Question

Topic: Strategy

Optimizing Sales Team Performance

Posted by steven.alker on 10/2/2006 at 9:03 PM ET 2764 Points
Dear Colleagues

I’ve been asked to put this question forward by a few clients and rather more MarketingProfs members. It concerns the question of balance between the different and often conflicting activities which sales people are expected to carry out and how we should seek to maximize or optimize their revenues for their company.

I would like to award points to members who offer both positive (Statistical, metrics and objective) answers and also to those who are more into the normative aspects. (Psychology, work satisfaction, job based reward and a desire to prevent talented sales people from turning to rather un-artistic expressions of discontent with a meat cleaver)

Please forgive me if I stick to field-based sales operatives. I’m sure that you can draw analogies to telephone based sales operations.

Only a short time ago, a sales team was expected to make appointments and, depending on their personal skills and training, produce orders as a result of successful sales meetings according to an acceptable closing ratio. In my old industry (Instrumentation Sales), we averaged a close rate of about 1:3. Make 4 sales calls and we would win an order.

Appointments were made from leads generated from Marketing. For every 4 leads we received, we would make about one appointment, so you could say that for every 16 leads, we would make a sale. When we had run out of leads on a planning day we went to the results of prospecting. We worked a week which consisted of 1 day planning and 4 days in the field. On the planning day, I would chew up about 32 leads to make about 8 appointments for the forthcoming weeks. I’d also get through about 40 Marlborough Lights and 8 pints of coffee! When we ran out of leads, I would revert to my prospect list, which I would have garnered over the last couple of weeks in the field, often based on looking at their company whilst in between appointments. It was and still is a very efficient use of sales time.

We improved those ratios by training, so that the close rate went up and through good territory planning, the call rate also went up.

Good Leads + Good Appointment Making + Professional Closing + Decent Territory Management allowed those of us who could give a damn, the opportunity to always better the company norms. It worked – One Ferrari and a Porsche were one of the ways I wasted my bonuses.

Then a management consultant said, “Hang on a moment, the only time that a sales guy is earning money for the company is when he (Sorry, it was all he’s then) is in face-to-face contact with the prospect. Let’s put in a Database (CRM system now) and get an internal team to make the appointments for them, thus freeing up a day or adding 25% to their selling time. It was a disaster – sales people vetted their leads and prospected on the basis of the “Look and Feel” of a company, along with the prospect’s Mercedes 500 in the car park. Appointments dropped off and sales moral slumped, as did orders, to the tune of about 45%. Sales people liked to be masters of their own calendar.

In the last 10 or 15 years, sales people have been increasingly mandated to perform marketing tasks, which in all but the smaller companies I think is counter productive – you might feel differently. However, I would like to look at a modern small company where this blending of roles is common, look at the assumptions and see if you can gibe me some insights.

Let’s take my basic premises:

Sales people only earn their income for the company when they are closing deals through presentations.

The more presentations that they can make, the more closes they will achieve.

They can improve their close rates and their presentation rates through training, but the time to do that must come out of their potential sales time.

To make presentations, they must make appointments. This is an essential precursor to carrying out sales appointments, but it is not in itself selling and thus does not directly result in earning money or making target. If you were to speech all week making appointments, you couldn’t go to any!

Marketing can rarely give sales people enough leads to book up the next weeks useful sales calls. Sales people weed out the information collectors and those without applications or budgets. Therefore sales people need to prospect to find potential clients to present to.

Prospecting, like appointment making is vital, but it is not actually selling and therefore, in itself, generates no sales income.

A sales person who can spend all day, every week, making quality presentations will have the best chance of closing the most deals, But:

A sales person who is always out in the field, has no time to book appointments and is therefore unable to book those appointments (Catch 22 or cart and horse, I don’t know)

When quality leads are lacking, a sales person must prospect, but whilst they are prospecting, they are only seeking to set up appointments, not earning money.

All other sales activities will use up time when the sales person could be profitably involved in face-to-face sales presentations, which have a reasonable chance of maturing into business.

I believe that no sales organisation can be run successfully unless the managers and the sales staff know what they are getting up to and what their success factors are. This involves reporting and forecasting. Whether this is on paper (Which is unlikely to be read) or on the CRM system (Which, sadly, is rarely set up to divulge this information) it all takes time. If sales people do it in the usual working hours, that is wasting valuable selling time. If they do it after hours, that might be an unreasonable demand on their personal time and eat into family and other commitments which keep them sane.

If you try to express this as a set of equations, you might be able to optimise it through linear programming, but that is rarely acceptable to the human side of an organisation. Many years ago, I worked with Hugh Walton, whose analogue business optimisation computers (The Simutron) would crack this nut if you knew how to enter the data, variables and constraints. Being analogue and covered in knobs, if the computer eliminated the chairman’s Rolls Royce to optimise profit, you could “Tweak” it back into existence.

