The Machine
The sales environment has become dysfunctional in most of the organizations. However,
the organizations have decided to focus on incremental initiatives such as sales force
automation and sales training as opposed to simple things that affect sales. In response, some
of the upcoming companies have innovated the sales concepts, thus there have been
improvements in sales. Sales environment is an organization function that does not perform
and has been difficult to scale economically. Therefore, there is a need for a new approach to
the management and design of the sales functions.
The book, "The Machine" is divided into two parts. The first part of the book focuses on
the changes that need to be made in the sales environment and entails the use of case studies.
Lessons gained in the manufacturing processes argue that the sales problems can be solved
through 4 fundamental principles. Firstly, schedules need to be centralized to allow the workers
connect with the overall performance of the system. Secondly, workflows should be
standardized in a division of labor that is set to enable the application of Customer Relationship
Management and an increase in sales. Thirdly, resources should be specialized in line with the
division of labor principle to increase the productivity of workers. Lastly, management needs
to be formalized to enable the adoption of a more formal approach to the leadership of the
organization.
The focus of sales in an organization should be inside-out. Organizations need to have an
inside-sales team that has priority information. Even though field sales is also important, it is
applicable in some markets. Most sales today are conducted at the internal level while field
activities are just for support. The changes from outside salespersons to inside salespeople has
been due to technological advancement. Conventionally, outside sales personnel acted as a link
between the vendors and their customers which is not needed today since technology has made
direct connection easier. Therefore, inside-out sales approach is paramount in today's market.
That is, sales should begin with inside sales function and the field resources should be
supplements since a significant percentage of sales opportunities do not need field visit.
Sales connect to other critical functions of the organization, thus dubbed “the machine
within the machine”. The goal of the business is to maximize profits, and the profits can only
be maximized through increased sales. However, sales can also harm the organization if the
sales exceed the capacity of production or sales is based on lower prices thus less profit to the
organization. Therefore, a complete business model is made of three functions: sales, new
product development, and sales.
Sales Process Engineering is not applicable to all situations while some of its applications
are universally applicable. It consists of a division of labor and the four key principles.
Therefore, organizations that do not practice division of labor cannot apply Sales Process
Engineering. Again, the inside-out model is often applied to the large- and mid-sized
organizations. The advantage of the model is that it works even in complex of environments.
However, most starting organizations used inside sales since they have repetitive and simple
transactions. Government and higher value sales apply engineer-to-order which is part of
inside-out model and support conversations that do not need to be made outside the premises.
Revolution of the sales calls for the end of the bonuses, commissions and other
management stimulants that are artificial. Sales Process Engineering transforms the sales’
responsibility from autonomy to centrally coordinated process. Therefore, commissions cannot
be applied in a sales environment that is re-engineered just as the piece-pay rate is not required
in current manufacturing environments. Salespeople cannot be autonomous and team players;
they cannot be tagged only to the sales outcomes yet expected to attend the sales meetings.
Similarly, it makes no sense for the salespeople to earn salary and commissions at the same
time. Salespeople do not need the commissions to sell for that is their job. Issuance of
commissions inhibits the performance of a business. The capability of the salespeople can be
enhanced through selection, practice, and feedback. Therefore, there is a need for a new
compensation plan whose main focus is paying the employees what they are worth to the
organization. Compensation is the same plan that is used to pay the rest of the employees in
the organization. Other stimulants such as quotas and targets also affect sales the same way as
bonuses and commissions. The challenges show that it is hard to transform a conventional
manager into a re-engineered sales environment. Consequently, it is important to build the
method of sales’ manager from scratch.
The second part of the book entails putting together all the parts that we have learned in
the previous part. Just as any other transitional process, planning is crucial. Planning should be
done after a comprehensive understanding of the process and the resource implications linked
with the changes. The first stage should be the identification of the suitable model to apply for
transitional purposes. One can simplify the model of the organization to fit one of the existing
applications, integrate multiple existing applications, or customize or create a new application.
However, it should be simple since complexity destroys value. When creating a personal model,
it is important that one starts from inside than outside. The number of customer service
representatives should be increased to match the volume of issues, quote requests, and orders.
Again, the organization needs an inside sales team and increased coordination with the outside
team if they exist. Regional offices also need to be put in place so that the business can be in
close contact with the customers. Again, the sequence is very important during the transition.
Sales Process Engineering can be transformed in seven ways. First, there is need to appoint the
champion of the project. Second, the new direction should be communicated to the relevant
team. Third, control should be given to the sales activity volume. Four, customer service should
be fixed to ensure the positive impact on the organization. After which, inside sales and
promotions should be developed and field representatives re-configured. Again, the business
development should be developed.
Sales Process Engineering needs a conversion of opportunities into sales. Opportunities
can be converted into sales through convincing a potential buyer to become a customer. Again,
the organization should have a standard workflow to enable customers to adopt and enhance
flexibility on the part of customers. Opportunity management workflow can be developed
through assembling the building blocks then start structuring the preferred model. The model
should have a simple and linear flow and complexity should be eliminated. After which, a
solution design should be developed and continuous improvements implemented.
Promotional campaigns should be conducted to generate sales. It starts with engineering a
sales function as per the needs of the organization then running promotional experiments visà-vis evaluations. After which, there is a need for rapid iteration and continuous checking that
scalable source of opportunities exists. The initial focus of the upgrade should be to increase
the sales to about two to five times. Campaign coordinator should spearhead the sales
promotion process. The promotional campaigns should entail an offer, an audience, and
effective communication. Campaigns consist of a series of activities and can take distinct
structures. They also have multiple steps that can change based on trial and error techniques.
The campaign coordinator needs to develop a filter that captures all the list of contacts thus
enhancing customer relationship management. Discounting can be allowed for the first time
buyers in a given period. Tools such as webinar and registration calls can be used to promote
products and services. Advertisements can also be used to reach diverse customers.
Technology to be integrated into the business should be concrete and practical. It is
important since it hastens the processes but only when used appropriately. For instance,
technology can add value to sales through sharing data, automation, and management of
information. General technologies required in the business include customer relationship
management, a website, marketing automation systems, and management information systems.
Inside-out model has specific requirements from the managers. It calls for leaders who
understand that promotions are part of sales while the project leaders should neither be part of
sales nor production. Line and functional management are also critical in the inside-out model.
The manager needs to take consideration of all the sale functions in making decisions. The
focus should always be inside-out and not outside in.
Advance praise
“We doubled our top-line revenue in the year following our
implementation of The Machine and are applying these same concepts to
an international company we just acquired and seeing the same sort of
gains in effectiveness. Justin’s book is providing us with an even deeper
understanding of the principles that changed our company and continue to
drive our sales.”
—Aubrey Meador, President of ARCA
“There’s no reason for the sales department to be the least predictable and
most chaotic part of a company. The Machine brings order by removing
non-sales work from salespeople and replacing it with centralized
scheduling, standardized workflows, specialized resources and formalized
management. The Machine offers a proven system for growing sales in an
organized, consistent way.”
—Andrew Warner, Founder of Mixergy
“The pioneering work of Justin Roff-Marsh in the design and execution of
effective sales ‘machines’ is, in my view, world leading. Organizations
who ignore it in the connected, globally competitive twenty-first century
do so at their peril.”
—John Lyons, independent company director
and coauthor of Marketing without Money
“In his provocative book, The Machine, Justin Roff-Marsh has
thoughtfully and forcefully challenged the status quo as it pertains to the
design of the sales function. Some readers will be angry, some dismissive,
and a select few will be enlightened by this alternative approach. We fall
in the latter camp and have found Justin’s approach to be a true asset for
growing sales in today’s complex selling environment!”
—Mike Schleyhahn, President of Swagelok San Diego
“The Machine will challenge everything you know about the sales process!
It makes a lot of sense, passes all the logical tests, and in the end, might
2
just keep you awake at night. We worked hard to implement a number of
these concepts in our organization and I can attest that the ideas are valid
and the payoffs are real.”
—Jeff Stuart, President of Hydra-Power Systems Inc.
“Justin’s approach to addressing the tired structure of traditional sales
environments is nothing short of revolutionary. The Machine shows
management how to drive growth with a tightly synchronized machine, as
an alternative to herding individual salespeople. There’s no question that
this book will be a great investment for any executive that runs a sales
team.”
—Paul O’Dwyer, author and business growth coach
“Justin’s book is a delight. Justin translates the idea that the whole is
greater than the sum of its parts to sales, demonstrating that there is a
substantially better way to sell compared to simply summing the sales of
each salesperson in a team.”
—Humberto R. Baptista, CEO of Vectis-Solutions
and lecturer at TOC Schools
“As an operations guy, I’m driven by process, efficiency, and repeatability.
The notion that the sales function is an art immune from the rigors of
process has never sat well with me. The Machine shatters that myth. The
Machine is a must read for any business leader wanting to achieve
predictable results from their sales function.”
—Marc Allman, COO of AMS Controls
“Justin Roff-Marsh gets to the root causes of underperforming sales
quickly and succinctly. It is clear he knows sales inside and out and has
thought deeply about the profession’s problems. The book is both global in
its implications for sales and practical in its applications for selling.”
—Charles Coury, President of 9Wood
“We have worked with Justin and his team for the past seven months and I
am continually impressed with the team’s professionalism and knowledge.
3
I am certain by the end of this year we will have a full working model of
the sales machine in place, and it will be producing the same results as we
have seen already in our customer service department. I am convinced we
are moving in the right direction to improve sales within our company.”
