“We’ve seen a really dramatic increase in sales …”, Joe explains.

“A good sales growth for us … in the industrial glove market … would be 5%. But, even through the recession, we’ve seen a pretty dramatic increase in sales. This year we’re about 25% up in our sales over the previous year.

“I think some of that is the economy but some of it has to be attributed to the sales process [engineering] as well”

Below you’ll find a link to an interview with Joe Geng of Superior Glove. Superior Glove distributes gloves throughout North America from its home base in Acton, Ontario.

In the interview, Joe discusses both the successes and the challenges they’ve faced implementing SPE. What’s particular interesting is the discussion of salespeople’s reaction to the radical changes in their operating environments.

Enjoy!

Justin Roff-Marsh interviews Joe Geng of Superior Glove

New SPE blog features simple design and discussion forum

I’ve been busy over the holiday period redesigning and rebuilding my blog.

You’re looking at it right now!

The change I’m most excited about is the addition of a forum (integrated with the the existing commenting system). The problem with comments is that, traditionally, they’re attached to posts – meaning that all the discussions are disconnected from one another.

Well, my blog now has the best of both worlds. You can still comment on posts, but comments also appear in the forum, along with all other discussions. I’m hoping to recreate some of the lively discussions that used to occur before I transitioned to the blog from a Yahoo Group.

So, please humor me. Take some time to participate in the couple of existing discussions (including the one attached to this post) – or go ahead and start your own discussion by posting a new topic. If you want to register (so the blog remembers you for future visits) you can do that but it’s not required. You can participate just fine without registration.

I have a tip for you for the holiday period that’s such an awesome tip it almost qualifies as a Christmas present.

Trust me: you’ll be so glad I blogged about this.

A one-hour interview with a founder, every day of every work week: totally free!

Every day of the (work) week, I listen-in on a one-hour interview with an entrepreneur.

Since I moved to LA, I’ve listened to shockingly-good interviews with founders, business owners and business luminaries – people like:

• Tim Ferriss (who wrote the 4-Hour Workweek and who invests in numerous Bay-area start-ups)
• Gary Vaynerchuk (founder of Wine Library TV and author of Crush it)
• Jimmy Wales (founder of Wikipedia)

I listened to these interviews on a site called www.mixergy.com. And, amazingly, I’ve paid nothing for the privilege.

Andrew Warner interviews Jimmy Wales (Wikipedia)

The sole purpose of this post is to encourage you to go to Mixergy – to encourage you to start listening to Mixergy interviews – and encourage you to develop a daily Mixergy habit, just like mine!

Please understand that this post is a no-holds-barred endorsement of Mixergy – but it’s NOT a paid endorsement. Andrew Warner (the founder of Mixergy) has no idea I’m writing this post – and I stand to get no benefit whatsoever (other than sharing what has, for me, been a life changing service).

And frankly, I prefer it that way. Absent any commercial relationship, there’s no need for me to pull any punches. I can literally plead with you to take the time to discover Mixergy.

So, I’ve given you a hint of what Mixergy is about. A free one-hour interview every day of the (work) week with a founder. But that’s not the half of it.

Three things that really make Mixergy special

There are three more things you really need to know about Mixergy:

First, the high-profile interviews I’ve mentioned above are just the tip of the iceberg. Of the 658 interviews Andrew has on his site – and of the ~200 I’ve listened to – the greater majority are total strangers. And that’s part of the magic. Every week I hear stories of people I’ve never heard of who’ve tapped into markets I never imagined existed and who have built businesses that turn over millions, tens of millions or even hundreds of millions of dollars.

The second thing you need to know about is Andrew Warner. This guy is a seriously good interviewer. He’s gentle and understated like Larry King. But he has an ability to dig for the key ideas – the root causes of founders’ successes – that is simply unequalled. Part of Andrew’s magic is that he’s a founder himself. Hi built and sold a $38 million online greeting-card company before starting Mixergy. This means that has the credibility to put his guests on the spot from time-to-time and challenge them to justify their positions. This makes for a subtly different dynamic between Andrew and his guests that you simply won’t experience elsewhere.

You also should know that most (not all) of Andrew’s subjects are founders of tech start-ups. Obviously, as someone with a tech bias, this is very appealing to me. But, it I think it should be appealing to you too, even if you are not technically inclined. This is because the tech industry is in a period of rapid growth unlike any other industry. It’s also because the tech industry attracts some of the world’s brightest entrepreneurs – who compete unrelentingly to be on the cutting edge of all critical business functions.

Benefits I’ve received from Mixergy interviews

In the year or so I’ve been addicted to Mixergy, I’ve learned so much about just so much!

I’ve learned a lot about online marketing – about PPC, SEO about analytics, about aggressive media buying, about the optimization of landing and squeeze pages and so much more.

I’ve learned a lot about funding growth – about the pros and cons of taking outside investment, about cashflow management, about taking on partners and so much more.

And, I’ve even learned a thing or two about traditional operations – inventory management, creating productive vendor relationships and more.

Plus, I’ve picked-up so many tips that have delivered immediate benefit to our business. One example: we used to buy an SMTP service from www.smtp.com. Then, one day, I heard an interview with the founder of www.sendgrid.com – a competitive service. I was impressed with the founder so I checked-out the service. Bottom line, I switched to a much more advanced service with a laundry-list of features I didn’t previously have and much better service. And, I cut our monthly SMTP bill almost in half!

That’s just one example. If I sat down and thought about it, I could probably identify (literally) 20-30 similar instances. And I pay NOTHING for Mixergy!

Nuts and bolts

Yep, it costs nothing to listen to Andrew’s interviews. You can watch the videos each day as he posts them or you can set up your podcast catcher to download the audio for you (I use iCatcher on my iPhone).

These interviews are available free for everyone for seven days. After that they disappear behind a paywall. If you want to listen to past interviews you can get access to all Andrew’s content for $199 a year.

I haven’t actually subscribed to Andrew’s paid service yet – I will shortly. But, I’m not suggesting you do that on day one.

Here’s what I am suggesting:

1. Get over to Mixergy now and watch one of the current interviews: www.mixergy.com
2. If you like what you hear, download one of the numerous free podcast catchers to your mobile device and subscribe to Mixergy from that application
3. Whenever you’re in your car – or on a plane – listen to a Mixergy interview – in place of the radio

That’s the process I followed. It took me about 10 days to go from casual interest to fan to total addict. I’ve already introduced Mixergy to a few of our clients, here and in Australia, and they report the same experience.

So, as the great Molly Meldrum used to say, do yourself a favor, get over to www.mixergy.com, and start listening.

And have a very Merry Christmas!

Case study: TEBA, Melbourne (Australia)

A common criticism of SPE is that it can’t be applied to small businesses.

Well, I’m happy to present (another) video case study that invalidates that position.

TEBA is a very small technology company. They supply and integrate network infrastructure, targeting mid-sized enterprises with multiple points of presence.

Before the transition, TEBA had a number of salespeople performing, collectively, very few sales calls.  After the transition, TEBA has no salespeople! Steve, the CEO, performs a small number of high-value sales appointments each week and opportunities are originated and managed by a dedicated sales coordinator.

Steve explains what his new model looks like and talks about the transition and the future. He explains how they are using events to generate a decent volume of sales opportunities and provides some insight into the size of the deals he’s winning as a consequence of these events.

He also makes that point that, in spite of the fact that the new system requires that he does more sales calls than his salespeople did collectively, he now has more spare capacity than he has ever had!

[watch video]

Market embraces new Ballistix service offering

Two months ago, I blogged (here) about how we were transitioning away from projects and towards a managed service.

Well, that blog generated a whole bunch of interest – including three people who e-mailed me right away saying essentially (or literally, in one case), sign me up!

Since then, we’ve:

1. Launched 5 new service engagements
2. Got word from 2 companies with existing projects that they want to transition to the service model at project end
3. Consumed all of our engagement launch slots in the near term in both the US and Australia
4. Built a wait-list in Australia
5. Officially stopped offering projects to anyone

Bottom line: we’re excited!

A total-sales-back-office solution for the price of a PR firm

One of the most exciting things about this new direction is the economics of the proposition.

Of course, transitioning to an annuity is nice from our perspective, but I’ve been shocked by how good the economics are from our clients’ perspectives.

Here’s a nice way of viewing the numbers:

Cost

Outsourced sales operations (OSO) costs about what your firm would pay to have a small PR firm on retainer.

Benefit

So, if you replace your PR firm with us, your bottom-line is unaffected.  However, we will, over time, reengineer and optimize your entire sales operations.  And, from day-one, we’ll provide all your promotional collateral (print, online and video). And, we’ll provide you a hosted technology bundle including enterprise CRM and Business Intelligence.

Oh, and back on the subject of costs, as you well know, we’ll almost certainly reconfigure your sales resourcing, meaning you’ll have fewer salespeople (and sales managers), but more internal sales-support personnel (which is likely to save you a bundle on payroll). There’s also the possibility that you’ll close a remote sales office or two, while simultaneously increasing the territory you cover.

What about PR?

So, you smell a rat? Yep, that’s right. PR isn’t one of the services we offer. So you replace your PR firm with us and we do everything other than PR (sounds kind of like a bait-and-switch, or something, right?)

Well, actually, it’s not. If you have a PR firm on retainer, they will be currently attempting to provide you every service under the sun – other than PR – while simultaneously trying to convince you that the term PR actually means everything under the sun, other than PR.

The thing is, there are only two events that are genuinely newsworthy (i.e. likely to land you an article in Forbes or Industry Week):

1. You launch a new product that is materially different from anything else that’s readily available
2. You get raided by the IRS

Each time one of these events occurs, your PR firm will do a sterling job of drumming-up coverage for you. But in between these special occasions, they’ll be trying to stay busy building you websites, posting on your Facebook Fan page, producing brochures and doing all sorts of non-PR stuff.

The advantage of having us doing everything other than PR is that we excel at synchronizing the entire sales function. In other words, we ensure that absolutely everything subordinates to the No. 1 objective: maintaining your sales team at 100% utilization (four appointments a day, five days a week).

Now, I don’t mean to pick on the PR firm. There’s a handful of other service providers we make redundant too, from the CRM vendor to the traditional design firm and the executive coach. And in every case, our point of difference is clear: there may be others out there that can build prettier websites or offer more esoteric CRM features, but there is no one – bar no one – who understands how to build a complete sales function like we do.

Oh yeah: we’re excited!

Welcome to Part 2!

Here’s where we dot all the ‘i’s and cross all the ‘t’s. We’ll be talking about roles, workflows, campaigns, technology and much more. But I don’t think we should be satisfied to examine these building blocks in a vacuum. After all, Part 2 is all about practice, not theory. Accordingly, it’s my intention to weave a conversation about how and when these blocks should be deployed, around the description of their constituent parts.

