Are you considering layoffs due to unpredictable markets and economic conditions? Companies striving to do more with less seek ways to cut costs. Staff cutbacks may seem like an easy solution, but the outcome is often less than ideal.
It’s best to consider other cost-containment measures first, leaving layoffs as a last resort. For example, finding ways to update and streamline your tech stack to eliminate redundancies and reduce costs. This allows you to better meet your needs while offering greater support for your staff in terms of automation and functionality.
Optimizing account management processes and team support are other ways to get the most of your Customer Engagement team. Then, if reducing headcount is ultimately deemed necessary, carefully assess the ramifications of each option. For instance, cutbacks on key account management (KAM) teams impact your organization’s ability to deliver measurable outcomes to your top clients. It hampers your business’ ability to maintain its revenue base, meet organizational goals, and grow consistently year over year.
Now, that’s just the tip of the iceberg, but layoffs on KAM teams, especially during unpredictable times like these, mean unnecessarily taking on a lot of risk. Let’s look at the reality of what happens when you use these cutbacks to “do more with less,” and what the perils are of reducing these teams.
At Kapta, we speak with a lot of KAM teams. Hence, we’ve seen the effects of KAM team reductions firsthand and it’s not pretty. As companies try to do more with less, KAM team headcount shrinks, and each team member’s portfolio increases as accounts are redistributed across the remaining reps. In some cases, these portfolios are more than double what they were previously.
Each person’s workload increases and they must manage in the same amount of time. Plus, the stakes are higher than ever. There’s a greater focus on customer retention since it’s a more cost-effective growth strategy than new customer acquisition and a better choice in a difficult economic climate.
This leaves KAM teams understaffed and overloaded. They are challenged to determine which activities to prioritize as they find themselves unable to do it all. This is especially true if you haven’t implemented a repeatable process for reps to follow like our KAM Process™ that keeps them on track.
Without such a process, KAM team members lack the bandwidth to take essential strategic steps like:
This limits their ability to develop strong client relationships, deeply understand their needs, goals, and priorities, and achieve measurable customer outcomes.
Additionally, when these crucial activities fall by the wayside, your team becomes more reactive and tactical, leaving them in “vendor status” instead of becoming the trusted advisor these top customers want. In short, this puts your largest accounts at risk at a time when you can’t afford to lose them.
What happens when your KAMs are understaffed and overburdened? They’re juggling so many priorities that they may not recognize at-risk accounts early enough to proactively address issues and minimize churn. Overextended account managers spend less time engaging with each of their clients, may drop the ball on account plan management, and drive fewer customer outcomes.
The best predictor of customer retention is measurable customer results. So, now is the worst time to stop driving customer value, when businesses are reassessing vendors to decide which ones to cut.
Consequently, the following hazards of KAM team cutbacks come at a high price.
Greater Churn: When KAMs engage with clients less frequently, behave more reactively and tactically, and achieve fewer customer outcomes, customers start shopping for a new solution. This causes them to churn by either reducing the amount they spend with you or completely leaving your brand for a competitor.
Decreased Renewals: As it is with churn if a client isn’t continuing to see the value of using your product or service, it’s likely that they’ll choose not to renew and will find an alternate solution.
Less Upsells and Cross-sells: Reduced KAM engagement with clients translates to a weaker relationship and understanding of the client’s businesses. This prevents KAMs from identifying and closing as many upsell and cross-sell opportunities. This, in turn, reduces growth and customer lifetime value.
Fewer Loyal Advocates and Referrals: The reduced quantity and quality of service, support, and measurable customer outcomes, combined with KAMs being stuck in “vendor” status, results in fewer clients becoming loyal advocates. These lukewarm customers are less willing to promote your brand or refer their network to you. This dampens your business growth as well.
Increased KAM Turnover: When KAMs are overloaded with what they believe is an unrealistic number of accounts to manage and retain, they become frustrated and disenchanted. They no longer feel like it’s possible to be effective in their role and they burn out. This is when account managers quit their jobs, leaving a vacancy on a team that is already stretched to their limits. This puts additional pressure on the KAM team members that remain, leaving them to get up to speed with more accounts that they don’t have enough time to support or retain.
Reduced Revenue: As you can see, reducing the size of your KAM team is a losing proposition that increases risks and costs significantly more than it saves. These losses can create a deficit that can be impossible to overcome once the damage is done.
It’s crucial to do more with less in challenging times but reducing the size of your KAM team should be a last resort. Start by streamlining your tech stack, optimizing processes, and supporting your account management team.
Then, carefully consider your cost containment options before you act. KAM cutbacks reduce account managers’ ability to protect and grow top clients. Consequently, this tactic backfires, causing you to lose revenue, miss business goals, and limit growth opportunities. That’s why reducing the size of your KAM team can be devastating for your business in the short term with long-term effects.
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