Rethink Sales Roundtable: Growth by Acquisition

All right, so let's get going. How's it going, Michelle?

It's going well.

Good, good.

How are you?

I'm doing well early here on the East Coast. 8am 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.

Oh, I don't even want to know what that looks like. I'm not sure.

So I want to welcome everybody to the Sales Globe Future of Sales Roundtable. We're talking about mergers and acquisitions today. I'm Mark Danolo here with Michelle. See? And Michelle, this is an exciting topic.

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

All right, let's talk a little bit about who we are. First, Sales Globe. 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. Michelle.

Yep. 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. We'll get into the top M and 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. There's a lot to cover when we talk about things and actions that you can take and the shortfalls of M and A. Please feel free to leave any questions you have in the chat and we will make materials available to you after the session.

And I want to point out one big point here as we're getting going to. You talked 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, get beyond the broad strokes and get into real specifics.

Yes, we are. So what do we know? Some of the things that we know is that in 2021 it was unprecedented for M and 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.

Right, right. And you know while 2021 was hot, 2022 is still very hot. 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, but it's after things aren't working. And those things are starting to show up now from even prior years.

Yep, that's correct. So what we know is it takes about one to five years to realize the synergies. And what we also know is that there's this big race to own the space. Space. 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. We start with cost synergies. That's probably the easiest one to explain. You get into things like headcount reduction, redundancies, consolidations 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 a combined organization than each organization would make on its own. It's a really important point. And finally, capital synergies. And just think about that as. Oh, gosh, as a larger organization, I can probably get better lending terms or better negotiations on contracts when I'm making purchases.

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.

Yep, that's right. Yep. 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?

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 work. So let's take a look at these areas specifically around, as we mentioned before, the revenue synergies and the cost synergies.

Right.

So within revenue synergies, one of the first areas Michelle is cross Sell. So we have products that we think we can sell to the other products, other. Other companies, Customers. Right. So that is probably one of the biggest ones. And you can see some of the stats here.

Oh, my gosh.

The importance of that.

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 if 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 with this was confirmed through a separate study in late 2020, 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's really a big problem.

Yep. Yeah, big gap there. So, I mean, if you just fix that one, 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, how do you make that into a better product? You know, hardware, softW 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. So we need to get into the SMB market or the consumer market or you think about sectors, we need to get into the legal sector 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? Well, one of the first ones, and this is really arguably a revenue synergy as well, is 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 and A situation. So very simply, from a sales organization perspective, we've got overlapping territories, we've got two reps in each territory. We have to figure out how do we sort them out, how do we do draft day, 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. So if you take revenue, you take cost synergies, you put these things together, these are some of the levers that you could pull. But the question is, Michelle, we know this in concept. How do you actually make it happen in reality?

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.

It's the deal people that 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.

And they're like, whoa, what? So anyway, yep. When we asked the question why.

Right.

What we decided to do was every year we do a survey with World at Work. World at Work, largest one of the largest HR organizations globally. And in this we decided, I think it was three years ago now, Mark, we decided to add M and A challenges to that survey. Both 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 and 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. So over half. 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 healthcare at 10. We've got distribution wholesale I think also at at 10. And then every other sector was maybe at that 8, 7%. So we believe that this is a pretty well rounded representation of M and A activity.

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

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, that different role definition and alignment across the organizations, that does come across as the number one challenge for companies. And what that means is, you know, you have, and we'll 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, at company A could be very different from company B. And we'll give some good examples of that as well. Incentive compensation alignment. 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, so 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. Total target compensation and the pay levels across the company, they could be very different across those roles.

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, an account executive, and they're in both companies, 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.

Yes, it can. And then integration of the sales organization. So let's not confuse role definition with integration. Role definition 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. 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 around the cultural differences.

Right, right.

So you, what you end up doing is allowing people to continue with their own current culture when you do that. And it, it can create more muddy waters than intended.

Yeah. And I think culture is one of the biggest challenges we see in an integration of. 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. 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.

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, 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, shouldn't have used the Titanic. Queen Mary, Queen Mary, Queen Mary. 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.

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, we're going to have 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 in an M and 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. So number one, alignment of segments. So making sure that we're actually working with the same definitions 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, Michelle, making sure the roles are actually reconciled and they're the same roles and bringing those together, mapping those and bringing those together and the talent that goes within them. 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 long or short sales cycle that's going to be harder for us to do the cross sell correctly. Product and service alignment. 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 planfully make sure we're going to get what we're looking for in the M and A situation and how do we identify what the levers are to pull to actually get us there. 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.

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. So what we 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.

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. So insider understanding what's going on in the business and 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 customers, what our value proposition is, our coverage model, so what kind of channels and roles we're using, our sales process, our deployment or territory, feet on the street 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. 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 sure. Make sure all these pieces connect together.

Yeah, it's just a really good tool. It helps frame your thinking, and it can also help you 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.