It’s important, therefore, that we set the scene for this conversation. What we need to get started is a high-level plan. You need a model for your new environment. You need a rough understanding of the resourcing (and cost) implications of the new model. And you need to know what the transition is likely to look like.

Interestingly, without guidance, most executives approach these questions in the opposite order. They start planning the transition without a clear understanding of the model or its resourcing implications! As a consequence, these are the questions that typically preoccupy a recent convert to our cause:

Do we start with salespeople, perhaps? Provide them new job descriptions (and a revised compensation plan)?

Do we start with promotions? More sales opportunities will never go astray, right?

Or, do we start with technology? After all, there’s something cathartic about a new enterprise application and all the friendly consultants who come live with us during its implementation!

Of course, all of these approaches are wrong. Dangerously wrong!

A plan that commences with these initiatives will almost certainly fail. Worse still, it will fail so spectacularly that it will discredit the whole notion of sales process engineering – providing you with little choice but to persist with the traditional model, in spite of its shortcomings.

The model

As suggested, the identification of the ideal model is the starting point.

We examined four models in Part 1, but we’ve also acknowledged that our four key principles provide no limit on the number of possible models.

If one of the models described is a perfect fit, that’s terrific. However, if your environment is more complex than the four described thus far, you have two choices:

1. Simplify your environment to fit one of the four models
2. Start with one of these models and customize it to fit your requirements

Of course if you are not convinced that your environmental complexity is adding value, option 1 is the preferable one!

Either way, your first challenge is to select one of the four models, either as the optimal one or as the starting point for customization.

Unpacking account management

In order to do that, you should answer four fundamental questions:

1. Where business-development is concerned, what is the nature of the conversation and where does it (or should it) occur?
2. Where transactions are concerned (repeat purchases), what is the nature of the conversation and where does it (or should it) occur?
3. What discrete sales activities absolutely must be performed in the field?
4. What discrete technical activities absolutely must be performed in the field?

The purpose of these questions is to unpack the concept of sales or, to use the more common terminology, account management. As we’ve discussed, it simply doesn’t make sense to treat sales (or account management) as a single activity.

As you answer these questions, try and organize your answers around two axes:

1. Inside versus outside
2. Selling versus not-selling

It’s helpful to unpack ‘account management’ tasks into four categories

With the help of a trusty Boston Matrix you’ll end up with something like the above. (It’s likely that you’ll be surprised by the small number of activities that do actually need to be performed in the field.)

Direct or via a channel

With this information at your disposal, you’re in a position to contemplate a big question:

• Does it make more sense to sell direct or via channel partners?

It’s a big question because the implications are huge – and because each option really needs to be an all-or-nothing proposition.

To arrive at your decision you should read (and re-read) the section of Chapter 5 entitled Indirect Sales.

The good news is that, if you conclude that you will sell via channel partners, you’ll likely discover that the indirect-sales model described in this chapter is good to go (with minimal customization).

Mapping activities to roles

You can now start to map activities to roles. Not the roles you already have, mind you. Pretend that you’re starting with a blank sheet of paper, here.

You’ll likely discover that the roles and activities don’t match-up with the categories in our Boston matrix – but that’s okay: that’s why arrows were invented.

Messy is okay. You’re on your way to creating a masterpiece here!

In the example above, you can see the following mapping:

Now that you have a general idea of the division of labor you can get little more detailed in your planning.

My preference, at this point is to create a diagram of the sales environment (including customer service and engineering).

This diagram should be granular enough to show functions, personnel (one circle per person) and work queues – but no more granular. At this point, you should not commit to the number of individuals in each role. You’ll almost certainly want to revise your initial assumptions after we shine the spotlight on resourcing in a moment.

Here’s an example from a business that sells a mixture of simple and complex design-related projects (from another of our quiet revolutionaries).

 A high-level drawing of the model is great to crystalize your thinking
and invaluable to sell your ideas when you’re done

In this example, we have a Special Project team that operates in an engineer-to-order environment with our standard model.

Project leaders are members of the design team – which also provides simple design concepts to Inside Sales.

The Inside Sales team is responsible for making outbound calls to solicit simple orders (make-to-stock and make-to-order). This team escalates more complex jobs to the special-projects coordinator.

The Customer Service team is responsible for order entry and management and issue management. And the Promotions person is responsible for generating sales opportunities for Inside Sales.

Resourcing

You now understand the division of labor. The next step is to determine exactly how many individuals are required in each role.

It’s best to start with field personnel and work backwards.

Salespeople

It’s almost certain that you need a fraction of the salespeople that you already have.

As you already know, a typical salesperson performs only two true business-development meetings a week. And, if we re-allocate all tasks other than business-development meetings, the result will be that your salespeople’s effective capacity will increase by a factor of 10 (from two business-development meetings a week, to 20).

This means that:

1. Your existing team can do 10-times the volume of business-development meetings
2. A team one-fifth the size can do twice the volume of business-development meetings
3. A team one-tenth the size can maintain the same volume of meetings

Regardless of your growth aspirations, you should immediately eliminate option ‘1’. Considering the magnitude of the change associated with the transition to this new model, there is absolutely no way that you can commit to generate ten-times your current volume of sales opportunities in the near to mid term.

Absent a ten-times increase in opportunity flow, the obvious outcome of the transition to the new model is that expenses will increase and your salespeople will spend most of their time standing idle.

(And, please, don’t even think about suggesting that salespeople might be able to use their idle time to originate sales opportunities. If this were possible, they’d be doing it already!)

The more sensible approach is to reduce your sales team to between one-tenth and one-fifth its current size. This gives you the opportunity to place your most capable salespeople in the few remaining business-development roles and to redeploy remaining salespeople elsewhere.

Some simple math will help you to arrive at the right answer.

The math

Start by determining the average weekly volume of (true) business-development appointments performed by your total sales team (it’ll most likely be around 2 per person).

Now, there’s a right and wrong way to determine this number. The wrong way is to ask your salespeople (or your sales manager) for an estimate!

The right way is to sit down with a representative number of salespeople and actually examine their calendars – page-by-page – and count the business-development meetings over a one-month period. Remember to differentiate between true business-development meetings and account-management visits (the latter have no explicit business-development objectives).

Let’s call the resulting number your: current (weekly) appointment volume.

Then, examine each of the following, and estimate the number of appointments that can readily be extracted from each on an ongoing (weekly) basis:

1. Existing accounts (remembering that we’re only interested in appointments that can be scheduled with an explicit business-development objective – no doughnut runs)
2. Existing under-exploited opportunities (these are opportunities that are currently being neglected because salespeople are deeming them to be unqualified)

Once you sum these two numbers, let’s call the result your: readily-achievable, incremental appointment volume.

The number of salespeople you require in your new model will be roughly equal to:

Of course, 20 is the weekly capacity (standard appointments) of each field salesperson in the new model.

In practice, then, if you have 10 salespeople in a particular region (or division) now, with the transition to the new model, this number will drop to between one and two.

The actual number should be determined primarily by your confidence in your ability to generate incremental appointments from existing clients and opportunities.

It pays to be conservative here. Even if you maintain your appointment volume at its current level, you’ll still derive significant benefit from:

1. Better salesmanship: all appointments are now being performed by your most capable salespeople
2. Better opportunity management: sales coordinators have better attention to detail and pursue prospects more relentlessly than salespeople ever do
3. Better customer service: the centralization and formalization of customer service (and project leadership) more often than not has a profound impact on customer satisfaction and, in turn, on re-order frequency

And there’s another important reason to be conservative.

In my experience, most organizations over-estimate their ability to respond to a sustained increase in sales. What typically happens is that an increase in business-development activity quickly consumes the customer service team’s protective capacity. And then, as this activity translates into orders, we discover that, while production has unutilized capacity on paper, it takes quite some time to exploit this capacity, in practice.

At least one-third of our quiet revolutionaries experience the following sequence of events:

1. They apply division of labor and transition to the new sales model (with a much smaller field salesforce)
2. The centralization of customer service and project leadership causes an immediate improvement in customer service and an unsuspected lift in transaction flow
3. Customer service and production run out of capacity and need to either add personnel or need to review their operating procedures
4. With more aggressive offers and better salesmanship (remember, the more capable salespeople are now handling 100% of the sales opportunities), the sales function becomes more effective
5. However, with limited customer service and production capacity, sales must deliberately throttle salespeople’s activity until the constraint shifts back to sales (this can often take months)

Bear in mind that the scenario above occurs after the sales team has been reduced to one-fifth its original size!

Geography and risk

While most executives understand the case for conservatism, many are reluctant to trust the math.

The two common objections are:

1. Geography: our salespeople have huge territories – they simply can’t do four appointments a day
2. Risk: if we reduce our sales team to a fraction of its current size, we’re exposed – if we lose a single person we’re in deep water!

It’s true that a lot of salespeople have large territories. What’s more, if you reduce your sales team to one-fifth its current size, territory size will obviously increase.

But here’s the thing: travel time is not primarily a function of territory size. What determines travel time is the distance between a given appointment and the one preceding it. As appointment volume increases, it becomes possible for a sales coordinator to batch appointments by travel time.

A typical salesperson, who performs only a few appointments a week, will inevitably find themself flying from city to city because they have only one person to visit in each location. However, a salesperson who performs 4 business-development appointments a day will, at any point in time be working on 80-200 opportunities concurrently (depending on opportunity cycle time). With this number of open opportunities, this salesperson’s coordinator should have no problem scheduling a day or two’s work in (say) Chicago, followed by a couple of day’s work in (say) Atlanta.

Now, if you’ve ever visited Chicago you’ll know that, even within the one city, travel times can be horrendous. But, on closer inspection, even this is not the problem that it appears to be. What tends to happen in large cities is that organizations of a similar type (manufacturers, technology companies, advertising agencies, etc) form clusters, which mitigates the travel problem.

The second concern is risk. In large organizations there’s often a feeling that more salespeople equal more sales. It simply doesn’t seem right that you could increase sales by decreasing the size of the team. Of course the flaw in this reasoning is obvious, it’s not sales people that’s the primary driver of sales – it’s sales appointments.

This concern does take a more rational form, however. If a field team is reduced to just one or two people (as is often the case) management often worries what will happen if a salesperson falls ill (or resigns).

