Management

Which Problems Are the Most Important to Fix?

May 15, 2017 by David Crankshaw

Imagine I am a new employee at your company and you want to show me around.

You would likely take me on a walking tour, first through reception then to the different departments: sales, customer service, legal, engineering, accounting, and production.

On this tour you would show me the different functions in your company.

Now let’s imagine that I ask people in the different functions about the problems they face each day.

What are the constraints that hold them back from doing their work?

People See Problems Through Their Functional Experience

People in each function will experience and describe a different set of problems. It’s likely that they will conclude that the problems in their function are also the problems that the entire company should be devoting itself to solve.

The receptionist will perceive that the problems lie in people’s unwillingness to answer the phone and return calls.

Sales thinks that the products are overpriced and that lead times to delivery are too long.

Customer service spends too much its time on expediting orders, not supporting buyers.

Purchasing doesn’t have enough lead time to make acquisitions.

Manufacturing is asked to meet impossible goals.

Which Are the Most Important Problems to Fix?

As you hear people in each function describe the problems in the company as they see them, how do you evaluate which problems take priority over others? Which ones are the most important to fix?

Lisa Scheinkopf says that this functional view puts you too close. You can see trees or branches on trees, but you can’t see the forest.

Instead of looking at functions, step back and look at the whole system of the organization.

Scheinkopf quotes her friend, John Covington. When asked how he approached complex problems, he replied “Make the box bigger!”

What did he mean by that comment? He was saying that sometimes we should look at functions in a system and other times we should look at the whole system. Too often we try to solve a systemic problem by looking at one function.

Step Back and Look at the Whole System

But the only way to decide which problem to solve is to find where the constraint is in the system. To do that we have to look at the whole.

We look at the whole because it enables our perspective to change. When we were looking at organizational functions, we saw a jumble of seemingly unrelated activities. But when we step back and look at the whole organization we can see a pattern. We can see a pattern of flow.

Raw materials and inventory flow into the organization. Inside the organization the raw materials and inventory are transformed into products and services. The products and services for customers flow out from the organization.

This output is the means by which your organization accomplishes its purpose.

The rate at which you generate output is the rate at which you accomplish your purpose.

All organizations want to improve the rate of their output because it improves the organization’s ability to accomplish its purpose.

And the way to improve your rate of output is to find the constraint. The constraint is the most important problem to fix.

Building a Scalable Business Machine

April 25, 2017 by David Crankshaw

Recently Justin Roff-Marsh interviewed Doug Voss, one of his clients, about the projects they have done together. Doug is a vice-president and founder at Sayfa Systems in Melbourne, Australia. Sayfa manufactures and distributes height safety and fault management systems for people who work on the roofs of buildings.

Sayfa went through a sharp growth period prior to working with Roff-Marsh. Sayfa’s future growth potential lies less in customer acquisition and more in the innovation of new products for existing customers.

The period of rapid growth revealed that Sayfa didn’t have a scalable business model. Consequently, most of the work with Roff-Marsh has been with new product development, technology, and engineering. They needed better technology to manage the teams and to make the work of the teams more visible.

Doug wanted a “scalable process that could cope with a high velocity of calls and customer service requirements that come through every day.” He wanted to get better control over the scalability of his systems so the company could cope with a high velocity of calls to sales and customer service.

At the solution design workshop with Roff-Marsh they mapped customer service and inside sales. Field sales activities were reduced from “small and spasmodic” to none.

Technology Migration for the Project Sales Team

Sayfa’s project sales team mostly does specification work. The inside sales team subscribes to a feed of specifications for new building projects in Australia. Inside Sales then chases specifications through the project workflow as projects move from architect to builder to installer.

They had been managing their projects in a spreadsheet, one project per row. But the spreadsheets became unwieldy—“teetering, freezing, crashing.” So they worked with Roff-Marsh to move the projects into a CRM application. The CRM application made it possible to associate one project with multiple stakeholders (architects, builders, and installers).

Everyone in project sales uses the CRM. This includes anyone from specification through tender through installation.

Improved Processes in Customer Service

Once Sayfa had moved project sales to the CRM application, they began a project to improve the process for customer service.

Many high demand requests come into the customer service team. They found it difficult to manage the workloads of the team. Customer service staff struggled to find someone who would take a difficult call when it arrived.

Roff-Marsh helped them to manage the flow and velocity of work through the team.

