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The Titanic is Sinking

All is not well in sales.

The sales environment, in a typical organization (most every organization, in fact), is seriously dysfunctional.

But rather than focusing on the obvious dysfunction, management is busy with incremental improvement initiatives:

  1. Sales training
  2. Sales force automation (technology of various types)
  3. Bolt-on lead-generation activities (outsourced telemarketing, for example)

Because none of these initiatives address the root cause of the dysfunction, they amount to nothing more than arranging the chairs on the deck of the sinking Titanic.

And make no mistake, the Titanic is sinking!

It’s not that sales is getting worse: the issue is that the rest of the organization is getting so much better, while sales clings to the same structure, the same management approach and the same practices that have been in place for the last fifty years.

Quiet revolutionaries

In a small number of companies, across two continents, a quiet revolution is in progress.

These companies (you’ll meet some of them in due course) have challenged the most fundamental assumption about how the sales function should be designed. Consequently, they have built sales environments that barely resemble those in their competitors’ organizations.

And they’ve seen massive performance improvements!

Improvements in the internal operation of sales:

  1. Field salespeople are spending 100% of their time in the field: performing four business-development meetings a day, five days a week
  2. Customer commitments are consistently met, administrative work is always done on time and sales orders appear more frequently and more consistently

And improvements in the relationship between sales and the rest of the organization:

  1. Hand-off problems between sales and production have been eliminated
  2. Marketing works closely with sales to ensure that salespeople are maintained at 100% utilization – and marketing has recruited the assistance of engineering (or senior management) to ensure offers are truly compelling

As mentioned, these changes are the consequence of challenging a single assumption about the design of the sales function – the assumption that: sales should be the sole responsibility of autonomous agents.

Are things really that bad?

Before we meet the new assumption embraced by these revolutionaries, it’s worth exploring the claim that sales is dysfunctional. Are things really that bad?

Consider the goal of the sales function (its reason for existence). The goal cannot be just to sell. The goal must be to consistently sell all of the organization’s production capacity (which may consist of traditional plant and equipment or knowledge workers).

In most organizations, sales consistently fails with respect to this goal. The modern organization’s capacity to produce has accelerated past its capacity to sell, and idle machines and production personnel cost shareholders dearly, month after month and year after year.

Why, then, is sales underperforming? One reason is that salespeople aren’t selling. A typical salesperson performs just two business-development meetings a week. You read it right. Less than 10% of a typical salesperson’s capacity is allocated to selling. And that figure is pretty standard across industries and across countries. The greater majority of a salesperson’s day is dedicated to customer service and administrative activities, solution design and proposal generation, prospecting and fulfillment-related tasks.

Let’s turn our attention to management. Why has management not fixed this problem? In many organizations, management has tried. Attempts to reallocate salespeople’s work have resulted in service quality problems (the right hand doesn’t know what the left is doing). The other alternative is simply to recruit more salespeople and many firms have tried that too: with interesting results.

Typically, when you add salespeople to an established team, costs go up immediately (easy to predict, right?). But sales don’t. In fact, in most cases, sales never increase to the level required to justify those additional costs. The reason is that salespeople do not generate the greater majority of their sales opportunities. Most sales opportunities spring into existence in spite of (not because of) salespeople’s prospecting activities. In most organizations, existing customers are by far the greatest source of sales opportunities. When management adds salespeople to an existing team, the same pool of sales opportunities is simply distributed across a larger team of salespeople. (In fact, management recognizes how very difficult prospecting is when they examine candidates for the new sales positions – looking to see who has the largest client list!)

But management’s problems don’t stop here. Salespeople are incredibly difficult to manage – particularly successful ones! You can’t direct your salespeople as you can production or finance personnel, you can only implore them. And successful salespeople are both a blessing and a curse. Sure they generate orders: but at a price. They run roughshod over production and finance personnel, they ignore management directives and they make frequent references to their clients, implying that they can leave and take the organization’s clients elsewhere – which, in fact, they can.

In summary then, when we examine sales we see a critical organizational function that consistently underperforms, that cannot be scaled (economically), that is in regular conflict with other functions and whose key assets are, in fact, a contingent liability.

The claim that sales is dysfunctional is no exaggeration!

A new assumption

It’s not hard to validate the claim that sales is typically the sole responsibility of autonomous agents.

When we employ salespeople we advise them that they will be held accountable for outcomes, not activities. We pay them commissions (in part, or in full), rather than fixed salaries. And we encourage them, in most cases, to manage their territories, their accounts and their sales opportunities as if they were, well, theirs.

