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!

This is more than an idle curiosity. The fact that we traditionally consider the sales function in isolation is likely to be an admission of a fundamental flaw in the design of sales – as well as the cause of many of the problems we experience.

This chapter presents a model for the organization as a whole and exposes the critical connections between sales and the other key organizational functions. We’ll start with the goal of the organization and drill-down to discover what the sales function must do – not to be successful in isolation – but to contribute to the success of the organization as a whole.

* * * *

While this book contains many implicit references to the Theory of Constraints (TOC), this chapter formally introduces some of TOC’s key concepts. TOC is a process-engineering methodology, developed by Eliyahu Goldratt and popularized in his 1984 best-seller The Goal. In short, TOC recognizes that the output of any system is determined by the system’s lowest-capacity resource – and that this resource (the constraint) can be used to gather intelligence about, and exercise control over, the system as a whole.

In practice, TOC enables a decision-making approach that contrasts with the traditional (cost-accounting-based) approach – which assumes (erroneously) that the output of a system is the sum of the output of each of the system resources.

The goal

Considering that this book considers just one type of organization (a business), the goal is obvious: to make money (now, and in the future). And, at a glance, the contribution that sales must make to the achievement of this goal also appears obvious: to make sales.

But, not so fast!

Does it automatically follow that, if the sales function generates more sales, then the organization makes more money?

Actually, it doesn’t. There are two (common) cases where the sales function can actually harm the greater organization by generating more sales.

Sales can sell something that production doesn’t have the ability (or capacity) to produce to the customer’s requirements (damaging goodwill as a consequence).

Sales can sell something that causes the organization to make less money than it otherwise would. (For example, limited production resources might be diverted to fill orders that generate a lower yield on those resources.)

We must recognize, then, that the objective of sales cannot be defined in isolation. It must reference at least one other organizational function. (And the same can be said for each of the other functions.)

We should also suspect that, because organizations can differ significantly from one another, it may not be possible to specify the objective with a standard statement that is applicable in every circumstance.

The constraint

As I’ve mentioned, a business consists of a number of functions that must work together to make money (the goal). How much money the business makes is determined, to a large extent, by how well these functions work together.

Let’s consider a very simple business, consisting of just a sales and a production function.

In order to make money, the business as a whole must generate gross profit at a faster rate than it incurs operating expenses. Units of gross profit must be processed by both sales and production before they can be banked. Specifically, sales must win an order and then production must fulfill it.

We will use the (TOC) term Throughput to refer to units of gross profit. Technically, Throughput is equal to the revenue generated by a transaction, minus the totally-variable costs associated with that transaction (raw material costs, sales commissions, shipping, etc).

Because the amount of money that a business makes is a function of the rate at which it processes Throughput, it is important that we understand the capacity of the business. In other words, we need to know how much Throughput the business can process in a given period.

The capacity of the business as a whole is determined by the capacity of its lowest-capacity function (what we’ll call the constraint).

So, if the capacity of each of the functions in our simple business is as marked above, it should be clear that this business can only generate $10,000 (Throughput) a day. Production does have the capacity to produce more but, without sales to fulfill, there’s no point it doing so.

Because (in this scenario) sales determines the profitability of the organization as a whole, we can draw some conclusions about how sales and production should work together:

1. Sales should sell as much as possible (in this scenario, it does make sense for sales to sell as much as possible)
2. Production should produce whatever sales sells (and nothing more)

We can now generalize from these conclusions to arrive at two simple rules – applicable to every business:

1. The constraint should operate at full capacity, at all times
2. Non-constraints, should subordinate to the constraint (in this context, subordinate means keep up with)

It should now be clear that sales should only operate at full capacity (i.e. sell as much as possible) when it is the constraint. In all other scenarios, sales should subordinate to the constraint.

So, if we reverse the capacities of the functions in our simple business (meaning that production is now the constraint), we can conclude that:

1. Sales should sell only what production has the capacity to produce
2. Production should operate at full capacity, at all times

Variability (our dark passenger)

Actually, these two rules will not produce the optimal outcome in reality! And, when we understand the reason why, we’ll also understand why our organization should have a (single) constraint in the first instance.