They made two distinctions in the type of tasks the team performed. The first distinction was between product requests and technical requests. The second was between short lead-time calls and long lead-time calls. They divided the work among team members who specialized in different types of calls.

They also began to measure on-time case completion. When they started using this metric, they completed 60% of their cases on-time. Now they are at 90%. They hung a board on the wall so everyone could see the on-time case completion rate.

When everyone can see the results, Doug explains that “you get a bit of banter among the team members.” This talk amongst the team causes people to look for ways to help each other to complete their cases and keep the on-time completion rate high.

When we can see the on-time case completion number coming down, we know we need to get some extra resources in or have a quick meeting to understand what is happening. What do we need to do to sort out or jump in and help the team. The team is aware of it, they haven’t become blind to it.

Identify and Exploit the Constraints, One at a Time

At their strategy session, Roff-Marsh and the Sayva team identified two possible constraints, project sales and customer service. They agreed that project sales was the most important constraint to focus on first.

Project sales faced problems with its ability to deliver full value to customers within a committed time-frame. However, this inability was not due to input constraints (they had plenty of new project specifications that they needed to respond to) nor was it due to a critical resource. The cause of the constraint was due to their sales production and planning practices.

In order to exploit the constraint in project sales, Sayva looked at the causes that might be restricting their output and how they could improve sales productivity. They identified problems with their technology, the “teetering, freezing, crashing” spreadsheets, and migrated to a CRM application.

Once they had addressed the constraint in project sales, the next constraint was in customer service. Once again, the cause of the constraint lay mainly with production and planning processes. Since the CRM application was in place by this time, they elevated the constraint mainly by examining the flow of calls into the customer service team. Better routing of calls and the measurement of on-time call completion made it possible to dramatically improve their quality and throughput.

Doug Voss at Sayva knew they had an opportunity to grow through innovation in new products. He also knew that he couldn’t pursue this opportunity until he had built a scalable machine in project sales and customer service. By identifying the constraints (in sales and service) and maximizing their productivity, Sayva was able to improve quality and throughput in both these functions. This improvement now makes it possible to pursue their growth opportunities in new product development.

Can Sales Productivity Become Your Competitive Advantage?

March 17, 2017 by David Crankshaw

All managers want to see their company grow. Their company’s growth comes from one of three sources:

More labor – you can produce more if you hire more people or if you ask your existing staff to work longer hours.
More capital – you can seek capital and use it to invest in new equipment, technology, or facilities.
Productivity improvements – Through better use of your labor and capital. Increased productivity can come from a variety of innovations in your product, your production, and your processes. These innovations can include large improvements (light bulbs, shipping containers, spreadsheets) and the myriad ways that each company finds to improve the way it does its work.

Labor and capital increase your costs and require investments which are limited, so the key to long-term growth is always going to be in the search for productivity improvements.

Although firms in the US made rapid productivity improvements in engineering and production over the last century, that rate of productivity improvement seems to have slowed since 1970.

When it becomes difficult to achieve competitive advantage through productivity improvements in engineering and production, companies struggle to separate themselves from their competitors.

However, many companies have overlooked an important opportunity. They’ve failed to seriously address the need for productivity improvements in the sales function. In fact, about 70% of companies in the U.S. are not able to even sell all their production capacity. And that should be the job of sales, right? To sell all of the company’s capacity to produce?

This untapped opportunity for productivity improvement creates an opportunity for companies that are willing to give some serious attention to improving processes in the sales function.

Sales Management Association Challenges Sales Training Tradition

August 22, 2016 by David Crankshaw

A recent article on salesforce.com by Jason Jordan challenges our assumptions about sales training. Normally when we hear sales training, we assume that means training for salespeople. Jordan recommends that we focus sales training investments on sales managers instead of salespeople.

This surprising conclusion came from the results of a survey by the Sales Management Association. The survey indicates that companies are more likely to achieve their revenue goal if they shift their sales training budget from salespeople to sales managers.

Specifically, organizations that invested more than 50% of their sales training budget in managers reported a 15% higher achievement of revenue goal than those that invested less than 25% in managers. And the relationship was relatively linear, with the middle group performing just in between. Interestingly, only 14% of the companies surveyed had the nerve to allocate more than half of their sales training budgets to their sales managers. All this presents a thought-provoking question: What if we spent literally nothing training salespeople? What if we only trained our sales managers rather than our sellers?

Should We Turn Sales Managers into Full-time Sales Trainers?

