CHAPTER

9

Managing Sales Development Professionals

Every successful manager, whether in sales or elsewhere, must possess a mix of strategic, operational, and leadership skills. However, the mix of required skills varies greatly as a function of the team’s objectives. Consider the differences between traditional sales managers (TSMs) and business development managers (BDMs). TSMs hold individuals accountable to monthly or quarterly goals while BDMs must be on top of daily activity. TSMs optimize and coach for success on farming while BDMs focus on hunting. TSMs tend to manage more experienced professionals than do BDMs. All of this means that TSMs tend to be more balanced across strategic, operational, and people leadership. BSMs, on the other hand, should be overweighted on operational excellence and people development.

Insource Sales Development

Before we go any further, a critical issue that we need to address concerns whether an organization should insource or outsource the sales development function, particularly if sales development is geared toward appointment setting. We urge sales leaders to insource sales development. Sure, outsourcing has certain advantages in that outsourcers offer flexible capacity and are usually well outfitted with the latest tools and technology including dialers and campaign automation. Also, outsourcers, at least in theory, are well along the experience curve in terms of templates and best practices. The world of B2B sales development has evolved from spray-and-pray numbers games to highly personalized, account-based selling, making the benefits of outsourcing not worth the costs.

Let’s start with the price one pays for flexible capacity. It is not the flex part of flexible that we have an issue with. It is the (a)ble part. Depending on the complexity of an organization’s products and services, it can take 3, 6, 9, 12, or more months to adequately train a sales development professional. The Bridge Group found that the average ramp to full productivity is 3.8 months, though there is wide variation as shown in Figure 9-1.¹ Technology and sales process skills are the least of it. Customer, product, and competitor knowledge are the most important aspects of training. Moreover, outsourcing sales development removes an incredibly valuable talent pipeline of future account executives.

  FIGURE 9-1 SDR Ramp to Full Productivity

Next, consider tools and technology. Years ago, appointment setting outsourcers had a major advantage in being able to spread the costs of telephony systems and enterprise software licenses and support across many customers. But this advantage has been neutralized with the advent of high-quality Internet telephony and cloud-based (aka software-as-a-service, or SaaS) platforms. Most tools can be purchased on a per-user, month-to-month basis. Additionally, many organizations were either not able to or did not want to connect an outsourcer’s platform with the company’s customer relationship management system. Today’s cloud-based tools make that easy. With average technical proficiency, we’ve seen teams integrate and configure these tools within days.

Last, with respect to the insourcing/outsourcing decision, we turn to best practices and templates. Again, years ago, outsourcers had a major advantage. But two neutralizing forces have leveled the playing field. One, competition for organic search traffic has led to an explosion in content marketing. Companies competing in and around marketing and sales automation publish data-driven studies and share best practices by the truckload. Two, the shift from spray-and-pray to account-based selling has made generic templates less valuable. When every e-mail sent and every voice mail dropped requires personalization, generic templates are more harmful than helpful.

We racked our brains to think of exceptions where we would actually recommend outsourcing. It took some time, but we eventually came up with one: the solopreneur. We know consultants who are very happy running their one-person shops and do not aspire to scale up. Many are time limited rather than opportunity limited. Consequently, these individuals need only a partial business development resource to set enough appointments to maintain a small backlog, making them the exception to the rule. Everyone else should insource sales business development, including appointment setting.

Attract a Strong Pool of Candidates

Conventional wisdom suggests that employee referral programs are the best source of talent. When “best” is measured on three factors—recruiting cost, employee tenure, and job performance—the conventional wisdom gets it right on two out of the three.