This concern also evaporates on closer inspection. If we imagine a situation where a team of five salespeople was reduced to a single salesperson, it’s true that the organization is exposed if that person falls ill. However, it’s easy to see that this exposure is no worse than in the previous model when you consider that:

1. Most of the activities previously performed by salespeople have been redistributed across sales support and engineering team members
2. The salesperson’s role has been simplified to the point that it can be readily filled (on a temporary basis) by a senior executive (or, worst case, by a project leader)

Now that you know how many field salespeople you require, we can work backwards to make resourcing decisions for the rest of the sales environment. (Don’t forget to adjust your draft model as we go.)

Project leadership

To recap, project leaders are only required in complex (typically engineer-to-order) environments.

The project leader is a technical person who can hold their own in the client’s executive suite. They are responsible for managing the technical component of the end-to-end engagement and, as a consequence, for ensuring the tight integration of sales and production.

It’s important to note that, in most complex environments, most (if not all) existing salespeople are actually a better fit in the project leader role. This is because complex environments demand project leadership skills and, consequently, attract more technical people.

This means that, if yours is a complex environment, while it’s true that you’ll be drastically reducing the size of your sales team, all that will happen, in practice, is that most salespeople will be reassigned to project leadership roles.

To determine the ideal ratio of project leaders to salespeople you need to estimate the amount of time that an average engagement will consume, bearing in mind that:

1. Not all sales opportunities become projects
2. All projects will require the project leader’s post-sale involvement
3. If you intend to run your salespeople at full utilization, it’s impossible for you to also maintain a project leader at full efficiency because you’ll regularly have resource contention (as the ratio of project leaders to salespeople increases, this becomes less of an issue)

You’ll get a much more accurate result if you estimate the load on the project leader in units of half a day. (To estimate in hours is like trying to measure the circumference of an island with a ruler!)

There’s no doubt that you’ll discover that one salesperson can keep a number of project leaders busy. The ratio of project leaders to salespeople is always greater than one-to-one and often as high as four-to-one.

Sales support

Now that you know the number of salespeople and project leaders you require, it’s quite easy to estimate resourcing for your sales-support team. (I’ll use the term sales-support to refer to customer service along with all centrally-based sales resources, including promotions coordination.)

Bear in mind that, under no circumstance does it make sense for your organizational constraint to move to sales support. Even if your designated constraint is your sales function, you will want to resource this function to ensure that salespeople (field or inside) are the constraint – and not support personnel.

In summary, then:

1. If sales is the designated organizational constraint, every role within sales support must have enough protective capacity to subordinate effectively to salespeople
2. If another function is the designated constraint, salespeople must have sufficient protective capacity to subordinate effectively to that function and sales support must have enough protective capacity to subordinate effectively to both salespeople and to the constrained function

Let me reiterate: there is no conceivable situation where it makes sense for sales support to become a bottleneck!

This should be obvious but, sadly, I see organizations almost every week where sales (and production) support resources are overburdened – meaning that significant value is being destroyed (cashflow and customer service quality), because of management’s unwillingness to maintain protective capacity in these areas.

Sales coordinators

It’s very easy to calculate the number of sales coordinators you require. You need one for each field-based salesperson.

That’s it. And it’s non-negotiable!

Think of it this way. Your salespeople are about to increase their volume of work by ten times. It takes an enormous amount of work, behind the scenes, to enable a salesperson to operate at this rate. And most of this work will be performed by your sales coordinators.

The economics make good sense too. The sales coordinator makes the most significant contribution to the ten-times increase you’re about to see in your salespeople’s effective capacity. But, in spite of the value they add, they typically cost less than half what salespeople do.

Customer service representatives

You need enough capacity in your customer service team to:

1. Absorb all the customer service tasks that are currently being performed by salespeople (including the generation of simple quotations)
2. Process all inbound orders
3. Update (proactively) clients on any changes in their orders’ expected delivery dates

In addition to this, we mustn’t forget our commitment to maintain protective capacity in all sales-support resources.

It is likely, therefore, that you will need to add some team members to your customer service team. However, you should be on the lookout for opportunities to improve the productivity of this team. Typically, our quiet revolutionaries have made an incremental increase in team size – but have generated huge increases in productivity by making simple changes to operating procedures and management.

If you’re wondering if you have opportunities for productivity improvement, check your answers to the following questions. If the result isn’t a string of yes’s then the questions themselves will give you an idea of what needs to be done in this area.

1. We have a happy, enthusiastic team that processes almost all (>90%) of orders, issues and requests-for-quotations well within customer tolerances
2. The team can accomplish (1.) while working normal hours
3. We have standard workflows for all common work-types – and checklists for complex activities (these workflows are posted in plain view of all team members)
4. All orders, issues and requests-for-quotations are managed using the ERP (or CRM), not using manila folders, post-it notes or home-grown Excel workbooks
5. The team has daily (or, twice-daily) work-in-progress meetings that include:
   1. A review of case-flow and of the size and location of any work queues
   2. A review of problem cases and creation of an action list
   3. Updates from production (and procurement), identifying jobs that are likely to be delivered late
   4. Review of a defect log (containing quality issues that were identified internally)
6. The team’s supervisor (or team leader) can quote your current on-time-task-completion percentage, without referencing a report

Inside salespeople

If you currently have a field team, it’s unlikely that you have inside salespeople at all. Or, if you do, it’s likely that they interact only with those customers that haven’t been assigned to field salespeople.

Either situation is likely to represent a missed opportunity.

Even in major-sales environments, there are generally transactions that can be readily made on the telephone. And the notion that better clients should be managed from the field and not the phone is clearly fallacious.

Your best clients will almost certainly benefit from phone contact, in addition to field visits.

Assuming that your inside team is not your sales front line, it’s unlikely that you will need to add inside salespeople on day-one of this transition.

A better approach is to experiment with the creation of inside sales once you have restructured your existing team. You can start with one or two inside salespeople and add more once you can see that they are paying for themselves.

Traditionally, organizations keep inside sales away from their field accounts because they’re concerned about communication problems (and sales commissions). With the elimination of commissions and the central planning of all field activities, both of these issues disappear.

Promotions coordinator

As we discussed in Chapter 3, there are two likely scenarios where promotions is concerned:

1. You have a marketing department, however, their primary concern is general marketing communications (as opposed to the generation of sales opportunities)
2. You have no marketing department, meaning that all necessary inputs are provided by contractors or agencies

In the first case, the promotions coordinator is a marketing team member who lives in the sales function and ensures tight integration between these two functions.

In the second case, the promotions coordinator interfaces with external providers.

In both cases, the promotions coordinator will be responsible for all campaigns and for the not-insignificant technical implications of campaign management (CRM management, online lead management, event management, etc).

Because a promotions coordinator deals with opportunities in batches (and because a larger batch does not typically consume greater effort), a single promotions coordinator can handle the demand generated by a very large sales team. Typically, we see multiple promotional coordinators only when organizations have multiple sales teams, spanning regions where different languages are spoken.

Management

It’s important that we don’t neglect management. Counter to most executives’ expectations, the transition we are contemplating is likely to be far more traumatic for management than it is for salespeople.

We’ll pay special attention to management in a later chapter so, for now, let’s just reflect on the resourcing implications of the new model.

For starters, it should be clear that the requirement for traditional sales managers has diminished significantly. After all, the field-based business-development team is now one-fifth its previous size (or smaller).

Secondly, much of the activity that was previously being performed in the field is now being performed by an internal sales-support team. Such a team requires an entirely different management approach.

Let’s discuss different approaches to the resourcing of these two important roles.

Sales management (field)

We need to start by asking if the field team is large enough to necessitate a sales manager. If your business-development team now consists of two people – and if project leaders now answer to engineering (which is likely) – the answer is certainly no.

In this situation, it probably makes more sense to combine sales and sales-support management into the one role. In fact, many of our quiet revolutionaries have taken advantage of the industrialization of their sales environments and made sales a responsibility of their operations managers.

If you have a larger sales team and you elect to maintain a dedicated sales manager, it’s important to make sure that your sales manager spends the greater majority of their time in the field (where the salespeople are). They should only visit the office to:

1. Facilitate sales meetings (which tend to be conducted via web conferencing software anyway)
2. Recruit and induct new salespeople (on the rare occasions that this is required)
3. Attend senior management team meetings

All clerical activities (including reporting) will be performed by sales coordinators. When you consider that the sales manager will never make solo visits, sales coordinators can plan the sales manager’s schedule with negligible additional effort.

Sales-support management (inside team)

Earlier, I’ve hinted at the cost of neglecting (or mismanaging) the customer service function. The problem, however, is that many organizations don’t have a big enough sales-support team to justify proper management.

Well that’s about to change! With the centralization of most of the activities that were previously being performed in the field, sales support is growing to include sales coordination, promotional coordination and inside sales – in addition to customer service.

Shortly, you’ll have a team that’s large enough and critical enough to deserve proper management.

Obviously, you need one sales-support manager for each sales-support location. However, you should have only one sales-support team for each continent!

That’s right. Sales support should not live in sales offices. In fact, with this transition, you’ll almost certainly discover that you no longer need sales offices. My rule of thumb is that the sales-support team should be based in the same location as your master (production) scheduler.

When you co-locate the scheduling of production with the scheduling of sales and engineering then you have taken a big step towards synchronizing the firm as a whole.

I trust I’ve provided you enough insight to fine-tune the model of your new sales function – and to calculate the numbers of heads required in each role. It’s time now to consider the economics of this transition.

The economics

Because you’re contemplating a major change here, your planning really needs to be iterative. In other words, it’s better done with a pencil and an eraser than with an ink marker.

This discussion of economics is a great opportunity to check the work you’ve done so far and go back and make changes if you discover you’ve made a mistake.

Expenses cannot increase

So, let me tell you, right up front, how to spot when you’ve made a mistake:

• You’ve made a mistake on the design or resourcing of your model if you determine that it causes operating expenses to increase

There are two reasons why I’m firm on this point:

1. Management always overestimates its requirement for field salespeople in this new model (this is sometimes a result of management overestimating the ability of the firm to grow)
2. The transition you are contemplating is complex and stressful without an increase in operating expenses however, if you increase expenses, the requirement to demonstrate a positive ROI multiplies this pressure

But don’t despair, if you’ve done a good job of designing your model, you still have significant upside. The thing is, you should be able to double your volume of business-development activity before you run into a requirement to increase operating expenses.

An illustration

The best way to navigate this discussion of economics is with an illustrative example.

We’ll consider the case of a typical mid-sized, engineer-to-order organization (maybe a custom manufacturer or a software development firm).

Here’s the resourcing situation, before and after the transition. The right hand column shows the change (delta) in payroll cost. Payroll costs are indicative, only. Salaries will vary from region to region, but the relative numbers will stay pretty much the same.