We must acknowledge that, in reality, the output of any resource is inherently variable. When we talk about a person, a machine or a plant producing an output of x, what we really mean is that the output averages x. If we plot the output of that resource (any resource) on a run-chart, we will discover that its output is quite variable.

This inside (telephone-based) salesperson may average
$5,000 in sales a day, but her range is greater than her mean.

This means that (continuing with our example above) it is impractical for sales to aim to provide production with $T10,000 worth of orders a day, for two reasons:

1. The output of sales will vary dramatically (as is the nature of sales) from day-to-day
2. The capacity of production will also vary but it’s variability will be independent of – and, therefore, out of sync with – that of sales

If sales was to attempt to provide production with $T10,000 worth of orders a day, production will find that it is regularly starved of work – meaning that the actual output of the organization will be less than the capacity of production (the constraint).

The solution to this problem requires that sales maintains a buffer of orders upstream from production, large enough to absorb the sales function’s inherent variability (but no larger).

The existence of the buffer enables the organization to fully exploit its production capacity, as well as to maintain good on-time delivery performance. However, if the buffer is larger than necessary, it will increase delivery lead-time – causing the organization’s product to be less appealing to customers.

With this small (but critical) modification to our simple business, we can now finalize our directives to each function:

1. Sales should maintain the constraint buffer at its optimal size
2. Production should operate at full capacity, at all times

As promised, variability also points us to the reason why an organization should have a (single) constraint.

The inherent variability in the output of every resource means that an attempt to balance the capacities of resources is a fool’s errand. In an environment where all resources have identical average capacities, the day-to-day variation in actual output will result in the emergence of a constraint that wanders, unpredictability, from resource to resource – rendering the organization unmanageable.

It makes more sense for management to determine which function should be the constraint and then build enough protective capacity at non-constraint resources to ensure that the system is stable.

The optimal constraint location

That’s right; you get to choose the location of the constraint within your organization. (Well, you do if – and only if – you can stop the cost accountants from attempting to balance the capacity of all resources!)

To shed some light on this decision, let’s meet one of our silent revolutionaries prior to their transition.

Acme is a traditional (plate and ink) printer. Its owner has stayed current with technology and has, consequently, seen Acme’s production capacity increase geometrically over the last 15 years. The owner’s not-insignificant investment in technology has produced a dramatic improvement in plant efficiency, measured on a per-impression (or, printed-page) basis.

However, Acme’s sales team has failed to keep-up with production. The plant has the capacity to generate around $600,000 a month in Throughput, but the sales team is selling less than a third of that. The owner is rapidly realizing that the efficiencies produced by the new technology are a mirage if the additional capacity is not sold.

Clearly, in Acme’s case, sales is the system constraint, meaning that we can apply our two rules to define objectives for both sales and production. But advising sales to sell as much as possible – and production to keep pace – is not much of a solution when two-thirds of acme’s plant capacity is sitting unused.

It makes more sense to take pause and examine the overall design of the organization. And, in so doing, the very first question we should ask is: which function should be the organizational constraint?

To answer that question, we must start at the beginning: with the goal of the organization.

We know that Acme’s goal is to make money but it’s worth exploring what make money really means. Clearly it means more than generating revenues (you can generate a lot of revenue and still go broke). It must also mean more than making profits (profits are good, but they are only half of the story). That’s right; making money means maximizing the return on owners’ equity (and you can do this by increasing the return, decreasing the equity or some combination of the two).

This better understanding of the goal helps us to recognize that production should probably be Acme’s constraint (not sales). The reason is that production is where almost all of the owner’s equity is invested!

So, in the short run, our two rules may provide Acme with a thumb in the leaking dike, but in the long run, Acme must:

1. Dramatically increase the capacity of the sales function (until sales can consistently sell more than production has the capacity to produce)
2. Reduce the capacity of the plant

Once Acme has remedied this immediate problem – and shifted the constraint to production – then the responsibility of sales will no longer be to sell as much as possible. Sales will be responsible for maintaining a queue of orders up-stream from production – large enough to ensure that production operates at full capacity, day in and day out.

Because Acme is one of our silent revolutionaries, you can probably guess that they chose to dramatically increase the capacity of sales. Today, the presses at Acme run at 100% utilization, 100% of the time. Acme’s salespeople are no longer looking for something – anything! – to print. Instead, they search constantly for ways to increase the yield that Acme earns on its finite plant capacity.

