Sales Management Science or Art? Maturing Your Sales Organization

Organizations go through phases, oscillating between a “Creative Phase” and then a “Maintenance Phase”. Do sales managers face the same challenge of balancing the art and science, or creativity and maintenance?

All companies get their start in the creative juices of the entrepreneurial endeavor.  By definition they are born with the genesis of a new idea, a new way of serving a need, a new way of solving a problem.  These organizations place a premium on creativity to find ways to compete against larger companies with more resources.

As these great Creative organizations grow, quality issues, and service level issues start to crop up. Owners and managers, span of control is stretched and the seeds are planted for a “Control Crisis”. The question of how to channel all of the creative energy in the same direction, and how to maintain quality standards become more and more urgent.  If you don’t address this Control Crisis, you’ll lose control of the business and performance, profitability will suffer.

But on the other hand, if you can successfully address this crisis, you can regain control and navigate your company into the Maintenance Phase. Maintenance doesn’t sound very glamorous but it is a part of the natural maturing process for a company and brings with it many great benefits.

You have fewer ‘fires to fight’ in the course of operating the business.  Procedures provide guidance to set expectations and inform how work is to be completed and issues resolved.  You can deliver higher quality of service more consistently. Operating costs go down.

Unfortunately, the seeds are also now planted for a ‘stagnation crisis’. Stagnation crisis comes from external forces, the market shifts and the company in its effort to maintain order and control operations, has lost its ability to adapt.

To continue, you needs to evolve again from the Maintenance Phase to the re-Creative Phase.  And so the pendulum will continue to swing in a healthy company, always trying to balance between maintenance and order, and creativity.

Sales organizations also need to evolve and mature from their creative beginnings if they are to become high performing organizations.  Evolving out of the creative phase, allows sales organizations to be more consistent in delivering results, to share best practices with each other and have these practices followed.

Where is your sales team on the pendulum swing between creative and maintenance?  What are you doing to find the right balance?

Forecasting – Finding a Better Way

The new year is off and running and for most sales organizations that means that they are chasing a new target. After struggling through 2009 this probably also means that everybody from the sales reps to senior executives are pouring over their forecasts and asking that fundamental question, “Do I have confidence in these numbers?” I thought I would take a few minutes today to share some thoughts about forecasting and what is or is not included in those numbers.

I wish I could provide a simple golden answer as to how to do forecasting.  I’ve seen lots of approaches taken by my clients, and most have some good logic behind them. Lets start with a couple of questions?

  • Why are you generating a forecast? Do you need to estimate quarterly earnings to the street? build operational plans? need to track the performance of your sales team? or all of these? Why you are completing a forecast and what you need to be able to do with the information has a big impact on how you approach the process.
  • How long is your sales cycle? Recognize that if you have a short sales cycle, under 30 days for example, you are forecasting in an environment that is very different than if your sales cycle is, say, 90 days or longer.
  • What data are you capturing in your CRM (customer relationship management) or SFA (sales force automation) system?  If you have a CRM system, there may be an opportunity to “give something back” to the sales team by automating more of the forecasting process and minimize the effort that the sales reps need to make.

A discussion about forecasting could go on for days.  I won’t.  Let me instead suggest a couple of different ways of generating a projection.  I leave it to you the reader to consider how you might merge each of these approaches to your own company.

Sales Roll-up Forecast

Almost every sales team does some version of the rolled-up forecast.  Sales reps submit their forecast to managers, often with some reference to what they will ‘commit’ to as well as what ‘upside’ potential exists. At each level, there is another level of scrutiny, and a similar evaluation until the total forecast reaches the executive team.  Often a necessary process but filled with emotion and optimism or conservative caution.  There is a lot of art in this process.

Historical Trend Forecast

This is the simplest approach for most businesses but is also probably the one that offers the least insight into current market conditions and your team’s performance.  As the name suggests, you generate a forecast by looking at historical trends for what ever period you are forecasting.  For example, how does this period compare to other periods during the history of your company.  “4th quarter is always 40% of our business.” “The second month of our quarter is always 25% of the quarter.”  With these references, you can project the next period.