Here are the changes in this example:

1. The field sales (business-development) team has decreased to one-fifth its previous size
2. Each salesperson is supported by a dedicated sales coordinator
3. Each salesperson is supported by two project leaders (it’s highly likely that project leaders were sourced from the sales team)
4. The capacity of the customer-service team has increased by 60% (ignoring efficiency improvements)
5. No inside sales personnel have been added
6. A promotional coordinator has been added, along with a sales-support manager
7. There is now just one sales manager
8. All team members are paid salaries
9. Management is responsible for ensuring that salespeople are maintained at full utilization (when the sales function is the organizational constraint)

And here are the predicted effects:

1. Sales (business-development) capacity (and most likely the volume of business-development meetings) has doubled
2. Customer service quality has improved significantly (a consequence of a larger and more efficient customer service team and four dedicated project leaders)
3. Management is now in the position where they can actually manage the sales function, in the true sense of the word ­manage
4. Payroll cost has reduced by $310k (it is also quite likely that some regional sales offices were closed, but this cost saving has not been accounted for)

The transition

At the beginning of this chapter we discussed that, without guidance, most managers approach the critical questions in the wrong order – starting with questions about the transition:

Do we start with salespeople, perhaps? Provide them new job descriptions (and a revised compensation plan)?

Do we start with promotions? More sales opportunities will never go astray, right?

Or, do we start with technology? After all, there’s something cathartic about a new enterprise application and all the friendly consultants who come live with us during its implementation!

Well, we haven’t fallen into that trap. We’ve fleshed-out our understanding of the new environment by starting with the design of the model, then the resourcing, and then the economics.

Now, it’s time for us to turn our attention to the transition. I’ll provide some detailed guidance in a moment but it’s important that we start with the most critical rule of all.

Start at the factory door and work backwards

You heard me right! Yes, this initiative is all about improving sales. But, no, we are not going to start with sales or promotional initiatives.

We’re going to start by making sure that we have a firm base to build upon – by fixing customer service! As was discussed earlier, insufficient capacity and poor operating procedures in customer service can do enormous damage to customer service and, consequently, repeat order flow.

And, in most organizations, customer service is not an exciting place to work. Typically, these teams are under-resourced, ill-equipped and poorly treated. While their name would suggest that they are responsible for customer service, in most organizations, customer service representatives are second-guessed by salespeople multiple times each day.

All this has to change.

If you are going to transfer absolute responsibility for customer service to the customer service team, this team needs to be properly resourced and properly equipped. They need information at their fingertips about job status and production capacity. And they need the authority to make decisions on the spot.

If you make the mistake of pushing forward with the reengineering of the sales function without, first, fixing customer service, you will discover that an increase in sales activity results on a greater load on customer service and a marked decline in service quality. This in turn will damage customer relationships and disenfranchise salespeople.

With that understood, let’s walk through the notable steps in the overall transition.

Step 1: appoint a project champion

An undertaking of this magnitude needs to be recognized as – and managed as – a project. In most organizations this project will need a dedicated champion for it to have a real chance of success.

You can either allocate a senior executive or you can identify an up-and-coming team member and provide it to them as a way to demonstrate their readiness for management. Either way, it needs to be a full-time responsibility.

Step 2: sell the direction of the solution

It’s unlikely that you will be able to plan this initiative without people in your organization getting wind of the fact that change is afoot.

In most cases, it makes more sense to come clean with your team as soon as you have a plan, than it does to allow team member’s perceptions to be shaped by the rumor mill.

A broad overview is sufficient – with the promise of more detail as each stage of the transition comes into sharper focus. The key points will look something like this:

1. The current model has scalability (and possibly quality) problems (here’s the evidence)
2. We’ve taken inspiration from production and project environments and planned a new approach (based on division of labor)
3. We plan for the customer service team to take full responsibility for customer service tasks – and we intend to add capacity to customer service and work closely with that team until their capability is proven
4. We plan to simplify the sales role and, specifically, to separate the responsibility for:
   1. Pure business development
   2. Opportunity management
   3. Opportunity origination (promotion)
   4. The processing of repeat transactions
   5. Technical experts, who support salespeople (pre-sale) and who facilitate the execution of projects (post-sale)
5. In practice, this will mean that:
   1. The existing sales team will be split into pure salespeople and dedicated project leaders
   2. Salespeople will be provided with executive assistants
   3. We will increase our investment in the generation of sales opportunities (promotion)
   4. Customers will interact directly with customer service where repeat transactions (and transactional issues) are concerned
6. We don’t have more detail than this right now, but we commit to the following:
   1. We’ll involve you in the detailed planning as each phase draws near (customer service is obviously phase 1)
   2. No one will get demoted or earn any less as a result of this project
   3. While the reality is that the new direction may not be a perfect fit for all team members, we have no intention to decrease overall headcount

Step 2: fix customer service

It’s time to go to work now and fix customer service. Because this is phase 1 of the transition, it’s important that you succeed quickly and conspicuously!

The good news is that fixing customer service, relative to the rest of the transition is quite easy. Remember the problems with customer service are more likely to be the result of neglect, than they are any real failure to execute.

While a detailed exploration of customer service is outside the scope of this book, there is an article on our general approach to process improvement in Appendix 1.

Step 3: recruit sales coordinators and provide basic training

The selection of capable candidates for the sales coordinator positions is critical. In particular these individuals need to be savvy enough to be able to schedule a salesperson (who sits above them on the organizational chart).

It’s possible to fill these roles by recruiting experienced executive assistants – however these individuals are hard to find and (consequently) expensive.

Our preference is to recruit smart, recent-graduates and train them from scratch. Sales coordinators need basic product knowledge and a detailed understanding of your CRM. It’s very beneficial to send them out in the field for a few days with the salespeople with whom they will be partnered.

Step 4: centralize opportunity management, repeat transactions and project leadership

There’s really no way of avoiding the fact that the stars need to be in alignment when you centralize the management of sales opportunities (and salespeople’s calendars).

This transition is an all-or-nothing proposition. Sales coordinators must take full ownership of salespeople’s calendars. Salespeople must hand-off all repeat orders and issues to customer service. And project leaders need to be capable enough to ensure that salespeople have no active involvement in technical activities.

Furthermore, in most cases, the entire sales team needs to be transitioned at the one time. If you expect salespeople and project leaders to work together productively, there can be no period where there’s an overlap of responsibilities.

Step 5: scale-up opportunity flow

You should do no special promotions until opportunity management has been centralized and the environment has adjusted to this critical change.

When sales coordinators first take ownership of salespeople’s calendars they should simply focus on scheduling the activities associated with existing open opportunities.

Once existing opportunities are under control, the next step is to generate business-development meetings from within the existing client base. As with all meetings moving forward, each of these meetings will be associated with an opportunity – and each opportunity will have an explicit business-development objective (even if, from the clients’ perspective, the purpose of the visit was a cup of coffee).

You should only consider cold-market promotions once you are sure that the new model is operating effectively and that you have sufficient protective capacity in sales support. If you have done a good job of planning this promotion, you’ll likely be surprised by how easy it is to maintain salespeople at full utilization without special promotional initiatives.

The organic increase in opportunity flow you experience will be a consequence of:

1. An improvement in customer service quality
2. An increase in the volume of visits with existing clients
3. The elimination of qualification (remember, your salespeople will now engage with anyone who has a non-zero likelihood of purchasing within a reasonable time horizon)

Client communication

You may have been surprised that client communication does not feature in this plan.

There’s a good reason for that. If you do a good job of this transition, there’s no requirement to sell it to clients. From your clients’ perspective, the only thing that will change is that they will hear some friendly new voices on the other end of the phone from time to time.

You should avoid any attempt to directly influence your clients’ behaviors. If they want to ring your salespeople to place repeat orders or report service issues, that’s their prerogative. Your salespeople should welcome their calls and then organize for the appropriate person to call them right back. Once your clients discover that it’s easier to communicate directly with customer service representatives (and with salespeople’s coordinators), your salespeople’s cell phones will simply stop ringing.

* * * *

You now have a plan. Or at least the skeleton of a plan. Let’s push forward then, and see if we can’t put some meat on them bones!

I’ve been dying to tell you what’s probably our biggest news after the launch of our US operations a few years ago.

But I wanted to wait until we had a few miles under our belt with this new model. I also wanted to make sure that this story is more than show-and-tell! (Although, the positive response I got to the post on our experiences with Social Media indicates that many people so see value in these kinds of updates.)

The big news is that we are backing away from projects as our primary offering and, instead, favoring the delivery of an ongoing service.

The service is called Outsourced Sales Operations and it consists of us taking over the supervision and the ongoing improvement of our clients’ sales support teams – and providing the necessary technology and marketing communications.

I’ll explain what this means in more concrete terms in a second, but first let me tell you how we got here.

Great idea, no business model!

About 15 years ago I left a start-up (the Hudson Institute) to found Ballistix with a cool idea.

The idea was to apply division-of-labor to the sales function and to centralize almost everything: the origination of sales opportunities, the management of sales opportunities (and salespeople’s calendars) and all customer service and production-related activities.

This idea had paid dividends for Hudson. The year I left, we put 45,000 people through public seminars and generated tens of thousands of sales opportunities. A phone-based team, managed these opportunities and channeled prospects into salespeople’s offices, where they queued (like patients in a doctor’s surgery).

We started Ballistix with a focus on the promotional component of this model (initially, Ballistix was a direct-marketing agency). However, it quickly became clear that the real problem faced by organizations had nothing to do with promotion. The fundamental problem was that division-of-labor thing.

I was travelling the country (just Australia, at the time) evangelizing the concept of sales process engineering. We sold thousands of tickets to seminars and workshops every year – business people absolutely loved the ideas – but virtually no one implemented them!

As the direct-marketing industry became more competitive, we were faced with a choice, hunker-down and focus on direct marketing or figure out a new model that would enable us profit from sales process engineering.

From direct marketing to consulting projects

When we transformed ourselves into a consulting firm, my total knowledge of this new industry was what I’d read in the The McKinsey Way.

Initially we sold my time: every minute of it!

We then added some structure – we sold audits and delivered comprehensive reports. For starters, we sold these engagements for $6,000. As we gained confidence, we increased the price – and the size of the reports. (Our $35,000 reports were so heavy we had to monopolize an elevator for an hour or so before a presentation to send them aloft!)

Sadly, this upheaval in our business model had zero impact on the results we were producing for our clients. Executives loved their reports. But virtually no one implemented!

Ideas are chump change: the money’s in the implementation

The decision to sell implementation (instead of advice) was not an easy one.

But the implications for us (and our clients) were significant. Implementation projects were just as easy to sell as audits – and we were able to sell them for five-times more! And, at last, organizations actually started to implement sales process engineering.