It’s true that, increasingly, management is attempting to rein-in salespeople’s autonomy. We ask salespeople to report their activities in the organization’s CRM. We pay them a mix of salary and commission. And we, at least, pay lip service to the notion that these are company accounts.

But we forget that, where true opposites are concerned, no compromise is possible. Salespeople can march either to their own drumbeat or to the beat of a central drummer. When faced with the demand to do both, salespeople will always pick the least-worst option.

When you consider that the entire organization – not just sales – is engineered around the assumption of salesperson autonomy, it’s easy to see that salespeople will always choose autonomy.

If you doubt the casual assertion that the entire organization is engineered around the assumption of salesperson autonomy, answer these three simple questions:

  1. If an important sales opportunity is lost, who is ultimately responsible?
  2. If an important customer is dissatisfied, who is ultimately responsible?
  3. If an account falls into arrears on its payments, who is ultimately responsible?

The connection between dysfunction and salespeople’s autonomy is also easy to spot.

Salespeople spend so little time selling because they have so many responsibilities competing for their limited time. They have so many responsibilities because each salesperson is a self-contained sales function.

Salespeople conflict with other functions because, in their world-view, they see only their opportunities and their accounts. However other functions (production, engineering, finance) also have limited capacity and are in receipt of competing demands from multiple salespeople.

Salespeople conflict with management because there is simply no place for management in a typical sales function. If salespeople own their own activities and are held accountable only for outcomes (as is so often advertised) there is literally nothing for management to do. Managing outcomes is, after all, an oxymoron, no matter how many times you say it!

If the assumption that sales is the sole responsibility of autonomous agents is the root cause of this dysfunction, it’s clearly time for a new assumption.

The good news is that if we approach this question with a clear head, the answer is oh so obvious.

We discussed that, relative to other organizational functions, sales is sinking fast. What, then, is causing the rapid ascent of these other functions? In particular, what has caused both the productivity and the quality of manufacturing to increase by many orders of magnitude over the last 100 years?

The answer is: division of labor.

Division-of-labor enabled manufacturing to transition from cottage industry to the modern plant. And division of labor has had the same catalytic effect on project environments (think construction and aerospace), finance and even marketing.

Division-of-labor is such a powerful concept that it pre-dates modern industry. We find the first evidence of division-of-labor at the origin of life itself!

There’s one little corner of civilization where division-of-labor is conspicuously absent. The fact is that the modern sales environment resembles manufacturing, as it used to look 100 years ago!

But that’s about to change.

The quiet revolutionaries have scrutinized sales for evidence that this function is somehow unsuitable for division of labor. Their search has been fruitless. The new assumption, around which their sales environments have been engineered and upon which this book is based is as simple as it is powerful.

Sales is the responsibility of a centrally coordinated team.

This book shows how this innocent-looking assumption leads logically to a radical new approach to the design and management of the sales function. It will show you to apply this approach to your organization (irrespective of the size of your firm or the complexity of what you sell). And it will introduce you to a diverse range of organizations that have trodden this path already (our quiet revolutionaries).

You are in for quite a journey!

Home Forums The Machine > Introduction

This topic contains 15 replies, has 1 voice, and was last updated by  Justin Roff-Marsh 6 years, 9 months ago.

Viewing 15 posts - 1 through 15 (of 15 total)
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  • #2312 Reply

    @consultski

    It will be hard awaiting the completion of this project. This book is needed… yesterday!

    #2313 Reply

    Martin Gilligan

    Justin: I have over 40 years in sales, part of that time as a "sales trainer" and boy, have you articulated my frustrations and intuition that something was wrong with this picture. When I went back to Manufacturing and Engineering management, it was a piece of cake compared to managing a sales force. Through my Aussie client, I have been a US fan of yours since the inception of your newsletter – this could be a game-changer book.

    #2314 Reply

    Pablo Alvarez

    Justin, I apologize for my poor English.

    I have some doubts about the proposed solution. Neil Rackham's research, in his book "Rethinking the Sales Force" states that one should not totally split the sales process. The reason is that because for me to sell you something I have to invest time in understanding who you are, your business, and what are their needs. And customers like to establish and maintain relationships with the same person, if I sent to another person will feel disturbed and communication begin to fail.
    Besides those sales people who are concerned about generating new business and seek opportunities with the existing customers getting maintain or increase their share of sale.
    The division should be done only between prospecting and sales. What do you think?

    #2315 Reply

    Pablo

    Where 'minor' sales are concerned, Rackham's advice is correct. There is no reason for anyone other than the salesperon to engage with the prospect, prior to the sale (with the exception of the salesperson's assistant (which is inconsequential).

