complicated and your perspective is well
beyond your years so on behalf of all of our viewers you’ve made a large
contribution to our field today so I want to personally thank you for that Tony: Enjoyed being here. Thank you very much. Alexander: Okay, fantastic.
There you have it. a pro’s and con’s review of the seven
dominant sales organization models by the youngest chief sales officer in the
Fortune 1000 I hope you enjoyed it I would also like to thank you our viewers
for tuning it if you enjoyed the show I suggest you subscribed SBI TV at
salesbenchmarkindex.com/TV or you can find us at our SBI YouTube
channel we have some outstanding guests confirmed for future episodes that you
will not want to miss until then I wish you the best of luck as you try and make
your number