The Machine: A Radical Approach to the Design of the Sales Function - by Justin Roff-Marsh
Date read: 2021-04-21How strongly I recommend it: 6/10
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A radical approach to designing a Sales team that's focused more on removing non-selling tasks off of your Sales teams and moving from an autonomous sales system to a team sales format. Hard to pitch to current companies given the complexity and additional roles needed to implement.
Contents:
- PRINCIPLE 1: SCHEDULING SHOULD BE CENTRALIZED
- PRINCIPLE 2: WORKFLOWS SHOULD BE STANDARDIZED
- PRINCIPLE 3: RESOURCES SHOULD BE SPECIALIZED
- PRINCIPLE 4: MANAGEMENT SHOULD BE FORMALIZED
My Notes
The majority of a salesperson’s day is dedicated to customer service and administrative activities, to solution design and proposal generation, and to prospecting and fulfillment-related tasks.
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.
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.
The lessons from manufacturing can be generalized into four fundamental principles:
- Scheduling should be centralized.
- Workflows should be standardized.
- Resources should be specialized.
- Management should be formalized.
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.
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.
The BDC pushes work to the BDM. This means that the BDM must transfer any and all scheduling responsibilities to the BDC.
The BDC should operate in close proximity to the business functions with which sales must integrate.
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.
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).
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.
The campaign coordinator’s reason for existence is very simple: to 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.
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).
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.
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.
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.
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 themselves.
Sales today is an inside endeavor, supported, in some cases, with discrete field activities.
The inside-out approach starts with attention to the type of transactions that make up the lion’s share of a typical organization’s revenue. These are simple—and typically repetitive—transactions.
Customer service should handle these simple transactions, and should generate quotations and handle customer issues.
A field specialist is a person who supports inside sales by performing discrete field activities. These activities are likely to be technical or semitechnical in nature. Their typical activities would include on-site requirement discovery and product demonstrations. The field specialist can also perform field visits that are requested of them by the customer service team.
The field specialist is responsible for performing field activities that would otherwise block the inside sales team from selling.
Sales should maintain the constraint buffer at its optimal size, and production should operate at full capacity at all times.
Production does not commence for a make-to-order (MTO) provider until the order is received. Accordingly, there can be no inventory of finished goods.
In most cases, the ideal constraint location for an MTO producer will be production. The responsibility of sales (as in our Pace example) should be to maintain a queue of orders upstream from production. Furthermore, this queue of orders should ideally maximize the yield on production’s limited capacity, bearing in mind that different types of work will have varying impacts on the profitability of the organization.
In each case, the constrained function—and only the constrained function—operate at 100-percent utilization and that the other functions subordinate to the constraint.
When money is tight, it can be tough to concede that what’s required is not a sales or production person but a scheduler—a person who neither sells nor produces. But, in situations like these, a master scheduler truly is the critical requirement. It enables a small business to solve its two most pressing problems by ensuring a consistent volume of sales activity, which in time will lead to a steady order flow, and by applying discipline to production scheduling, which will eliminate chaos and effectively increase the organization’s production capacity.
Salespeople have more than their fair share of complaints. They hate the volume of clerical and customer service work that prevents them from engaging meaningfully with potential and existing customers. They don’t enjoy spending their evenings in hotels, entering data in the CRM, generating expense reports, and writing proposals. They resent the continual conflict over the allocation of commissions—particularly when accounts span multiple territories. They hate having to advise customers that their promises will not be met, and they resent the fact that they have to live with the continuous uncertainty over production performance. And they don’t enjoy the underlying—and constant—conflict in their relationships with production, customer service, engineering, management, and even finance.
You should be looking to build one customer service team—as opposed to multiple teams, perhaps in different locations. This is because a single team enables you to pool both supply and demand—meaning that you need a smaller team to provide you with the same amount of protective capacity.
To determine how many inside salespeople you need, calculate how many meaningful selling interactions your entire existing sales team has in an average day. Multiply that by four, because quadrupling your daily selling interactions will be easily achievable with specialization. Then divide the result by thirty, which is the number of meaningful selling interactions that a dedicated inside salesperson should average. This is the number of inside salespeople you should start with, unless it is less than two—in which case, you should have two inside salespeople.
You will almost certainly be surprised by how few BDMs you need, and that’s a good thing. It’s better to have fewer and spend the money to get high-caliber people in this role. Typically, our silent revolutionaries have one BDM for every $30 million in annual sales (give or take).
The one thing I can say with certainty is that you need more project leaders than BDMs. If you genuinely need project leaders, you’ll certainly need between two and four for each of your BDMs.
My general advice where sales offices are concerned is that you don’t need them. If you must have regional offices for operational reasons, please make sure that your regionally based field personnel do not have access to them.
In real terms, this means that you start your transition by fortifying customer service—and engineering if you’re an engineer-to-order environment. There are two reasons that it’s important that you start here: You need a lot of additional capacity in customer service to cope with an increase in sales activity and to enable salespeople to offload the customer service tasks they are currently performing; and in most cases, you can generate immediate but small increases in sales just by reducing your customer service lead times (i.e., faster quotes, order processing, and issue resolution).
You should postpone making changes to your field salespeople until you absolutely have to, and when you do make changes, you should ensure that these changes are driven by the results you are generating with your internal activities.