    However, in the case of 'major' sales (which is Rackham's speciality, by the way), he is wrong. In major sales environments, a perfect hand-off between sales and production is impossible, meaning that salespeople are ultimately pulled in two directions: [a] focus on selling and ignore the invitable problems in production or; [b] become entangled in production for the duration of the delivery process.

    Of course, the latter is what actually happens. In practice, then, the prospect's happiness with the salesperson is contingent upon the salesperson ceasing to be a salesperson and masquerading as a production person!

    Better to recognize that, in a major sales environment, there are two conversations that occur concurrently — the technical conversation and the commercial one. It is NOT critical that the one person vendor-side participates in these discussions (afterall, client-side, there will often be multiple parties involved). What IS important is that the two conversations are synchronized. (You should read this article to learn more about how we engineer the engagement model in a major sales environment: http://www.salesprocessengineering.net/2010/05/09

    Where 'research' is involved, you have to be careful to ask the right question. If you ask a prospect if he'd rather interract with one or two people, he'll always choose one. But this answer is meaningless because the question assumes-away all the critical context. It assumes that there is no degredation in quality when prospect engages with a single individual and it assumes that interracting with two people will introduce 'synchronization' problems (which is likely to be the prospect's experience).

    In our model, having specialists look after the commercial and technical components of the solution results in a better quality outcome for both. Having these people work shoulder-to-shoulder — and the centralization of the scheduling of the whole sales environment — eliminates the synchronization issues.

    It's simply not true that 'customers don't want to talk with multiple parties'. The reality is that customers don't mind interracting with multiple parties — AS LONG as they are not having the same conversation multiple times.

    Justin

    #2316 Reply

    Pablo Alvarez

    Justin,

    Excellent explanation of your assumptions. I'm a TOC practitioner and consultant, and I only have a few concerns before trying to implement your concepts in a company. I just read the article you mentioned and I had a doubt. Can you get the same results in a Make-to-stock environment? For example in consumer goods.

    On the other hand, the article "Less is more" (Goldratt / Herman, 2008), describes the formal solution of TOC for the sales process, but the solution lies in challenging other assumptions to improve the flow of sales opportunities and the solution is just based on limiting the number of opportunities, among other things.

    I can see a huge potential to bring together the two solutions, especially because your solution requires a deeper change to restructure the entire process, which is more challenging. What do you think?

    #2317 Reply

    Pablo

    Our model works fine in M2S environments. It may well be that the greatest improvements come from cost-reduction, however. You must first confirm that it is economic for field reps to be the 'sales front-line'. In many cases, when dealing with commodity products (even high-dollar-value ones) we move the front-line to inside sales and turn field reps into support for both sales and customer service <a href="http:// (http://www.salesprocessengineering.net/2009/12/12/why-your-field-rep-should-not-necessarily-be-your-salesperson/)” target=”_blank”> <a href="http://(http://www.salesprocessengineering.net/2009/12/12/why-your-field-rep-should-not-necessarily-be-your-salesperson/)” target=”_blank”>(http://www.salesprocessengineering.net/2009/12/12/why-your-field-rep-should-not-necessarily-be-your-salesperson/).

    I just and re-read the article you reference. I see no fundamenal conflict — but I don't see that the 'solution' in that article introduces anything that isn't already built into our model. We already choke the release of opportunities — or, more commonly, choke the release of promotional campaigns to maintain the opportunity queue at its optimal size.

    There's a limit to what you can achieve without centralizing scheduling. And of course, once you do that, everything in that article becomes super-easy!

    I do disagree with the prominence given to 'hit rate' (conversion rate or win-loss ratio) in that article. The primary measure should always be T/cu. Conversion rate is a cost-world measure. If sales is the constraint, the primary measure should be T / Available Appoinment Slot. This is NOT the same as conversion rate.

    Justin

    #2318 Reply

    Pablo Alvarez

    Justin,

    I agree that there is no conflict between the two models, but there is a conceptual difference based on the developments that have had the TOC knowledge in recent years.

    Initially TOC had developed functional solutions (DBR, CCPM, etc.) where the T / CU had a key role, but if we want a systemic approach we should not see functions but holistic solutions. This resulted in Viable Vision projects where the constraint is placed strategically in the customers orders and we should develop processes that ensure the constraint will never come back inside the company. We must not allow the emergence of bottlenecks and we should not allow the sales people be the constraint. In this scenario, the T / CU is meaningless.

    The internal focus should be to improve the flow (the primary objective) and use an indicator such as T / CU to prioritize the work is not aligned with this approach. Instead we should give priority with time consumption of the buffer (sales cycle). In fact, I think that's the change that I am thinking to try.