Automated CRM Forecast

I have seen this done less but it can be very successful.  One of my clients regularly had their CRM analyst develop a forecast independent of the sales team’s rolled-up forecast. The analyst consistently generated a more accurate forecast than the sales team without any knowledge of what was happening out in the field.  Generating a forecast this way didn’t provide an opportunity for inspection and dialogue within the sales team, but when it came to projecting revenue to stakeholders, this was the way to go.

How do you approach forecasting?  What are your biggest challenges?

Sales Management: Selling to Your Sales Team

Last week I had the pleasure of attending a Business Marketing Association (BMA) lunch where John Maples, vice president, sales, PepsiCo/Quaker Foods and Snacks spoke about Pepsi’s business-to-business sales and marketing efforts. It was an interesting talk and insightful to hear how their business-to-business efforts with convenience stores, Starbucks and sports franchises are coordinated with their direct to consumer marketing. After listening to John for a while one could hear that there was a definite trend in the way Pepsi approaches its businesses sales, which is to say that they do NOT leave it up to the power of their brand, but they do a lot of what John described as “a best practices spreading” approach.

Each instance of this “best practices spreading” had a similar plot line. Pepsi had a goal and some ideas for achieving that goal, one example might be selling oatmeal through convenience stores. The next step was to find an outlet that was willing to work with Pepsi. With this partner, they could test the idea and measure the results. Only after there were measurable, quantifiable results, could the real selling begin. Armed with these results Pepsi then shared the results with other outlets to explain the benefit of the new program and concept, in this example, increasing sales by having oatmeal beside the juice and coffee. In this way, Pepsi was able to test each concept and scale quickly because they had the insight and the facts to support their proposition.

Not only is this a great example of using data in business-to-business sales but it is a great example of how to approach transformation of a sales organization, whatever you are trying to get your team to do.  When I work with sales teams, I am frequently working with sales managers, or those outside of sales who are entirely frustrated with trying to get the sales team to change their stripes.  When I have been successful it has been from following a plan very similar to Pepsi’s.  Start by understanding how your change is going to impact the sales team.  How is it going to help them with their goals?  Find somebody, or multiple somebodies, to test the concept on. Measure the results.  Learn from the process and make adjustments if you need to.  Then and only then, when you are armed with the results, go out and ‘sell’ the new approach to your team.

Great Conversation on Sales Process

The need for a sales process is a topic that I have commented on here and I am sure will continue to comment on in the future.  Today, I would like to link to a couple of other blogs that have touched on the subject in the last week.  Both of which I thin make some good comments.

The first blog was written by David Brock, ‘But We Have A Sales Process”. To quote David, “Without a process, selling is like taking a random walk through the forest—you never know where you’ll end up. A well-defined sales process provides a clear roadmap of the most effective and efficient means to facilitate the customer in their buying process.” I don’t want to steal all his thunder but the blog is worth a read and make some good points.  If you think you have a sales process, assess if your sales team is actually following the process. If you are using the process that came embedded in your CRM system, have you adapted it to the specific needs and lessons learned by your sales team?  If you want it to be a relevant and meaningful process, make sure it fits your needs.

The second blog that I would like to bring to your attention is one by Dave Stein, “More Excuses For Not Doing The Right Thing About Sales Effectiveness”.  Dave starts by giving us a definition for the sales process which is NOT synonymous with your sales methodology.  A sales process does not stifle creativity!  A process will actually enable and support creativity. Think of the most creative members of our community – painters, musicians, actors.  They almost all follow a process when creating great works.

Use your sales process.  Keep it simple and embrace it.  It will help you take the mystery and unpredictability out of your work.

