Management | Page 2

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.

Four Principles that Precede the Division of Labor in Sales

March 31, 2016 by David Crankshaw

Four-Principles

If the sales function has not kept up with the productivity gains that we’ve seen on the production side of the house, what has been holding us back from making the changes that would improve productivity?

Well, for a long time the traditional sales model worked, so changes were unnecessary. But those times of the traditional model are behind us. The world has changed. First, sales is more competitive now that the rate of product innovation has slowed. Second, sales is more complicated. Companies are selling products that are built-to-order instead of simply selling from their stock of inventory.

It’s hard for us to adjust when the world changes. Usually we respond first by attempting to use the methods and tools that have always worked for us in the past. We make incremental adjustments. But then we find the old tools no longer work. Finally, we are forced to confront our assumptions about how the world works.

Time to Challenge our Assumptions

And what assumption have we been making about sales? Justin Roff-Marsh says that from the time that sales became a profession in the U.S., we’ve assumed that “sales should be the sole responsibility of autonomous agents.”

But if sales is more competitive, can we really expect salespeople to do everything—prospect, sell, support, and administrate? If companies are offering build-to-order products to their customers, can we expect salespeople to sell and then to work closely with production on every order to design and engineer solutions?

A new world requires a new assumption. To enable salespeople to be successful in a more competitive and fluid environment, we have to divide the labor among more people. Roff-Marsh explains that we need to make sales the “responsibility of a centrally coordinated team.”

Salespeople should be able to do what they are best at, selling. And others can pick up the prospecting, the support, the administration and the design.

Divide the Labor

Ok, if we were to divide the labor that a salesperson traditionally performed, what would that look like? What would be the roles on a centrally coordinated team?

Before we can answer those questions, Roff-Marsh cautions us to slow down before making changes. You face many challenges when you transition from a craft shop to production team where labor is divided among multiple players. Before making significant changes, study the principles that have worked in production. They have been experimenting with process improvement for a long time.

Study the Principles of Manufacturing and Learn Their Ways

Roff-Marsh identifies four principles that have come out of our experience with the division of labor and process improvement in manufacturing environments.

Scheduling should be centralized. When you have multiple people working on different parts of the same problem and each has a different role, they have to coordinate their activities so that the right work is done at the right time. In this environment someone has to manage the schedule. There’s nothing new here, it’s common in other work environments to centralize scheduling and project management. Just ask the master scheduler in a factory, the project manager on a software team, or the conductor of an orchestra.
Workflows should be standardized. When a salesperson works as an autonomous agent, there’s no need to standardize workflows. Each salesperson has their own ways of responding to opportunities and producing outcomes. But once you divide the labor among multiple people, you can only manage the work if you standardize how you route the flow of work from opportunity to outcome.
Resources should be specialized. As the flow of work moves through a standardized route, who will do the work? The answer is that the work is done by people who are specialized in that task. It’s not enough to divide the labor and then ask people to do many types of specialized work. When people perform only one type of work, they become very good at it. And they avoid the costs of switching between significantly different types of work.
Management should be formalized. A certain fragility is associated with an organization that schedules work to flow along established routes to specialized resources. Someone has to pay attention to the whole organization. The manager makes adjustments, resolves problems, and improves the design.

Now that we have firmly established Roff-Marsh’s four principles in our minds, we can begin to learn how he reimagines the sales function.

What Caused the Traditional Sales Model to Collapse?

March 30, 2016 by David Crankshaw

The traditional model of sales no longer works.

Salespeople find that they spend:

Too much time doing customer service and account administration work.
Not enough time in meaningful sales interactions that lead to additional business with current and new customers.
Too much time working with production and finance on non-standard orders.

How did we get here? Those traveling salesmen that traveled by rail after the Civil War were well-suited to a model where the salesperson functioned as an autonomous agent. This remained true throughout much of the twentieth century.

Justin Roff-Marsh explains that gradually two things changed. Production ceased to improve as rapidly. And companies shifted more of their work to build-to-order.

The Rate of Product Innovation Slows

Throughout the 19th and 20th century we experienced an astounding rate of invention and production improvement. Companies continuously invented whole categories of technology and product. Roff-Marsh explains that the primary role of the salesperson was to “take a highly differentiated product and demonstrate it to potential customers.” Salesmanship counted, but most of the value was contributed by new product development and production.

Today that pace of innovation has slowed. Markets have become more competitive as product differentiation has declined. It’s no longer enough for the demand-creation side of the house to demonstrate a product and display a little salesmanship. Companies cannot afford to have their salespeople spending most of their time on customer support and administration issues.

As the pace of product innovation slows, sales has been revealed as the constraint in the system. The model of salesperson as autonomous agent no longer works in this environment.

Companies Shift from Build-to-Inventory to Build-to-Order

The second pattern in industry has been the way it organized its value chain. Historically companies forecast their production needs and built to stock.