—Jim O’Connell, President of Hotsy Pacific
“We look at business books every hour, every day. The Machine was a
welcome standout. Soundview votes by a large committee on which books
we are going to select as the 30 Best Business Books of the Year. The
Machine got a unanimous “Yes” vote. That rarely happens.”
—Rebecca Clement,
Publisher of Soundview Executive Book Summaries
“Justin stands on the shoulders of a giant and uses the tools of Dr
Goldratt’s TOC to focus on the effective management of what will be the
principal constraint of all businesses sooner or later in the 21st Century.
Justin inspires the necessary cultural change within companies—not only
entering into a convincing discussion of what to change and why, but also
what to change to and how. The energy and stamina required to make such
a change should not be underestimated but, provided you have the
courage, The Machine provides the direction.”
—Andrew Jackson, Chief Executive at Triumph Furniture
4
5
Published by Greenleaf Book Group Press
Austin, Texas
www.gbgpress.com
The Machine: A Radical Approach to the Design of the Sales Function
Copyright ©2015 Justin Roff-Marsh
All rights reserved.
No part of this book may be reproduced, stored in a retrieval system, or transmitted by
any means, electronic, mechanical, photocopying, recording, or otherwise, without
written permission from the copyright holder.
Distributed by Greenleaf Book Group
For ordering information or special discounts for bulk purchases, please contact
Greenleaf Book Group at PO Box 91869, Austin, TX 78709, 512.891.6100.
Cover design by Greenleaf Book Group and Kimberly Lance
Ebook Conversion by Ramesh Kumar Pitchai
Author’s photograph by SmartShoot.com and Eric Stracke
Publisher’s Cataloging Publication Data is available.
e-ISBN: 978-0-692-50430-7
15 16 17 18 19 20 10 9 8 7 6 5 4 3 2 1
First Edition
6
Dedicated to
Warren and Sylvia Roff-Marsh
who instilled in me a love of reading
and
Bo Hye Roff-Marsh
who is always the first to read each page I write
7
Contents
Acknowledgments
Introduction
Part 1: The Case for Change and a New Model
Chapter 1: After the Revolution
Chapter 2: Four Key Principles
Chapter 3: Reimagining the Sales Function
Chapter 4: The Death of Field Sales
Chapter 5: The Machine within the Machine
Chapter 6: One Big Idea, Many Possible Applications
Chapter 7: The End of Commissions, Bonuses, and Other Artificial
Management Stimulants
Part 2: Putting It All Together
Chapter 8: Formulating a Plan
Chapter 9: How to Convert Opportunities into Sales
Chapter 10: How to Generate Sales Opportunities
Chapter 11: Technology: Why CRM Sucks!
Chapter 12: Managing the Sales Function
Notes
About the Author
8
Acknowledgments
I must first thank Ballistix’s, clients who have had faith in me over the last
20 years (more than has been warranted, on occasion) and who have
welcomed my ongoing experiments on their businesses. These clients are
among the silent revolutionaries whose stories are told on the following
pages.
I thank the team at Ballistix too for diligently taking my ideas and
making them work in practice—and for finding creative workarounds
when reality failed to yield to my will!
And a big thank you to the late Eliyahu Goldratt and to the entire TOC
community who have been early supporters and frequent contributors to
sales process engineering.
Note: The names of our silent revolutionaries’ organizations have been
changed. This enables me to share information about their experiences that
would otherwise be confidential.
9
Introduction
The Titanic is sinking: All is not well in sales.
The sales environment in a typical organization—in most every
organization, in fact—is seriously dysfunctional. But rather than focusing
on the obvious dysfunction, management is busy with incremental
improvement initiatives: sales training, sales force automation (technology
of various types), or bolt-on lead-generation activities (e.g., outsourced
telemarketing, social media activities). Because none of these initiatives
address the root cause of the dysfunction, they amount to nothing more
than arranging chairs on the deck of the sinking Titanic.
And make no mistake—the Titanic is sinking!
It’s not that sales is getting worse: The issue is that the rest of the
organization is getting so much better while sales clings to the same
structure, the same management approach, and the same practices that
have been in place for the last fifty years.
SILENT REVOLUTIONARIES
In a small number of companies, across three continents, a silent
revolution is in progress. These companies (you’ll meet some of them in
due course) have challenged the most fundamental assumption about how
the sales function should be designed. Consequently, they have built sales
environments that barely resemble those in their competitors’
organizations.
And they’ve seen massive performance improvements! They’ve seen
improvements in the internal operation of sales:
• Field salespeople are spending 100 percent of their time in the field,
performing four business-development meetings a day, five days a
week.
• Skilled inside sales teams are generating high volumes of sales activity
at shockingly low costs.
• Customer commitments are consistently met, administrative work is
always done on time, and sales orders appear more frequently and more
10
predictably.
And they’ve also seen improvements in the relationship between sales
and the rest of the organization:
• Hand-off problems between sales and production have been eliminated.
• Marketing works closely with sales to ensure that salespeople are
maintained at full utilization—and marketing has recruited the
assistance of engineering (and senior management) to ensure that offers
are truly compelling.
As I mentioned above, these changes are the consequence of challenging
a single assumption about the design of the sales function: the assumption
that sales should be the sole responsibility of autonomous agents.
Are Things Really That Bad?
Before I reveal the new assumption embraced by these revolutionaries, it’s
worth exploring the claim that sales is dysfunctional. Are things really that
bad?
Consider the goal of the sales function (its reason for existence). It’s
tempting to resolve that the goal of sales is to sell. But, in most
organizations, this just doesn’t cut it. To pull its weight, the sales function
has to consistently sell all of the organization’s production capacity. This
capacity may consist of a traditional plant and equipment, or it may consist
of teams of knowledge workers.
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.
Why, then, is sales underperforming? One reason is that salespeople
aren’t selling. A typical field salesperson performs just two businessdevelopment meetings a week. You read it right. Less than 10 percent of a
typical salesperson’s capacity is allocated to selling. And that figure is
pretty standard across industries and across continents.1
The majority of a salesperson’s day is dedicated to customer service and
11
administrative activities, to solution design and proposal generation, and to
prospecting and fulfillment-related tasks.
Let’s turn our attention to management. Why has management not fixed
this problem? In many organizations, they have tried. Attempts to
reallocate salespeople’s work have resulted in problems with service
quality (the right hand doesn’t know what the left is doing). The other
alternative is simply to recruit more salespeople, and many firms have
tried that too—with interesting results.
Typically, when you add salespeople to an established team, costs go up
immediately (easy to predict, right?). But sales don’t. In fact, in most
cases, sales never increase to the level required to justify those additional
costs.
The reason is that salespeople do not generate the majority of their sales
opportunities. Most sales opportunities spring into existence in spite of
(not because of) salespeople’s prospecting activities. In most
organizations, existing customers are by far the greatest source of sales
opportunities. When management adds salespeople to an existing team, the
same pool of sales opportunities is simply distributed across a larger team
of salespeople.
But management’s problems don’t stop here. Salespeople are incredibly
difficult to manage—particularly successful ones! You can’t direct your
salespeople as you can production or finance personnel; you can only coax
them. And successful salespeople are both a blessing and a curse. Sure,
they generate orders—but at a price. They run roughshod over production
and finance personnel, they ignore management directives, and they make
frequent references to “their” customers, implying that they can leave and
take the organization’s goodwill elsewhere—which, to some extent, they
probably can.
In summary, then, when we examine sales, we see a critical
organizational function that consistently underperforms, that cannot be
scaled (economically), that is in regular conflict with other functions, and
whose key assets are, in fact, a contingent liability.
The claim that sales is dysfunctional is no exaggeration!
12
A New Assumption
It’s not hard to validate the claim that sales is typically the sole
responsibility of autonomous agents. When we employ salespeople, we
advise them that they will be held accountable for outcomes, not activities.
We pay them commissions (in part or in full) rather than fixed salaries.
And we encourage them, in most cases, to manage their territories, their
accounts, and their sales opportunities as if they were, well, their own.
It’s true that, increasingly, management is attempting to rein in
salespeople’s autonomy. We ask salespeople to report their activities in the
organization’s customer relationship management application (CRM).2
We pay them a mix of salary and commissions. And we at least pay lip
service to the notion that these are company accounts.
But we forget that, where true opposites are concerned, no compromise
is possible. Salespeople can march either to their own drumbeat or to the
beat of a central drummer. When faced with the demand to do both, they
will always pick the least bad option.
When you consider that the entire organization—not just sales—is
engineered around the assumption of salesperson autonomy, it’s easy to
see that salespeople will always choose autonomy. If you doubt this casual
assertion, answer these three simple questions:
1. If an important sales opportunity is lost, who is ultimately responsible?
2. If an important customer is dissatisfied, who is ultimately responsible?
3. If an account falls into arrears on its payments, who is ultimately
responsible?
The connection between dysfunction and salespeople’s autonomy is also
easy to spot. Salespeople spend so little time selling because they have so
many responsibilities competing for their limited time, because each
salesperson is a self-contained sales function.
Salespeople conflict with other functions because, in their world-view,
they see only their opportunities and their accounts. However, other
functions (production, engineering, finance) also have limited capacity and
are in receipt of competing demands from multiple salespeople.
Salespeople conflict with management because there is simply no place
13
for management in a typical sales function. If salespeople own their
activities and are held accountable only for outcomes (as is so often
advertised), there is literally nothing for management to do. Managing
outcomes, after all, continues to be an oxymoron, no matter how many
times you say it!3
If the assumption that sales is the sole responsibility of autonomous
agents is the root cause of this dysfunction, it’s clearly time for a new
assumption. But what should that be?
