How Do We Assign Strategic Account Managers?

Some firms simply do not understand—as Motorola did—the need to concentrate strategic account management on a small number of accounts. We became aware of the problem in the early nineties, when we created a 36-member world-class strategic account manager panel. We periodically submitted research questions to this panel. In 1995, one of our consultants asked several panel members how many customers a strategic account manager could effectively manage. The panel members responded by telling the consultant he was asking the wrong question—he should be asking how many individual relationships an account manager should manage. The consultant then asked that question to our entire panel.

It seemed to us that, with the answer to this and other questions, we could construct an account-manager staffing analog, a tool we had not seen before. Among other questions, our consultant asked the panel how much time each month a relationship required to prevent "drift," where the customer, not feeling enough attention from the supplier, simply drifts toward another supplier relationship. He also asked strategic accounts how often they needed to see an account manager. To our surprise, given the many industries and account managers replying, accounts and panel members agreed that individual relationship management took an average time of somewhere between two and eight hours a month. The two to eight hours is not necessarily face time. It could be phone time or email. It depends on the expectation of the strategic account contacts and the maturity of the relationship. New relationships tend to take more time; older relationships, once you establish reliability and trust, tend to take less time. This of course depends on any given account contact's relationship needs (Figure 5-6).

1. Strategic accounts have multiperson relationships, and require that a minimum of 5 to 10 relationships be managed.

2. Effective account managers need to manage a number of internal relationships as well.

Figure 5-6: Things to Consider

Starting with the 2 to 8 hours a month needed to prevent drift, we can begin to construct a strategic account management assignment model based not on sales models but on the expectations of account contacts. The model assumes that there are 20 workdays in a month, or 160 hours—although most account managers thought this assumption laughable. One said, "We're on flex time here...Icanworkany90 hours a week I want to." If you accept those two assumptions, though, a strategic account manager really has time to manage between 20 and 80 individual relationships. Account managers consistently told us, however, that the ideal number of relationships to manage was somewhere between 40 and 60, although most did admit to being responsible for at least 60 to 80 relationships. So their responses were consistent with each other. When we asked some account managers on the panel how they were handling the last 20 individual relationships, most said they were concentrating on the higher-leverage account contacts. In other words, they were skimming some of the account contact relationships.

Companies tend to compensate employees based on the ease and efficiency of internal processing rather than on exceeding the expectations of strategic accounts.

This model also assumes that SAMs will have to manage a number of internal relationships if they are consistently going to exceed account expectations. This is especially critical at suppliers just starting strategic account programs, where alignment may not have occurred. But even if the strategic account management program is 10 years old, we have mentioned before how many suppliers' delivery systems, processes, and therefore employees are internally focused. Companies tend to compensate employees based on the ease and efficiency of internal processing rather than on exceeding the expectations of strategic accounts.

In unaligned firms, SAMs sometimes spend the bulk of their time selling to and managing internal relationships. Such internal marketing is almost never a value-added activity for the strategic account manager.

So from the 20 to 80 individual relationships, subtract 10 to 20 from the number of external relationships, to make room for internal relationships—not a high number when considering the layers, levels, and internal orientation of most large suppliers. Now we are down to one account manager "owning" 10 to 60 individual external relationships, which is within the ideal number of 40 to 60 relationships our panel mentioned.

The model's final assumption is that key account relationships are "many-headed"—with a minimum of 5 or 10 contacts with which relationships need to be developed and managed—and this could be too low a number for some of your larger relationships. Let's look at our competed equation graphically (Figure 5-7). ^[5]

Potential # of Manageable Relationships (20–80)

MINUS (-)

Potential # of Internal Relationships (10–20)

EQUALS (=)

Potential # of External Relationships (10–60)

DIVIDED BY ( )

Potential # of Relationships per Account (5–10)

EQUALS (=)

Potential # of Accounts Assigned to One Account Manager (1–12)

Figure 5-7

That translates the 10 to 60 relationships into 1 to 12 accounts. Keep in mind that 1 to 12 accounts tends to be low for most people called strategic account managers. We recommend that you adjust this model for your own program (many strategic account relationships, for example, require that substantially more than 5 to 10 relationships be managed). Many firms—as we did at first—are asking the wrong questions in assigning SAMs.

A number of factors can impact the final number—that a strategic account manager should be managing 1 to 12 accounts (Figure 5-8).

1. How much opportunity does a given customer offer?

2. How experienced is the account manager?

3. Is the customer geographically dispersed?

4. Is decision making decentralized?

5. How many individual relationships need to be managed at the strategic accounts?

6. How well aligned is the supplier?

7. Has a huge new opportunity suddenly appeared that requires a seasoned strategic account manager?

8. How many supplier employees and executives are willing and able to support these relationship-management activities?

9. Will employees outside sales take responsibility for tasks assigned them by the strategic account manager?

10. Are there sufficient support people so that the large account managers can concentrate on value creation and relationship management rather than purely sales or administrative duties?

Figure 5-8: Factors Impacting Strategic Account Assignment

Overassigning accounts is one of the fastest ways to nullify the effectiveness of an excellent account manager.

Again and again, lost-account interviews reveal that the ex-supplier had badly underestimated the time relationship management required. Overassigning accounts—unfortunately commonplace in account management—is one of the fastest ways to nullify the effectiveness of an excellent account manager.

There are holes in this model. It allows no time for at least four major account management activities: (1) account planning (which our panel stated was one of the three most time-consuming tasks performed by excellent SAMs), (2) administrative activity (reporting and control), (3) travel time, and (4) vacation/personal time. We readily admit that these holes lower still further the number of customer relationships an account manager can manage.

We would argue, however, that this staffing analog, even with its holes, is far closer to account-defined reality than any headcount projection or sales-staffing model.

It continues to surprise us how many suppliers make critical staffing decisions not on what their strategic accounts expect or merit but on staffing analogs whose relation to reality is statistical at best. The point of this exercise is not exactitude as much as it is to achieve account focus: to start seeing strategic account management from the customers' point of view.

We've spoken about the challenges of SAM selection, development, and assignment. Let's now turn our attention to the challenge of account manager compensation.

It continues to surprise us how many suppliers make critical staffing decisions not on what their strategic accounts expect or merit but on staffing analogs whose relation to reality is statistical at best.

^[5] S4 Consulting, Inc.