First, examining hiring at a manufacturing plant of a Fortune 500 high-tech organization, academic researchers from Technion Institute of Technology confirmed that the recruiting cost from employee referrals was significantly better (lower) than from other sources.² Out of 1,545 applicants, the organization in the study spent $521,000 to hire 131 employees; hence, the average cost per new hire was $627. While that average cost may seem low, the recruiting source varied wildly, as can be seen below (note: the yield—the percentage of applicants hired—is shown in parentheses):

National newspaper advertising: $81,000 (1.8 percent)

Local newspaper advertising: $1,149 (7.3 percent)

Employee referral: $0 (13.3 percent)

In this study, the superiority of employee referrals can be attributed to the low yield of newspaper advertising as well as to the fact that the company did not have a paid employee referral program in place. Unfortunately, the researchers excluded two other interesting sources: self-initiated walk-ins and employment agencies.

Second, researchers from Radford University confirmed that referral employees have a longer tenure by combining the results of 11 studies.³ They found the following differences between recruitment sources and tenure: (1) employee referral hires stay 20 percent longer than average, (2) direct application hires stay 1 percent shorter than average, (3) employment agency hires stay 8 percent shorter than average, and (4) media advertisement hires stay 11 percent shorter than average.

Third, the conventional belief that referred employees are better performers has not been confirmed conclusively by academic research. Most studies, including the Radford University meta-analysis just cited, show that performance on the job is independent of recruiting source.

In summary, these studies confirm hiring via referral is best. While performance is ultimately unrelated to hiring source, referred employees are cheaper to hire and they tend to stay longer.

Regardless of the hiring source, employers seeking to attract sales development representatives must craft compelling job descriptions. The best job descriptions contain the following elements:

Language that gives candidates the sense that your organization is a great place to learn and advance their careers

Example: We are seeking candidates looking to advance their careers by joining our sales development team in Salt Lake City, Utah. We are committed to investing in your future by training you in sales and professional skills that will serve you here at (company name) or beyond. Depending on performance, our sales development professionals are promoted to account executive after 18 months.

A simple explanation of day-to-day duties

Example: You will be responsible for supporting the sales efforts of your team, including sourcing, establishing, and building relationships with corporate executives over the phone and by e-mail. You will be responsible for researching and identifying new client opportunities, presenting our services to prospects and clients to increase awareness of our brand, using our CRM system to track and map client accounts, and working to drive adoption and usage of our services.

Jargon-free attributes of top performers separated by strict requirements and nice-to-haves

Example: An ideal candidate must have the following:

A bachelor’s degree with a GPA exceeding 3.3 out of 4.0

Superior verbal and written communication skills

Comfort with high-activity phone and e-mail prospecting

Keen attention to detail and motivation to deliver high-quality work product

Ability to build strong and lasting relationships with key decision makers in client firms

Ability to work well independently and be self-motivated as well as work on a team and across functional areas of an organization

An ideal candidate should have the following:

1 to 4 years of relevant work experience in sales development and/or the manufacturing industry

Overview of your organization and its core values

Example: (Company name) is the world’s leading platform for (service). Business leaders, investors, consultants, social entrepreneurs, and other top professionals rely on (company name) to (primary benefit). Clients partner with (company name) to take advantage of (primary features). We believe strongly in our mission- and values-driven culture. Our core values drive our success. They are: (values).

We placed learning and advancement first on the list because candidates for SDR positions ask us most frequently about those topics. Learning should include functional sales skills as well as general professional skills. Advancement means clarity on the promotion path. With respect to the latter, sales guru Trish Bertuzzi recommends establishing micropromotions. For instance, in a one-year program, a new hire might graduate from an associate SDR who sets appointments to a senior SDR who generates qualified opportunities. Such promotions must be based on achievement, not on tenure.

Last, we usually avoid including salary range in the job description. Instead, we ask for the expected salary range when candidates apply so that we can weed out candidates whose expectations are too high. In our own experience, we would rather not fall in love with an expensive candidate because it wastes everyone’s time and such candidates artificially and unfairly raise the bar on the realistic candidate pool. In the end, hire the best candidate given the money you budgeted. Quickly release the ones who don’t perform, and extravagantly reward the ones who do with recognition and compensation.