The third function: new product development

Now that we understand the concept of the constraint, we need a more complete model of the organization. To date we’ve envisaged just two functions, sales and production.

In the long-run, however, a business needs (at least) one more function in order to thrive: new-product development (or engineering).

The primary responsibility of new-product development (NPD) is to conceptualize and design the products (or services) that sales sells and that production delivers. (Additionally, NPD will often innovate internally, creating better production or distribution processes.)

It’s critical that we explicitly recognize the existence of – and the importance of – NPD . It’s not just that NPD keeps the organization relevant in the long-run. In most organizations it’s NPD that determines whether or not potential customers are prepared to entertain your salespeople!

Now, obviously all organizations have more functions than those examined here (finance, administration, etc) but, because these are support functions they have no bearing on this discussion. Similarly, I am choosing to ignore senior management because I’m assuming that it’s senior management who’s doing the modeling in the first place!

With our model expanded to three functions, determining the ideal constraint location becomes a little trickier. However, if we consider the three value-chain configurations we discussed in Chapter 2, the optimal constraint location starts to come into focus.

Make to stock

A traditional car company (e.g. Ford or Toyota) is an example of a make-to-stock (MTS) manufacturer. The flow is simple:

1. NPD designs something
2. Production manufacturers it
3. Sales sells it

In most cases, MTS manufacturers sell via arms-length resellers, rather than direct – and for this reason, it makes more sense to refer to our third function as distribution than sales. In practice, this does not make a large difference – particularly when you consider that the manufacturer will still need to maintain some kind of salesforce in order to acquire and develop channel relationships.

As for the question of which function should be the organization’s constraint, this is evident from the phrase make to stock. As discussed previously, the stockpile of inventory exists to buffer production from distribution – meaning that sales must be the constraint.

In most cases the flow between NPD and sales is asynchronous (hence the dotted line above). In other words, NPD designs new products periodically, not once for each item manufactured.

Because services cannot be stockpiled, the term MTS applies purely to manufacturers.

Make to order

Production does not commence for a make-to-order provider until the order is received. Accordingly, there can be no inventory of finished goods.

Increasingly, technology is allowing even traditional manufacturers (think, car companies) to move to a make-to-order (MTO) configuration. Dell is a perfect example of a MTO manufacturer – as is a tax agent or a traditional printer. A MTO provider does not have to design a new product for each client – rather it’s a case of configuring standard options to suit the client’s specifications.

The MTO flow looks like this:

1. NPD designs a product (or service) with a finite number of customizable options
2. Sales sells the product – and helps the client customize it to suit their requirements
3. Production produces it

In most cases, the ideal constraint location for a MTO producer will be production. The responsibility of sales (as per our Acme example) should be to maintain a queue of orders upstream from production. Furthermore, this queue of orders should ideally be composed so as to maximize the yield on production’s limited capacity (bearing in mind that different mixes of work will have varying impact on the profitability of the organization).

An interesting example of an MTO provider is a funeral home. At first glance, it would appear impossible for a funeral home to maintain a queue of orders upstream from production (the mortuary). The reality, however, is that, in recent years, funeral homes have figured-out how to do exactly this! Most homes today have sales teams that sell funeral plans – meaning that, when a person passes, their funeral has already been arranged and paid for.

Engineer to order

Engineer to order (ETO) environments add another level of complexity to MTO.

Rather than configuring a product (or service) to suit a customer’s requirements, an ETO provider designs a custom solution and, in most cases, the design procedure spans the point of sale. In other words, in an ETO environment, the vendor will most likely need to do some preliminary design to win the job and will then have to complete the design after the job is won.

In most ETO environments, engineering should be maintained as the organizational constraint. This is because:

1. Engineering is the source of the firm’s competitive advantage
2. Engineering is, in most cases, harder to scale than sales or production (remembering that components of production can generally be out-sourced)

Examples of ETO providers include engineering and architecture firms, traditional- and web-design companies, and enterprise-software providers.

A new objective for sales

If we adjust our diagram to indicate the optimal constraint location for each value-chain configuration, we now have our final model. In each case, the constraint is the resource downstream from the constraint buffer.