Transforming Your Sales Team – It Is Hard Work

A few weeks back I attended a great discussion and presentation sponsored by the Kellogg business school alumni titled “Selling Strategies In A Challenging Environment”. The event included a panel discussion with four sales executives who answered questions about their efforts to evolve and transform their sales organizations. During the course of the conversation, a couple of  question came up about turnover – how much was there? had these sales leaders worked to reduce turnover?

Across the board, these executives had experienced turnover within their organizations, and a lot of it. Turnover in each case had exceeded 50%. I don’t think this is the answer that any of us wants to hear but I think it is realistic and a challenge that sales leaders who want to transform their organizations will need to face sooner or later.  It is not that individuals are or intend to be cut throat or malicious to successfully transform their organization, but change is hard and not everybody is going to make it. Consider:

The willing but incapable: Perhaps your transformation requires a different style of selling, a different market or product, a different level of executive conversation.  There is probably at least a few in your organization that may have the right attitude but just cannot, for whatever reason change their skills to fit in the transformed organization.

The capable but unwilling: These exist in every organization as well.  Skilled individuals who are not willing to make the change that the organization has asked them to make.

Right-sizing the sales team: Many transformation efforts include changing the structure of the sales organization.  Does an inside sales team need to be added? Is the size of the each managers sales team changing? Are two organizations merging and redundancies need to be removed?

A couple of conversations last week with family business owners, again caused me to reflect on how hard transformations can be. A third generation business owner shared his journey from running the family business to selling that business to an investor and to becoming professional management for another business owner. He shared how it had been impossible to layoff the overpaid, under-performing employee as the business owner but could recognize the need and take action when he was hired management. Transformation is hard, necessary perhaps for continued success but very, very hard.

This morning I read a blog posted by Buckley Brinkman about how difficult transformational change is.  He is in the process of making career changes and moving to a new city which has caused him to reflect (again?) on how hard change is. Buckley is a “Change Catalyst” and in the business of making change happen for companies that he works with.  Yet even this master of change, has to dig a little deeper to find the benefits that make the pain of change worth going through.

Read Buckley’s Blog Post on Change.

How have you managed challenging transformations within your sales team?

Assess Your Sales Organization – 8 Questions

I just read a GREAT blog post by Melissa Raffoni on the HBR Now blog. I have long believed that many organizations are leaving money on the table because they do not have a clear sales strategy or an effective sales organization to execute the sales strategy.  Too often as I talk to executives about sales and what they are doing to improve sales the extent of the work being done is to consider training or compensation and there are so many other elements that can to be considered and leveraged to improve the sales team effectiveness. Melissa in her blog considered the question of sales effectiveness and by asking good questions suggests some of the opportunities that are out there for companies to capitalize on.

Here are Melissa’s questions. Can your organization answer these questions?

  1. “Okay, tell us again, what’s your value proposition? Why should customers choose you over the competitors?” It’s so basic, isn’t it? Yet, I continue to be amazed at how difficult it is to answer this question well. With the constantly changing competitive landscapes and customer needs, every company should take a second look at what they are pitching and why it still resonates today. I’m sure, for most, the value proposition needs a face lift.
  2. “What is your sales process and how does your organizational structure map to it?”
  3. “Do you think your overall cost of sales is where it should be? What makes you think that? Are you comparing to an industry standard or mapping to a projected financial model?”
  4. “What key measures are you using to track sales effectiveness? Do you have a sales dashboard?” Is it cost of sales as a percentage of revenue, close ratio, sales person productivity? Something else? You can’t really optimize if you don’t know which lever you want to move.
  5. “If you believe there are two ways to drive sales–increase the funnel and/or increase the close ratio–what are you doing to achieve those increases?”
  6. “Is sales compensation driving the right behaviors?” Is there enough of a variable compensation component to make a difference?
  7. “It’s a new world, how are you taking advantage of it?” Partners are willing to talk, new talent is on the street, customers are looking for high ROI offerings, social media is changing how people communicate. Are you experimenting?
  8. “Do you have the right people?”

Check out Melissa’s entire blog post here: Eight Questions To Assess Your Sales Organization

Accountability – To Improve? Or Humiliate?