In addition to adding and training customer service representatives, you need to • ensure that all work (order processing, quoting, and issue management) is performed in your enterprise resource planning (ERP) software (if you can’t manage issues in ERP, you might have to use the CRM for this purpose); • ensure that every activity (e.g., calls, emails, instant messaging sessions) is tracked in the same system in which the work is performed; and • institute a daily stand-up WIP meeting, where open jobs are discussed and expediting decisions are made.
You can deem your customer service team to be fixed when greater than 90 percent of work is processed within target lead times and when you maintain sufficient protective capacity to give you confidence that this number can be maintained indefinitely.
As you build your customer service capacity, you can encourage your sales manager to put gentle pressure on your field salespeople to route customer service tasks to your customer service team. Once your customers discover the existence of this customer service team, they’ll quickly stop calling your field salespeople for transactional reasons.
So, an opportunity is a potential deal that a salesperson is working on or a potential deal that has been queued for a salesperson to work on within the current period. Now, if you think about it, the potential deal bit is redundant. In the inside-out model, salespeople don’t work on anything else. Practically, then, sales opportunities are the raw material that salespeople work on.
There is certainly no reason for variation between salespeople, and even where customers are concerned, it is usually preferable to adopt a standard workflow, for two reasons: First, in a mature market, competitive pressures will cause your customers to structure their businesses similarly and to adopt similar procurement procedures; and second, in an immature market, customers will not have developed fixed procurement procedures—meaning that your salespeople have the opportunity to convince them to purchase via whatever sequence of steps you believe is optimal for both parties.
A complex sale does not necessitate a complex opportunity-management process. Just as a centipede with 191 trunk segments is no more complex than a fly, which has only twelve, the complexity of an opportunity-management process does not increase as we accumulate multiple iterations of an inherently simple subprocess.
We prosecute a simple opportunity with a simple process (consisting of just a handful of activities). We prosecute a complex opportunity with the same simple process, repeated multiple times.
The software is a distraction from what you’re buying. A smart ERP vendor will not show it to you. Rather than demoing software, this vendor will talk to you about the assumptions, theories, and methodologies that are baked into their software. They’ll understand that if they can sell the theoretical underpinnings of their software, you will lose interest in examining the application itself. They’ll assume that if you’re one of the very few software vendors who are capable of having a high-level discussion about the realities of business management, you’ve probably also figured out how to build software that works.
All promotional campaigns have three fundamental ingredients: 1. an offer, the basic proposition the campaign presents; 2. an audience, the set of individuals to which the campaign is targeted; and 3. communication, how the offer communicated—the creative execution. These ingredients are listed in order of significance. Item 1 has roughly an order of magnitude more impact on the effectiveness of the campaign than item 2, and item 2 is an order of magnitude more important than item 3.
The CRM is a subset of a larger class of software, known as enterprise resource planning (ERP). ERP is the software that manages operational workflows in the organization as a whole. Things such as order generation, production environment scheduling, inventory management, payables and receivables processing, and so on.
Unlike ERP which evolved around the requirements of real users, CRM has never really been embraced by users in any meaningful sense. Absent useful user feedback, technologists have had no choice but to design the technology around their vision of what a sales environment should look like. Hence my claim, previously, that CRM has been designed around an environment that doesn’t actually exist.
The 360-degree view of the customer—available to anyone in the organization—is of no value to anyone at all if the salesperson is working hard to monopolize the customer relationship (often with the customer aiding and abetting their cause). The technology to tightly integrate sales and marketing is of no value to anyone if sales and marketing are fundamentally distrustful of one another—and even less so if the two departments are held accountable to metrics that propel them apart. And the ability for management to see salespeople’s efforts and outcomes is of no use if the salespeople have the power to flavor the data they enter into the CRM, along with huge incentives to do so. (These incentives emerge from the bizarre game that sales managers and their salespeople play in which both pretend that it’s possible for salespeople to simultaneously be team members and autonomous agents.)
If you have a sales manager who is mature enough to rule their team like a tyrant and to interface with other departments like a diplomat, this individual is a rare find indeed and should probably be on the fast track to the executive suite!
Technically, customer service should be regarded as part of operations, not part of sales. The processing of repeat transactions, the generation of quotes, and the resolution of issues are all operational activities.
Project leaders must be neither a part of sales nor a part of production. As we discussed earlier, their very reason for existence is, in part, to manage the necessary tension between these two functions. Accordingly, project leaders can belong to your engineering function if you have one; and if you don’t, project leadership should be a department of its own (assuming you need it, of course).
Your sales manager should manage sales just like a production environment. The goal should be to generate a steady volume of sales, month after month. Record months are only worth celebrating if it’s likely that a new normal has just been achieved.
In each sales meeting, late-stage opportunities are reviewed as a team and allocated to one of three categories: possible, probable, highly likely. The month in which each deal will likely close (if, indeed, it does) must be agreed on. This data is used to generate three month-by-month scenarios: the worst case (pessimistic, but not paranoid), the middle case, and the best case (optimistic, but not hysterical). This data must be made available (in summary form) to other departments—and you must refuse to collapse the data set into a single number.
Early in your transition to the inside-out model, you should measure one thing only, and you should obsess over this number. The metric (as I’ve already discussed) is sales activity or, more specifically, your volume of meaningful selling interactions. No matter what else happens, this number must go up, week after week, and it certainly must go up each time you make a change to your sales function.