National Sales Center

Advice On Reduction In Force (RIF) In A Sales Organization

It was just announced that the September 2009 US unemployment rate reached 9.8 percent. Not too long ago we were told it would not reach 8 percent. My focus is Sales Organizations and many sales teams are facing their third or more Reduction In Force (RIF) since the economy took this nosedive. I have some advice for those involved in a Reduction In Force (RIF) as it pertains to a Sales Organization.

Sales RIF

A Reduction In Force of a sales organization begins with numbers. Finance looks at their business and revenue models and decides they need to cut back staffing levels and some of those cuts must come from Sales. Finance, effectively gives up and says the Sales Organization is overstaffed based on Sales forecasts and projections. I find it unsettling that not one word is said about what’s required to increase sales. Instead, a retreat is launched based on projected “numbers”.

Sales RIF And Morale

Once a Reduction In Force is announced, expect the Sales Team’s morale to suffer. One may think that sales reps would get busy trying to keep their jobs but it rarely works that way. Instead, they get busy with “Cover Your Butt” activities. Some get their resumes ready while other reps get paralyzed with fear. Still others get disenfranchised after learning that the company they cared about is treating them like a number.

HR And A Reduction In Force

Next, Human Resources gets involved. They are not connecting a “Human” element to Finance’s numbers. Instead, they are charged with implementing the Sales RIF. Human Resources is tasked to insure the Reduction In Force is implemented legally and with full consideration given to the Company’s best interest.

Eventually, a number is given to a Sales Manager and that number dictates how many sales reps will lose their jobs. Perhaps 24 months ago, the Sales Manager had an 8 to 1 span of control. Now the span of control is reduced to 5 to 1. At this point, Sales Managers may get included in the Reduction In Force. Why not combine two offices and give one Sales Manager a 10 to 1 span of control? Of course, that lucky Sales Manager is often never given any training on how to best manage a remote sales office.

Reduction In Force And Sales Compensation

A Sales Manager’s compensation many also be effected by a RIF. Let’s assume that a Sales Manager receives a 2 percent commission on total billed new revenue. Well, on that type of compensation plan, you can sure earn more with 8 reps instead of 5 reps. Often, these compensation plans are never adjusted for the loss of income potential. All are just expected to do more and earn less. In effect, a “Share The Misery” culture is established during a RIF. Few sales reps and managers complain in fear that they’ll be told they are lucky to have a job. Things sure get bad fast.

Sales Organization’s Reduction In Force

The reasons listed above are just the tip of the iceberg on why Sales is the last place for a RIF. How can you grow revenue with less sales reps? How many accounts will leave because they are tired of being assigned a new sales rep every year?

We all know this economy will not last forever. When the economy heats up again, companies will scramble to hire and train new reps to replace the ones that loss their jobs in the RIF. This extra cost could have been avoided if only these companies thought about how to sell more instead of thinking about how to operate on less.

I’m a Sales guy, not a Finance guy. I know that every corporate financial condition is different and at times, a Sales RIF is necessary. My advice is to move with care and caution before implementing a Reduction In Force that will effect a sales organization. A sales team is a company’s face to the marketplace. Clients and prospects want to do business with companies that are growing, not shrinking. Salespeople also function best when they enjoy security and encouragement.

Avoid A Sales Reduction In Force

Operating on less is the opposite of being willing to do the things required to earn more. Instead of a Sales RIF, a better answer may be to invest in sales training. When the competition is involved in a Reduction In Force, there is an opportunity for an aggressive company to take their accounts. This represents the best time to develop new sales techniques and sales prospecting strategies.

A Reduction In Force is hard on a sales organization. The effects are long lasting and quite costly. I urge companies to think hard before implementing a Sales RIF. My feeling is that most RIFs involve a “fight or flight” mentality. Consider aggressively fighting your competition when that competition is on the ropes. If you have faith in your products and employees, why run away and hide until the economy improves?

My best to you always!

Nick

Tags: sales advice