I read the blog this morning by Rosabeth Moss Kanter at the Harvard Business School.  She was discussing accountability and the many challenges that organizations have with accountability and providing feedback. One line in particular caught my attention:

“In contrast, high-performing organizations use information to help people improve, by giving people abundant, timely, and helpful data about their performance on a regular basis, individually and as a group.”

How often does this perspective get lost when working with sales organizations.  Is it any wonder that the sales teams grows to hate a CRM system that has been implemented to capture met. Metrics that are used to find blame. And there is no engagement with the team, no understanding of how to use the metrics to support the sales team to do a better job.

I couldn’t agree with Rosabeth Moss Kanter’s comments more.  Metrics are fabulous and essential to improving performance but managers need to be trained on how to use them, how to coach their teams with the metrics. How to help engage the team and use the metrics to gain insight to improve and not to simply blame.

Read her full article:  Four Tips for Building Accountability

Sales Organization Phases

I heard an interesting talk this morning at the CFO Forum hosted by Broadpeak Collaborative in downtown Chicago.  The speaker was John Aplin, Managing Partner of CID Capital. During the talk, John described the two different phases in an organization’s development.

The first phase is the entrepreneurial or creative phase.  Those who have been in start-up organizations or have worked with them will easily recognize this phase. They are characterized by a creative drive to solve problems and a lack of organization or management controls.  As John observed, it is at this stage in a company’s life when legends are created.  It is the stories of amazing herculean feats to close deals with key customers that live on in organizations and shape their culture.

It is also in this creative phase that the seeds are planted for the “control crisis” that occurs as organizations reach the point when they need to evolve to the next phase – the administrative or maintenance phase.

At some point organizations reach the point as they continue to grow when they cannot maintain the quality and service levels that they want to provide to their customers.  In order to maintain the expected level of quality they need to create and build the repeatable business processes that can be measured and managed.  These business processes not only allow a company to continue to grow but also are essential for that growth.  They also plant the seeds for the next crisis. The “stagnation crisis” occurs because companies become too internally focused and too married to their business process that they can no longer change.

While this description of a company’s life cycle is not particularly unique, I had a sense of hearing it again for the first time as I think about the challenges that face business owners and sales leaders as they lead their team and about the work that I do with these teams.

The sales team is, in most cases (all?), the group that will hold onto the creative phase and resist evolution to a mature and business process focus the longest. They frequently work shoulder to shoulder with the heroes and heroines of the corporate legends who got it done for their customers, who brought in the tough deals against the odds.

They are close to the customer and sometime during their past sold for organizations that had become too bureaucratic.  They have felt the pain first hand when they cannot deliver for the customer.  They are the customers’ protectorates and advocates, being unresponsive are their greatest fear.

But even here, even in sales, at some point a company needs to introduce a level of structure and yes, a process to continue to grow.  Or perhaps, I should say especially in sales.  At an individual level, the best sales people recognize that much of selling is a disciplined process – calling and following up, qualifying opportunities.  These are not random occurrences but refined sales techniques that the best sales people have developed over time.

The trick is to introduce this discipline across the organization without stifling the creativity that is also so much a part of the developing relationships with customers. So what is an organization to do? Step lightly. Collaborate with customers, and with the sales and marketing team.  Recognize that less maybe more, especially as you begin the journey.  Minimize what is required and back that up with metrics and evidence that proves to the whole team, why what is required is a better way. Encourage and incorporate innovation into the process.  Maybe even build a process to keep listening to the customer in order to fend of the ‘stagnation crisis’.

People can survive their life crises by enduring them, companies cannot.  If companies do not face their crises, they will flounder and collapse. There is an uneasy tension between creative and administrative that constantly needs to be rebalanced. Face the uncertainty, take a step forward but don’t stand still.

More On Measuring Sales Performance

I wish I could just tell my clients what to measure. It would make life easier for me and certainly for them, but companies are not cookie cutter images of each other and therefore the critical metrics they need to measure are necessarily different too.