The good news is that, if we approach this question with a clear head, the
answer is oh so obvious.
We discussed that, relative to other organizational functions, sales is
sinking fast. What, then, is causing the rapid ascent of these other
functions? In particular, what has caused both the productivity and the
quality of manufacturing to increase by many orders of magnitude over the
last 100 years?
The answer is the division of labor. The division of labor enabled
manufacturing to transition from a cottage industry to the modern
manufacturing plant. And the division of labor has had the same catalytic
effect on project environments (think construction, aerospace, finance, and
even marketing). The modern sales environment resembles manufacturing
as it used to look more than a century ago.
But that’s about to change! The silent revolutionaries have scrutinized
sales for evidence that this function is somehow unsuitable for the division
of labor. Their search has been fruitless. The new assumption, around
which their sales environments have been engineered and on which this
book is based, is as simple as it is powerful.
Sales is the responsibility of a centrally coordinated team.
This book shows how this innocent-looking assumption leads logically
to a radical new approach to the design and management of the sales
function. It will show you how to apply this approach to your organization
(irrespective of the size of your firm or the complexity of what you sell),
and it will introduce you to a diverse range of organizations that have
trodden this path already (our silent revolutionaries).
14
THE MACHINE
This book likens the result of this new approach—quite unapologetically
—to a machine.
This metaphor is apt because, under this new approach, sales becomes
the consequence of a number of interrelated processes—rather than the
output of a person. Salespeople become a component in a much larger
machine (albeit an important component!). And management assumes total
responsibility for the design and day-to-day performance of the sales
function (managers own sales targets, and they cannot delegate them
away).
In this book, I’ll explain why sales must be viewed as a machine, rather
than as a person. I’ll detail how to create a smoothly functioning sales
machine—and how to integrate it with the rest of your organization. And
I’ll counsel you on the (often perilous) transition from your status quo to
The Machine.
15
Part 1
THE CASE FOR CHANGE AND A NEW MODEL
16
Chapter 1
AFTER THE REVOLUTION
Jennifer retrieves her smart phone from her purse and brings it to life with
one authoritative swipe.
Moments later, she’s talking to David—her assistant back at head office.
“Good meeting,” she answers, “you can go ahead and schedule the
requirement-discovery meeting. Yep, you can keep talking to Debra. And
the opportunity’s actually a retrofit . . . let’s say 150 grand.”
“I’m all over it,” David reassures Jennifer as he updates fields in the
customer relationship management application (CRM). “So, you’d better
hot-tail it over to Tyson Engineering. Phillip left here half an hour ago, so
he should be ready for the presentation when you get there.”
****
Jennifer, David, and Phillip all work for James Sanders Group (JSG), a
manufacturer of point-of-sale displays and internal fit-outs. JSG is one of
our silent revolutionaries.
JSG is an engineering-centric company. They became successful by
solving tough problems and building innovative custom installations.
JSG recently suffered a slow leakage in sales. The problem was not that
they were suffering at the hands of a large competitor—that’s a battle they
were well equipped to fight. What was happening was that numerous small
competitors (some of them recent market entrants, others offshore
manufacturers) were chipping away at their base: winning numerous small
jobs, often at crazy margins.
JSG had recognized that this was not a trend they could reverse solely
with superior production performance. They knew they needed sales
activity—boots on the ground.
That was easier said than done, however. Each time JSG added a
salesperson, the new recruit would win a job or two and then become
entangled in account management. Before long, account management
would become so all-consuming that sales activity would grind to a halt.
17
While this was happening, JSG’s competitors were simply sidestepping
those complex jobs and focusing on winning the easy contracts.
Initially, JSG looked to account managers (as they had taken to calling
them) for a solution to the problem. Ultimately, it became clear that this
was a process problem, not a people problem.
The snippet of conversation above speaks volumes about the
consequences of JSG’s revolution. Jennifer is JSG’s business-development
manager (BDM). And that’s the first unusual thing. Although JSG services
all of Australia (an area roughly the size of the continental United States),
JSG has just one field salesperson. They need only one salesperson
because Jennifer is ten times more productive than any of JSG’s
competitors’ salespeople. While a competitor’s salesperson averages two
sales meetings a week, Jennifer consistently performs twenty.
Another reason JSG has only one field salesperson is the company
discovered that a surprising percentage of sales opportunities (particularly
repeat purchases) could be handled by a small (but highly efficient) inside
sales team. This team finds and pursues simple opportunities, and, from
time to time, it stumbles across opportunities that are significant enough to
be escalated to David and Jennifer.
David is the key to Jennifer’s efficiency. David and Jennifer talk at least
four times a day. Like an air traffic controller, David is Jennifer’s eyes and
ears. He carefully monitors the status of all sales opportunities—freeing
Jennifer to focus only on the sales meetings that appear—as if by magic—
in Jennifer’s smart phone.
David’s official title is business-development coordinator (BDC). His
responsibility is to manage JSG’s portfolio of high-value sales
opportunities. He manages each opportunity like a project. He works
tirelessly, trying to schedule the next activity in sequence for each. In most
(but certainly not all) cases, the next activity is a meeting with Jennifer.
And, of course, Jennifer’s objective at each meeting will be to sell the next
activity—generating still more work for David.
David frees Jennifer of the requirement to do anything other than face-toface business-development meetings. In addition to appointment
scheduling, David performs all of the clerical tasks associated with the
18
management of sales opportunities: data entry, reporting, literature
fulfillment, expense tracking, and calendar management.
David routes nonadministrative tasks to other specialist resources within
JSG. Customer support issues and requests for quotes are routed to
customer service representatives. And requirement discovery and solution
design become the responsibility of project leaders.
As each task is handed off, David logs the date in the CRM and leaves
himself a prompt to follow up prior to the task’s expected completion date.
In many cases, these tasks are prerequisites for meetings he has already
scheduled for Jennifer. It’s critical, therefore, that he keep all the parts of
this machine working in unison.
Phillip also makes a significant contribution to Jennifer’s tremendous
efficiency as a project leader. His job is to manage the interface with
engineering and production. Prior to each sale, Phillip works closely with
Jennifer. She introduces him to clients early in each engagement to
discover their requirements and to conceptualize and design solutions.
Solution design is always a collaborative process. Clients have their say,
of course: They want Rolls Royce solutions on Toyota budgets. Phillip
represents both engineering and production: He must ensure that whatever
is specified can be delivered on time and within budget. And it’s Jennifer
who uses a mixture of hustle and artful diplomacy to close the gap
between the two parties.
After the sale, Phillip is responsible for managing the relationship
between production and the client. He’s on hand to negotiate change
requests and to fine-tune the production plan on those occasions when it
becomes obvious there’s a gap developing between the client’s
expectations and the direction of the project.
There’s no question that Jennifer is busy. Twenty business-development
appointments a week is a lot of work. And then there’s the travel—a lot of
travel!
But the interesting thing is that Jennifer loves working in this
environment. There’s no stress. She doesn’t feel like a juggler with a
hundred balls in the air. The clients are happy too. They understand where
her responsibilities begin and end, and they always know exactly who to
19
talk to if something appears to be going wrong.
All Jennifer has to do is show up at meetings and talk to people—and
she’s really good at that. The selling looks after itself.
MANAGEMENT
BY
NUMBERS
Matthew is one of James Sanders’ two sons. He’s in charge of operations
and sales. Sales wasn’t previously under his purview, but it is now. In spite
of the fact that the JSG sales function has more moving parts now, it’s
actually become simpler to manage.
Matthew chairs a weekly sales meeting. The meeting consists of a review
of a simple dashboard. The team’s primary concern is the size of four
critical queues of work. There’s a queue of forward-booked meetings in
Jennifer’s calendar, and there’s a queue of sales opportunities upstream
from David and from each of the two inside salespeople.
Matthew knows that the profitability of the firm requires a steady flow of
work to the plant. He also understands that the primary driver of this flow
is the volume of selling conversations performed by his sales team. Any
hiccups in sales activity will result in idle machines and workers in a
month or so.
Matthew keeps an eye on other indicators too. He scans run charts,
looking for unhealthy trends, and scrutinizes cycle times for critical
activities to ensure that protective capacities are being maintained.
Matthew’s biggest sales challenge is maintaining the support capacity
required to keep up with the sales team’s unrelenting flow of orders.
Prior to the revolution, Jennifer was one of five account managers.
Today, two of those account managers have been converted into project
leaders (and one came inside to kick-start the inside sales team). To free
project leadership capacity, Matthew has been building a team of customer
service representatives, but this team is under the pump too. Every month,
it seems like there are a couple of new faces in there.
ARRESTING
THE
DECLINE
JSG is clearly a different organization today. Sales used to be the
20
responsibility of five overburdened account managers. Now, in place of
those account managers, there’s a team of specialists. A campaign
coordinator ensures that two inside salespeople can have thirty (mostly
outbound) selling conversations a day. A percentage of those sales
opportunities are escalated to David, who coordinates Jennifer and the
team of project leaders. And behind the scenes, a customer service team
looks after the processing of orders, the generation of quotations, and the
resolution of customer issues.
Today, JSG’s sales function is a clearly a machine!
But the impact has not been just on sales. The revolution in sales has
benefited most of JSG’s other functions too. Sales and engineering work
closely together now—to the obvious benefit of both. A full order book
has simplified the lives of the production team—they are consistently
busy, and they like it that way! And even finance has benefited—the teambased approach to sales eliminated the requirement for sales commissions
and, consequently, the requirement for finance to mediate constant
disputes over compensation.