So, can you help me to understand how we might optimise the revenue and perhaps the profit implications in a modern company where sales functionaries have to assimilate many, often conflicting tasks.

Best wishes

Steve Alker
Unimax Solutions
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RESPONSES

  • Posted by steven.alker on 10/3/2006 at 7:53 AM Author
    Dear Marcus

    That was quite a take on my question, hitting several points which I wanted to find answers and opinions to and no small number of points which I should have wanted to “Get my head” around.

    I was a bit worried about the fact that professional sales is no longer a numbers and quality business (My 2 Q’s: Quantity of Effort and Quality of Sales Effort) but has more to do with subtle synergies and “presence” rather than asking six questions, getting six answers and a few more comments and then closing the guy on the information gleaned. What the hell does this mean?!!

    If it has transmogrified into something which I can’t measure, as a CRM consultant, I’m in trouble. As a management consultant, however, I’m in the money, because I can spout any old crap I like and as long as I sound convincing. $2000 an hour is mine for the taking. Only I don’t want to go down that road!! If I had, I’d have become an Evangelical preacher in the USA in the late 1970’s and “blessed” people into parting with their money, but even though I wasn’t a Christian at that time, I never felt that I was able to be that immoral and corrupt, so I went into sales instead!

    The first thing which is apparent from your comments is that the execution, if not the nature of selling has changed over the last 25 years. I’m a CRM guy and a Marketing consultant with a retainer from a head-hunting firm for sales, marketing and management positions in the world of instrumentation. I own a sales training business and I’m a partner in Unimax Solutions, so you’d think that working both with and for all those sales people, I’d have my ear fairly close to the ground, eh?

    No, that is wrong. I have for some years suspected that the geography of the sales process has changed out of most, but not out of all recognition. But it has changed from what it looked like when I joined up in 1980 and even from when I was a sales director in 1996.

    In those days optimisation of effort to maximize results consisted of the following; I’ll deal with the real structured ones and the flippant, but ever so real, reasons in the same paragraph. Here I lay out the optimisation of sales effort and maximization of revenues 1981 – 2001 (roughly speaking)

    • Be utterly trained in the product
    • Know how to open a sales discussion with questions
    • Understand that your listening to talking ratio should be at least 2:1
    • Listen for buying signals, no matter how negative
    • Give a cracking presentation. It won’t sell a thing, but it proves that you are not a wombat.
    • Conduct trial closes to expose objections
    • Answer the objections
    • Close and gain either the order or a commitment to it at a further meeting
    • Follow through to reduce cancellation risks
    • Ask for referrals


    Right, those are the formal one’s and clearly, if the quality of sales effort is maintained (Questions, listen, trial; close, objections, close) then the success rate is rather down to how many of these discussions you have. I have for some time preached the two Q’s of sales which I mentioned above, namely, “Quantity of effort x Quality of effort = value of sales” Give or take a constant and a non-linear algorithm or two!

    So we were right, at least then to say to a failing salesman that if we could increase his call rate from 3.5 a day to just 4 a day, if he continued to be professional in his approach, then his sales should increase by about 14% which is enough to move someone from failing to successful. Often this could be achieved by paying attention to some of the more frivolous aspects of succeeding in sales:

    • Not getting blotto the night before an important meeting
    • Getting up early, regardless of how lovely the person you met last night is
    • Planning the presentation and doing a dummy presentation with colleagues or friends
    • Not aiming to drive 300 miles to your 9.00am appointment, just to deliver a quote.
    • Etc, etc.


    You are hinting at more involved and complex sales success factors. I’ve used and studied strategies such as Miller Heiman and so on, but all strategies which I have evolved in forecasting either involve an analysis of past sales activities which can then be tied to future results or straight forecasts based on rigid rules and gut feel.

    Thus, separating the qualitative aspects of a first class sales person, if the members of the team are making the requisite number of sales visits, discussing the appropriate products and demonstrating them in a live environment, then the aspects of salesmanship on the Quantity side are taken care of.

    If they are using their geographic territory planning in a sensible manner, using leads effectively and adding to them through prospecting, that’s half of the Quality aspects. If on accompanied sales visits they can take a discussion through to a close, that used to be the rest and the sales person would be very likely to succeed.

    Are you now saying that it’s all changed? I accept that things are different and that prospecting, “Burrowing Into Accounts”, relationship building etc are all more important, but I would have thought that the basics of asking around six questions, getting around six answers and then going for a trial close followed by the real thing would still be appropriate. If you disagree, please change my mind – I am totally open to suggestions.