Hire and Train Smart, Conscientious, Articulate, Early-Career Individuals

Every sales leader knows that hiring skill is critical to success. According to CSO Insights,⁴ overall sales representative turnover averages 22.4 percent, half of which is voluntary. In our experience, turnover is even higher among sales development teams where the employees are often younger and the work is both routine and stressful and managers must “always be hiring” to get ahead of inevitable attrition.

The ideal sales development new hire is a highly successful hunter working for a competitor who comes in via referral from an internal star performer. Of course, such a rare individual is not making a move anywhere unless offered a massive increase in pay and responsibility. Unfortunately, the job of a sales development professional is typically entry level and, therefore, commands neither high compensation nor a broad span of control.

So whom should you hire? Fortunately, academic researchers have spent years searching for the answer to just this question, and they have come to some amazingly valuable conclusions. Shockingly, very few hiring managers are aware of these findings, and among those who are, few apply them. We are willing to bet that the major deciding factor when you were last hired (or when you last hired someone) was an informal, face-to-face interview. Well, Frank Schmidt from the University of Iowa and John E. Hunter from Michigan State University proved more than a decade ago that that is a terrible way to hire.⁵ General mental ability (GMA) is the best predictor of hiring success, accounting for 26 percent of the variation in job performance. Adding an unstructured interview to an intelligence test increases the explanation of performance variation by a mere four points to 30 percent. Administering IQ tests, something almost nobody does, is way better than conducting informal interviews. On their own, unstructured interviews predict only 14 percent of variation in job performance.

Two other tests, a work sample test and a test of conscientiousness, are also better than informal interviews. While each takes more effort to conduct, work sample tests and hands-on job simulations add 13 points to the explanation of variation in job performance. Conscientiousness tests add 10 points. Though Schmidt and Hunter’s meta-analysis considered many types of jobs, other researchers found similar predictors of sales performance. A group of professors from the University of Iowa showed that “sales representatives high in conscientiousness are more likely to set goals and are more likely to be committed to goals, which in turn is associated with greater sales volume and higher supervisory ratings of job performance.”⁶ Moreover, in contrast to conventional wisdom, these same researchers found extraversion is not related to either sales volume or supervisory ratings of job performance.

A trio of researchers from Erasmus University, Rotterdam, added the missing piece. In addition to GMA (characterized as cognitive aptitude) and conscientiousness (characterized as the degree of adaptiveness and the ability to deal with role ambiguity), their study⁷ found selling-related knowledge to be a statistically significant driver of sales performance. They defined selling-related knowledge as that which “reflects the knowledge of both products and customers that is required to present and ‘co-create’ solutions for customers.”

Let’s pull all of this together. Experienced account executives create more economic value in senior account management roles. Moreover, an experienced account executive might not accept the monotony and relatively low degree of control even with adequate pay. Hence, in most circumstances, organizations will be able to hire only early-career professionals into sales development roles. A successful evaluation of candidates can be made using (a) a GMA test or rigorous screening based on past academic performance, (b) a test of conscientiousness, (c) a test of sales aptitude, and (d) a structured role-play to assess many factors including selling skill and communication ability.

We have investigated a number of commercial tests of sales aptitude including those from Devine/Sandler, Objective Management Group (OMG), Predictive Index (PI), SalesGenomix, and Talent Analytics. We prefer tests composed of forced-choice questions. This means candidates must choose the better of two desirable options or the lesser of two evils. For instance, “Would you describe yourself as more intelligent or more conscientious?” or “Would you rather miss your quota while your team makes theirs or make your quota while your team misses theirs?”

The Devine/Sandler and Talent Analytics tests are two of our favorites in this category. The Devine/Sandler test conveniently provides scores relative to benchmarks the vendor has developed by sales role. The Talent Analytics assessment requires that you develop your own benchmark by first applying the survey instruments to your organization’s top performers. In our eyes, this makes Devine/Sandler better for smaller organizations and Talent Analytics better for larger ones. Either way, you should test at least two of the assessments to identify which is better able to identify individuals likely to become top performers in your organization.

