Mike Burnett: Hello, I’m Mike Burnett, partner at the Alexander Group and co-leader of our business services and financial services practice. Today, I’m joined by my colleague Mason Ginsberg, who is a director in the practice and one of the leaders when it comes to our commercial and industrial services practice. Today, we’re going to be discussing a topic that’s not necessarily unique, but very prevalent in the commercial industrial space, which is dealing with the unique challenges that come with operating within a branch based sales model. Mason, thanks for joining.
Mason Ginsberg: Yeah, thanks for having me.
Mike Burnett: All right. So, Mason, maybe for the audience’s sake, start us off and just explain what is a branch based model and why is it so prevalent within this space?
Mason Ginsberg: Yeah, that’s a great question. So, when we say branch-based model, we’re really referencing business models where local offices or branches include sellers that work alongside other business functions in much of the day to day operations are managed independently from other branches. So oftentimes, sellers will roll up to a regional reporting structure that includes other non-sales resources rather than a centralized sales leader. We see this pretty prevalently in certain industries, specifically in business services And it’s inherently necessary in a lot of cases because of the heavy on site nature of services that some companies sell. But it can exist everywhere. I mean, it can be as a part of a company that’s grown organically and through a lot of M&A activity. It can be via organic growth, where you just really want to maximize your local connectivity to your customers. So, there there are reasons for it but that really doesn’t mean that these companies have to accept some of the go-to-market-related challenges that really arise as a result of that. And that’s why we’re here to talk about today.
Mike Burnett: Right. So proximity to customer seems like an added benefit, but I imagine some of the decentralized nature of these models is a challenge. Based on your experience, what would you describe as some of the top go-to-market challenges for folks that operate in a branch-based model?
Mason Ginsberg: I’d say my experience I’ve seen four that really are pretty consistent. Let’s start broadly around company corporate strategy. So, all companies evolve, right? That’s a necessary step in the overall growth trajectory. You might sell new products. You might sell to new customers. You might just change what you want to prioritize as a business. Asking sellers or asking the people throughout your organization to change when they’ve done things a certain way for a while is hard. It’s even harder when you have a decentralized model that make it really tough to ensure that regions embrace changes, especially if there’s potentially a short-term deficit, as you learn the new skill or try to do things differently before you realize that growth opportunity at the end.
The second is really around job role and responsibility and consistency. So a very typical byproduct of branch-based models is a lot of autonomy at those individual branches with leadership. You could have sales roles at different branches, do things very differently. Take a branch in a really growth-oriented market versus one that’s very saturated. You may have sellers selling to new to new customers and sellers selling to existing customers. And they might be called the same thing, maybe called a sales rep or territory manager, but they’re really not doing the same things. So it can be advantageous when you’re talking kind of early stage company, high growth to have that flexibility. But as companies evolve, it gets a lot tougher to manage, especially thinking about talent development. So how do you progress throughout a role? How do you make sure you’re finding the right talent? How do you train the right talent? So a lot of changes, again, that come from scaling the business in that regard.
The third would be sales comp. How do we pay for the right behaviors? In those decentralized organizations, there’s a lot of, I would say to put it bluntly, commission rate type programs that really incentivize retention type sales activities over more growth-oriented behaviors. And so you end up having a situation where you can have inequity across roles, across people in the similar responsibilities and just have challenges driving year over year growth. I mean, the age old example is you have a seller that has a large book of business and declined year over year, and that seller is able to make more than someone with maybe a mid-size book of business that really grew and did the right things. The last thing I’ll note that really connects to all three of those points is poor data management that limits your understanding of results. So I’d say in the majority of cases, I’ve seen branches essentially report up what they need to report up for a financial reporting. Not really anything that allows you to understand more about the business. So if a branch grew year over year, how did that happen? Did it add new customers? Did they expand existing relationships? Did it grow just based on a couple of big wins? All of those things matter as you set forth your really your organizational strategy but if you don’t have that visibility at the corporate level, it really limits your ability to really drive change and to do the right things as an organization holistically. So those are the four main things that I’ve seen.
Mike Burnett: Yeah, it makes a lot of sense. And I think to your last point, it’s this blending of operational and sales related activities, and therefore reporting that oftentimes is essential to run the business, but can be a challenge in terms of trying to measure, are we gaining traction on the sales initiatives or the sales growth strategies that you were outlining before, just due to the nature of how the business is structured and what they’re reporting out on a day to day basis makes a ton of sense. All right, so we’ve walked through some of the challenges you’ve seen. What have you seen organizations do well to try to overcome some of these challenges?
Mason Ginsberg: Yeah. So, a few things and we work with our clients to really do some of these things, but I’d say, first of all, understand where shared resources fit into the equation. So rather than trying to let every single branch do their own marketing or do their own business development, do their own operational work, centralize those things where possible. It really is a great way to empower a sales organization thinking about professionalized marketing across the business demand generation functions, sales or revenue operations. Doing those things centrally really are a powerful way to be more efficient, but also take aggregate data and make sense of it in a more effective way.
Sales leadership consistency is another area. So we talked about differences in job content for a rep. There’s very different ways that companies have approached the management structure as well. We will oftentimes see branch managers as the effectively the sales manager, which can be pretty challenging because they have other responsibilities as well. And so if you have that reporting structure that really goes all the way up to president and has a blend of responsibilities beyond just sales, it doesn’t really give the right level of focus to the actual sales responsibilities. And so making sure you’ve got true sales leadership at all levels is a great way to unlock additional revenue growth.
The third would be job architecture and then the comp alignment. Making sure that they’re able to align incentives to actual job responsibilities, not just the job title, is really important. So to tie back to that earlier example around a seller might be selling to new customers versus existing. There are different sales compensation solutions for those issues. And so making sure that you’ve got clear job definition and calling a job what it actually is, and designing the actual comp program based on that job is an integral way to really get to the right solution.
The last thing I’ll say is you just want to understand your own starting point, broadly speaking, as a business. And so those three solutions I just mentioned, 1 or 2 might apply to certain organizations or different solutions. But really the best way to go about it is to really do a self assessment of your own organization, understanding what challenges exist, but also understand where good exists. There’s going to be a lot of great practices that are happening across certain branches of the business that other branches might not know about, and you really want to take those learnings and figure out how you can expand to the rest of the business. And so I would just kind of end by saying it’s not only about figuring out what’s broken, but figuring out where pockets of good are happening and really porting that over to the rest of the business.
Mike Burnett: Yeah, I was going to say, Mason, I think you hit on a key point there, which is a lot of these businesses have grown in a lot of their successes based on the entrepreneurial spirit of local business owners or folks that are managing these local branches. And oftentimes, you don’t want to deviate too far from the recipe that’s been working for them. But we need to break down silos in order to make sure that the good is shared throughout the organization. So I think that’s a really important point. It’s not just about fixing the problems, it’s also about trying to share and scale best practices.
Mason, thank you so much for the time today, and audience thank you for joining. If you’re interested in learning more about the commercial and industrial services space or interested in just learning about go-to-market issues at large, please visit us at AlexanderGroup.com. Thanks again.