In summary then, what we are proposing is that:

1. In each case, the constrained function (and only the constrained function) operates at 100% utilization.
2. Non-constrained functions subordinate to the constraint

For each resource, to subordinate means something a little different:

1. NPD subordinates (in MTS and MTO environments) by ensuring that product (or service) offerings are consistently appealing to the market (meaning that they are innovative and that they can be competitively priced)
2. Production subordinates to distribution in a MTS environment by ensuring that inventory stockpiles are the optimal size (and composition). Too little inventory will mean stock-outs and too much will cause distribution to liquidate unsold items or, alternatively, will prevent the uptake of newer lines.
3. Sales subordinates in MTO and ETO environments by ensuring that a queue of orders is maintained up-stream from either production or engineering – and by ensuring that the composition of this queue maximizes the yield on the downstream function’s finite capacity

We can now see that it’s only in the case of the MTS environment that the objective of sales should be to sell as much as possible.In the other two environments, sales should be subordinating to either production or engineering.

And, as we mentioned earlier, over time, organizations are tending to transition from MTS to either MTO or ETO. This means that it is increasingly unlikely that your sales function is (or at least should be) the organizational constraint.

If you are not a MTS manufacturer and your sales manager believes that their responsibility is to maximize sales then you should suspect that this is evidence of an organizational design problem. If it does not make sense for sales to be your organizational constraint then sales should have enough protective capacity to enable it to maintain a queue of orders upstream from either production or engineering at all times (come hell or high water).

If sales is resourced properly, your sales manager would never claim that it’s their responsibility to maximize sales. It would be obvious to them that this would cause the order queue to quickly inflate to the point where lead-times would explode and client relationships would be damaged. (If you consider that the sales function exhibits a greater degree of variability than all other functions, it should be clear that you need quite a deal of protective capacity in sales to enable that function to subordinate effectively).

As mentioned, it’s not just the size of the order queue that’s important in MTO and ETO environments: it’s the composition of that queue. Sales should be responsible for selling the mix of work that maximizes the yield on either production’s or engineering’s finite resources.

The optimal mix

Now, the notion of constraints applies at the functional – as well as the organizational – level. In other words, if your organizational constraint is your production function, then the production function will be constrained (at any one point in time) by a single production resource.

In Acme’s case, production is now the organizational constraint. However, if we look inside production, we discover that the plant is designed to ensure that a bank of shiny new 5-color Heidelbergs operates at 100% capacity at all times. The other production resources subordinate to that that bank of printing presses.

If Acme’s sales manager wants to maximize the profitably of Acme (which I can assure you he does), he will plan promotional and sales activities with a view to (in this order):

1. Keeping those printing presses fully loaded with work
2. Prioritizing jobs that maximize the yield on the Heidlebergs’ limited capacity
3. Identifying opportunities to sell any spare capacity in the plant that may not put a load on the presses (e.g. it might be possible to opportunistically sell some spare capacity in the bindery to a print broker)

It should be clear that this tight integration of sales and production will have a profound impact on the profitability of the firm (as indeed it has in Acme’s case).

And the importance of tight integration (as discussed in the previous chapter) is even more critical in an ETO environment, where the line between sales and production is blurred.

For this reason, in MTO and ETO environments, the new approach to the design of the sales function, presented in this book, offers much more than the opportunity to build a more efficient sales function. By allowing the tight integration of sales with other functions, this new model will impact almost every facet of the client engagement.

A word of caution

The model presented in this chapter is intended as a ready-reckoner – not as a substitute for a formal approach to strategy formulation.

As well as the value-chain configuration, you should also consider the source of the organization’s competitive advantage. For example, if movie studios and drug companies compete on the basis of continual and rapid innovation, NPD (or R&D) should always be their organizational constraint (remembering that the constraint is the only function that operates at 100% utilization).

And, as suggested earlier, it’s worth paying attention to how owner’s equity is distributed among functions.

In the case of organizations that consist of a single function (print brokers and travel agencies, for example), the identification of the optimal organizational constraint should be relatively easy!

The factory floor as a classroom

There’s a good reason the factory floor makes an ideal classroom for this lesson on sales process design and management. I want to focus your attention on the process in sales process. And it just so happens that manufacturing people know an awful lot about processes.

