Sales departments were invented when managers of larger companies fell in love with the notion that client relationships could be standardized, controlled and steered. Such ideology has long been proven wrong.
We know today that selling (if such a thing exists) is by no means a complicated business, but that purchasing by clients is rife with complexity. It is fiddly. I once had a B2B client whose seven-people sales department produced little more than reports, indicators and meetings. The Head of Sales and the salesmen almost never talked to clients or prospects – neither personally nor virtually. They would hardly perceive this as a problem, though, as they understood their business as “professionally planning and directing” client relationships. Nobody else in the company would talk new business with clients either. Unsurprisingly, the company stopped gaining new business, and current clients grew quite unhappy. But despite the constant, predictable failure of sales departments, such structures keep existing in most companies, causing profound damages to responsiveness, growth, innovation and profitability.
Sales departments:
They are a bad idea turned structure.
It’s part of the hubris of command-and-control thinking to assume that something as complex and subtle as client relationships can be placed in the hands of very few sales people or Key Accounters. Notions of the few chosen, heroic men who “make rain” or “close the deal” have become intrinsic elements of sales identity. Such overly simplistic beliefs are the very reason why sales departments continue to exist at all.
Little wonder that today’s sales departments are managed through intricate systems of targets, such as lead/sales funnels, percentage of sales growth, number of customer visits, number of new projects, or sales contacts generated. Plus coordinating roles like sales planning, account planning, route planning and more. Add on top of that efforts invested in sales forecasting and campaigns that are little more than “phases of added rebates and discounts”, and the true picture of managed sales emerges. In the end, once you have created a sales area or department, and constructed wall-like, broken interfaces with your clients, you will somehow have to drive those interfaces with detailed targets and diverse means of steering.
When companies begin isolating their client relationships into the stand-alone functions we refer to as sales, all reasonable thinking about client proximity flies out of the window. A lot of potential for accountability, self-steering and entrepreneurial thinking gets lost. Developing partnerships with clients becomes unnecessarily difficult. Companies that have sales areas not just alienate their client-facing people from their clients (and vice versa), they pretty much keep everybody else from true servicing and thorough relationship-building.
After divorcing a sales function from what could be functioning, autonomous, thrifty business teams, there is no way of making that stand-alone function work effectively. Decentralization offers the means to effectively reintegrate the client relationship functions back into the business.
Sales targets: They are just the tip of an iceberg called “destructive organizing”
But before we turn to the solution of decentralization and reintegrating sales back into the business, let’s take a closer look at the way the sales function is managed today. Targets and measures abound - everything is controlled: The number of client visits, sales quotas, and the number of trade fair contacts to obtain. These are all attempts to tackle highly complex phenomena such as client relationships, market success and market reach with complicated means, a.k.a. steering. Sales targets, to put it bluntly, are under-complex, destructive nonsense. This goes for all fixed quotas and volume targets, all fixed revenue targets, all sales process indicators and all fixed earnings objectives like “15% growth next year.” Setting sales targets in advance and “steering sales” is a fallacy that negates the complexity of real-world business problems. With sales targets, only managing remains where proper conversation with clients and servicing to clients should exist.
The very existence of sales departments, separate sales functions, or similar “silos” is testament to overly simplistic thinking: “Sales” itself is an over-trivialization that stands in the way of building and sustaining effective client relationships.
The fundamental problem is that in complex markets, steering from the inside-out is merely a beautiful illusion. Even the word sales is a symptom of that illusion. This illusion is deeply built into the organizational structures and performance systems that companies are deploying today: we somehow believe in those fixed, individualized, elaborately contrived, detailed targets and the steering that accompanies them. In fact, target negotiations and setting of fixed targets is more akin to shamanistic rituals than of relationship-building with clients. Such systems are deeply superstitious – esoteric in fact. But sales is more than a nuisance: This world of plans and targets distances teams, managers and conversation within companies from value creation and the real-world market problems and client relationships. At some point, the front stage of corporate communication around sales degenerates into mere business theater. The problem in today's organizations is much deeper than most entrepreneurs, board members, top managers, or sales managers realize.
Go functionally integrated and go relative!
While most companies that have crippled themselves with sales departments and sales targets is usually how to meet their those targets, the real question everybody should be asking themselves how to organize for client relationships. I would be much wiser, surely, to measure the actual business success and profitability of functionally integrated business teams (or “cells”), instead of appraising individual sales people. This profitability would be expressed through metrics such as “relative sales margin compared to other cells,” or “relative profitability, compared to competition,” or “client satisfaction relative to other teams.” Such targets don’t serve central control, but rather self-assessment and self-organization of highly autonomous teams in the organization’s periphery. We call such measures Relative Targets.
Relative Targets must never be applied to individual employees, but only to team. That is, to, say, groups of four to eight people who work together with-each-other-for-each-other. The reason for this is simple, but it may still sound awkward: No such thing as individual performance exists in organizations.
In organizations, there is no such thing as performance at the level of the individual employee. Because collaboration is the reason that all organizations exist! Organizations are “ensembles” by nature. Here, individuals merely deliver contributions to joint (team) performance.
The use of targets, or performance measures must thus end at the team level. Otherwise the company will inevitably wind up in the behavioral control, micro-management and asphyxiation-by-steering.
What do a periphery team’s Relative Targets look like?