My first question after seeing one company’s proposed metrics was to wonder what their strategic goal was. As a company what are they trying to achieve and how will they measure success? Jim Collins in his book “Good To Great” discusses the importance of distilling down to a single metric what a company does and what has the most significant impact on the company’s performance. Agreement on one or maybe a few key metrics should then be able to be cascaded down to each division and department to their own metrics that support the overall goal. Hopefully the metrics for sales and marketing are aligned with the corporate strategy and then the metrics for the sales process and the sales reps will align to these overall strategic goals as well.

Regarding metrics for the sales team, I would keep it simple. It never ceases to amaze me, the ability of sales reps to game a system and get into a mode of ‘checking the box’ to get management off their back. You want to try and avoid creating that culture of ‘checking the box’.

“You cannot manage what you cannot measure.” Find some basic way to define the ‘business development’ (from marketing all the way through closing a sale) process so that the company can start measuring and find out where the choke points are in the process. Start building the closed loop management system so you can do continuous improvement. Define the process, measure what is going on, build hypothesis for improvement, test improvement, deploy to rest of organization. There will be a limit to how much you can change at one time based on the capacity of the organization for change. Remember, this is a journey; the most important thing is to keep moving forward whatever the pace.

Are reps following up on leads quickly enough? Do you know how quickly is quick enough? Case study: individual applies for insurance from 2 companies, both companies indicate they will follow-up within 1 week but company A follows up within 24 hours and company B follows up after 4 days. Even though Company B ‘exceeds’ what they promised, they underperform the competition. Calculate your metrics with an understanding of what customers expect and what the competition is doing. Measure the results of different activities to figure out what the best practice is. Then instead of just handing sales reps an arbitrary requirement, you can explain and show them how it helps them be more successful.

Where in the process are deals being lost? Can reps get first meetings but not second meetings? What is the close rate on written proposals? Case study: Ohio manufacturing company stopped responding to blind RFPs, when they discovered that the close percentage increased 5x if they mandated a meeting prior to submitting a proposal.

Sales Leadership Lessons From Geese

Last week one of my friends sent me a link to a video on YouTube called “Leadership Lessons from Geese”. It is a somewhat sappy video that extracts lessons in leadership and teamwork from the behavior of geese.

The first observation in the video is the role of aerodynamics to enable the geese to fly farther using less effort.  When the geese fly in the familiar “V” formation, they are able to fly 71% further. The lift generated by the goose in front is passed back to the geese that follow. The lesson to be learned: we will go further through teamwork than if we “fly solo”.

Okay, for a lot of sales people this is probably a good reminder, but reducing it to just teamwork is over simplifying. It is the force of the aerodynamics in conjunction with the teamwork that gives the group 71% lift. So the challenge for a sales leader is to figure out what is at her disposal that will increase by orders of magnitude the ‘lift’ and ‘distance’ her team flies? To get the multiplier effect, sales leaders need to work with their teams to build out the sales process and sales playbooks. The goal is to find efficient and effective ways to share best practices across the sales team, thereby ‘lifting’ the performance of the entire team.

One-on-one coaching and mentoring doesn’t give you 71% lift. There are only so many hours in the day. If the only way to share information, ideas and what it takes to close a deal is by a sales manager riding along, the capacity to raise the team is limited. There is no scalability in this model. To go back to our geese analogy, instead of the team in a “V”, you have a series of paired geese. And with only two geese instead of a whole flock there isn’t much aerodynamic advantage being created.
On the other hand by defining, documenting and standardizing your sales process, you start to create a system that can lift the whole team. Take a portion of the time you spend coaching under-performers to talk to your stars.  What are they doing differently?  Capture it and share it with the whole team.  Now we start to get lift across the whole team not just with one individual.

This is perhaps oversimplified as well. The task of standardizing a sales process and sharing it effectively is not to be underestimated. Where do you start?  You start by having the vision of what you are trying to achieve. Then you take one step at time.