In fact, I think it would be fair to say that manufacturing process improvement has driven most of the increases we’ve seen in organisational productivity over the last century (from the assembly line to the quality movement).

What is a process?

We’ll start our tour by climbing the stairs to your executive suite. (We’re making the climb because this mezzanine level provides a bird’s-eye view of your factory.) From up here, it’s easier to spot the method in the apparent madness below. As you look from workstation to workstation, you can see raw materials being gradually transformed into finished products. This view provides a practical definition of the word process — a logical starting point for our study:

A process is a sequence of value-adding steps that transforms a set of inputs into an output.

Makes sense, doesn’t it? But try applying that definition to your sales process. You know the desired output of your sales process is sales. But what are the inputs? And what specifically are the value-adding steps that transform these inputs into sales? When pressed, most executives claim that the input into their sales process is leads (or sales opportunities). But this answer exposes a fundamental (and common) flaw in sales process design. If your sales process begins with a pre-existing sales opportunity, your ability to scale this process is constrained by the availability of such opportunities. Now, unless your organisation is in the fortunate position where demand for your product exceeds supply, it’s likely that this source of pre-existing sales opportunities is limited. It’s inappropriate, therefore, to regard sales opportunities as the input into your sales process. Our article on Relationship-centric Marketing explains that sales opportunities emerge from the relationships that your organisation has under its custodianship. The key to generating sales opportunities is to carefully manage these relationships. If a relationship precedes a sales opportunity, from where then do relationships come? Well, generally speaking, relationships come from two sources, existing clients and potential clients. If you’re doing a good job of managing your existing client relationships, you should be more interested in the latter source of relationships than the former. This is because there is a limit to how many sales opportunities you can extract from clients (without damaging the valuable client relationships). Where you have a finite number of client relationships, the potential to acquire relationships with potential clients is limited only by the size of your market. To acquire relationships with potential clients, you need to invest money in a special kind of promotional campaign (we call this a relationship-acquisition campaign). This promotional expenditure is the true input into your sales process. Accordingly, your sales process should probably look something like this:

The lesson

The lesson here is that your sales process should have the same key attributes as your manufacturing process. It should have inputs, outputs and a sequence of value-adding steps. There should be a measurable cause and effect relationship between inputs and output. And it should be designed so that it can be scaled in line with the capacity of your organisation as a whole.

It’s an organisational process

We’ve descended from the mezzanine level, and we’re now strolling through your factory. We stopped and chatted to Terry, a forklift operator who receives raw materials and transports them to the appropriate workstations. We met Sue who operates a sheet metal press. And we even bumped into her husband Bob, who operates a powder-coating booth on the other side of the factory. In chatting to Terry, Sue and Bob, we noticed that each is a specialist. Each focuses on one step in your manufacturing process — each has a trade qualification relevant to the particular tasks that make up that step. While all exhibited a healthy interest in your manufacturing process as a whole, their focus was obviously on their particular areas of expertise. (When I asked Bob if he ever drove Terry’s forklift, he laughed, as if the idea were preposterous.) It’s easy to see that responsibility for managing your manufacturing process as a whole vests with Elliott, your production manager. In contrast to Terry, Sue and Bob, Elliott has only a passing interest in the individual tasks that comprise your manufacturing process. But when we ask him a question about the productivity of this process, he can’t wait to share his control charts with us! If we contrast the division of tasks and resources (in this case people) with a typical sales process, the differences are obvious. Your manufacturing process is an organisational process. However, most sales processes are personal processes. In most organisations, the salesperson is the sales process. If you think of a typical sales process, the salesperson (or people) is responsible for prospecting, data entry, literature fulfilment, appointment scheduling, face-to-face selling, the preparation of reports, customer service and even for expediting orders through the factory. In such a sales process, a salesperson spends a small fraction of her time selling. The rest of her time is devoted to clerical duties, or duties that could be better performed by other specialists (or by specialist business systems). This situation appears even more ludicrous when you consider that a typical salesperson is paid more than a trade-qualified production worker — and perhaps even more than a production manager! There are three main problems associated with delegating responsibility for your sales process (or any complex process) to a single individual: The process becomes highly inefficient. Your salesperson is so busy performing clerical duties that she doesn’t have time to sell. The process suffers from limited capacity (it’s not scalable). Because salespeople are expensive, it’s hard to justify employing more salespeople in an effort to increase sales. (Especially if sales opportunities are in limited supply.) The process is all but unmanageable. Because a single individual owns the process, it is possible only to measure output. It is not possible to micro-manage the steps that make up the process as a whole.

