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:
- Sales training
- Sales force automation (technology of various types)
- 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.
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:
- Field salespeople are spending 100% of their time in the field: performing four business-development meetings a day, five days a week
- 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:
- Hand-off problems between sales and production have been eliminated
- 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:
- If an important sales opportunity is lost, who is ultimately responsible?
- If an important customer is dissatisfied, who is ultimately responsible?
- 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!