In contrast to fixed targets, the relative sort will alway refer to an individual team, a group of teams (e.g., “Nordic region”) or to an entire organization. Relative Targets neither predict, nor do they set expectations for future periods. Which is wise – given that the future is unpredictable. Instead, actual team performance is compared with past performance (e.g., with “the same month of the previous year”), with other teams from within the same organization (e.g. through so-called “league tables”), or with other companies. Through these Actuals-Actuals comparisons, fixed target figures and target negotiations become entirely superfluous. The annual planning, budget negotiations, target-setting, individual performance appraisals and plan-driven reporting can also be dispensed with.
Ultimately, the Relative Targets approach helps teams assess their own performance realistically and critically, so that they can act responsibly and entrepreneurially at all times. This is a world of difference from the performance systems that most common employ today, which produce dependence, complacency, and learned helplessness.
Measuring periphery performance without target-setting:
Compare teams’ performance against their own past performance.
Compare business teams among each other - also using league tables.
And observe team performance over time. It’s everything you’ll ever need.
A number of companies have banished fixed targets several decades ago – using Relative Targets instead. Shining examples of the Relative Targets practice are Swedish universal bank Handelsbanken, German retailer dm-drogerie markt, and Toyota. The social services giant Buurtzorg also joined the club, building Relative Targets into its DNA at the moment its foundation, according to its founder, Jos de Blok. There are now several large, high-performing companies with 10,000, 50,000, and over 300,000 employees, respectively, that consistently deploy Relative Targets.
Business teams, not sales departments
It's bad enough that sales departments were invented at some point in the industrial age. But the story of sales management did not end there, of course: Soon enough, sales departments were equated with business units – which, in a way, added insult to injury. In the 1980s, Matrix Structures further cemented the myth that “sales”, as a stand-alone function had value, somehow embodying the business. Which of course it never did. The Key Account Management fad followed. And, from the 1990s on, ERP softwares promoted the barriers to performance associated with sales departmentalization even further.
Since then, a plethora of tools and fads, including target systems, reporting approaches (“war rooms”, “dashboards” and the likes) have promoted further decline of client relationships. An example: When I started my career as a finance manager, sales funnels was all the rage. The concept assumes that client opportunities drip through a sales funnel from first contact to closing the deal, with certain “conversion rates” from stage to stage. It is a highly seductive way of thinking about the sales process. So seductive, in fact, that the concept is now embedded in most Customer Relationship Management (CRM) systems. The problem is that funnels were always an illusion. Those who use the funnel approach or adapt to its way of thinking will lose their ability to understand client relationships and value creation. The fix is simple: Funnels, the accompanying measures and terminology are to be eliminated, Key Account Management must be dissolved and sales management as a whole abolished.
In our time, the challenge is to finally overcome the profound misunderstandings underlying the sales-as-structure ideology. A better stance at the sales function would sound like this:
Everybody sells,
or nobody sells.
Which is what BetaCodex organizations like Semco, Handelsbanken or W.L.Gore have preached all along. To dissolve sales areas (which should never have existed) means to devolve the full responsibility for client relationships to teams in the periphery, which must “own” individual clients. This is what such a decentralized cell structure with client-facing business teams in the periphery looks like:
Instead of having “front-line people”, a decentralized and functionally integrated organizations is structured into many client-owning, client-serving business teams that pull services from the organizational center, by purchasing the center’s services. Each periphery cell will have its own Profit-and-Loss statement, which makes comparisons between periphery cells easy. This allows to do away with sales targets and steering. Also, as periphery cells will buy services from the center, service cells in the center will generate their income, thus gaining their own Profit-and-Loss statements, and the ability to break even by serving the periphery well.
In this Cell Structure Design approach, all periphery cells will “sell” products and/or services to external clients. with each of the periphery cells owning a comparatively small portfolio of clients - much smaller than the client portfolio a single sales department would possess. With this, a decentralized organizations gains simplicity and elegance, while teams in the periphery become self-steering and truly close to their respective clients, or client portfolios.
By understanding this decentralized and functionally integrated way or organizing, it becomes clear that most artifacts of functionally separated sales organizations can and should be abandoned. The following illustration lists such artifacts that should be submitted to organizational hygiene.
By combining relative performance systems with decentralized, functionally integrated structure, companies can overcome the misguided ideology of sales, and regain the power to develop true client relationships. As we highlight in the Cell Structure Design approach and in recent BetaCodex Network research papers (here and here), overcoming sales will take no more than 90 days or so.
It is a worthwhile undertaking.
Sources and recommendations
In the context of this article on sales, I would like to recommend the work of authors and experts who approach value creation from a systems theory perspective. The legendary W. Edwards Deming is worth mentioning here—especially his book The New Economics and the What would Deming do? book of quotes I published in 2023. Then there’s John Seddon’s useful book Freedom From Command-and-Control. In my own books, Organize for Complexity and Essays on Beta, Vol. 1, you will find key concepts discussed in this article, and essays about the topic of relative performance measurement and Cell Structure Design — all articulated in in a concise, practically applicable manner. On the BetaCodex network recommended books page, you can find even more titles on Relative Targets and Cell Structure Design: Use the filter!
For more detailed information about Relative Targets, visit www.relativetargets.com. For more on Cell Structure Design, visit www.cellstructuredesign.com Watch a BetaCodex LIVE podcast conversation about the illusion of selling here.
Bob Moesta presents an alternative view to the old sales model that pushes solutions on to customers, to one that is collaborative by understanding why a customer "hires" your product or service and their respective "jobs to be done" with it. He calls it Demand-Side Sales.
https://digestibledeming.substack.com/p/why-you-should-read-demand-side-sales