As you would expect, these changes have had a profound impact on
JSG’s profitability. At the beginning of the journey, small increases in
operating expense were easily compensated for by additional sales activity.
But over time, the gap between revenues and expenses has widened at an
increasing rate, thanks to economies of scale in both sales and production.
THEORY
INTO
PRACTICE
This chapter has shown you the implications of sales process engineering
(SPE) for one business environment (an engineer-to-order manufacturer).
Chapters 2 and 3 will show you why SPE is so important in today’s
business environment, introduce you to SPE’s four fundamental principles,
and then explain how these simple principles lead logically to the end
result exemplified by JSG’s story.
Chapter 4 will introduce you to the inside-out model: the model most
commonly employed by our silent revolutionaries.
One message that will play over and over throughout this book is that
you cannot improve the performance of sales by focusing solely on the
21
sales function. This theme will be tackled head-on in chapter 5.
In chapter 6, you’ll learn how to apply SPE’s principles to create
profound improvements in the performance of a range of business
environments (including indirect sales and small businesses).
In part 1’s final chapter, chapter 7, we’ll explore the case for the
elimination of salespeople’s commissions.
And then, part 2 is dedicated to the practical application of SPE in your
organization. It’s time to go to work!
22
Chapter 2
FOUR KEY PRINCIPLES
Our first order of business is to address two questions that have the
potential to derail this discussion. The issue is not that these questions
expose weaknesses in sales process engineering (SPE). The issue is that
these questions stand in the way of even being able to start our discussion.
Considering the radical nature of the change we’re contemplating, it’s
only natural to ask these questions: If the traditional sales model is so
dysfunctional, and if there’s a better method available, why haven’t more
companies adopted it already? And if the traditional model has withstood
the test of time, how can it be that this model is fundamentally flawed?
WHY DO WE PERSIST?
There are two (interrelated) reasons we persist with the traditional
approach to the design of the sales function. First, the traditional model
conforms to all our assumptions about how sales should be made. Second,
it is impossible to inch one’s way to the inside-out model; that requires a
revolution.
Deeply Held Assumptions
If we are to evaluate the traditional model with reference to enduring and
deeply held assumptions about how to generate sales, the traditional
approach to the design of the sales function measures up well.
Ask yourself whether you agree with the following statements:
1. Sales of expensive products and services are highly dependent on
personal relationships.
2. A successful sales function is highly dependent on star performers.
3. Salespeople should be encouraged to operate autonomously—to view
their territory almost as if it’s their own business.
4. Sales is essentially an outside activity.
5. Customers require—and benefit from—a single point of contact with
23
their suppliers.
6. Sales improvement is all about improving conversion (plugging the
leaky funnel).
Each of these statements sounds innocent enough, right? But, for most
salespeople—and their managers—these statements are more than true.
They are axioms; they are fundamental, self-evident, and unquestionable
truths. Attempts to challenge them will be met with injured feelings—or
even hostility.
Consequently, any approach to sales improvement that is in alignment
with these axioms will feel right, but an approach that conflicts with one or
more will almost certainly be dismissed out of hand. As you’ll discover in
due course, SPE conflicts with every one of these statements—and with
numerous other commonly held beliefs about sales too.
Sadly, the serious consideration of SPE tends to require at least one of
the following conditions: The performance of the sales function must be so
bad as to shake management’s faith in the traditional model to its very
core, or senior executives with no prior exposure to sales (perhaps an
engineering or production specialist) must turn their attention to the sales
function and refuse to adopt the existing orthodoxy. Almost without
exception, our silent revolutionaries began their investigation of SPE only
when both of these conditions were in place!
Incremental Change Won’t Cut It
The other hurdle to the adoption of SPE is the magnitude of change
required for the successful transition. Consider just a few of the changes
that have to occur: A significant percentage of the activities associated
with the acquisition and maintenance of accounts must be moved inside.
Salespeople must willingly give up ownership of calendars, accounts, and
even sales opportunities. Field salespeople must be prepared to spend all of
their time in the field (in practice, this means a five- to tenfold increase in
territory size and, consequently, a lot more travel). Management must be
prepared to add new team members and—possibly—to see some existing
team members exit the organization. Management must be prepared to
assume (and, ultimately, reassign) responsibility for the origination of
24
sales opportunities.
And then there’s the impact on the rest of the organization. In pretty
much every case, customer service needs to be reengineered to cope with
the additional load. Organizational functions must be tightly integrated
with one another. New product development must work closely with
marketing, and engineering must march in lockstep with both sales and
production. If production scheduling has devolved into brinkmanship to
accommodate the demands of competing salespeople, scheduling must be
fixed, and the master schedule must become sacrosanct.
When you consider the counterintuitive nature of SPE and the
significance of the transition from the traditional model, it’s no wonder
that the traditional model persists.
But it can persist for only so long!
HOW DID WE GET HERE?
The traditional sales model hasn’t always been dysfunctional. For much of
the history of industry, this model has been the optimal one. (In fact, there
are situations today in which the traditional model is still quite
appropriate.) What has happened is that industry itself has undergone two
sea changes, and sales has remained much the same.
Sea Change 1: From Production-Focused to Sales-Focused
In the 1989 film Field of Dreams, Kevin Costner’s character plows under
his corn and builds a baseball field in response to the promise that “if you
build it, he will come.” Fortunately, Shoeless Joe Jackson and friends
arrive just in time to rescue the hapless farmer from bankruptcy.
Today, the phase build it, and they will come is often used to reference
the unrealistic expectation that production is sufficient to create a market.
However, for most of the history of industry, production has, in fact, been
sufficient.
Until recently, the salesperson’s job was to take a highly differentiated
product and demonstrate it to potential customers. Sure, there was a
requirement for some salesmanship, but for the most part, the sale was
really made in new product development and production.
25
Today, because the market is so much more competitive, it’s unusual for
a product to be highly differentiated. It’s common for customers to choose
product A over product B and reasonably expect to pay a similar price for
a product that performs almost identically. It’s true that we still have true
groundbreaking products, but these tend to be the exception rather than the
rule.
Because production has been the primary success driver for most of our
recent history, this is where our capital and our brainpower have been
invested. And the return on this investment has been staggering. Over the
last hundred years, we’ve seen massive increases in productivity
(measured against any reasonable standard) and improvements of a similar
magnitude in quality as well.
We’ve seen at least three major revolutions in production. Frederick
Winslow Taylor introduced scientific management at the start of the last
century. Henry Ford’s approach to mass production drove costs down to
unprecedented levels. And, in the 1950s, W. Edwards Deming jumpstarted the quality movement, contributing to the rise of Japan, and
subsequently revolutionizing operating procedures in production facilities
the world over.
Of course, the rate of change we’ve seen in production cannot be
sustained forever. Increasingly, managers are recognizing that their
advances in production have exposed sales (including distribution4) as the
weak link.
Today, sales is the new frontier. We’re already seeing the focus of senior
management shift to sales—and with focus comes capital and brainpower.
My prediction is that the next fifty years will bring revolutions in sales
similar in scope and consequence to those we’ve seen in production.
Let this book be the first shot across the bow of the good ship Orthodoxy
!
Sea Change 2: From Make to Stock to Engineer to Order
As was mentioned previously, the fundamental assumption that sits at the
base of the traditional sales model is that sales is the sole responsibility of
an autonomous agent. If we consider how a typical organization has been
26
structured for most of the history of industry, this assumption is a perfectly
reasonable one.
Figure 1 shows a traditional value chain. The production facility produces
to maintain a stockpile of inventory, and the salesperson sells from this
inventory.
In this environment, it makes perfect sense for the salesperson to operate
autonomously. The firm as a whole benefits when its salespeople sell as
much as possible. Because inventory is already sitting in a stockpile,
orders can be fulfilled as soon as they are received. And because of this
stockpile, minimal interaction is required between sales and production.
Increasingly, this is not how value-chains are configured. We have seen a
recent and dramatic shift from make-to-stock to make-to-order
environments, as in figure 2. The latter reduces holdings costs and
provides customers with greater choice. In a make-to-order environment, it
no longer makes sense for the salesperson to simply sell as much as
possible; the salesperson needs to sell only what production has the
capacity to produce. Rather than operating autonomously, the salesperson
must subordinate to production.
This is complicated by a further twist in the value chain. Today, an
increasing number of products (as well as almost all services) are actually
27
designed (engineered) as they are being sold. In an engineer-to-order
environment, tight integration between sales, engineering, and production
is critical. The degree of integration determines both the likelihood of the
sale being won and the quality of the product delivered.
In such an environment, sales cannot possibly be the sole responsibility
of an autonomous agent. In fact, for this reason, the traditional model
damages both sales performance and product quality—and, therefore,
customer satisfaction.
In summary, the traditional model always has and perhaps always will
make sense in make-to-stock environments—where it is possible for the
sales function to operate at arm’s length from production. Such
environments include most consumer goods (typically sold in retail
environments), consumer and small-business financial services (insurance
and investment products), and packaged software.
However, in make-to-order and particularly in engineer-to-order
environments, the requirement for tight integration between sales,
engineering, and production renders the traditional model dangerously
inappropriate. These environments include business services (consulting,
legal, and finance), design-and-construct building, and enterprise software.
Now that we understand why sales environments look the way they do
today—and why change is not necessarily an appealing proposition—let’s
return to the task at hand: redesigning the sales function.