Mr. Jordan proposes that we train sales managers to become sales trainers for their own people. It asserts that if your sales manager can train your salespeople, then there is less need to remove salespeople from the field and send them to training. Further, you can take the money you would spend to give modest training to ten salespeople and give exemplary training to one sales manager. You improve the ability of sales managers to coach better performance from their team.

But does this article go far enough in challenging how we go about managing and developing our salespeople?

The survey assumes that salespeople need training to improve their ability to hold meaningful sales conversations with their customers. If their ability improves, then more of those conversations will convert prospects into customers.

Here’s the question to ask: Is conversion really the problem? Instead of focusing entirely on conversion improvement, why not hold more meaningful conversations each week? In other words, focus less on sales conversion and more on sales throughput.

Instead, Allow Salespeople to Specialize in Selling

If most salespeople are only scheduling a few meaningful conversations each week, what if you increase that number to ten or even twenty conversations per week? If a salesperson is holding twenty conversations per week, it’s likely that their current level of training is perfectly adequate to the task and that many of these conversations will turn into customers. Furthermore, the best way to get better at something is practice. Salespeople who hold ten or twenty conversations per week are going to get better much more quickly than those that only hold two conversations per week.

But wait. If a salesperson is holding twenty conversations per week, this raises questions about all the other work that salespeople do besides hold meaningful sales conversations. What are these other tasks? They include administration, customer service, prospecting, solution design, and appointment-setting.

Since meaningful sales conversations are the main factor that drives how many prospects turn into customers, would it be worth finding other people to do the tasks assigned to salespeople that are not sales conversations? If you did this, then you would free the salespersons time to spend on sales conversations. Your throughput would increase dramatically with a consequent increase in revenue and contribution margin.

Why It’s So Hard to Fill Sales Jobs

August 19, 2016 by David Crankshaw

The Wall Street Journal reports that many companies find it difficult to fill positions in sales. Positions in scientific and technical fields pay well, but young people are uninterested.

Technical sales and sales-management positions play a critical role for U.S. businesses, but they are among the hardest to fill, according to a 2014 report from Harvard Business School’s U.S. Competitiveness Project. Employers spent an average of 41 days trying to fill technical sales jobs, compared with an average of 33 days for all jobs for the 12-month period ending in September 2014, according to Burning Glass, a labor-market analysis firm that worked with Harvard Business School on the report.

Many potential applicants are turned off by the stereotype that sales is a high-pressure, competitive environment (think Glengarry Glenn Ross). Others are wary of the financial risk. However, in many companies, the sales environment is changing.

As companies become savvier about the products they buy, wheeler-dealers are out, and problem-solvers are in. Sales organizations today are more commonly structured as teams, with lower-ranking members identifying prospects and developing early interest, someone else running through the specs or demos on highly technical products, and field reps negotiating and closing deals, employers say.

Rebuild Your Sales Function from the Inside Out

April 6, 2016 by David Crankshaw

If field sales is on the wane and inside sales is replacing it, how do we organize the sales function to reflect this transition?

Justin Roff-Marsh recommends an inside-out approach. “Start with an inside sales function and then add field resources as they are required—and only to the extent they are required.”

He says to begin with the simplest and most common transactions and give them to Customer Service Reps. Staff enough CSRs to handle all requests for quotes, simple orders, and issue resolution.

Once the CSRs are taking all the routine calls, you can add inside sales reps whose only job is to have what Roff-Marsh calls meaningful selling interactions with customers and prospects. Inside salespeople can conduct 30 of these conversations a day, many more than a field person could possibly achieve. Some of these calls are inbound, either from your website or by phone. Others are outbound calls which are fed to the inside salespeople by the campaign coordinator.

Some customers will want a visit from a representative from your company to conduct a product demonstration or an on-site discovery. You might think this would be the time to add field salesperson. But no, Roff-Marsh cautions, these customers don’t need a selling conversation for these visits. Instead, simply augment the selling conversations of the inside salespeople by adding a field specialist.

If you have fully exploited your inside sales group and augmented their capabilities with a field specialist and you still need the abilities of field salespeople, now you can consider adding business development managers (BDM). Of course, by giving them a business development coordinator (BDC) to do all the scheduling and a project leader to work with production, the BDMs will be highly productive.

Inside Sales: Lower Cost, More Effective, Customer Preferred

April 5, 2016 by David Crankshaw

Field sales is no longer necessary in the way it once was because communication has improved. At one time customers relied on salespeople for information about not only the vendor but also industry trends. Conversely, vendors relied on their salespeople to learn about changes in their market and customer needs.

