Chapter 5: Key 4: Create Human Resources Support for Strategic Account Managers

Overview

If I could implement (national account management) again, I'd insist on having more of the infrastructure in place before we went to market.

Tom VanHootegem
Director National Accounts
Boise Office Solutions ^[1]

Throughout this book, we talk about different support structures required by strategic account management. Excellent firms/programs tend to see their account managers as human assets, fundamental to their success. This chapter will concentrate on four of the most critical of these human-resource support issues:

1. How do we select strategic account managers?

2. How do we develop strategic account managers?

3. How do we assign strategic account managers?

4. How do we pay strategic account managers?

As we have seen, some firms confuse key account selling with strategic account management, and assume that a good frontline salesperson will make a good strategic account manager. They therefore just look for their most productive sales-people. Because these salespeople already know how to sell, their firms may see little need for developing them into SAMs. And because the old method of assigning customers and compensation always worked with these salespeople, their organizations often see little reason to change these, either.

Suppliers, by not knowing the expectations of all the buying influences in the account's decision-making group, have woven the noose that hung them.

While the key account selling approach works well in generating short-term revenue, it can easily lead to relationship problems, should a customer expect a truly strategic relationship. In too many cases, suppliers, by not knowing the expectations of all the buying influences in the account's decision-making group, have woven the noose that hung them.

They have created a human-resource infrastructure that usually overassigns the key account sellers and rewards them for focusing primarily on quarter-to-quarter revenue, paying them well to meet only a few of the account's expectations.

The key account seller approach, which often generates significant revenue, leaves the door wide open to a competitive supplier offering a true strategic relationship. An example: we know of a high-tech supplier that in the mid 1990s provided its key account sellers little training, assigned them 40+ accounts each, and based their compensation heavily on commissions. One of this firm's largest—and oldest—customers was a services firm that generated $300,000+ a year in business. After 10 years, the services firm suddenly dropped the high-tech supplier from its approved vendor list. When we spoke to the SAM who later recovered the account (after almost 3 years), he told us that his firm had lost that customer's business because the high-tech supplier had been complacent in both its service levels and presentation of value. Instead of searching continuously for new value propositions, the supplier responded only to account requests.

But those were not the only problems.

The key account seller who had lost the account used to sell—or, rather, took orders from—one person in procurement. Trying to cover his 40+ accounts, he had neither the time nor inclination to analyze the services firm's decision-making units or its purchasing practices. He did not bother to see if his firm was offering the appropriate internal people an ongoing, competitive, and compelling value equation. He had not developed metrics to measure his firm's performance at the services firm. In managing the services firm, neither the key account seller nor the high-tech supplier really understood what was at stake. This remained the case until the services firm's newly hired VP of procurement analyzed all his firm's supplier relationships. When he audited the high-tech supplier's relationship with his firm, he saw little value and kicked them out.

The key account seller did exactly what he was asked to do—continue to generate revenue from many accounts. And so he skimmed relationships to generate the cash. The service firm's VP of procurement, however, expected suppliers to develop more internal relationships, to measure their performance, and to regularly quantify their value delivered. In other words, the high-tech supplier was sending a tactician—and a good one—to manage a customer where a critical—and unknown—person wanted a more strategic relationship. The high-tech supplier had created a human-resource infrastructure that paid the key account seller well to do the wrong things for this customer—to think and sell short-term. Quarter-to-quarter revenue generation is, of course, a critical way to measure a strategic account manager's success; but just as critical is truly understanding what the customer expects, how it buys, what its business challenges are. Answering those questions can allow the revenue stream to grow exponentially.

When the new strategic account manager recovered the service firm's business after three years, the firm initially generated tens of thousands of dollars a year in business. After an additional nine months, though, the account manager had developed the former $300,000-a-year customer into more than a $2 million-a-year account. The supplier, which hired the new account manager for his strategic acumen, assigned him the one account, and compensated him mostly by salary, with some incentive bonuses tied to account share and profitability. The high-tech supplier's payback for making this investment was huge—huge enough for it to rethink how it was selling to certain customers. The high-tech supplier asked the account manager who had recovered the services firm relationship to help the firm develop what they now saw as true strategic account management.

The four steps the high-tech strategic account manager took with the services firm included: (1) conducting an in-depth situation appraisal, (2) developing a strategy for winning the business back, (3) implementing his action plan, and (4) looking ahead/developing another strategy for expanding the business. At a high level, this is the repeatable sales process that every successful strategic account manager takes to secure business and relationships. ^[2]

We have been discussing possible pitfalls when decision makers don't ask the right questions about human-resource support issues. Let's return to this chapter's initial questions and see how to approach human-resources support more systematically and effectively.

^[1]From an interview the authors conducted with Tom VanHootegem in May 2001.

^[2]The best in-depth look at this process comes in Miller, R.B. & Heiman, S.E. (1992). Successful Large Account Management. New York: Warner Books.