Determining Your Sales Rep To Sales Manager Ratio
Question: What is the ideal number of sales representatives that a sales manager should manage?
Answer: Good question. As is commonly the case, my answer begins with “it depends…”
Figuring out the sales rep to sales manager ratio depends, first, on the type of compensation plan that is used to pay the sales force. My rule is, “The nature and type of compensation plan directly impacts the quantity of sales management.”
For example, if you have a 100 percent variable plan, where the salespeople are paid purely on some formula for their results, then you can go with less extensive sales management. The idea is that a well-crafted, 100 percent variable plan will, to some degree, step into the gap and influence the salespeople to manage themselves. In such a case, I can see one sales manager for every 15 to 20 salespeople.
On the other hand, if you have a sales compensation plan with a relatively high percentage of fixed income (i.e. salary or draw), then you need to fill the management gap with people. In these cases, one sales manager for every seven or eight sales reps is an appropriate ratio.
But this is only one variable; there are others that will impact your ratio.
Let’s discuss the “touch” component, which refers to the degree to which the salesperson and sales manager actually see one another and work together. The lower the “touch” ratio, the lower the ratio of sales manager to salespeople.
Take as an example, an inside sales situation with a group of people on the phone, supervised by someone there with them, and contrast that to the same number of salespeople, spread geographically around the country. The inside situation is relatively “high touch,” and the outside situation is relatively “low touch.” With everything else being equal, the high-touch manager could supervise 12 to sales representatives, while with the low-touch manager, the ratio would be half of that.
Here’s another variable: The degree to which the company is able to measure the salesperson’s activity and performance. The greater and more detailed is the measurement, the more salespeople to sales manager. The less measurement, the more sales people to sales manager.
For instance, let’s contrast two situations. In the first, the salespeople are only measured by the total dollars of gross sales coming out of their territories on a monthly basis. In the other situation, the company uses an Internet-enabled, PDA managed ERP solution, which requires every salesperson to load notes following every sales call. The company, therefore, has the ability to examine every call, every account, every opportunity, etc.
With the low-tech situation, the sales manager should handle fewer salespeople. With the high-tech situation, the sales manager can handle relatively more salespeople.
The variables that influence the sales rep to sales manager ratio go on and on. Some other things to take into account include:
• The training, or lack thereof, of the sales force
• The expectations for the sales force
• The expectations for the sales manager
• The relative experience of the sales force
• The length of the sales cycle
• The sophistication of the sales process
• The relative pay scales of the sales force
• The training, or lack thereof, of the sales manager.
If you are getting the idea that there are so many variables that impact this decision that it is impossible to legislate a specific number, good for you, you’re right.
Anyone who gives you an off-the-cuff answer is coming from a perspective that lacks a depth of experience. Your answer is going to come from a detailed understanding of the variables listed above, and the way that they impact your selling situation.
Like I said in the beginning, “it depends.”
Dave Kahle is one of the world’s leading sales educators. He’s written nine books, presented in 47 states and eight countries, and has personally worked with 287 companies, helping enrich tens of thousands of sales people and transform sales organizations. Sign up for his free weekly Ezine. 3,050 sales people and 751 companies have benefited from his Top Gun Sales System seminars, and 1,073 sales managers have been trained in his Kahle Way Sales Management System.
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