I should add that it took a long time for us to learn how to deliver projects effectively. I could write a book on the challenges associated with internal politics and technology. And I’m sad to report that some of our more elegant intellectual constructs failed spectacularly upon contact with reality (for example, we quickly discovered that writing a manifesto for each client was not such a great idea).

We’ve spent the last five years or so fortifying our (implementation-based) consulting offering. We’ve standardized and codified everything, we’ve built a significant management-information system (which we integrate with each of our client’s CRMs) and, of course, we’ve expanded into North America.

And now, we’re changing everything again!

Why sell projects when you can sell services?

The truth is that we’ve been dreaming about selling services instead of projects for years now.

The benefits for our business are obvious:

1. Clients relationships become annuities – rather than one-off transactions
2. A larger number of open-ended engagements allow for more efficient scheduling (and more aggressive pricing)

But we’ve been starting to suspect that most (not all) of our clients would be better served with an ongoing relationship too:

1. With ongoing contact, we can continue to optimize the performance of our clients’ sales environments
2. An ongoing relationship will enable our clients to eliminate a number of redundant expenses (design and other creative services, inbound marketing (SEO, PPC, etc) and even executive coaching).
3. An ongoing relationship will enable us to provide a total (hosted) technology solution, including CRM, business intelligence (MIS) and even web hosting.

Outsourced Sales Operations: the nuts and bolts

The scariest part about the transition to services was thinking about it!

When we put our team together for a day to brainstorm the new offering, we were amazed how appealing the proposition turned out to be – and how good the economics were (obviously, the short-term was our biggest concern).

Since then we’ve offered both project and service options to all of our potential clients – and been delighted that almost all have accepted the service option.

Here’s the basic proposition:

We will reengineer your existing sales function – in line with SPE principles – and supervise the operation of the critical sales-support team on an ongoing basis.

In addition, we will provide all promotional services required to generate the necessary volume of sales opportunities (including traditional promotional collateral and web-based promotion (inbound marketing, web video, etc).

We’ll also provide all sales-related technology on an on-demand (SAAS) basis, including CRM (if required), business intelligence and event- and lead-management.

Furthermore, we (well, yours truly, actually) will host a quarterly strategy review meeting, at which we’ll review the general operation of the sales function and plan (and monitor) special ongoing-improvement initiatives.

The great news is that the monthly fee for this service is almost half the monthly fee for our projects.

And, what’s more, in most cases, our clients reduce their payroll costs (by downsizing their field teams and moving many sales-related activities inside) – and they eliminate recruitment, promotional and technology expenses too.

Homework: thought experiment

If you are currently selling projects, maybe it’s worth evaluating the shift to services?

The economic advantages are obvious but there are many hidden advantages too.  One thing we’re already discovering is that our new service model allows us to match the cadence of our change initiatives to our clients’ ability to absorb those changes. (Where previously the cadence was determined by a contract!)

If you’d like to know more about this service offering – or even if you’re curious how we’re packaging and pitching it – please use the contact form on this site to request an overview. (Just put the words “Service Overview” in the Message field.)

By the way, we are still offering projects on those (few) occasions that it really make sense to do so, but our intention is for projects to become the exception, rather than the rule.

His full name was Dr Eliyahu Goldratt but the world knew him as Eli.

He burst onto the world stage when his first book (The Goal) became a runaway best seller.

The Goal went on to become one of the most-read business books of all time and Eli established himself as one of a small number of big thinkers in the area of business.

Eli developed an interest in business shortly after earning his PHD in Physics. He recognized that a manufacturing environment is a complex system – ill-suited to the standard plant-scheduling practices at that time.

A radical new approach to plant scheduling was baked-into OPT – the production planning software produced by Eli’s first company. But Eli grew frustrated with the slow uptake of OPT and set to work writing a book that would dramatize his production-planning method.

The Goal was an unusual book. It was a fictional story about a plant manager and his journey of discovery. It was also a love story!

As The Goal became required reading in every business (and business school) in the developed world, Eli noticed that managers who read the book and applied his ideas without software were seeing dramatically better results than his company’s software customers were.

With that realization, he turned his back on software development and devoted the rest of his life to writing, consulting and teaching. Eli named his body of knowledge Theory of Constraints (TOC).

He first packaged his plant scheduling approach into a formal method called drum-buffer-rope.

He then launched a new approach to project management with a book called Critical Chain and a method of the same name.

In subsequent years, he turned his attention to management accounting, distribution, strategy and general problem solving.

I first encountered Eli when Brian Menzies (The CEO of Flair) showed me a video of Eli sharing his thoughts on the development on what he called a Mafia Offer. I was captivated by Eli’s reasoning and insight, and purchased The Goal that weekend (about 8 years ago).

I spent all day Saturday reading. I started reading over breakfast in a café and when I couldn’t drink any more coffee I shifted to a sunny park bench. I finished reading as lunchtime ran into dinnertime and I was beginning to overstay my welcome at my regular luncheon haunt.

As I think is the case with most people who read The Goal, the book had a profound effect on me. But its message was especially important because it contained the solution to two problems that were constraining the growth of Ballistix at the time.

I set to work integrating the key insights from the Goal into our approach to sales management. I sent an initial draft of a whitepaper to Eli, who was quick to offer his agreement and support. Since then, I’ve become closely involved with the global TOC community and I’ve been lucky enough to meet with Eli on numerous occasions and work with many practitioners of TOC across three continents.

Sadly, Eli passed-away last weekend.

His passing is huge loss and a terrible shock to the TOC community. His legacy, however, is so significant that he will never be forgotten. Anyone can experience Eli by reading one of his many books – or by absorbing some of the many audio and video programs that he produced.

I will be forever grateful that I am one of the lucky few who can say, I knew Eli.

Here’s a brief update on upcoming events: with links to read more and register.

I hope to see you at one or more of these.

Webinar

Build a new sales and marketing process without breaking the bank

On May 10 in the US (which is May 11 in Australia) I’m co-presenting this event with Eric Keiles, the author of Reality Marketing Revolution and founder of Square 2 Marketing.

Obviously, I’ll be talking about the sales process and Eric will discuss marketing.

In addition to presenting our own ideas, I’m expecting that we’ll be able to have a lively discussion about the areas where sales and marketing interact.

You can read more about his event here.

US event

2011 Continuous Process Improvement Symposium

I’m delighted to be presenting (for the third time) at this year’s Continuous Improvement Symposium at Weber State University in Ogden, Utah.

This event draws practitioners from the three main quality disciplines: Lean, Six Sigma and TOC. It’s a very enjoyable conference, with a broad cross-section of presentations.

In addition to a standard presentation, I’m fortunate enough to be joining Robert Fox as a panelist in an open discussion (the subject of which has not yet been confirmed).

You can read more about this event here.

Aussie events

Sales Process Engineering: Lunch-n-Learn

Next week I’m returning to Australia to present our popular Lunch-n-Learn events in Brisbane, Sydney and Melbourne.

These are intimate luncheons (Ballistix buys the lunch) where I present the principles of SPE with just a flipchart and a handful of markers.

These are always lively events; well-attended but with small enough groups to enable a spirited debate or two.

Although all of these events present the basics of SPE, our recent experiences in the US are providing me with a lot of new material (or valuable tweaks to existing practices) – so, if you haven’t attended a Lunch-n-Learn in a while, you might consider coming again.  (There’s no charge for these events.)

You can read more here.

US Lunch-n-Learns?

In case you’re wondering, we don’t have any US Lunch-n-Learns scheduled. This is primarily because we don’t (yet) have a large enough house list in the US to make the promotion of these events cost effective.

However, if you can put a group of executives together from 8 or more organizations, let me know. It’s quite likely that Ballistix will be prepared to foot the bill for both your lunch and my round trip!

Case study: Bas Sol, Perth (Australia)

If you are a professional-services firm – or if you track and bill time – I think you’ll find this video very interesting.

It’s an interview I conducted just before Christmas with Rosie Davidson, the CEO of Bas Sol, a Perth (Australia) based accounting and bookkeeping firm.

I must admit that I approached Rosie’s firm with very little prior knowledge of accounting practices.  But, what little I knew, I didn’t like!

My primary problem with accounting firms (from experience as a customer) is their obsession with time-and-material billing. My complaint (as voiced here before) – from a customer’s perspective – is that there’s only a casual correlation between time spent and value delivered.

Things aren’t much better from the firm’s perspective. T&M billing encourages high-value team members to hoard work to inflate their billings and robs the firm of the efficiencies that could be exploited via division of labor.

Although accountants have been generally uninterested in my rantings on this subject, Rosie was all ears!

The bottom line is that Rosie eliminated T&M billing completely, replacing it with negotiated monthly retainers. Now, this wasn’t optional for clients (as Rosie explains in this interview) and it wasn’t phased-in over time. Amazingly, Rosie made the transition without losing a single client.

Internally, quite a bit changed too.

We added a master scheduler to schedule all activities (both production and sales). We took baby-steps towards division of labor. We intercepted all inbound calls (and other distractions) and allocated them to team members in batches. And – hooray – we eliminated time tracking altogether!

In addition to all this, we added some simple sales activities – geared around scheduling new client interviews for prospective clients (with Rosie).

The results? The impact on team morale?

Well you need to listen to this interview and hear it from Rosie! (By the way, the video quality is terrible, but I think you’ll agree that the story more that makes up for this.)

.

Justin Roff-Marsh interviewed by The Independent Entrepreneur

On the subject of interviews, a friend of mine interviewed me recently for his blog.

It’s nice because it’s a relaxed chat that covers a hell of a lot of ground.

Click here to take a listen.

The Machine > Chapter 4: served piping-hot tomorrow

I just sent the draft of Chapter 4 of The Machine (my forthcoming book) to our publisher for comment.

As soon as I’ve made the first round of edits I’ll post it to this blog (meaning it’ll likely land in your inbox tomorrow).

Keep your eyes peeled for this chapter.  It breaks new ground in that it presents a model for the organization as a whole – integrating new-product development, production and sales, and suggesting an optimal constraint location based upon three organizational structures.

This chapter addresses a subject I discuss at least once a week with our clients – but have never attempted to codify … until now.

Our first order of business is to address two questions that have the potential to derail this discussion.

The issue is not that these questions expose weaknesses in Sales Process Engineering (SPE). The issue is that these questions stand in the way of our discussion even getting started!

Considering the radical nature of the change we’re contemplating, it’s only natural to ask:

1. If the standard sales model is so dysfunctional – and if there’s a better method available – why haven’t more companies adopted it already?
2. If the standard model has evolved over many years – and withstood the test of time – how can it be that this model is fundamentally flawed?

Why do we persist?

