After the usual compensation questions, the #1 question I hear from SE leaders is “what is the correct sales/SE ratio?” The answer, like most things in life, is “it depends” – but here are a couple of thoughts that may help.
1. The SE Budget. My preference for setting an SE Budget is to base it on a true budget and not on a headcount number. That is, I’d rather be told I have $10m to fund an organization than be told I have a target headcount of 50 people. The monetary number (as long as it is reasonable) gives me far more flexibility in my hiring profile. Look at it this way – suppose I am told I can go out and hire two additional people – the usual response is to hire the best two SE’s I can find in the marketplace and bring them in as master/senior/principal SE’s. Yet it may make more sense for my overall business to hire five recent college graduates into an associate position – and it will cost me the same in terms of cash. Headcount gives no flexibility – budget does.
2. The Sales/SE Ratio. Back in June 2010 I wrote “How Many SE’s Does It Take ToSell A Solution?” It was intended as a primer to walk you through the growth of a typical SE organization. However, it was still based on the fallacy of a Sales/SE ratio. The problem with a ratio is that unless you are a small single-product company it really doesn’t work too well. Sure – it’s a good starting point, yet the correct number of SE’s should be based on a return on investment as opposed to meeting a ratio or adding quota.
As an example: One of my customers re-aligned their Americas SE team, and decided that for global accounts the ratio would be 1:1, Strategic accounts and Federal got a 3:2 ratio, corporate/middle market was 2:1 and everything else (SMB, telesales and partners) was 5:1. These numbers were dictated by finance, and where they got them from I have no idea (and nor do they!).
So what is a better way? Base the ratio on how busy and how productive your SE’s are. I use a baseline figure of 60% customer-facing time (carefully measured, including prep time) as a metric for SE’s. If a team is consistently below that number, they are not busy enough, and if they are over 60% then they are running hot. Now – running hot is not the same as being efficient, so you need to look at what they are doing and the revenue generated. That is ROPE – Return On Presales Effort. All things being equal, if your North-East group has a ROPE of $2.3m and the South has a ROPE of $1.4m – I’d add SE budget to the North-East.
More later – obviously the art is in determining if all things are equal, and what to do if they are not .. so stay tuned.