DIRECTION
OF THE
SOLUTION
Let’s consider how we might go about causing a dramatic increase in the
productivity of the sales function. What might be the direction of the
solution?
We should immediately discount traditional sales-improvement
initiatives (e.g., sales training or adjustments to the comp plan). History
suggests that at best such initiatives produce only incremental results.
For inspiration, we might look to manufacturing. This makes sense
because we know that this is one part of the organization that has seen a
dramatic increase in productivity in recent times.
Do we know the cause of this dramatic change? As it happens, we do.
28
In 1776, in his magnum opus, An Inquiry into the Nature and Causes of
the Wealth of Nations, Adam Smith predicted that the division of labor
would drive a massive increase in productivity. He told the story of a pinmanufacturing operation in which ten workers had divided the production
procedure into eighteen distinct steps and then distributed these steps
among themselves.
Individually, each worker could produce twenty pins a day. Collectively,
they were producing 48,000!
The benefits of the division of labor are not enjoyed only in
manufacturing environments. If we take a stroll around a typical
organization, we discover the division of labor in all types of production
environments, in engineering, and even in finance. In fact, the only part of
the organization that has not embraced the division of labor is sales!
Assuming there is no reason to immediately disqualify the division of
labor, let’s assume that this is the direction of our solution.
Playing Devil’s Advocate
But, not so fast! If we were to commission an experienced salesperson to
defend the traditional model—to be the devil’s advocate, as it were—can
we imagine their objections to the concept of division of labor?
These are likely to be their two primary objections:
1. Complexity. Sales is complex in most environments nowadays. You
have multiple influencers and decision makers. You have numerous
conversations with multiple parties spanning weeks or months. This
complexity does not lend itself to division of labor.
2. Personal relationships. People buy from people. No one likes to
transact with a machine. The division of labor will destroy the critical
personal relationship between the salesperson and the customer.
Before I directly address these objections, it’s interesting to observe that
these are similar in nature to the objections you might hear from a
craftsperson (an artisan) who is being encouraged to transition to a modern
manufacturing environment. This person is likely to suggest that if they do
not personally craft their product, any increases in efficiency will surely be
offset by a reduction in quality.
29
Of course, history suggests that the artisan’s concerns are unwarranted! It
just so happens that the changes we must make to a production process to
improve efficiency are the very same changes that are required to
maximize quality. (In case you’re wondering, we improve efficiency, in
part, by reducing variability within a production process. And as
variability reduces, so does the defect rate.)
Complexity
Our devil’s advocate is correct. A modern sales environment is certainly
likely to be complex—for all the reasons stated. But is complexity a reason
to avoid the division of labor?
If it is, we should see a decline in the division of labor as we examine
production environments of increasing complexity. Let’s consider two
extremes in a production context: the assembly of a hang-glider and the
assembly of a jet aircraft. The notion of a single person assembling even
the simplest of jet aircraft is laughable. The fact is, in truly complex
environments, the division of labor is not just possible; it’s essential.
Our devil’s advocate has hinted at a potential problem in the application
of the division of labor—one we’ll grapple with in due course—but he has
not dealt our proposed solution a lethal blow.
Personal Relationships
It’s true that people enjoy (for the most part) interacting with other
people.5 It’s also true that many salespeople have good relationships with
their customers. However, it’s dangerous to assume (as salespeople
frequently infer) that these relationships cause sales.
To see why, we should inquire into the origin of a salesperson’s
relationships. Specifically, which comes first—the sale or the relationship?
The reality is, for the most part, that the salesperson’s relationships are the
consequence of sales, not their first cause!
Now, our devil’s advocate is unlikely to take this line of reasoning lying
down. His immediate objection will surely be that the distinction between
first and proximate cause is purely academic—and that if relationships and
sales are related, it matters little how they came to be that way.
30
It’s here that we must make a critical distinction—a distinction between
the initial transaction in a series of transactions and the rest of those
transactions. In most cases, the salesperson’s initial transaction signals the
acquisition of a new account. All of the subsequent transactions (assuming
the same product or service type) are repeat purchases. The first
transaction—because it signals the acquisition of an annuity—is many
times more valuable than any of the subsequent ones.
Because initial and subsequent transactions are materially different, it
doesn’t make sense to lump them together and refer to them all as sales, as
our devil’s advocate is doing.
So, for the balance of this book, I will use the word sale to refer only to
the acquisition of a new account (or the sale of a new product or service
line to an existing one). I will refer to repeat transactions as just
transactions.
We must consider, now, the contribution that the salesperson’s
relationship makes to the retention of existing accounts. There’s no
question that this relationship must factor into the retention equation, but
what are the other considerations?
As we’ll discuss in much more detail, every organization must have three
core functions to be viable in the long run: new product development,
sales, and production. It’s revealing to rank these three functions in the
order in which we believe they will affect account retention.
Although salespeople all over the world are allocated responsibility for
retention, it is extraordinarily rare to find a salesperson who will identify
sales as the primary influencer of retention. Almost without exception,
salespeople recognize that production performance is the primary
influence. In other words, the number-one thing an organization must do to
retain its customers is deliver on time, in full, without errors.
Salespeople will also willingly volunteer that the number-two thing that
an organization must do is ensure that its products are consistently better
than—and cheaper than—its competitors’, which is, of course, the
responsibility of new product development.
The shocking reality is that salespeople contribute little to retention,
relative to production and new product development—even though
31
retention is their responsibility.
If you are deficient in the areas of production or new product
development, it may be that your salespeople’s personal relationships
cause accounts to persist with your organization a little longer than they
otherwise would. However, to claim that personal relationships cause
sales amounts to either equivocation or outright denial (or a little of
each).6
PUTTING THE DIVISION
PRINCIPLES
OF
LABOR
TO
WORK: FOUR KEY
With those objections out of the way, we’ve bought ourselves a little bit of
time to piece together our solution. The division of labor is not the
solution, after all—just the direction of the solution. Our devil’s advocate
intuitively recognized this when he raised the objection about complexity.
The thing is, when we apply the division of labor to any environment,
the situation tends to get a lot worse before it gets better. The rewards
offered by the successful transaction from the craft shop to the division of
labor are exciting (as was reported by Adam Smith all those years ago),
but the transition itself is difficult and extraordinarily perilous.
The fact that production has been the primary focus of industry for the
last hundred years is evidence of the difficulty of the transition. The good
news is that if we intend to lead our sales function down the path already
taken by production, this is indeed a well-trodden path.
The lessons from manufacturing can be generalized into four
fundamental principles:
1. Scheduling should be centralized.
2. Workflows should be standardized.
3. Resources should be specialized.
4. Management should be formalized.
We’ll dedicate the balance of this chapter to the exploration of these
principles—in their natural manufacturing context. And in the next chapter
we’ll figure out how to repurpose these principles for the sales
environment. First, however, we need to be sure we understand the nature
32
of the problem we are attempting to solve. To achieve that, we’ll turn our
attention to a boat race.
The Primary Challenge
In fact, let’s consider two boat races—both of them time trials. In each
case, the oarsmen will attempt to maximize the speed of their vessels. (In
the first race, the oarsmens’ times will be averaged to determine the
result.)
In the first race, each oarsman commandeers his own boat. Each is an
autonomous agent. When the starter’s gun fires, each oarsman must do his
level best to maximize the speed of his vessel. And he does that, not
surprisingly, by rowing as fast as is humanly possible. This race is an
allegory for the craft shop environment in manufacturing and for the
traditional sales model.
In the second race, we make one subtle change. We put all the oarsmen in
one boat. The goal is the same: to reach the finish line in the shortest
amount of time. But each of the oarsmen must undergo a radical shift in
33
his approach to the goal. If each oarsman rows as fast as possible, the
speed of the vessel will definitely not be maximized.
If each oarsman maximizes his individual rate of work, the consequences
will be a lot of noise, clashing of oars, and, possibly, a capsized boat. In
this second race (an example, of course, of the division of labor), the speed
of the vessel is determined primarily by the synchronization of the
oarsmen—not by their individual rates of work.
Now, the shift of focus from individual effort to synchronization may not
seem significant, but it is—particularly when we consider environments
more complex than a rowboat. Learning to row in unison with others is
tricky, but this skill (in this context) is made easier by the fact that you are
operating in close proximity to your colleagues (you stroke in time with
the person in front of you), and the fact that you have immediate feedback
(you can see and feel the impact of your actions on the performance of the
vessel).
This tends not to be the case in a typical work environment (few people,
today, work in rowboats).
In a reasonable-sized manufacturing plant, for example, it’s unlikely that
all of the workers contributing to a process are in visual contact with one
another. And, in a knowledge-work environment, such as—say—a sales
function, work in progress is invisible, and lead times are long—meaning
that there is no immediate feedback.
In such an environment, how do workers synchronize their rates of
work? The short answer is that, without special intervention, they simply
don’t.
Here’s an interesting thought experiment:
Consider the changes we would need to make to our rowboat model in
order for this model to be representative of a standard knowledge-work
environment.
How about we replace each of the oarsmen with a rowing machine—a
powerful solenoid, operated by remote control? And let’s put each of our
oarsmen in a cubicle in an office complex, and equip each with a remote
control unit. On each remote control unit is a button that actuates the
solenoid back in the boat and causes that oarsman’s two oars to stroke.
34
If each oarsman is isolated from the boat—and from his colleagues—and
he is committed to winning that race, how will he determine when to press
the button?