The lesson

Your sales process should be an organisational process, not a personal process. If the idea of your spray painter doubling as a forklift operator is ludicrous, so too should the prospect of your salesperson performing clerical duties. Your salesperson should perform only those duties to which they are ideally suited (both by skill and by salary level). Your sales process should be managed by a person with a global view of the process (and not by a salesperson). Our article entitled Is your marketing manager redundant? suggests that a typical organisation should consider redesigning its marketing manager’s role so that this person becomes a sales process manager.

Design for volume

We’re now standing between two parallel assembly lines. On one line, the mechanical components of your product are being assembled and, on the other, the discrete electronics are being soldered into the controller boards. What’s fascinating is that, even though quite different tasks are being performed on each line, the lines are synchronised so that the controller board for each product is finished (and tested) just as the final nut is tightened on the mechanical assembly. Watching your production process at work is like watching a race car driver in action. Each of his movements is so deliberate, precise and obviously well rehearsed that it’s easy to forget he is travelling around the racetrack at speeds exceeding 300km an hour. Like a racing car, your manufacturing process has been designed for speed (or, more correctly, volume). This is because, as the volume of your manufacturing process goes up, the organisational resources (capital) consumed by this process (on a per-unit-of-output basis) goes down. (Which would you prefer: two slow-moving production lines, or one production line that operates at twice the speed, to deliver the same volume of output?) In comparison with your manufacturing process, a typical sales process has been designed to maximise conversion rates, rather than to optimise volume. In a typical organisation, each salesperson represents an entire process (each salesperson is responsible for acquiring and managing relationships, for generating sales opportunities and for converting sales opportunities into sales). Accordingly, a typical organisation has multiple sales production lines, each with very limited capacity.

The lesson

The obsessive pursuit of unrealistically high conversion rates results in the sub-optimisation of most sales processes. (If you show me a sales process with a conversion rate of greater than 90%, I’ll show you a process that can’t be scaled!)

Your process should be designed to optimise volume for two simple reasons: Just as a fast-moving production line consumes less organisational resources (capital), a high-volume sales process consumes less sales resources (salespeople’s time). Your efforts to increase conversion rates (more sales training, new technology, better sales aids) will only ever produce incremental (and rapidly-diminishing) gains in output. However a similar investment in volume (more relationships under management) will produce geometric increases in sales (even if conversion rates go down).

Manage the constraint

We’ve now stopped at what appears to be the most important step in your manufacturing process. We’re looking at a particularly unimpressive machine (it stamps your product’s main housing out of sheets of aluminium). But, for some reason, this machine is attracting a disproportionate share of attention. This machine has three operators. One is hand-feeding it aluminium sheets from a small pile of inventory. (This is the first time we’ve seen any inventory in your plant.) Another is removing the finished housings from the machine, checking them and then handing them off to a nearby workstation. And the third is watching the whole process and graphing the output of the machine on a piece of chart paper! There’s a simple reason why this machine is receiving all this attention: it’s the bottleneck (or constraint) in your manufacturing process. Your manufacturing team knows that the output of their process as a whole is limited to the output of this constraint. In other words, if this machine can stamp just 20 housings an hour, your manufacturing process can produce no more than 20 complete units an hour. Accordingly, your team recognises that it must do everything it can to maximise the output of this machine. (This also explains the small pile of inventory in front of this machine. Because this machine is the constraint, if it stops due to a lack of inventory, the whole manufacturing process grinds to a halt.)

You can learn more about the Theory of Constraints by reading The Goal (by Eliyahu Goldratt). This brilliant book is a must for those interested in our sales process design methodology.