Here is how we use assessments: First, stack rank your existing sales organization using fact-based metrics such as performance-to-quota, new business generated (for hunters), or uncapped wallet retention (for farmers). Second, carefully review the stack rank to make sure it is accurate; adjust or remove any glaring anomalies that have special circumstances such as an account manager who lost a major account due to an external factor like bankruptcy. However, do not make adjustments based on managers’ opinions. Third, assess the top and bottom quartiles and develop a set of attribute weights that maximizes the score difference between the two populations. Fourth, verify that the resulting model is non-discriminatory. For new job candidates who score in the top quartile, move quickly to hire while looking for red flags. For new job candidates who score in the middle 50 percent, the assessment provides little information. Last, eliminate new job candidates who score in the bottom quartile from the hiring process unless there is something otherwise exceptional about them. Personality-based assessments should be only one of many factors used in hiring.

As for the role-play, we recommend a test we affectionately call the Kobayashi Maru. (Star Trek aficionados will recognize this as the no-win test of character command-track cadets must endure to graduate from Starfleet Academy.) In this test, we ask candidates to call us and try to schedule an appointment for our product. We relentlessly throw objection after objection at them: “Send me some information,” “I need to run to a meeting,” “I don’t see the ROI,” “I don’t understand what you are saying,” and so on. We do not yet care about their product knowledge. Instead, we judge two factors: The most important is their ability to persevere through at least three objections. The second is the degree to which they remain articulate throughout the process.

Where possible, hire individuals with some experience, either in a B2B sales role or in the industry an organization sells into. Seek out more experience (and expect to pay more) when selling a high-priced, complex product or service to very senior executives. The Bridge Group found required experience for sales development representatives selling $25,000 to $50,000 solutions averaged 1.7 years, while those selling $100,000+ solutions averaged 2.3 years (see Figure 9-2). Then, systematically train new sales development hires separately from seasoned account executives in a combination of customer knowledge, value messaging, product knowledge, competitive knowledge, sales skills and behaviors (verbal communication, business writing, objection handling), best-practice processes, and technology platforms.

  FIGURE 9-2 Required SDR Experience by Average Selling Price

With respect to hiring, we recommend bringing on sales development representatives in cohorts rather than one at a time. As Craig Ferrara, vice president of client operations for AG Salesworks, noted,⁸ benefits include strong peer learning, accurate benchmarking, productive competition, efficient training, and lower risk to sales volatility.

SDRs, typically early-career sales professionals, expect and deserve extensive training. The best organizations hold weekly team meetings focused on training. Some organizations even train on a daily basis. In addition, best-in-class organizations test their SDRs and recognize success with extrinsic (money) and intrinsic (certificates, experiences) rewards. As mentioned previously, training should focus on a range of areas such as technology, sales skills, soft skills, products, accounts, and competitors. SDR leaders should maintain and share a sales development playbook that includes ideal account and prospect profiles, qualification criteria, multitouch cadences, voice mail talking points, objection handling guidance, e-mail templates, technology tutorials, hiring criteria, and career paths.

Though most training occurs on the job, team and one-on-one training can be especially effective. In team sessions, we emphasize role-paying, analyzing sales e-mails sent by other companies, interviewing friendly customers, reviewing books, and listening to call recordings. In one-on-ones, managers should review activity and results as well as call recordings. One SDR leader we spoke with requires his SDRs to bring their best call and worst call to their one-on-ones. The best calls are scored using an objective scorecard and go into a shared “Hall of Fame” repository.

Hire Dedicated Sales Development Managers

Leaders face an array of organizational structure decisions, especially when starting a new development function, the first being whether it should roll into the sales or the marketing organization. Unfortunately, we have not been able to find any studies comparing the performance of sales development groups reporting to one function or the other. Our sense is that the top-level reporting structure is irrelevant compared to other factors such as hiring, the first-line manager, or process optimization. Organizations that are highly dependent on inbound leads tend to roll sales development into marketing to ensure the immediacy of response and consistency of message. In contrast, organizations that are highly dependent upon outbound prospecting tend to roll the function into sales to ensure that the right accounts and contacts are prioritized.

