What is the ideal number of sales representatives that a sales manager should manage?
Good question. As is commonly the case, my answer begins with “it depends…”
It depends, first, on the type of compensation plan that is used to pay the sales force. I often confront this issue in our work with sales compensation plans. One of my rules is this, “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 sales people 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 sales people to manage themselves. In such a case, I can see one sales manager for every 10 – 20 sales people.
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 people is an appropriate ratio.
But that’s only one variable. There are others that impact this ratio. The “touch” component of the situation is another important variable. The “touch” component refers to the degree to which the sales person and sales manager actually see one another and work together. The lower the “touch” ratio, the lower the ratio of sales manager to sales people.
Take for 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 sales people, spread geographically around the country. The inside situation is relatively “high touch,” and the outside relatively “low touch.” With everything else being equal, the high touch manager could supervise 12 – 16 sales people, 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 sales person’s activity and performance. The greater and more detailed is the measurement, the more sales people to sales manager. The less measurement, the more sales people to sales manager. For example, let’s contrast two situations. In one, the sales people 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 sales person 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, no-tech first situation, the sales manager should handle fewer sales people. With the high-tech situation, the sales manager can handle relatively more sales people.
The variables that influence this number 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, or lack thereof, 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 gaining the idea that there are so many variables that impact this decision that it is impossible to legislate a specific number, good for you.
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.