Customers today no longer need salespeople to perform these communication functions. Industry trends are available from a variety of sources. Vendors post lots of information on their website about products, pricing, and usage case studies.

Many customer questions can be answered with a question via text messaging or a quick phone call. No need for a salesperson to visit the customer.

These trends support the case that field sales is dying and inside sales is replacing it. The economics of customer acquisition also support the argument for the transition to inside sales.

Field Sales Is Dramatically More Expensive than Inside Sales

David Skok divides the four methods of selling software-as-a-service (SaaS) in order of complexity from Freemium to No Touch (online e-commerce), Inside Sales and Field Sales. He has stated that he expected to find a linear relationship between the complexity of these four methods and Customer Acquisition Costs (CAC). However, he found in his own informal review of different companies that the relationship between CAC and sales complexity is not linear at all.

What we see is something quite surprising: using the rough numbers that I had estimated for these different categories, CAC appears to increase exponentially as Sales Complexity increases.

This logarithmic relationship creates a tremendous incentive to conduct as many transactions as you can using either No Touch or Inside Sales. And it supplies a strong economic motivation to avoid Field Sales except where it’s absolutely necessary.

How Does the Sales Process Look to the Customer?

Justin Roff-Marsh also makes the case for moving much of the sales process to inside sales. “The fact is,” he says, “sales today is an inside endeavor, supported in some cases, with discrete field activities.”

To understand more clearly how this vendor-customer dynamic has changed, Roff-Marsh suggests we look at the situation from the customer’s perspective.

Ask yourself the following: If you are making a purchase (of an unspecified nature), is your default starting point to look for a person who can come and visit with you in the field? I suspect not.

For most of us, our first instinct is to make the purchase with no human intervention at all, like on a website. If that isn’t possible, then we’ll still opt for minimal human communication—by phone or by visiting the place of business ourself. Our last choice will be for the field person to come to our home or office.

Even for a complex purchase (like something that must be built-to-order), we’ll begin with online research, and then perhaps we’ll pick up the phone to ask some questions. It’s only if it’s very complex that at the late stage of the buying process that we’ll agree to meet with someone in person.

Roff-Marsh makes a clear argument that No Touch communication and Inside Sales are the preferred way that customers today want to buy. Fortunately for sellers, these methods are also dramatically less expensive than deploying salespeople in the field.

Redesigning the Work of Sales

April 4, 2016 by David Crankshaw

In my last article I described four principles that Justin Roff-Marsh recommends we adopt to dramatically improve Sales productivity.

Scheduling should be centralized.
Workflows should be standardized.
Resources should be specialized.
Management should be formalized.

Let’s look at how Roff-Marsh applies these principles to the sales function. Although this article only summarizes the application of these principles, you can find many more important details in Chapter 3 of Roff-Marsh’s book, The Machine.

We’ll start with the traditional model where the salesperson does all the work. It’s just the Business Development Managers (BDM) working on their own. They do everything–prospecting, sales, administration, support, and solution design. This leaves them little time for meaningful sales interactions.

Principle One: Scheduling Should Be Centralized

The first principle tells us to divide the labor between the salesperson and someone to schedule the work. We’ll call this person a business development coordinator (BDC).

The BDM no longer needs to schedule appointments with customers nor arrange internal meetings. The BDC manages the schedule and pushes work to the BDM.

Note that the Business Development Manager works in the field. This enables the BDM to spend more time directly with customers. It also saves the BDM from the difficulty of switching back and forth between field and office activities.

And conversely, the BDC works in the head office (not a regional office). The BDC is more able to coordinate with production and customer service when the BDC is located near them. It also helps the BDM to feel directly connected to the rest of the organization if the BDM’s scheduler is working in the head office close to everyone else.

Now you might be thinking that Business Development Managers would find it awkward and demeaning for their work to be scheduled by a more junior BDC. Let’s frame it a different way. The BDC is more like valued executive assistants who support and protect their executives. The executive (and by analogy, the BDM) find their status elevated by working closely with a scheduler.

The economics of this relationship are compelling. Roff-Marsh has found that a BDM and BDC working together can increase the BDM’s capacity to 20 meetings per week, a tenfold increase over a BDM working alone. That’s leverage!

Principle Two: Workflows Should Be Standardized

Before we consider other resources that could relieve BDMs from responsibilities that prevent them from more meaningful sales conversations, let’s look at principle number two and study how workflows could be standardized in sales. Then we’ll return to how we resource the workflows.