Fortunately, thanks to The Bridge Group,⁹ we can at least share that most companies, 73 percent in fact, place sales development within the sales organization. Of the remainder, 24 percent roll the function into marketing, and 3 percent locate it elsewhere. We agree with Trish Bertuzzi of The Bridge Group, who recommends, “This team reports to whoever has the expertise, passion, and bandwidth to lead it. This is far more important than what ‘everybody else’ is doing.” In almost all circumstances, we recommend that organizations recruit sales development managers from within the company because their people need leaders who know the products, prospects, and process inside and out.

To that end, start by looking within the sales development organization for talent. However, beware of simply promoting the top performing SDR to manager. Often, high performers are ruthlessly independent. Instead, look for an above average performer whom other SDRs trust and go to for answers. While we prefer pure managers to player-coaches, we recommend that SDR managers run a short cadence with a small number of prospects at least once a quarter to stay in tune with what is working and what is not, as well as to earn credibility with their team (even if the manager is unsuccessful in booking meetings or qualifying opportunities).

Assuming one follows the majority, the next decision is whether to centralize or decentralize the sales development function. Outbound sales development professionals should be aligned with but not report to individual sales managers. Traditional B2B sales managers typically lead six to eight account executives (AEs). Since the industry average is one SDR for every four AEs,¹⁰ an average sales team could be supported by one or two SDRs. Hence, SDR territory strategy will naturally mirror AE territory strategy.

Alignment does not imply reporting structure. We strongly recommend centralizing the sales development function by having dedicated sales development managers, each with a span of control of six to eight SDRs. Since new hires need to respect and learn from their manager, we insist the team manager come from inside the company with success as a hunter and possess an analytical mindset as well as solid selling skills knowledge.

Turning to the next organizational structure decision, geographic placement, we recommend collocating the new team in an office with a concentration of experienced account executives when starting a sales development function. This is especially important early on, when the account executives must share feedback about practices that have worked and not worked for them. Our philosophy in piloting new initiatives is to “stack the deck.” This means removing any factors that might later be used as an excuse to explain failure. If a pilot fails under the best conditions, then one knows the initiative will not work at scale. After proving success, a scaled-up sales development function can be located in a lower-cost long-term location with a sizable, well-educated talent pool. In the United States, great locations include Salt Lake City, Austin, and Raleigh-Durham.

The final organizational structure decision concerns whether to combine or separate inbound and outbound sales development. Figure 9-3 shows a little more than half, 55 percent, of organizations adopt a blended approach.

  FIGURE 9-3 Distribution of Inbound Versus Outbound Group Focus

We believe there is little consistency in combining or separating inbound and outbound sales development because the decision is extremely context dependent. Though rapid response to inbound leads is critical, the decision depends on several factors, including these:

The volume of inbound leads: The lower the volume, the more likely the sales development focus will be blended.

The breadth of customer needs: The more diverse the customer base, the more likely the sales development focus will be blended because SDRs need domain expertise to connect on a meaningful level with prospects.

The breadth of the product portfolio: The broader the product portfolio, the more likely sales development will be blended.

Enable Sales Development Professionals with Process and Technology

As we explored in detail in the previous chapter, sales development professionals should have access to tools that either allow them to do things they would otherwise not be able to do (run overlapping multitouch, multichannel campaigns) or streamline routine work (dial at the click of a button and record activity in their CRM). In addition, SDRs should have access to a campaign library consisting of proven contact frequency and duration cadences, e-mail templates, voice mail scripts, and compelling content and collateral.

