I was, for the most part, always pretty lucky when it came to having good bosses. I was a benefactor of ‘servant leadership’ and witnessed firsthand the tireless drive of my bosses to deliver results for their team. It made an impression on me and by the time I stepped into leadership roles, I knew I wanted to embody those same ideals. But that comes at a cost.
That level of commitment carries the risk of burnout. Between one-on-ones, calls with customers, management meetings etc. there is little time left for much else. Being spread too thinly only serves to disconnect a manager further from their team and undermines their ability to properly support their direct reports.
On the other hand, you can be left questioning your credentials as a leader if you’re managing what feels like too small a team. In turn you start to wonder, whether or not you are leaving potential success on the table by not doing more with your time and capacity to manage.
At a business-wide level, this issue of manager capacity has serious ramifications on your revenue engine’s ability to perform in line with expectation. We all have our limits, leaders are no exception. But where is that limit? How much responsibility is too much? Or too little? How many direct reports is too many direct reports?
The Magic Number
For several years now, I’ve seen the number seven thrown about as being the optimal number of direct reports into a single manager. This was born out of several academic studies delving into the concept of ‘span of control’. That might ‘feel right’ to many of us, but it’s safe to describe it as a one-size-fits-all number. Whilst it may yield results that are there or thereabouts, we’re living in an age where it is more commercially expedient to be precise. We’ve all seen what happens when tech companies overhire for an entire decade, the waste and layoffs that ensue hardly seem worth it.
In regards to managing commercial teams, there’s no single answer when it comes to the ideal manager to sales person ratio. If you don’t have a slew of data to base your decision on, your best bet is taking our lucky number seven, considering the context of your current team and your business and either adding or subtracting by a few heads as appropriate. But what factors do we need to consider then? Let’s break it down.
This is a solid jumping off point when considering the manager:rep ratio within your revenue organisation. Somewhat obviously, if you’ve a small existing team of a handful of reps led by a single leader, the chances of that individual being stretched too thinly are less. Hire a handful more and that balance can quickly shift to your sales leader struggling to keep up with all the deals, personnel issues, holiday requests etc. that come with rapid headcount growth.
Pre-empting that shift is what’s critical to consistent growth, so in order to do so you need a sense of how that leader feels today and whether or not the reps under them are getting the attention they need to succeed. The best way to do this? Have an open conversation with the team and the revenue leader, take the feedback from that away and look at your data for any correlating evidence. Has performance across the team dipped since your last batch of hires? Have new starters made significantly slower starts than the incumbent team?
Complexity of the Sales Process
This comes down to how much support a given rep requires when closing a deal. Are you consistently selling sophisticated Enterprise grade-software and working directly with senior stakeholders on the prospect side over many months to get a deal through procurement/legal and over the line? Or are you filling orders and answering a couple questions before a prospect gives up their credit card details? In each scenario, the sales rep has different needs.
For more consultative sales, leaders will need to sit closer to individual deals and retain more details and even build relationships with prospects to secure a contract signature. In such sales-led contexts, it’s difficult to expect a single manager to be across the deals of ten reps in adequate detail. Considering the size of the prize, divide your team up, bring in more managers and watch them conquer together as multiple teams.
For more transactional sales, the manager can afford to take more of a backseat and focus on efficiency over excellence as a first priority. In this situation, adding a few more reps to the team won’t harm the manager’s capacity to drive performance as it doesn’t create additional complexity for them to manage.
Building on the previous point, the fundamental consideration here should be answering the question of what your reps need in terms of management support and how that works alongside the expectation you place on them in terms of attainment. If the team you’re building is largely made up of less experienced individual contributors whom you’ve set a big target, it follows that a more experienced manager with a better understanding of how to develop reps and foster performance sooner could be the best option. But such decisions aren’t always so obvious and in reality, your salary budgets may limit your ability to always hire for experience.
It becomes a question of hiring managers with the right blend of experience. If you can’t afford to hire for both functional expertise and subject matter expertise, which do you prioritise? Whilst subject matter expertise is beneficial, it’s somewhat easy to pick up through exposure to a company’s product and market whereas management experience is more painstakingly gained and thus valuable to acquire. However, this comes with a significant caveat, that if not followed can and will likely prove costly…startup experience. If you’re an early stage startup or a growing scaleup, how likely is it that hires (management or ICs) from larger corporates will succeed? It’s nice to think that their big enterprise deals become your deals but that thinking is flawed. Once you factor in the additional levels of support they receive or how representing a name with brand recognition impacts their ability to open doors, the case for hiring them becomes much less compelling.
Phase of Company Development
This perhaps touches less on the appropriate manager:rep ratio and expands more on the point above about experience. When you’re scaling from $50M to $100M ARR, your needs from a management perspective will differ greatly from when you went from $0 to your first $1M ARR.
In the early stages of growth, sales will either be largely founder-led with support from either a single individual contributor or perhaps a handful of them. For many founders, they see continued progression being a natural evolution of this dynamic whereby those heroes of early-stage growth are hired partially on the well-intended promise of ‘greater responsibility’ and offered middle management roles once they’ve proven themselves.
Eventually, however, the need for a tenured leader becomes clear and new senior hires will often be viewed by incumbent managers as people who have been brought in over their heads. There is a lesson to be learned here. As your revenue function scales, so too does its needs and the skills required in order for someone to manage it.
Acknowledge this from the outset with all individual contributor hires that you make, otherwise you run the risk of mismanaging their expectations and losing good people with proven track records. By communicating this point to your team early, you don’t risk disappointing them. Keep them engaged and happy by compensating them fairly and hire a leader that gels with them and prioritises their development.
Not only does such an approach minimise the risks associated with headcount turnover, it also turns your commercial team into a talent factory and a real source of value for your business as you continue to grow.
Fundamentally, by taking the above considerations into account when planning out your team structure, you’ll be able to derive from the magic number seven, what the appropriate manager to sales person ratio is for your business.
Planning around the lags and challenges of hiring can be a planning nightmare, and one that we don't believe can properly be done in a spreadsheet.
Using technology to better predict all of compute all the science, formulas and moving parts behind revenue, sales capacity & hiring planning can help to elevate business growth and profitability, and create more predictable revenue.
Q: What is the ideal manager to sales person ratio?
A: There is no single answer when it comes to the ideal manager to sales person ratio. It depends on several factors such as manager capacity, complexity of the sales process, and experience.
Q: Is the number seven the optimal number of direct reports for a manager?
A: The number seven is often thrown around as being the optimal number of direct reports for a manager, but it is not a one-size-fits-all solution. It is important to consider the context of your current team and business when determining the appropriate ratio.
Q: How can I determine the ideal manager to sales person ratio for my business?
A: To determine the ideal manager to sales person ratio for your business, consider factors such as manager capacity, complexity of the sales process, and experience. You can also have open conversations with your team and revenue leader and look at data for any correlating evidence.