Sadly, this scenario is not dissimilar to many modern work
environments. To complete the picture, all we need to do is add a manager
who attempts to improve the performance of the boat by running from
cubicle to cubicle encouraging everyone to row harder—and then who
periodically berates team members for their lack of communication.
Principle 1: Scheduling Should Be Centralized
To claim that the division of labor causes workers to become disconnected
from the performance of their overall system is stating the obvious. After
all, as we’ll soon discuss, a narrowing of the worker’s focus is both a
benefit of and a necessary condition for the division of labor.
It’s inevitable, then, that the division of labor will result in
synchronization problems.7 The solution is to centralize scheduling.
Any work you perform can be broken into two components. The first of
these are the critical activities that cause matter (or information) to change
the form, sequence, and timing of each of these activities.
The second component is what I’ll be referring to as scheduling. Of
course, scheduling is pretty easy when it’s just you doing the work. You
can learn the basics in a half-day time-management workshop. However,
as you add more workers to the work environment, scheduling rapidly
becomes more complex.
The key to avoiding synchronization problems when we apply the
division of labor is to first split the responsibility for these two components
of work. If we fail to do this, the local efficiency improvements that result
from workers focusing on a single task will quickly be eaten up by the
general chaos that spreads through the environment—like those clashing
oars in the rowboat.
There are many environments in which the centralization of scheduling
is a well-established practice: the manufacturing plant (in which
scheduling is the responsibility of the master scheduler); the project
environment (in which the project manager owns the schedule); the
35
orchestra (in a string quartet, the first violin sets the tempo, while in the
case of a full orchestra, a dedicated conductor is required); and the airport
(consider the chaos if, in the absence of an air-traffic controller, pilots had
to decide among themselves when to take off and land!). In each of these
cases, scheduling is a specialty. (The project manager doesn’t wear a tool
belt, and an air-traffic controller can be quite capable even if they have
never flown a plane.)
Now, it’s true that even the most complex sales environments are less
complex than a busy airport, but it’s also true that almost every sales
environment is significantly more complex than a rowboat. Therefore, if
we are entertaining the idea of applying division of labor to sales, we must
first acknowledge that the very first activity for which the salesperson
relinquishes responsibility will be scheduling.
Postscript
Until now, we have accepted that, in a simple environment—like a
rowboat—the division of labor doesn’t require the centralization of
scheduling. However, it’s interesting to consider what we might do if we
were really serious about winning the boat race we discussed earlier. If
you look at most competitive rowing teams, you’ll discover—you guessed
it—centralized scheduling!
In a scull, for example, the coxswain sits in the stern of the boat, facing the
oarsmen, and sets the tempo to which the oarsmen row. If we consider the
racing scull for a moment, we can draw two interesting observations that
relate to scheduling in all environments.
First, the coxswain is a dead weight (he does not row), and his inclusion
36
increases the weight of the vessel by a significant amount. It’s reasonable
to assume, then, that the performance improvement resulting from the
inclusion of the coxswain more than compensates for this weight increase.
And this is in a simple environment in which the centralization of
scheduling is not even critical.
Second, the coxswain maximizes the speed of the boat by causing all of
the oarsmen to row at the same speed as the slowest oarsman. Therefore, to
maximize the speed of the boat, all but one of the oarsmen must row
slower than their maximum capability.
Principle 2: Workflows Should Be Standardized
The need to standardize all workflows is regarded as self-evident by many
managers. Note the attention paid to standard operating procedures in the
modern workplace. But it’s worth acknowledging that standardization is
only a necessity in an environment in which the division of labor has been
applied.
Interestingly, you can see evidence of this if you look at customer
relationship management (CRM) implementations in sales environments.
Almost every mid- to large-sized organization has invested tens (or, more
commonly, hundreds) of thousands of dollars in this technology in recent
years in anticipation of increased sales performance. Few, however, can
point to any performance improvement that can be attributed to the CRM.
If you examine business cases for typical CRM implementations, you’ll
discover that many promises hinge on an assumption that the
standardization of salespeople’s procedures will cause an increase in sales.
Absent the division of labor, this is not a surety. Capable salespeople
neither need nor benefit from the standardization of their operating
procedures. Consequently, the CRM adds overhead (the additional data
entry associated with enforcing standards) without generating any
performance uplift.
But the division of labor changes things: Standardization suddenly
becomes critical.
When the person who plans the work (the scheduler) is remote from the
people who do the work, the standardization of procedures (and
37
workflows) prevents the complexity of environments from multiplying to
unmanageable levels.
In manufacturing environments, the workflow is referred to as the
routing. The routing is the path that work will follow through the plant,
taking into account both the activities that will be performed and the
resources that will perform them. The general rule in manufacturing is that
for production of the same product, the same routing should be followed.
If we apply the division of labor to the sales environment, we must
standardize our workflows for the same reason. For this environment to be
manageable and scalable, all opportunities of the same type (i.e., the same
objective) must be prosecuted using the same routing—from the
origination of those opportunities, through their management.
Principle 3: Resources Should Be Specialized
In discussing the centralization of scheduling, we’ve already broached the
subject of specialization. We know that when we apply the division of
labor, the scheduler is the very first specialist. Indeed, once we have
centralized scheduling and standardized workflows, specialization is
relatively easy.
Specialization causes a significant increase in workers’ productivity for
two reasons: First, when a worker performs activities of just one type, they
become very good at performing those activities. Second, switching
between materially different activities imposes a significant overhead on a
worker. The elimination of this switching (multitasking) increases that
worker’s effective capacity.
Of course, specialization doesn’t relate just to people. In most
environments today, activities will be shared between people and machines
(including computers). However, we should note that automation has not
been the root cause of productivity improvement in the last hundred years.
The primary cause is the division of labor. After all, it’s the division of
labor that has allowed us to simplify activities to the point at which they
can be performed by machines.
When it comes to dividing activities, it tends to make sense to make
divisions along three axes:
38
1. Location. You should split field and inside activities—meaning that
people work inside or outside but never a mix.
2. Work type. You should split activities that are different enough to
impose a switching cost. For example, creative activities do not mix
well with more transactional ones.
3. Cadence. You should split long and short lead-time activities. For
example, in a technology environment, you should not mix true
development work with break-fix tasks.
Principle 4: Management Should Be Formalized
It’s interesting to note that the very first manager was a scheduler (as per
our coxswain example). However, as environments grow, so do the
responsibilities of management. Today, it’s more likely that the manager
of a function delegates scheduling to a technical specialist and focuses on
the internal performance of their function—as well as its integration with
the rest of the organization.
This broader focus makes sense for two reasons: The division of labor
causes work environments to become inherently fragile, and because the
organization consists of a number of functions—each of which could be
characterized as an oarsman in a larger boat—someone must pay attention
to the synchronization of the organization as a whole.
Specialization is a two-edged sword. It causes a dramatic increase in the
productivity of each individual, but it also causes each worker to operate in
a vacuum—intently focused on their own work in progress (their task list).
To a great extent, the scheduler compensates for this narrow focus, but the
manager is still required to ensure compliance with the schedule, to resolve
problems as they occur, and to make decisions relating to the design and
resourcing of the overall environment.
Now, the word formalize in this fourth principle may seem redundant.
After all, in our production example, there was no need for management
prior to the division of labor. Why then do we need to formalize
management—as opposed to simply adding a manager?
This is one area in which the sales environment differs from our
production example. The modern sales function has grown large enough
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that there is a requirement for a manager to attend to those second-order
management responsibilities.
This means that most sales functions have managers—in spite of the fact
that they are still essentially craft shop environments. These managers,
however, have no understanding of scheduling and no experience
managing the kind of environment that will exist after the transition to
divided labor.
Accordingly, we will definitely need to convince our sales managers to
adopt a more formal approach to management.
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Chapter 3
REIMAGINING THE SALES FUNCTION
In this chapter, we’ll reason from first principles to the sales function we
discovered in chapter 1. Then in the following chapter, we’ll expand our
discussion to include environments where not all opportunities are major
ones—and introduce you to the critical inside sales function.
We commence with the direction of the solution (the division of labor)
and our four key principles.
Yesterday, our sales function essentially consisted of a single salesperson.
Tomorrow, sales will be the responsibility of a tightly synchronized team.
PRINCIPLE 1: SCHEDULING SHOULD BE CENTRALIZED
Our first principle dictates that, as we push toward the division of labor,
our very first specialist must be a scheduler. We’ll elect to call our
scheduler a business-development coordinator (BDC). We’ll also refer to
our salesperson as a business-development manager (BDM), to highlight
their new focus.
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It’s important to note that the BDC is not a sales assistant. The word
assistant would imply that it’s the BDM who allocates work. The opposite
—as is indicated by the direction of the arrow in figure 7—is the case. The
BDC pushes work to the BDM.
This means that the BDM must transfer any and all scheduling
responsibilities to the BDC. This may be a more significant undertaking
than it sounds when you consider that, in most cases, the BDM’s
scheduling responsibilities are not limited to the management of their own
calendar. In most cases, salespeople are interfacing with production and
customer service, coordinating the delivery of clients’ jobs.
At this point in the discussion, it’s premature to allocate specific
activities to resources, but it will do no harm to draw four very general
conclusions:
1. Our BDC must perform all scheduling.
2. Our BDM will spend more time selling.
3. Our BDM should work in the field (not in an office).
4. Our BDC should work from the head office (ideally—not a regional
office).
The first two conclusions are not at all contentious, but the importance of
the second two is less obvious.