Roff-Marsh divides the sales workflow into two stages. In the first stage the work is about how we originate opportunities, in the second we prosecute those opportunities.

In the the illustration below you can see the sequence of a typical sales workflow.

Roff-Marsh separates these workflows because companies can originate opportunities in batches, but they must pursue them one at a time.

Which raises the question, do salespeople need to follow a standard sequence of events when they pursue an opportunity? Do they have to follow the same workflow each time? Should all the salespeople in a department use the same workflow?

Roff-Marsh suggests we look at the customer and ask this question: Does the customer follow a standard workflow when making a purchase?

For small purchases, yes customers follow a standard workflow. And for large purchases, they may not follow a standard sequence simply because they make these purchases infrequently. But an optimum sequence probably exists and it will be to the seller and the customer’s benefit if we figure out what it is.

So the answer is, yes, it’s to our benefit (and our customer’s) to adopt a standard workflow for the pursuit of opportunities.

The point of a standard workflow is to enable your company to scale your sales function by dividing the labor of the BDM among multiple people. A standard workflow engineers complexity out of your system and makes it possible for people to hand off their work when they complete an activity in the workflow.

Principle Three: Resources Should Be Specialized

Now that we’ve established a standard workflow for the sales function, let’s return to the question of how to divide the labor of the BDM among different specialist resources.

So far we’ve got a project manager (the BDC) and the BDM is doing everything else.

By everything else, Roff-Marsh identifies these types of activities:

promotion (i.e. the origination of sales opportunities)

administration (i.e. critical supporting activities)

sales (i.e. meaningful selling conversations)

technical (i.e requirement discovery and solution design)

semi-technical (i.e. quoting, order processing, and issue management)

So let’s see how Roff-Marsh assigns these activities to other people.

Promotion

Although salespeople could originate their own sales opportunities, it would be highly inefficient. Promotion includes building lists of contacts, developing compelling campaigns, and testing multiple campaign versions. These promotion activities are best done in batches.

Therefore Roff-Marsh identifies a Campaign Coordinator as the next person to join the resource pool. Although the campaign coordinator could live in marketing (where the campaigns originate), in practice it works best if the coordinator resides in sales. This enables this person to be in close contact with the conversations that the campaigns produce and to make adjustments to those campaigns.

Administrative Tasks

Few would argue that the BDM could transfer responsibility for many administrative tasks to the BDC—data entry, reporting, calendar management and travel planning. But, Roff-Marsh asks, “what about appointment setting and follow-up calls?” These calls are traditionally considered part of the salespersons purview and include a level of salesmanship that is beyond the ability of an administrator.

Roff-Marsh explains that if the salesperson has sold the next meeting in the buying/selling sequence, then appointment setting simply becomes a scheduling task. Even the initial appointment-setting call is a scheduling exercise if the salesperson has effectively sold the initial meeting.

Technical Tasks

Companies that sell engineer-to-order products encounter a common problem. Above a certain level of complexity, salespeople simply cannot extricate themselves from the handoff from sales to production. It becomes impossible to communicate everything production needs to know in order to complete a clean handoff.

Roff-Marsh solves the problem by adding a third party to the mix, a project leader. The project leader works closely with the BDM throughout the opportunity prosecution stage of the sales cycle. In particular, the project leader assumes responsibility for the requirement discovery and solution design stages of the sales workflow. The project leader becomes well-equipped to be the liaison between the customer and production which frees the BDM to move on to the next customer.

Semi-technical Tasks

Roff-Marsh assigns a variety of semi-technical tasks to the Customer Service Representatives (CSR). These include “the generation of standard proposals, the processing repeat transactions, and the provision of after-sales support (e.g. issue resolution).”

In order for the customer service team to take responsibility for these activities (and relieve the BDM from the need to own them), two changes must be made.

First, the customer service team must upgrade their skills so they can own customer service activities. And second, salespeople have to extricate themselves from immediately assuming responsibility for customer service issues when they arise.

Principle Four: Management Should Be Formalized

When you divide the labor of one person among multiple people, you create a system that is vulnerable to miscommunication, misunderstanding, and mistakes. The fourth principle from Roff-Marsh addresses this problem by requiring a formalization of management. Since many of the people in the newly organized sales function are more junior, it’s necessary to put in place a more senior person to manage issues and to make sure the relationships with production, marketing, and finance are working smoothly.