Salespeople then sold product from the stock of inventory. This value chain made it possible to deliver orders quickly to a customer. The clean separation between production and sales also made it feasible for salespeople to operate as autonomous agents.

As production has become more flexible and as communication between seller and buyer has improved, more companies have shifted from build-to-stock and have moved to build-to-order production. This method reduces their inventory holding costs and gives the customer more choice in their purchase.

For salespeople though, the world has gotten more complicated. As Roff-Marsh explains, “it no longer makes sense for the salesperson to simply sell as much as possible; the salesperson needs to sell only what production has the capacity to produce.” Now salespeople must stay in close contact with production and its capacity constraints.

To further complicate matters, many products and services are engineered-to-order. Salespeople work closely with production to design a specific solution for the customer.

Both of these trends have reduced the autonomy of salespeople. These changes in the production and sales environment force us to challenge the long-held assumption that “sales should be the sole responsibility of autonomous agents.”

A New Assumption for Sales

March 28, 2016 by David Crankshaw

In his recent book, The Machine, A Radical Approach to the Design of the Sales Function, Justin Roff-Marsh recommends a new assumption for Sales. The old assumption is broken, he says, and no longer fits in our world.

What is the old assumption? In the old model a salesperson owns the relationship with the customer and all interactions with that customer. In this model, we assume that “sales should be the sole responsibility of autonomous agents.”

After the Civil War, Traveling Salesmen Criss-Crossed the Country

Well, of course they should. The model of the salespeople as autonomous agents is integrally tied with the history of our country. After the Civil War traveling salesmen (yes, they were all men) fanned out across the country using the newly built rail networks. They developed relationships with the general stores in each town in their territory. Since they worked for wholesalers (not the manufacturers), they sold a wide variety of goods. They cultivated relationships with their customers and advised them on business practices and promotion. They had the power to issue credit and to offer discounts. By necessity these sales people operated as autonomous agents.

The sales profession attracted people who thrived in a work environment where they could operate independently. They created a culture that encouraged independence from management.

The Traveling Salesman Model Ceases to Work

Roff-Marsh explains that this model no longer works. How do we know? Because the role of the sales function is not only to sell, but to “consistently sell all of the organization’s production capacity.” Whether it is a manufacturing plant with machines and equipment or a software company with teams of engineers, investors expect a return on their equity that can only come about if the sales function can keep up with the company’s ability to produce.

Alas, the sales function has simply not kept up with the productivity gains in production.

Measured against this more meaningful goal, sales consistently fails in most organizations. In recent history, the modern organization’s capacity to produce has accelerated past its capacity to sell, and idle machines and production personnel are costing shareholders dearly, month after month and year after year.

What causes this underperformance? Roff-Marsh identifies three primary reasons:

Salespeople aren’t selling. Too much of their time is taken with “customer service and administrative activities, to solution design and proposal generation, and to prospecting and fulfillment-related tasks.”
Most sales opportunities arise from existing customers, not new customers. So even if management reallocates the work of salespeople (quality declines) or hires more salespeople (costs go up), they all simply end up spending their time on existing customers.
Salespeople are difficult to manage. Their profession is all about the ability to function as autonomous agents and so they “run roughshod over production and finance personnel, they ignore management directives, and they make frequent references to “their” customers, implying that they can leave and take the organization’s goodwill elsewhere—which, to some extent they probably can.”

Time for a new assumption

Of course, it’s our own fault that sales is consistently failing most organizations. We are the ones who have made salespeople autonomous agents. We hold them accountable for the outcomes they produce, not the activities they perform. If a sales opportunity is lost, we hold them responsible. If a customer is unhappy or falls behind in their payments, the salesperson must take ownership.

We give them full responsibility for a customer, including all the administration and solution design. Then we expect them to also prospect for new customers.

If making sales the sole responsibility of autonomous agents is the wrong assumption, what is the right one?

For the answer to that question, we need look no further than the production function in any company. Unlike the craftsperson of two hundred years ago who did everything to make clothing or farm implements or bread, today’s modern manufacturing plants have divided the labor among many specialists. Specialization of labor enabled production to drastically improve its productivity. Yet sales is still largely stuck in the craftsman model.
Sales will only improve its productivity if it adopts a similar model to the successful one in the production side of the company.

Therefore, Roff-Marsh recommends this new assumption: “Sales is the responsibility of a centrally coordinated team.”

Roff-Marsh has worked with many companies who are willing to adopt this new assumption. He’s seen them achieve massive performance improvements as field salespeople spend 100% of their time in the field and regularly schedule 20 business meetings a week, as inside sales people generate high rates of sales at low costs, and as customer service meets all customer needs for administration and order completion.

In his remarkable book, Roff-Marsh explains how they do it.