BDMs Work in the Field, Not in an Office
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Traditionally, salespeople split their time between the field and an office.
And this is unavoidable when you consider the diverse range of activities
for which they are responsible. If we have a choice, however (and we soon
will), it makes sense to have BDMs spend all of their time in the field, for
two reasons: First, if we are going to spend the (not insignificant amount
of) money required to employ enterprise-class salespeople, it makes sense
to have them selling in the field, where—presumably—they’re more
effective. And second, a fundamentally different approach is required for
scheduling field- and office-based activities—meaning that it’s impractical
to schedule a combination of the two.
The BDC Works from the Head Office
It would be tempting to assume that the BDC should operate in close
proximity to the BDM—but the opposite is true. The BDC should operate
in close proximity to the business functions with which sales must
integrate.
We’ve already discussed that the integration of sales, engineering, and
production is increasingly important for the modern organization. Well,
that integration is significantly easier to achieve if the individuals
responsible for scheduling each function operate in close proximity to one
another.
In addition, if you consider the BDM’s perspective, the BDM will feel
less disconnected from the organization as a whole if their BDC is located
in the head office.
The Relationship between the BDC and the BDM
Let’s consider the relationship between the BDC and the BDM by
contrasting sales with another environment in which we have senior people
working closely with schedulers.
That environment is the executive suite. In the executive suite of a
decent-size firm, we will likely encounter at least one executive who
works closely with an executive assistant. Unlike a typical assistant, an
executive assistant assumes overall responsibility for the initiatives in
which the executive is involved—and also assumes responsibility for the
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executive’s calendar.
The executive assistant maintains an awareness of all the initiatives on
which the executive is working (and their relative importance) and plans
the executive’s time so as to maximize the yield on their limited capacity.
If we take the preceding sentence and substitute business-development
coordinator for executive assistant and business-development manager for
executive, we have a perfect functional description of the role of the BDC.
And if we reflect on the nature of the relationship between the executive
assistant and the executive, we will observe exactly the relationship that
must exist between the BDC and the BDM in order for the sales function
to be productive.
This discussion also sheds light on the inevitable questions about, in
practice, whether BDMs will find it demeaning for someone else to plan
their calendars, and whether potential customers will find it disturbing if
BDMs fail to set their own appointments.
The answer to both questions is a firm no. Treating salespeople like
executives does not demean salespeople; if anything, it elevates their
standing in the eyes of potential customers.
The Economics of the BDM–BDC Relationship
At first glance, it would appear that we’re multiplying expenses by
partnering BDMs with BDCs. Nothing could be further from the truth. A
traditional field salesperson averages two face-to-face businessdevelopment meetings per week. If you partner that same salesperson with
a capable BDC, their effective capacity increases to four meetings per day,
or twenty a week. That’s a tenfold increase in effective capacity. This
means that two BDMs partnered with BDCs will do the same volume of
work that would otherwise require ten BDMs working alone.
In practice, this means that you can reduce the size of your team of
BDMs (retaining the most capable ones) and still perform the same
volume of face-to-face meetings. When you consider that BDCs cost
roughly half what BDMs do, the economic benefits are compelling.
PRINCIPLE 2: WORKFLOWS SHOULD BE STANDARDIZED
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Our second principle dictates that we use a standard sequence of activities
to originate opportunities (i.e., to identify or generate sales opportunities)
and to prosecute opportunities (i.e., to pursue them to their ultimate
conclusion—either a win or a loss).
Although these two workflows are clearly part of the one value chain, it
makes sense to treat them separately, simply because opportunities can be
originated in batches; but they must be carried out, or prosecuted, one at a
time. Because opportunities can be originated in batches (e.g., via
promotional campaigns), the idea of standardizing the first workflow is not
particularly contentious. However, the case for standardization is not so
clear where opportunity management is concerned. To frame this
consideration as a question, do our salespeople require unlimited degrees
of freedom in order to effectively win orders?
The Case for Standardization
To address this question, we should first acknowledge that whenever we
are selling, a potential customer is buying. Therefore, our opportunitymanagement workflow is the flip side of our potential customer’s
procurement workflow. So we can reframe our question as the following:
Do our customers require unlimited degrees of freedom in order to make
an effective purchasing decision?
Viewed from this perspective, the answer is not necessarily.
Increasingly, organizations are standardizing their procurement procedures
for those products or services they purchase regularly. What’s more,
different organizations’ procurement procedures for comparable products
tend to be remarkably similar.
If we consider major purchases, I suspect the greater variation we see in
procurement procedures is more a consequence of an absence of procedure
than it is evidence of the absence of a need for one. In other words, I’m
suggesting that there probably is an objective ideal procedure for making
major purchases of various types—it’s just that because organizations
make major purchases infrequently, they haven’t yet determined what that
procedure is.
I’ve often asked groups of salespeople who sell major products (e.g.,
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enterprise software) whether there’s a right way and a wrong way for
organizations to purchase a product like theirs, and I’ve always been
impressed by how well reasoned (and unanimous) the salespeople’s
responses are.
My suggestion, then, is that there is an ideal opportunity-prosecution
workflow for both minor and major purchases. Where minor purchases are
concerned, this is more likely to be determined in advance by your
customers, and enormous variation from customer to customer is unlikely.
Where major purchases are concerned, there is still an optimal
procurement procedure; it’s just that customers are unlikely to be aware of
it, which presents your salespeople with the opportunity to take the lead
and help the customer buy more effectively.
Making It Scalable
Practically, as was mentioned in the previous chapter, the benefits of
standardization (in and of itself) are relatively limited. The real value of
standardization is that it enables hand-offs between stakeholders in both
the sales environment and the associated functions (e.g., engineering and
production). Of course, without hand-offs, there can be no division of
labor.
Consider the communication between a BDM and a BDC. If an
opportunity is being prosecuted according to a preexisting workflow, after
each field activity, the BDM needs only to update their BDC with one of
four possible next steps. They will recommend:
1. abandoning the opportunity,
2. repeating the activity just performed,
3. scheduling the next activity in sequence, or
4. scheduling an activity further downstream in the workflow.
If the workflow is sensibly constructed, these four options provide
sufficient flexibility for both parties, and if more flexibility is required, the
design of the workflow should be revised.
The important point, though, is that this structure enables a lot of
information to be transferred in just a few words. In designing a workflow,
we’re not trying to map the existing complexity; rather, we’re engineering
46
it out of the sales environment (at least to the degree that it’s realistic to do
so).
Typical Sales Workflows
From a high level, most sales workflows look something like figure 8.
Although all promotional activities are outbound to some extent, it is
convenient to divide promotional campaigns into two categories:
outbound, in which you assume a requirement and deem there to be a sales
opportunity, and inbound, in which you engage in advertising (and similar)
activities, with a view to generating (inbound) expressions of interest.
PRINCIPLE 3: RESOURCES SHOULD BE SPECIALIZED
If we return to our project analogy for a moment, we now have a project
plan (our standard workflow for originating and prosecuting sales
opportunities), a project manager (our BDC), and a resource pool
containing a single resource (our BDM).
To exploit the benefits of the division of labor, it’s now necessary to add
some more people to our resource pool. An obvious starting point is to list
the activities performed by a typical salesperson (as in table 1) and to
determine which are critical for our BDM to perform and which can be
allocated to other resources.
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Beside each activity in table 1 is a proposed activity type. Some of these
are obvious, and some are a little contentious, so let’s be sure to resolve
the contention, if we can, before we reallocate some of these activities:
1. promotion (i.e., the origination of sales opportunities),
2. administration (i.e., critical supporting activities),
3. sales (i.e., meaningful selling conversations),
4. technical (i.e., requirement discovery and solution design), and
5. semitechnical (i.e., quoting, order processing, and issue management).
Promotion
It is possible for salespeople to originate their own sales opportunities, but
the fact that they can does not constitute an argument that they should (and
this statement applies to almost every other activity above too). The thing
is, the origination of sales opportunities is extremely resource intensive if
they are originated one at a time—and salespeople lack the resources
required to originate them in batches.
Typically, the batch origination of sales opportunities requires the ability
to procure and manipulate contact lists, the ability to produce hard-hitting
promotional campaigns, the resources to broadcast personalized email (or
48
snail mail), and perhaps even the ability to promote and coordinate events.
Salespeople lack these capabilities, so it makes sense—at least notionally
—to allocate responsibility for opportunity origination to the marketing
department. Within the marketing department, the origination of sales
opportunities is referred to as promotion (one of the four Ps of marketing).
I say that the origination of opportunities is notionally the responsibility
of marketing because, in practice, the requirement for tight integration
between promotion and sales is so strong that the responsibility for the
former cannot possibly be delegated (at least in full) to another
department.
The practical solution is to add a campaign coordinator to sales. This
person must be physically located within the sales department because
they must be tuned in to the telephone conversations that are occurring as a
direct consequence of the campaigns they are coordinating.
It’s helpful to think of the campaign coordinator as a member of the
marketing department who’s on permanent loan to sales. Your campaign
coordinator must understand promotional processes and must have good
connections to people in your marketing department. But their primary
allegiance must be to sales. As we’ll see in part 2, your organization’s
sales activity will quickly grind to a halt if your campaign coordinator
loses focus for just a day or so.
The campaign coordinator’s reason for existence is very simple: to
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maintain a queue with an optimal number of sales opportunities upstream
from the BDC. This ensures that the BDC always has someone to call
when an empty slot appears in the BDM’s calendar.