There are two (interrelated) reasons why we persist with the traditional approach to the design of the sales function.

First, the standard model conforms with all our assumptions about how sales should be made. And, second, it is impossible to inch your way to the new model – a revolution is required.

Deeply-held assumptions

If we are to evaluate the standard model with reference to long- and deeply-held assumptions about how to generate sales then the standard approach to the design of the sales function measures up well.

Ask yourself, do you agree with the following statements:

1. Sales of expensive products and services are highly dependent upon personal relationships
2. A successful sales function is highly dependent upon star performers
3. Salespeople should be encouraged to operate autonomously – to view their territory almost as if it is their own business
4. Customers require – and benefit from – a single point of contact with their suppliers
5. Sales improvement is all about improving conversion (plugging the leaky funnel)

Each of these statements sounds innocent enough, right? But, for most salespeople – and their managers – these statements are more than true. They are axioms (fundamental, self-evident and unquestionable truths). Attempts to challenge them will be met with injured feelings, or even hostility.

Consequently, any approach to sales improvement that is in alignment with these axioms will feel right. But an approach that conflicts with one or more will almost certainly be dismissed out of hand. As you’ll discover in due course, SPE conflicts with every one of these axioms – and with numerous other commonly-held beliefs about sales too.

Sadly, the serious consideration of SPE tends to require at least one of the following conditions:

1. The performance of the sales function must be so bad as to shake management’s faith in the standard model to its very core
2. A senior executive with no prior exposure to sales (perhaps an engineering or production specialist) must turn their attention to the sales function

Almost without exception, our silent revolutionaries began their investigation of SPE only when both of these conditions were in place!

Incremental change won’t cut it

The other hurdle to the adoption of SPE is the magnitude of change required for the successful transition.

Consider just a few of the changes that have to occur:

1. Salespeople must willingly give-up ownership of their calendars and ownership of sales opportunities
2. Salespeople must be prepared to spend all of their time in the field (in practice this means a five- to ten-times increase in territory size: and, consequently, a lot more travel)
3. Management must be prepared to add new team members and – possibly – to see some existing team members exit the organization
4. Management must be prepared to assume (and, ultimately, reassign) responsibility for the origination of sales opportunities

And then there’s the impact on the rest of the organization:

1. In many cases, customer service needs to be reengineered to cope with the additional load
2. The new project leadership function must be tightly integrated with production and customer service
3. If production scheduling has devolved into brinkmanship to accommodate the demands of a small number of increasingly-powerful customers, this negative trend must be reversed

When you consider the counter-intuitive nature of SPE and the significance of the transition from the standard model, it’s little wonder that the standard model persists.

But it can only persist so long!

There’s a slow trickle of sales managers (and even salespeople) who are recognizing the dysfunction within their sales functions. And there are numerous executives from other functions who are growing restless with the under-performance of sales and who are starting to suspect that the emperor has no clothes!

How did we get here?

The standard sales model didn’t used to be dysfunctional.

For much of the history of industry, this model has been the optimal one. (In fact, there are situations today, where the standard model is still quite appropriate.) What has happened is that industry itself has undergone two sea-changes and sales has stayed pretty much the same.

From production- to sales-focused

In the 1989 classic, Field of Dreams, Kevin Costner’s character plows under his corn and builds a baseball field in the hope that if he builds it, he will come. Fortunately ‘Shoeless’ Joe Jackson and his colleagues arrive just in time to rescue the hapless farmer from bankruptcy.

Today, the phase build it and they’ll come is often used to reference the unrealistic expectation that production is sufficient to create a market. However, for most of the history of industry, production has, in fact, been sufficient.

Until recently, the salesperson’s job was to take a highly differentiated product and demonstrate it to potential customers. Sure, there was a requirement for some salesmanship but, for the most part, the sale was really made in production.

Today, because the market is so much more competitive, it’s unusual for a product to be highly differentiated. It’s common for customers to choose product a over product b and reasonably expect to pay a similar price for a product that performs almost identically. It’s true that we still have true ground-breaking products, but these are much more likely to be the exception, rather than the rule.

Because production has been the primary success driver for most of our recent history, this is where our capital and our brainpower have been invested. And the return on this investment has been staggering. Over the last 100 years we’ve seen orders of magnitude increases in productivity (measured against any reasonable standard) and orders of magnitude improvement in quality.

We’ve seen at least three major revolutions in production. Frederick Winslow Taylor introduced scientific management at the start of the last century. Ford’s approach to mass production drove costs down to unprecedented levels. And, in the 1950’s W. Edwards Deming jump-started the quality movement, contributing to the rise of Japan and subsequently revolutionizing operating procedures in production facilities the world over.

Of course, the rate of change we’ve seen in production cannot be sustained forever. Increasingly, managers are recognizing that their advances in production have exposed sales (including distribution) as the weak link.

Today, sales is the new frontier. We’re already seeing the focus of senior management shift to sales (and with focus comes capital and brainpower). My prediction is that the next 50 years will bring revolutions in sales similar in scope and consequence to those we’ve seen in production.

Let this book be the first shot across the bow of the good ship Orthodoxy!

From make-to-stock to engineer-to-order

As mentioned previously, the fundamental assumption that sits at the base of the standard sales model is that: sales is the sole responsibility of an autonomous agent.

If we consider how a typical organization has been structured for most of the history of industry, this assumption is a perfectly reasonable one.

Make-to-stock

Above is a traditional value-chain. The production facility produces to maintain a stockpile of inventory. The salesperson sells from this inventory.

In this environment, it makes perfect sense for the salesperson to operate autonomously. The firm as a whole benefits when its salespeople sell as much as possible. Because inventory is already sitting in a stockpile, orders can be fulfilled as soon as they are received. And because of this stockpile, there is minimal requirement for interaction between sales and production.

Make-to-order

Increasingly, this is not how value-chains are configured. We have seen a recent and dramatic shift from make-to-stock to make-to-order environments. The latter reduces holdings costs and provides customers with greater choice. In a make-to-order environment it no longer makes sense for the salesperson to simply sell as much as possible. The salesperson needs to sell only what production has the capacity to produce. Rather than operating autonomously, the salesperson must subordinate to production.

This is complicated by a further twist in the value chain. Today, an increasing number of products (as well as almost all services) are actually designed (engineered) as they are being sold. In an engineer-to-order environment, tight integration between sales, engineering and production is critical. The degree of integration determines both the likelihood of the sale being won and the quality of the product delivered.

In such an environment, sales cannot possibly be the sole responsibility of an autonomous agent. In fact, for this reason, the standard model damages both sales performance and product quality (and, therefore, customer satisfaction).

In summary, the standard model always has and perhaps always will make sense in make-to-stock environments – where it is possible for the sales function to operate at arms-length from production. Such environments include:

1. Most consumer goods (typically sold in retail environments)
2. Consumer and small-business financial services (insurance and investment products)
3. Packaged software

However, in make-to-stock and (particularly) engineer-to-order environments, the requirement for tight integration between sales, engineering and production renders the standard model dangerously inappropriate. Environments like:

1. Business services (consulting, legal and finance)
2. Design-and construct building
3. Enterprise software

Now we understand why sales environments look the way they do today – and why change is not necessarily an appealing proposition – let’s return to the task at hand: redesigning the sales function.

Direction of the solution

Let’s consider how we might go about causing a dramatic increase in the productivity of the sales function. What might be the direction of the solution?

We should immediately discount traditional sales-improvement initiatives (sales training, for example). History suggests that, at best, such initiatives produce only incremental results.

For inspiration, we might look to manufacturing. This makes sense because we know that this is one part of the organization that has seen a dramatic increase in productivity in recent times.

Do we know the cause of this dramatic change? As it happens, we do.

In 1776, in his magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith predicted that division of labor would drive a massive increase in productivity. He told the story of a pin-manufacturing operation where 10 workers had divided the production procedure into 18 distinct steps and shared these steps among themselves.

Individually, each worker could produce 20 pins a day. Collectively they were producing 48,000!

The benefits of division of labor are not enjoyed only in manufacturing environments. If we take a stroll around a typical organization, we discover division of labor in all types of production environments, in engineering and even in finance. In fact, the only part of the organization that has not embraced division of labor is sales!

Assuming that there is no reason to immediately disqualify division of labor, let’s assume that this is the direction of our solution.

Playing the Devil’s advocate

But, not so fast!

If we were to commission an experienced salesperson to defend the standard model – to be the devil’s advocate, as it were – can we imagine their objections to the concept of division-of-labor?

These are likely to be their two primary objections:

1. Complexity: “Sales is complex in most environments nowadays. You have multiple influencers and decision-makers. You have numerous conversations with multiple parties spanning weeks or months. This complexity does not lend itself to division of labor.”
2. Personal relationships: “People buy from people. No one likes to transact with a machine. Division of labor will destroy the critical personal relationship between the salesperson and the customer.”

Before we directly address these objections, it’s interesting to observe that these are similar in nature to the objections you might hear from a craftsperson (an artisan) who is being encouraged to transition to a modern manufacturing environment.

This person is likely to suggest that if they do not personally craft their product, any increases in efficiency will surely be offset by a reduction in quality.

Of course, history suggests that the artisan’s concerns are unwarranted! It just so happens that the changes we must make to a production process to improve efficiency are the very same changes that are required to maximize quality. (The quality revolution taught us that the words efficiency and quality are functionally synonymous.)

Complexity

Our devil’s advocate is correct. A modern sales environment is certainly likely to be complex – for all the reasons stated.

But is complexity a reason to avoid division of labor?

If it is, we should see a decline in division of labor as we examine environments of increasing complexity. Let’s consider two extremes in a production context: the assembly of a hang-glider, versus the assembly of a jet aircraft. The notion of a single person assembling even the simplest of jet aircraft is laughable. The fact is, in truly complex environments, division of labor is not just possible: it’s essential.

Our devil’s advocate has identified a potential problem in the application of division of labor – one we’ll grapple with in due course – but they have not dealt our proposed solution a lethal blow.

Personal relationships

It’s true that people enjoy (for the most part) interacting with other people. It’s also true that many salespeople have good relationships with accounts.

However, it’s dangerous to assume (as salespeople frequently infer) that these relationships cause sales.

To see why, we should enquire into the origin of a salesperson’s relationships. Specifically, which comes first, the sale or the relationship? The reality is, for the most part, the salesperson’s relationships are the consequence of sales, not their first cause!

Now, our devil’s advocate is unlikely to take this line of reasoning lying down! His immediate objection will surely be that the distinction between first and proximate cause is purely academic – and that if relationships and sales are related, it matters little how they came to be that way!