In a typical sales process, the constraint is the acquisition of sales opportunities. However, rather than mustering all available resources to manage (and preferably, eliminate) this constraint, most organisations do the exact opposite! As mentioned previously, most organisations focus their resources on attempting to convert the small number of available sales opportunities into sales. Meanwhile, the activities that are supposed to generate sales opportunities are either totally ineffective (most branding campaigns), cost-prohibitive (cold calling), or unscalable (referrals).

The lesson

If the generation of sales opportunities is the constraint in your sales process, you need to focus all your management attention on eliminating this constraint. You need a scalable and cost-effective method to generate a predictable flow of sales opportunities. And you need a stockpile of inventory in front of your opportunity acquisition machine to ensure that this machine never suffers a stock-outage. Our Relationship-centric methodology explains that sales opportunities are generated by the active (and strategic) management of relationships with clients, potential clients and centres of influence. Accordingly, you need to pay close attention to your management of the relationships under your custodianship to ensure that you are optimising the flow of sales opportunities. Furthermore, you must ensure that you have more than enough relationships under management to generate the volume of sales opportunities that you require.

Manage by numbers

By the time we complete our factory tour it’s approaching closing time. We catch Elliott’s attention just as he’s about to make a dash for his car, with an armload of control charts and his Hewlett Packard calculator (every engineers’ best friend). We thank Elliott for letting us tour his factory and congratulate him on his efficient manufacturing process. Elliott’s armload of control charts alerts us to the fact that he manages his production process with scientific precision. He performs regular measurements on the productivity and the volume of each component of his process, as well as on the process as a whole. And he uses these measurements to continually fine-tune its design and operation. It’s rare that we find a sales process that’s managed with this kind of precision. Which is strange, when you consider that a sales process is just as complex and just as critical as a manufacturing process. In a typical organisation, the marketing manager manages promotional activities (which should be a component of the sales process). And the sales manager manages the opportunity management process (which is obviously a component of the sales process). But no one manages the process as a whole. Just imagine what would happen to your manufacturing process if it were treated with the same neglect!

The lesson

Someone in your organisation must be made responsible for your entire sales process. They must be responsible for both the productivity and the output of the process as a whole. And they must manage this process by numbers, rather than by intuition. (For more information, read our article entitled How to establish a clear cause and effect relationship between promotional expenditure and sales.) When we look at most organisations, we discover that the sales process is the constraint on the growth of the business. We also discover that the sales process is operating at peak capacity (at least with its current structure). If this is the case with your business, your sales process needs urgent management attention. Until you reengineer this process so that it is both manageable and scalable, your business is limited to organic (incremental) growth. But don’t despair, the answer to your problem is close at hand. You don’t need marketing consultants, sales trainers or sales force automation software, you just need to take a wide-eyed stroll around a modern manufacturing facility.

Ramsay is the gruff, Scottish, Michelin-star-winning, celebrity chef. His show tracks his attempts to knock poor-performing restaurants into shape with his unique mix of screamed expletives, gentle reasoning and some sound business principles.

The other night he asked a restaurateur to explain why, on the one hand, she was promoting a cheap burger on her blackboard, while on the other, her menu items were ridiculously overpriced.

She explained that, because she was loosing money, her accountant and banker had encouraged her to raise prices — which she did. The problem is that this reduced cashflow. So, to generate cash to pay wages, she had to offer discounted blackboard items!

Predictably, Ramsay instructed her to phone her accountant and advise him that he is an a*******. But what was more interesting was the solution he proposed.

Ramsay instructed her to re-price her menu, serve smaller meals and focus on selling three courses to diners, rather than one.

But here’s the good bit. Because the restaurant’s weeknights were quiet, he told her to switch her focus from selling food to selling tables. His solution was to sell each table for 10 pounds — a fixed menu — and then sell each table multiple times in the one night.

While Ramsay has probably never heard of TOC, he’s smart enough to know that tables are typically a restaurant’s constraint — and, consequently, that the key to maximising the profitability of a restaurant is to maximise Throughput per table.

If you’ve seen the show, you’ll know that Ramsay often fails to rescue the restaurants he takes on. In the case of this show, when he returned a few weeks after his initial stay, the restaurant was doing well — particularly weeknights. From memory, on the particularly weeknight that Ramsay visited the restaurant was so busy that it had turned it’s tables three times each! And the restaurateur reported that she was, at last, making money.