Administrative Tasks
It should be easy to see why data entry, reporting, calendar management,
and travel arrangements have been categorized as administrative activities,
but what about appointment setting and follow-up calls? How can they
possibly be administrative activities?
Let’s start with follow-up calls.
As we have discussed already, at each meeting within the opportunityprosecution workflow, it’s the BDM’s job to sell the next critical activity
in the workflow. If the BDM has done their job properly, the scheduling of
that activity is purely an administrative function.
On the occasion when a BDC discovers that further input from the BDM
is required before the next activity in the workflow can be scheduled, the
BDC should schedule either another meeting with the salesperson or a
conference call. In either case, this additional meeting does not constitute a
material change to the opportunity-prosecution workflow; it’s just a repeat
of the last performed activity.
If you think about it, the initial appointment-setting call is no different
from follow-up calls. If the initial meeting has already been sold, the call is
simply a scheduling exercise.
Consider this real-world example:
Nigel is the director of sales for a large recruitment firm (one of our
silent revolutionaries). Because he also happens to be the most capable
public speaker in the sales department, he’s now addressing a room full of
senior executives, introducing a controversial approach to headcount
management.
At the close of his presentation, he will ask the delegates to complete a
feedback form and will encourage them to tick a box at the bottom of the
form to indicate they would like to schedule a best-practices briefing with
Rick, the firm’s local consultant (salesperson).
It’s Nigel’s expectation that a little more than 20 percent of the delegates
50
will tick that box, and that virtually all of those will meet with Rick.
What’s interesting is that Rick’s BDC is unlikely to call any of them.
Setting those appointments is such a simple undertaking that she will
simply send each an email, asking them to indicate their preference from a
number of available meeting slots in Rick’s calendar.
In this case, it’s clear that the initial appointment-setting call is purely
administrative in nature. Of course, this is in contrast to the status quo—in
which the initial appointment-setting call is most definitely a sales call.
A major benefit of classifying the initial appointment-setting call as
administrative in nature is that it forces you to sell the meeting in advance
of the call. This is hugely beneficial, because it highlights the difficulties
that BDCs might have setting meetings and it forces management to create
more compelling offers and market propositions. In turn, the more
compelling offers (and market propositions) result in better-quality
appointments, and that benefits everyone.
Of course, the origination of sales opportunities is a challenging subject,
one we’ll return to in part 2 of the book.
Technical Tasks
Every engineer-to-order environment has the same problem. Salespeople
become entangled in the delivery of the solutions they sell—and this
entanglement cannibalizes their selling capacity (and generates a host of
other problems). This inevitable entanglement has a simple cause.
The thing is, above a certain level of product complexity, a perfect handoff from sales to production is impossible. It’s not just difficult; it’s
impossible. This means that beyond this complexity threshold, information
will always be lost when sales hands off a project to production. This
information loss cannot be eliminated with more detailed briefings, more
documentation, or management exhortations to communicate better.
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There are only two possible solutions to this problem: We can propose
only products that are simple enough to sit beneath the complexity
threshold (e.g., limit customization to a fixed menu of options), or we can
eliminate the requirement for a hand-off altogether.
Of course, in major-sales environments, the second option tends to be the
default approach. What happens is that the salesperson never fully hands
off to production; they remain on-call, after the sale, to answer questions
and to interface with the client.
There is, however, another approach, one that has a profound impact on
both the effectiveness of sales and service quality. The alternative
approach is to add a third party to the mix, a person we’ll call a project
leader.
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In this alternative approach, the project leader and the BDM work side by
side for most of the opportunity-prosecution workflow.
Here are the essential characteristics of this approach: Because the BDM
has no postsale responsibilities, they have more selling capacity. This
enables them to engage earlier with clients than they otherwise would—
meaning that initial contacts are conceptual in nature. At the point at which
the client wishes to discuss (in concrete terms) their requirements, the
BDM introduces the project leader. The project leader takes responsibility
for requirement discovery and for solution design (in many cases, these
will occur in the form of a formal solution-design workshop). From this
point until the point of sale, the BDM and the project leader work together.
The project leader is responsible for the technical component of the
engagement, and the salesperson tends to the commercial component.
After the sale, the project leader champions the project as it moves through
production. This means that the project leader replaces the BDM as the
primary point of contact for both production and the client.
The sole responsibility of the project leader is to manage the interface
between production and both the client and sales. When they do their job
well, the product presented to the client is both salable and deliverable
(taking into account, for example, features, price, delivery lead time), and
the product that is ultimately delivered to the client fulfills the client’s
requirements, without compromising the profitability of the organization
(understanding that the client’s requirements may well have changed—or
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been reinterpreted—during delivery).
Because the project leader seeks to optimize the numerous trade-offs
though both the opportunity-management and delivery phases of the
engagement, it should be clear that their role is critical and their
contribution invaluable. For this reason, the project leader should always
have protective capacity; they should never be overburdened with work.
Accordingly, it is not a problem that the project leader works both in the
office and in the field. If we are deliberately maintaining the project leader
at less than 100-percent utilization, it is obviously not necessary to
maximize their efficiency.
Semitechnical Tasks
Semitechnical activities include the generation of standard proposals, the
processing of repeat transactions, and the provision of after-sales support
(e.g., issue resolution). All these activities—as well as any others that are
semitechnical in nature—should be allocated to the customer service team.
54
Although most organizations already have customer service teams, the
primary responsibility for customer service rests with the salesperson. The
result tends to be that the customer service representatives (CSRs) are
disillusioned and generally unprepared to take ownership of customer
service cases (I’ll use the word case to refer to a unit of customer service
work).
This means that two changes must occur: The customer service team
must rapidly develop both the capability and the capacity to take full
ownership of the entire customer service caseload, and salespeople must
extricate themselves from customer service. In practice, the latter is not as
difficult as it sounds. With two simple initiatives, it can be accomplished
quite quickly:
First, salespeople must avoid taking ownership of customer service cases
in the first instance. This is easier than it sounds. For example, if a
customer asks a question about an incorrect order, the salesperson might
use their cell phone to initiate a three-way conference call between the
customer, a CSR, and themselves.
Second, customer service representatives must assume ownership of
cases as soon as they encounter them. With this in mind, it is useful, in the
design of your customer service workflow, to stipulate that the CSR must
send the client an email when each case is opened and closed. Obviously,
the first email should make it clear that the CSR is the person responsible
55
for resolving the issue and is, consequently, the primary point of contact.
The customer service team must be close to production, ideally, in the
same building. If there’s a requirement to perform field visits in order to
resolve customer service cases (perhaps to inspect a problematic product),
the CSR should task the project leader to perform this visit and report back
with necessary information.
If we return to our project analogy—in which I compared a BDC with a
project manager—we can now see that our BDC has inherited a resource
pool consisting of three resources (salesperson, project leader, and CSR).
This means that in order to prosecute each sales opportunity, the BDC will
break the opportunity into a series of activities and allocate each activity to
one or more of these resources, in accordance with the routing specified in
the opportunity-prosecution workflow.
The Customer’s Perspective
It’s easy to see that this model is quite ordered and logical from the
organization’s perspective, but what about the customer? In asking our
customers to interface with multiple people, haven’t we just made their
world more complex?
It’s true that in this model, customers will interface with four people
(BDC, salesperson, project leader, and CSR). It’s also true that, today,
most customers ask for—and most organizations strive to provide—a
single point of contact. However, reality is a little more complicated than
this.
It’s a mistake to commence this discussion with an assumption that the
traditional model delivers good customer service. It simply doesn’t. It’s
also a mistake to take at face value customers’ claims that they’d rather
have a single point of contact. In practice, customers can be quite
aggressive in seeking out relationships with other individuals if they sense
that this is in their best interest.
My experience is that the following statements are closer to the truth
(particularly in major-sales environments): What customers really want is
a single conversation. In other words, they will willingly speak with
multiple people within your firm, as long as they do not have to repeat
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themselves. If customers have a choice between dealing with a single
generalist and multiple specialists, they would rather speak with
specialists. Although we talk about the customer as if this were a single
entity, in most cases, there are multiple people on the customer side
involved in the purchase and consumption of your products.
You will discover that this new model provides a vastly better quality of
service, provided you ensure that there is a clear delineation of the
responsibilities of the various parties with whom customers interact and
that BDCs (who plan all opportunity-management activities) and CSRs
(who tend to become customers’ primary points of contact between
projects) remain in close communication with one another.
PRINCIPLE 4: MANAGEMENT SHOULD BE FORMALIZED
As we discussed, the downside of the division of labor is that it causes
environments to become fragile. Although it’s the responsibility of the
BDC to synchronize the various team members, management oversight is
critical for a number of reasons. BDCs tend to be younger and less
experienced than both BDMs and project leaders. Accordingly, the BDC’s
mandate is very limited. If the sales environment is operating exactly as it
should be, they have total control over the schedule. However, a relatively
small disturbance in the operation of the environment can render them
impotent. The sales function must integrate effectively with other
functions (production and marketing, to name two). Because the BDC
tends to be relatively inward looking, it’s necessary for a more senior
person to interface with those other departments. In most sales
environments, there are multiple BDCs (one for each salesperson). This
means that a more senior person must manage any contention between
BDCs (or BDMs).
In most environments, there’s actually a requirement for two managers.
You’ll need a supervisor to oversee the internal team and a more senior
person to manage the overall sales environment (including field operators).
How exactly to resource these two management requirements is a sensitive
subject (particularly in smaller businesses), so we’ll have to defer this
discussion until part 2 of the book.
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