It’s here that we must make a critical distinction – a distinction between the initial transaction in a series of transactions and the rest of those transactions. In most cases, the salesperson’s initial transaction signals the acquisition of a new account. All of the subsequent transactions (assuming the same product or service type) are repeat purchases. The first transaction – because it signals the acquisition of an annuity – is many times more valuable than each of the subsequent ones.

Because initial and subsequent transactions are materially different, it doesn’t make sense to lump them together and refer to them all as sales, as our devil’s advocate is doing.

So, for the balance of this book, we will use the word sale to refer only to the acquisition of a new account (or the sale of a new product or service line to an existing one). We will refer to repeat transactions as transactions.

We must consider, now, the contribution that the salesperson’s relationship makes to the retention of existing accounts. There’s no question that this relationship must factor into the retention equation but, what are the other considerations?

As we’ll discuss in much more detail, every organization must have three core functions to be viable in the long run:

1. New-product development
2. Sales
3. Production

It’s revealing to rank these three functions in the order in which we believe they will impact account retention.

In spite of the fact that salespeople, all over the world, are allocated responsibility for retention, it is extraordinarily rare to find a salesperson who will identify sales as the primary influencer of retention! Almost, without exception, salespeople recognize that production performance is the primary. In other words, the number-one thing that an organization must do to retain its customers is deliver on time, in full, without transactional errors.

Salespeople will also willingly volunteer that the number-two thing that an organization must do is ensure that its products are consistently better than – and cheaper than – its competitors’: which is, of course, the responsibility of new-product development.

The shocking reality is that salespeople contribute little to retention, relative to production and new-product development – in spite of the fact that it is their responsibility (consider how many salespeople are actually referred to as account managers)!

If you are deficient in the areas of production or new-product development, it may be that your salespeople’s personal relationships cause accounts to persist with your organization a little longer than they otherwise would. However, to claim that personal relationships cause sales amounts to either equivocation or outright denial (or a little of each!)

Putting division of labor to work: four key principles

With those objections out of the way, we’ve bought ourselves a little bit of time to piece-together our solution. Division of labor is not the solution, after all – just the direction of the solution.

Our devil’s advocate intuitively recognized this when they raised the objection about complexity.

The thing is, when we apply division of labor to any environment, things tend to get a lot worse before they get better! The rewards offered by the successful transaction from the craftshop to division of labor are exciting (as reported by Adam Smith all those years ago) but the transition itself is difficult and extraordinarily perilous.

The fact that production has been the primary focus of industry for the last 100 years is evidence of the difficulty of the transition. The good news is that, if we intend to lead our sales function down the path already taken by production, this is indeed a well-trodden path.

The lessons from manufacturing can be generalized into four fundamental principles:

1. Centralize scheduling
2. Standardize workflows
3. Specialize resources
4. Formalize management

We’ll dedicate the balance of this chapter to the exploration of these principles – in their natural manufacturing context. And, in the next chapter we’ll figure-out how to repurpose these principles for the sales environment. First, however, we need to be sure we understand the nature of the problem we are attempting to solve. To achieve that, we’ll turn our attention to a boat race.

The primary challenge

Two boat races, in fact: both time trials. In each case the oarsmen will attempt to maximize the speed of their vessels.

Autonomous agents

In the first race, each oarsman commandeers his own boat. Each is an autonomous agent. When the starter’s gun fires, each oarsman must do his level best to maximize the speed of his vessel. And he does that, not surprisingly, by rowing as fast as is humanly possible.

This race is an allegory for the craftshop environment in manufacturing (and for the standard sales model).

Division of labor

In the second race, we make one subtle change. We put all the oarsmen in the one boat. The goal is the same: maximize the speed of the vessel. But each of the oarsmen must undergo a radical shift in his approach to the goal. If each oarsman rows as fast as is humanly possible, the speed of the vessel will definitely not be maximized.

If each oarsman maximizes his individual rate of work, the consequences will be a lot of noise, clashing of oars and, possibly, a capsized boat! In this second race (an example, of course, of division of labor) the speed of the vessel is determined primarily by the synchronization of the oarsmen – not by their rates of work.

Now, the shift of focus from individual effort to synchronization may not seem significant but it is – particularly when we consider environments more complex than a row boat. Learning to row in unison with others is tricky, but this skill (in this context) is made easier by two factors:

1. You are operating in close proximity to your colleagues – you simply stroke in time with the oarsman ahead of you
2. You have immediate feedback – you can see and feel the impact of your actions on the performance of the vessel as a whole

These factors tend not to be present in a more typical work environment (few people, today, work in row boats).

In a reasonable-sized manufacturing plant, for example, it’s unlikely that all of the workers contributing to a process are in visual contact with one another. And, in a knowledge-work environment like (say) a sales function, work-in-progress is invisible and lead-times are long – meaning that there is no immediate feedback.

In such an environment, how do workers synchronize their rates of work? The short answer is that, without special intervention, they simply don’t.

Here’s an interesting thought experiment.

Consider the changes we would need to make to our row-boat model in order for this model to be representative of a standard work environment (production or sales).

How about we replace each of the oarsmen with a rowing machine – a powerful solenoid, operated by remote control? And, how about we put each of our oarsmen in a cubicle in an office complex – with a remote control unit?

On each remote control unit is a button that actuates the solenoid back in the boat and causes that oarsman’s two oars to stroke. If each oarsman is isolated from the boat – and from his colleagues – and he is committed to winning that race – how will he determine when to press the button?

Sadly, this humorous scenario is not dissimilar to many modern work environments. To complete the picture, all we need to do is add a manager who attempts to improve the performance of the boat by running from cubical to cubical encouraging everyone to row harder – and then who periodically berates team members for their lack of communication!

Principle 1: centralize scheduling

To claim that division of labor causes workers to become disconnected from the performance of their overall system is stating the obvious. After all, as we’ll soon discuss, a narrowing of the worker’s focus is both a benefit of, and a necessary condition for, division of labor.

It’s inevitable, then, that division of labor will result in synchronization problems.

The solution is to centralize scheduling.

If you think of any work that you perform, that work can be broken into two components:

1. The critical activities that cause matter (or information) to change form
2. The determination of the sequence in which to perform these tasks and of when, exactly, to commence each

The second component of work is what we’ll be referring to as scheduling.

Of course, scheduling is pretty easy when it’s just you doing the work. You can learn the basics in a half-day time-management workshop! However, as you add more workers to the work environment, scheduling rapidly becomes very difficult.

The key to avoid synchronization problems when we apply division of labor is to first split the responsibility for these two types of work. If we fail to do this, the local efficiency improvements that result from workers focusing on a single task will quickly be eaten-up by the general chaos that spreads through the environment (remember the clashing oars in the row boat).

There are many environments where the centralization of scheduling is a well-established practice:

1. The manufacturing plant (where scheduling is the responsibility of the master scheduler)
2. The project environment (where the project manager owns the schedule)
3. The orchestra (in a string quartet, the first violin sets the tempo; however, in the case of a full orchestra, a dedicated conductor is required)
4. The airport (consider the chaos if, in the absence of an air-traffic controller, pilots had to decide among themselves when to take-off and land!)

In each of these cases, scheduling is a specialty. (The project manager doesn’t wear a tool belt and few air-traffic controllers even know how to fly planes.)

Now, it’s true that even the most complex sales environments are less complex than a busy airport but, it’s also true that almost every sales environment is significantly more complex than a row boat. Therefore, if we are entertaining the idea of applying division of labor to sales, we must first acknowledge that the very first activity for which the salesperson relinquishes responsibility will be scheduling.

Post script

Until now, we have accepted that, in a simple environment – like a row boat – division of labor doesn’t require the centralization of scheduling.

However, it’s interesting to consider what we might do if we were really serious about winning the boat race we discussed earlier.

If you look at most competitive rowing teams you’ll discover – you guessed it – centralized scheduling!

Centralized scheduling

In a scull, for example, the coxswain sits in the stern of the boat, facing the oarsmen, and sets the tempo to which the oarsmen row.

If we consider the racing scull for a moment, we can draw two interesting observations that relate to scheduling in all environments:

1. The coxswain is a dead weight (he does not row) and his inclusion increases the weight of the vessel by a significant amount. It’s reasonable to assume, then, that the performance improvement resulting from the inclusion of the coxswain more than compensates for this weight increase. And this is in an environment where the centralization of scheduling is not even critical!
2. The coxswain maximizes the speed of the boat by causing all of the oarsmen to row at the same speed as the slowest oarsman. Therefore, to maximize the speed of the boat, all but one of the oarsmen must row slower than they possibly can.

Principle 2: Standardize workflows

The need to standardize all workflows is regarded as self-evident by many managers. Note the attention paid to standard operating procedures in a modern workplace.

But it’s worth acknowledging that standardization is only a necessity in an environment where division of labor has been applied.

If we were to insist that an experienced craftsperson create (say) violins following exactly the same sequence of steps for each instrument, it’s not so clear that craftsperson’s productivity would increase.

Consider sales environments, for example. Almost every mid- to large-sized firm has invested tens (or, more commonly, hundreds) of thousands of dollars in CRM technology in recent years on the promise of increased sales performance. If you examine business cases for typical CRM implementations, you’ll discover that many of these promises hinge on an assumption that the standardization of salespeople’s procedures will cause an increase in sales.

Of course, it’s rare to encounter an organization that can point to any performance improvement that is attributable to the CRM. The reason for this is simple: capable salespeople neither need nor benefit from the standardization of their operating procedures. In fact, the CRM has provided capable salespeople with additional overhead: data-entry that must be done purely to satisfy management! When you consider the small number of sales opportunities that a typical salesperson is prosecuting at any point in time, it’s clear that the salesperson’s trusty Franklin Planner is significantly more useful than the CRM!

But division of labor changes things: standardization suddenly becomes critical.

When the person who plans the work (the scheduler) is remote from the people who do the work, the standardization of procedures (and workflows) prevents the complexity of environments from multiplying to unmanageable levels.

In manufacturing environments the workflow is referred to as the routing. The routing is the path that work will follow through the plant, taking into account both the activities that will be performed and the resources that will perform them. The general rule in manufacturing is: same product, same routing.

If we apply division-of-labor to the sales environment, we must standardize our workflows for the same reason. For this environment to be manageable and scalable, all opportunities of the same type (same objective) must be prosecuted using the same routing – from the origination of opportunities, through their management.

Principle 3: Specialize resources

In discussing the centralization of scheduling we’ve already broached the subject of specialization. We know that when we apply division of labor, the scheduler is the very first specialist.

Indeed, once we have centralized scheduling and standardized workflows, specialization is relatively easy.