In smaller sales development teams, SDRs will likely be responsible for gathering their own leads from a variety of data sources. As a team grows, it pays to separate outbound lead acquisition into its own function. High-quality data is paramount to sales effectiveness, so investments in cleaning contact information pay huge dividends. Organizations that adopt this level of specialization must build robust contact validation processes because low-quality leads waste time and lower motivation.

Reward Results, Not Activity

Consider for a moment all of the data points generated by sales development professionals as their prospects move from the top to the bottom of the funnel: new contacts added, e-mails, phone calls (dials, connects, voice mails, talk time), appointments set, appointments completed, leads accepted (and linked to opportunities), and, finally, closed-won business. Common benchmarks are 50 dials and 8 connects per day; 1 appointment set per day; and 8 opportunities added per month. The Bridge Group, whom we have cited with permission many times thus far, identified over 30 different variable compensation schemes in their survey. While most organizations use only one or two factors, 28 percent apply three or more components to calculate incentive pay.¹¹ In doing so, they violate the core tenet of compensation design: simplicity.

While we find it useful to monitor top-of-funnel activity including dials and e-mails, we strongly recommend against elevating their stature. When those metrics become either widely syndicated or included in compensation plans, bad things start to happen. To achieve their dial numbers, SDRs may cut short what might otherwise be valuable conversations. To achieve their e-mail numbers, SDRs may underpersonalize their messages, which then come across as “spammy.” We support call monitoring and (where legal) call recording for constructive coaching purposes but not for punishment.

Similarly, we find it critically valuable to monitor the ultimate bottom-of-the-funnel metric, revenue from closed-won business. What percent of total company revenue is typically sourced by SDRs? According to The Bridge Group’s study, 45 percent. However, unlike dials and e-mails, where SDRs have too much control, closed-won business is a metric over which SDRs have too little control. Compensation should never be tied to factors over which employees have little or no control. This said, we support the common practice of awarding SDRs a special bonus of up to 1 percent on transacted business they were involved with; this level is subtly motivating without being distracting.

The right place to find metrics for SDR incentive compensation is right in the middle of the funnel. A recent survey¹² found 65 percent of sales development groups are focused on generating qualified opportunities, 26 percent on appointment setting, and 9 percent on a combination of the two. For teams that generate qualified opportunities, we believe the single metric to use for variable compensation is opportunities accepted by account executive.

We prefer accepted rather than generated because it adds an important layer of quality control. If account executives are inspected on the close rate of opportunities in their pipeline, they will not accept junk just to help out their SDR partners. For teams that set appointments, we believe the single metric to use for variable compensation is leads accepted. Appointments set is not a strong enough metric since the SDR’s job is not done until the appointment is held.

Moreover, appointments held is not a strong enough metric either because, as with opportunities accepted, there needs to be some degree of quality control. We are willing to live with the fact that account executives might overaccept leads from appointment-setting professionals since it would not be fair to compensate SDRs on qualified opportunities—their doing so is too dependent on the skill of the account executive.

With all this talk of incentive compensation, we would be remiss if we did not suggest paying SDRs a base salary alone. This strategy is particularly effective with good management and measurement combined with an expectation that SDRs move up or out after 12 months. Often, vying for a promotion or seeing one’s position on a leaderboard is incentive enough to drive high performance.

Our final piece of advice on managing sales development professionals is to remember to treat SDRs as human beings. This was our guiding principle when writing this chapter. Compensating SDRs on midfunnel results rather than top-of-funnel activity empowers them to do what is right for prospects and for the organization. If most associates reach out to 50 prospects per day to get one appointment and one associate accomplishes the same goal reaching out to only 10 prospects, then so be it. Countless studies¹³ have proven that job satisfaction is closely linked to control. Since highly optimized sales development processes take away a decent amount of individuality, managers must strive to find ways to give back as much autonomy as possible to SDRs.

Let’s also not forget that much of the glory among sales teams goes to rainmakers, the seasoned account executives who bring in the most sales. We believe SDRs need to be viewed as full members of the sales team and celebrated equally for their contributions.