All right, so we'll dig into a few of these here, Michelle.

Yeah, so let's get into that second one, Mark, that you mentioned on sales roles and 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. 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, or simply everything that a sales role could be responsible for doing. So understand those sales role 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. So it'll be the attributes of the role, 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. Yep, yep, yep.

So, and I think one of the important areas on this, too, Michelle, 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.

Yeah.

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 its sales strategy responsibility? So does it sell to new customers? Does it sell to current customers? Is it doing retention or service responsibilities or does it do all 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 it 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 in that job and gets tougher for that for that job to accomplish. Market, marketing and channel responsibility. So does it have any responsibility in terms of how it's going to be going out to pre market what it does and 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, healthcare, that type of thing? Again, the more sectors a job is covering, the harder it gets for that job. Sales process, 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 hand it off after it's been closed? And does somebody else implement that? The marketing responsibilities, technical responsibilities, does it have technical expertise around a product? So you know, imagine you're working in a high tech company. You say, well this particular job has to understand the products to a certain level of depth and versus they have an SE to help them, a systems engineer to help them. And then finally management 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, on every one of these you get a pretty expansive job and then you get a job that's really hard to execute. Right, 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.

That's right. So this is a great starting point, or we would say it's the starting point by looking at sales role 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 hr, 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. So I'm going to take a quick segue 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, 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 role dimensions are, you're going to take all the different job titles across the different companies. 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 could have a lot of titles there. And what you want to understand are a few key things. Sales role 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. You're going to look at the attributes of that role. So Mark just brought up different talent and skill requirements. If you're in a technical sales role, you might have certain certifications that are required or 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? 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 take and you're going to group them into this, this harmonized roles. Now I just mentioned to you that we had, this is an example of that company. I was just discussing the global company. 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 role categories. We're showing four 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. 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. 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, the, 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. So account manager, which has a lot of assumptions, can actually have very different revenue responsibilities, which translates into very different responsibilities.

You know. You know, one of the things I, I find too, Michelle, 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.

Yes, they do.

So 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 and A situation.

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 2,000 people, you need to talk to all 2,000 people, but you can get good representation from frontline management that typically understands what's going on.

Yeah, I mean, I'm thinking 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.

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

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 roles are going to work. And we might hear a challenge like this, Michelle. Our sellers aren't cross selling because something.

Isn'T aligned right here at all the time.

And then we look and we see stuff like, well, is it. And we ask questions. Is it a different buyer? Is the cycle different? You know, do they know how to sell it? Is there 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. So we have six different areas here to take a look at the buyer and for your sales process. Ask these questions for each of the situations. Is the same buyer for the cross sell. So I can think of a situation, Michelle, where we were working with a shipping company, this is a while back, and they were moving into the financial services business. They said, well, we can offer, you know, receivables, factoring, and we can offer all sorts of other financial services around our shipping products. 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 that buys shipping, that buys financial services.

Big yes.

You know, underestimation of the difference between those.

Right. You know what we see? We see all these assumptions that because I have a great relationship, you may, it may be your, one of your top 10 strategic customers. Right. Because I have a great relationship. We got a great customer there. They're gonna, the buying is not really gonna be a challenge, but you may be starting from round somebody completely different.

Right?

Yep.

The offer. So do you have different offers? Is one offer a commodity? The other is 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 sales cycle. The role you just mentioned the role. So the roles mapped, are they, are they integrated well? Talent. Okay. This is a great one too. 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 or are they going to try to take it down themselves and end up losing it? Right. Which we see that happen as well.

We do see that happening.

And then finally this one comes up a lot 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 gallon from this other organization that I don't know into my customer and they're going to mess things up. 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 checkpoints you can look at here. And, and again we can go deeper into this as a follow up if you'd like. But just some things you would look at around the sales process and the cycle definition.

Right. Just being aware of these things, 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 deal maker level. And they're not really thinking about the salespeople 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. And again, pretty practical approach. Approach that we know works.

All right. And then one of my favorites, Michelle. 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 and A situation is we develop the sales capacity model because we have to be able to manage to that. So the, the challenge we hear is we don't know exactly how we're going to get the growth synergies.

Yeah.

Or what levers to pull or manage to. 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 generalities, it's not that we're going to have these synergies, we're going to cross all this 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. And then you have to manage to that sales capacity model. So you got to prove it out, you've 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 staffing, what people are doing, the sales process or the sales cycle, how they're doing it? So there are different levers that we can pull there. Okay, so let's take a look at some of 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 quota success model. This is in the book Quotas, as you can see on the upper left here, if you want to go into detail on this. 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 US There's a certain amount out there in the, in the regions and the geographies and within those different sectors. 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. And so there's a lot of extra capacity in there because they're doing service and operational things. So right there, you know, hint 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 a current customer. And you know, a hint there is to sell a new, new customer. 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.

