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The Worst Way to Structure Pricing

There is no “right” way to structure a pricing group.

Instead, there are a whole lot of different “right” ways. We’ve seen organizations be successful with a host of different org charts. One particular arrangement might better for you than others depending on your industry, the age and size of your company, and who has been handling pricing activities before you formalize your organizational structure.

But while there isn’t one right way, there is a wrong way to structure a pricing group.

And unfortunately, this wrong approach is also one of the most common.

In our opinion, the absolute worst way to structure pricing is to set up functional siloes. It’s easiest to understand what we mean by that by considering an imaginary B2B startup.

This company might have begun with one employee: the CEO. Over time, he or she added more personnel as they were needed. First came someone to design the product, then someone to handle sales and marketing. As sales started to flow in, they needed an accountant, and someone to answer the phones, and so on.

Eventually, the team gets big enough that it’s getting hard to keep track of all the prices that the company is offering customers. So the first pricing person hired might have the primary job of recordkeeping and setting up processes and technology to monitor prices.

Then management realizes they don’t just want to keep records, they want to analyze those records, so they hire someone to perform analytics. Then, they might need someone to handle all the exceptions coming in from sales. Or the company might start an initiative related to differential value or customer segmentation, and they hire new people for those roles. They might even hire dedicated people to manage some of the technological tools.

It’s easy to see how this structure evolves, right? It’s only natural that when you need someone to do a new job, you hire someone new to do that job.

The problem is that over time, it causes a lot of bloat. You end up with a whole lot of people who each do just one or two things. And if the specific need for that specific thing diminishes over time, you’re not going to fire anyone. Instead, you’re left with a person who is doing something that isn’t all that meaningful. This is the phenomena that anthropologist David Graeber refers to as “bulls**t jobs.” (And if you don’t have time to read Graeber’s book, NPR also has an excellent podcast on the topic that explains that between 37 and 40 percent of all people believe that the world would not be any different if their jobs didn’t exist.)

The net result of this siloed structure is that the people who work in pricing aren’t doing enough strategic work to justify their cost. Instead, they’re doing a lot of bulls**t work that makes them unhappy. And if the company needs to go in a different direction, it doesn’t have any well-rounded pricing experts who can fill that need. All it has are a bunch of super-specialists who can do one specific task. So the company has to go out and hire another new person, and the cycle starts all over again.

If you started out adding personnel to your pricing team this way, it’s time to start over. Jump off the merry-go-round and restructure your department. You might need to re-train some of your employees, but that’s OK. Trust us, if they are like 99 percent of the population, they will prefer having meaningful work to sitting in their cubicles doing one simple chore and then twiddling their thumbs the rest of the time.

Our webinar How to Structure Pricing Functions explains a whole bunch of other ways to structure your pricing team. Any one of these would be preferable to functional siloes, and one is probably a good fit for you. While you’re at it, check out Developing a Winning Roadmap for Pricing and How to Hire Great Pricing People. All these resources can help you build a team that not only works efficiently, it is also engaged in meaningful, strategic efforts that keep both the workers and the bosses happy.

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