    Returning to your model I have read the importance given to the centralized program, why? we are talking about a CRM?

    #2319 Reply

    Pablo

    I'm well aware of the Viable Vision approach and I disagree with much of it. Sadly, the general failure of VV projects inspires little faith in those ideas.

    My position is that the constraint should always be internal. If it's not in production, it's in sales or NPD. If customer orders are limiting Throughput and, if the job of sales is to generate customer orders, then the constraint is in sales.

    To my mind, a systemic solution simply recognizes that one of the functions is the constraint and applies the 5 focussing steps at this higher level. There's no need for all the conceptual knots! I haven't been able to discern what Eli's current thinking is with respect to this question, but I do know that I haven't heard him mention the words 'Viable Vision' in the last couple of years!

    Because we convert sales to a project environment, there's a requirement for centralized scheduling.

    Justin

    #2320 Reply

    Pablo Alvarez

    Justin,

    You're right, now the Dr Goldratt is focused on the concept of ever flourishing company , but projects are still called viable vision and begin with a seminar entitled "Now and in the future."

    Place the constraint on the customer orders is accepted by most TOC practitioners and it's deduced from the TOC solution to the Strategy. The idea behind the holistic vision is to understand that a system has a single constraint and the entire system must be subordinated to the decision to exploit it. It's not just a function that has to be subordinated

    What I am trying to understand is how bring together the two solutions. I think the only change should be done is change the way of prioritizing the opportunities (T/CU) to improve the flow.

    I still have a concern about accounts management , if sales are repetitive they should be managed by inside sales, but how do you schedule that?

    #2321 Reply

    Thank you! And thank you for your ongoing support of my blog.

    #2322 Reply

    Bryan

    Justin
    Have you ever recommended using outgoing call centers (telemarketers) in your sales process for the promotional / lead generation process?

    #2323 Reply

    Denis

    Hi Justin,

    Interesting approach so far. Because this approach may require a substantial change for some organizations, I'm curious to know the evidence to support the comments that "Less than 10% of a typical salesperson’s capacity is allocated to selling", "The sales environment, in a typical organization (most every organization, in fact), is seriously dysfunctional.", and "…relative to other organizational functions, sales is sinking fast."? Anecdotally it seems plausible.

    It seems that real estate sales stars do practice division of labor so that they only spend time with clients and let back office support handle the rest. I think this is what makes them stars and able to ramp up volume. I look forward to reading the next chapters.

    #2324 Reply

    Denis

    There's actually a reference to a Proudfoot study in the text (mouse over the word 'country' in the region of the passage).

    The thing is that it's very uncommon to find an environment (particularly major sales — which doesn't include real-estate brokerage) where salespeople do anymore than 2 true bus-dev meetings a week.

    The next few chapters substantiate the other claims!

    What you say is true about real estate stars (and other sales stars too). Many of them have invented our model for themsleves — at huge expense to the firms they work for (who could easily have institutionalized the infrastructure).

    Justin

    #2325 Reply

    Bill Lane

    Interesting I picked up this from Linkedin (They must be using context sensitive marketing like google!) I have to say I am interested in reading your book, I was a sales manager for 18 years at Sun Microsystems and Identified the problem that my people were only seeing 2 customers a week (If you were lucky). So I outsourced the compleat process on a shared risk basis, I had 16 callers generating 16 appointments a day, 8 sales execs seeing a minimum of 2 customers a day (pre booked in their diarys. I then monitored the roi. A huge increase in productivity (They never came in the office). I ran the model for 5 years. each year we made 300 k calles 80k conversations 3.5k appointments 1.7k opportunities closed 800 avrage order value $50k = $50M PA. GM of 55%. My specific interest will be to see how you can increase the customer visits form 2 to 4 ;-). Kind Rgs Bill Lane EVP Gorillia Corp

    #2326 Reply

    Thanks for commenting Bill.

    In short, we transition from two to four by making a simple — but critical — tweak to your system.

    In your system (if I understand right), callers originate the opportunity and book the first meeting. From onwards, the opportunity is owned and managed by the salesperson.

    In our system, promotions originates the opportunity and sales coordinators own and manage it from cradle to grave. Salespeople are paired up with sales coordinators. The SC is essentially an exec assistant for the SP.

    SC's book all meetings and do ALL clerical / office-based tasks. SP do NOTHING other than face-to-face meetings in the field. If it's a technical sale, project leaders (sales engineers) are responsible for solution-design, proposal generation, etc.

    Salespeople just sell!

    Justin

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