Specialization causes a significant increase in workers’ productivity for two reasons:

1. When a worker performs activities of just one type, they become very good at performing those activities
2. Switching between materially-different activities imposes a significant overhead on a worker. The elimination of this switching (multitasking) increases that workers effective capacity

Of course, specialization doesn’t just relate to people. In most environments, today, activities will be shared between people and machines (including computers). However, we should note that automation has not been the root cause of productivity improvement in the last 100 years. The primary is division of labor. After all, it’s division of labor that has allowed us to simplify activities to the point where they can be performed by machines.

Principle 4: Formalize management

It’s interesting to note that there’s no essential difference between a scheduler and a manager.

To appreciate why, let’s consider when and why the concept of manager sprung into existence (at least in a business context).

In the craftshop environment, there was no such thing as a manager. Division of labor created a requirement for managers because, as workers became specialists, someone had to synchronize the operation of the work environment as a whole. That’s right; manager is just another word for scheduler!

Today, scheduling is still management’s primary responsibility; it’s just that modern managers employ technical types to do the more detailed scheduling, freeing them to focus on compliance and the synchronization of their function with the rest of the organization.

Although scheduling and management are essentially the same, in practice, the manager plays a critical role for two reasons:

1. Division of labor causes work environments to become inherently fragile
2. Because the organization consists of a number of functions – each of which could be characterized as an oarsman in a larger boat – someone must pay attention to the synchronization of the organization as a whole

Specialization is a two-edged sword. It causes a dramatic increase in the productivity of each individual but it also causes each worker to operate in a vacuum – intently focused on their own work in progress (or their task list). To a great extent, the scheduler compensates for this narrow focus, but the manager is still required to ensure compliance with the schedule, to resolve problems as they occur and to make decisions relating to the design and resourcing of the overall environment.

If we consider that the organization as a whole consists of a number of functions (sales, engineering, production, finance, etc) then we can see that the synchronization of the firm is as necessary as the internal synchronization of each function. This is the responsibility of the management structure as a whole, including all executives from the CEO down. In short, it’s the responsibility of each functional manager to ensure that their function makes the necessary contribution to the goal of the organization (we’ll pay more attention to this subject in due course).

You may be wondering why this principle is entitled formalize management, as opposed to just manage. Well, in the context of this book, the distinction is important. A sales manager in a traditional sales environment is not a manager and nor can they be.

Management only becomes possible after the application of division of labor. If the essential responsibility of management is scheduling – and if the salesperson in the standard model operates autonomously (they own their own schedule) – then a sales manager in this environment is a manager in name only.

By the way, the common claim that I manage outcomes is not a defense; it’s an admission of liability. To manage outcomes is to not manage at all. A manager who manages outcomes is a spectator, not a manager!

So, armed with the direction of our solution (division of labor) and the four key principles that enable division of labor to work in practice, let’s turn the page and envision a brand new model for the sales function.

Four appointments a day, five days a week

Jennifer retrieves her Blackberry from her purse and flicks it free of its protective case in one easy gesture.

Moments later, she’s talking to David – her assistant back at head office. “Good meeting,” she answers, “you can go ahead and schedule the RDM. Yep, you can keep talking to Debra. And the opportunity’s actually a retro-fit … say fifty-grand.”

“I’m all over it.” David reassures Jennifer as he updates fields in the CRM. “So, you’d better hot-tail it over to Tyson Engineering.” Phillip left here half an hour ago, so he should be ready for the presentation when you get there.”

Jennifer, David and Phillip all work for James Sanders Group, a manufacturer of point-of-sale displays and internal fit-outs. JSG is one of our quiet revolutionaries.

JSG is an engineering-centric company. They got to be successful by solving tough problems and building really cool stuff!

In recent times JSG had been suffering a slow leakage in sales. The problem was not that they were suffering at the hands of a large competitor – that’s a battle they were well equipped to fight. What was happening was that numerous small competitors (some of them recent market entrants; others, offshore manufacturers) were chipping away at their base: winning numerous small jobs, often at crazy margins.

JSG had recognized that this was not a trend that they could reverse solely with superior production performance. They knew that they needed sales activity: boots on the ground.

Easier said than done, however! Each time JSG added a salesperson, the new recruit would win a job or two and then become entangled in account management. Before long, account management would become so all-consuming that sales activity would grind to a halt. While this was happening, JSG’s competitors were simply side-stepping those complex jobs and focusing on winning the easy stuff.

Initially, JSG looked to account managers (as they had taken to calling them) for a solution to the problem. Ultimately, it became clear that this was process problem – not a people problem.

The snippet of conversation above speaks volumes about the consequences of JSG’s revolution.

Jennifer is JSG’s salesperson. And that’s the first unusual thing. In spite of the fact that JSG services the whole of Australia (an area roughly the size of the continental USA) JSG has just one salesperson. The reason is that Jennifer is exactly 10-times more productive than one of JSG’s competitor’s salespeople. A competitor’s salesperson averages two sales meetings a week: Jennifer consistently performs 20!

David is the key to Jennifer’s efficiency. David and Jennifer talk at least four times a day. Like an air traffic controller, David is Jennifer’s eyes and ears. He carefully monitors the status of all sales opportunities – freeing Jennifer to focus only on sales meetings as they appear – as if by magic – in her trusty Blackberry.

David’s official title is sales coordinator. His responsibility is to manage JSG’s portfolio of open sales opportunities. He manages each opportunity like a project. He works tirelessly, trying to schedule the next activity in sequence for each. In most (but certainly not all) cases the next activity is a meeting with Jennifer. And, of course, Jennifer’s objective, at each meeting will be to sell the next activity – generating still more work for David.

David frees Jennifer of the requirement to do anything other than face-to-face business-development meetings. In addition to appointment-scheduling, David performs all of the clerical tasks associated with the management of sales opportunities: data-entry, reporting, literature fulfillment, expense tracking, and calendar management.

David routes non-administrative tasks to other specialist resources within JSG. Customer support issues and simple request-for-quotes are routed to customer-service representatives. And requirement-discovery and solution-design become the responsibility of project leaders.

As each task is handed-off, David logs the date in CRM, as well as a prompt for himself to follow-up prior to the task’s expected completion date. In many cases, these tasks are pre-requisites for meetings he has already scheduled for Jennifer. It’s critical, therefore, that he keeps all the parts of this machine working in unison.

Phillip also makes a significant contribution to Jennifer’s tremendous efficiency. Phillip is a project leader. His job is to manage the interface with production. Prior to each sale, Phillip works closely with Jennifer. She introduces him to clients early in each engagement to discover their requirements and to conceptualize and design solutions.

Solution design is always a collaborative process. Clients have their say, of course: they want Rolls Royce solutions on Corolla budgets. Phillip represents production: he must ensure that whatever is specified can be delivered on time and within budget. And it’s Jennifer who uses a mixture of hustle and artful diplomacy to close the gap between both parties.

Post-sale, Phillip is responsible for managing the relationship between production and the client. He’s on hand to negotiate change requests and to fine-tune the production plan on those occasions that it becomes obvious that there’s a gap developing between the client’s expectations and the direction of the project.

There’s no question that Jennifer is busy. Twenty business-development appointments a week is a lot of work – and then there’s the travel. A lot of travel!

But the interesting thing is that Jennifer loves working in this environment. There’s no stress. She doesn’t feel like a juggler with a hundred balls in the air. Clients are happy too. They understand where her responsibilities begin and end, and they always know exactly who to talk to if something appears to be going wrong.

All Jennifer has to do is show-up at meetings and talk to people – and she’s really good at that. The selling looks after itself.

Management by numbers

Matthew is one of James Sanders’ two sons. Today he is in charge of operations – and the sales function is now simple enough to be managed as part of operations.

On the face of it, managing sales is relatively easy. Matthew chairs a weekly sales meeting. The meeting consists of a review of a simple dashboard. First order of business is to ensure that opportunity flow is healthy. It’s critical that there’s a queue of sales opportunities sufficient in size to keep Jennifer busy. And the size of the buffer of forward-booked meetings in Jennifer’s calendar is important too.

Matthew knows that the profitability of the firm requires a steady flow of work to the plant. Any hiccups in meeting volume will result in idle machines and workers in a month or so.

Matthew keeps an eye on other indicators too. He scans run-charts looking for unhealthy trends and scrutinizes cycle-times for critical activities to ensure that protective capacities are being maintained where necessary.

Matthew’s biggest sales challenge is maintaining the support capacity required to keep up with Jennifer’s unrelenting flow of orders.

Prior to the revolution, Jennifer was one of five account managers. Today, four of those account managers have been converted into project leaders – all of whom are now sprinting to keep up with Jennifer. To free project-leadership capacity, Matthew has been building a team of customer-service representatives. But this team is under the pump too. Every month, it seems like there’s a couple of new faces in there!

Arresting the decline

JSG is clearly a different organization today.

There is a clear delineation between the critical sales activity and solution-design and production. Jennifer performs a fixed volume of business-development meetings every week – and the rest of the team sprints to keep up.

Obviously a complex job is likely to consume incrementally more of Jennifer’s capacity than a simple one. But that’s okay. Even when this is factored in, Jennifer still performs more business-development meetings in a week than the rest of the account-management team used to in a month. And, when there’s a hole in the production schedule, Jennifer does whatever’s necessary to win the jobs required to keep the plant busy.

But the impact has not just been on sales. The revolution has impacted every corner of the firm. Conflict has disappeared. People are happier and more willing to help-out when required. Strangely the firm seems quieter today than it ever has before – in spite of the fact that production is busier than it has been in years.

For JSG, the new model means a stronger and more consistent flow of jobs, a better interface between sales and production, and a less stressful work environment for everyone. And, as should be expected, the impact of the revolution on JSG’s profitability has been significant.

Theory into practice

This chapter has showed you the implications of sales process engineering for one business environment (an engineer-to-order manufacturer).

Chapters 2 and 3 will show you why sales process engineering (SPE) is so important in today’s business environment, introduce you to SPE’s four fundamental principles and then explain how these simple principles lead logically to the end result exemplified by JSG’s story.

In subsequent chapters you’ll learn how to apply these principles to create profound improvements in the performance of other business environments:

1. Indirect sales (when sales are made through distributors, resellers or manufacturers’ representatives)
2. Commodity sales (when solution-design is not a critical component of the engagement)
3. A micro-business or a start-up (when resources are limited and specialization appears impossible)

One message that will play over and over throughout this book is that you cannot improve the performance of sales by focusing solely on the sales function. And this theme will be tackled head-on in Chapter 4.

In Part 1’s final chapter, we’ll explore the case for the elimination of salespeople’s commissions. Part 2 is dedicated to the practical application of SPE in your organization.

Let’s go to work!