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 today and what workloads are. But this particular one, and Mark's going to get into some of the details, was probably one of the favorite, my favorite sales capacity models. 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.

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

It does, but that's okay.

But you're not supposed to read this. Right. So 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? So, okay, so we're going to zoom.

In on just a couple of pieces here. 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. And what we're 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's a size of the market. Now you'll notice here we start breaking things out. 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. 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. You'll see a cute little thing here behind Michelle called sales time Optimizer. Slide over there. There you go. Okay, that's a little tool we use 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. And it'll give you a lot of good inputs for sale 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, 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. 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. 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, Michelle, 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. 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, 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.

Yeah. That's why I really love 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.

Yeah, it takes out a lot of guesswork.

It does, yep.

So now we're Sales comp harmonization.

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? And it could be driving turnover. And we do find that it does drive turnover because of pay and equity or perceived pay and 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. 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 C 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.

All right, let's check it out. All right. So C level goals. Michelle, I think the first thing to mention on C 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. But there was this guy Bob, who was a CEO and he was notorious for tearing up sales comp plans and they could 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. So we asked these five big questions here.

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?

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 C level product. I remember one thing Bob said was we need to actually sell our full portfolio of services. So that was an M A situation. They had acquired a digital company that expanded onto 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.

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, well, all of their sales through an inside sales team. Very highly tenured, very highly skilled, with a lot of certifications. 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 or they had to manage that one. You know, because 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. 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 actually go to market and meet those other C level goals?

Right. And then finally your, your financials. Right?

Yes.

And, 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.

Yep.

Okay, so if so when you ask those questions, it might be, well, why do you need to know those things for compensation? 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 certain place in the customer, what does that mean for the comp plan and how does that translate?

Yes, that's right.

Okay, so let's dig into the details then of what you might look at around the compensation plan. So if you're 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. That's actually step number seven here. It starts in the middle with the C level goals. So if we know what the priorities are, and you talked about the roles before, if we have the roles established, those roles become the foundation or the platforms upon which we design the compensation program. Right. And so then we can look at these big areas that you see on the upper right, the framing of the plan. So your target pay levels, your pay mix, your upside potential, which is for your top performers, your threshold or entry points into the plan. We can then also look at the lower. Right, how you link pay and performance together. So what kind of measures are we using? What are the weights of those measures or priorities of those measures? Are we paying at an individual level or are we paying at a team level? 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 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. 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 and A, there are some specific areas you want to.

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. 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 and A. And not solely within M and A, but we see this all the time. And it starts with the biggest point at the top, which is pay philosophy differences. Right. 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. And 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 of the value proposition that we offer. And there's a whole lot of other things that go around pay philosophy as well.

Yeah. And think back to the culture question, to Michelle, 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.

Yep. 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 role 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 expected or as they appear on the surface. Only because what hasn't happened is the jobs haven't been aligned. 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 want people to have more of a pay for performance plan where I might have greater incentive compensation? 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 and fall into that pay philosophy. But it really is inconsistent pay mix. And then on upside potential. So upside potential, what is that? That is basically. Are you looking at that? Thank you, Mark. Any. 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.

Yeah, I mean if you. Okay, so could your. And you could ask this to each organization.

Yes.

Should your top performing rep or could your top performing rep earn more than the president of the company? And Right. So you get a visceral reaction there. Which when you ask that question and somebody might say, well, of course that we'd love to see that. Or the other organization might go, well, no, that would kind of violate our pay bans and our pay policies.

Right, 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 pay philosophy and your upside.

It does. And then just to you know, be clear, upside down side 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. 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, 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 comer.

Right, right. Or even the question of we pay account managers on bookings or we pay account managers on invoice revenue.

Right.

Very different. Right. And you put those two together and you've got a big, big delta between them. Yeah.

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

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 quote quotas need to be, what they look like for each person. In some companies they're a hard target to incentive. In others it's a guideline.

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 company's quotas. But then there were different assumptions that went in there in terms of what they were selling because the product portfolio was different. But you put two account managers together from the different companies and one's got double the quota than the other and they're paid roughly the same. That could be an issue.

It's a real problem. And then of course the lack of governance or administration. This extends well past M and A. Governance just means that you've got a very clear policy for, oh gosh, let's say a bluebird deal. So a really big deal. What we call them whale deals. Right. So just having the right governance and administration, that's very consistent, 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 and 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. So with that, Mark, we have concluded our first M and A overview. For everyone that's listening here today, I.

Think it's a wrap.

I think it is a wrap.

Good news is we got some actions.

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 podcasts, you'll see Apple up there as well. But we did a recent podcast on M and 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. Get our books right. So you see those books that, that over there? We've got quotas. What your CEO needs to know about incentive compensation. Those are two really good guides to help you through your M and 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.

Yeah. Thanks everybody for joining us and great talking to you this morning. And have an awesome day.

Yes. We'll see you the next time.

Thanks.