    And that leads me back to the basis of balance to optimise a sales outcome. Ideally our sales person would spend 8 hours a day making superb presentations. If they could do that, their results would be stupendous. But because the lead qualification and appointment making are recognised to be part of the sales process, they have to lose at least 20% of their working (Sales working) week to appointment making. Then they need to lose some more time to prospecting, though I’ll admit that there isn’t a lot of valuable selling that you can do if you are 200 miles from the office and there’s 45 minutes to your next appointment which thanks to superb territory planning is only 3 miles away, so some on the site prospecting is a zero cost option – the opportunity cost is nil because there are no sales activities the sales person could be carrying out.

    That still leaves me with the problem – how do we mathematically optimise the division of time to which a sales person will devote his working day and how do we decide what is a sensible division of time on different tasks if we wish to retain his employment for more than a few months.

    Lovely start to the discussion though!

    Steve


  • Posted by Frank Hurtte on 10/3/2006 at 2:10 PM Accepted
    Steve,
    One thing that you did not cover is this. In my world selling is not a one shot deal. Relationships are built, small sales are made, service is tested, act of selling is very similar to a flowing river.
    Distributor salespeople get to know one person, bridge from that relationship to others, sell to committees, loose sales and in the process better their position for a future sale.
    In this ongoing process, often sales people build relationships with customers that transend companies and employers. In this type of sale coaching and skills building are ever important. Often the right skills will accellerate the relationship building process. Learning to ask for references will move you into other territories and other locations.
    (and now for a story from my misspent youth)
    When I was in college, I sold encyclopedias and books. My first lessons in selling were scorched earth lessons. If it didnt look like a sale would happen, bail out, run to the next attempted sale (or better closing). Ten doors knocked on equaled 4 opportunities to pitch the book, one of these equaled a sale. I was told the good sales person recognized that no sale would happen and immediately (and impolitely left the customers house).
    After being somewhat successful this way, I tried something else. When I made a sale, I aske for references. I then asked if we could call from their house to set something up. The number went from 10-4-1 to 4-3-1. I worked smarter and got more sales. I also began developing (without knowing it) a niche market. Exchange students with kids wanted english books to take home to where ever they were from. I began going back to people already sold. They provided more leads and more sales.

    I am getting long winded.. but shouldn't the sales process be looked at on a longer termed basis?
  • Posted by steven.alker on 10/3/2006 at 2:24 PM Author
    Dear Jay (Frank - I'll respond to you later and no - you are not being long winded!!)

    That is an interesting reference, though at 230 pages I will take some time to digest it! As a matter of interest I was one of Bob Thompson’s first members of CRMGuru (He is cited in the report as valued source of information) and the Hewson Group have just done a profile on Unimax Solutions.

    Salesforce.com is probably amongst the most pro-active of the CRM companies as far as metrics are concerned and as sponsors of the report, there appears to be a strong flavour from the kind of statistics which they offer. There is no attempt at first sight however to employ any Linear Programming techniques which I would have thought would lend themselves to a CRM based Sales Force Automation solution which inherently stores enough information to allow an astute analyst to work out the best mix of endeavours.

    I’d go so far as to apply Reductio ad Absurdum as we did for a previous question:

    https://www.marketingprofs.com/ea/qst_question.asp?qstID=14901

    If a sales person spends all day in face-to-face selling, they will maximize their opportunities to close sales.

    But if they do that, they won’t have any time to make any appointments, so they won’t actually get in front of any customers in the first place.

    If they farm out appointment making to a third party or to an internal sales team, the lack of skills from the internal team and sense of disenfranchisement felt by the sales people will waste about 45% of the sales leads.

    If the sales team spend an adequate amount of time making appointments themselves, they don’t have any time left to visit people and sell to them so they won’t sell anything.

    If the sales team don’t spend any time prospecting, they won’t have enough leads or prospects to supplement those offered by marketing.

    If they spend too long prospecting, they won’t have enough time left to visit potential clients in order to sell things.

    If we solve the problem by getting marketing to provide all the leads the sales team needs to make high quality appointments, a law of diminishing returns kicks in and the marketing budget needed to achieve it would probably exceed the GDP of Belgium, so it is unlikely to be a feasible proposition.

    How do we optimise that lot whilst still staying solvent?

    As you’ve read the report and found it to be of value, have you come up with any solutions or partial solutions to this conundrum?

    Best wishes and thanks again. I hope that you can come back with some further insights.

    Steve Alker
    Unimax Solutions


  • Posted by steven.alker on 10/3/2006 at 6:55 PM Author
    Dear Frank

    I agree with you that a sale is the component of the parts which lead up to someone giving you an order. Naturally, organisations have devolved functions such that people can play to their own strengths. Thus sales people used to be freed-up to close sales and to optimize their performance through sales technique, territory planning, prospecting by observation, asking for referrals and to ensure that sales visits were worth the petrol or the shoe leather. I used to work on the basis that if a candidate was willing to learn, I could improve his or her performance in each of these areas to the extent that their overall performance would increase by 50 or 60 percentage points. But that is optimisation and improvement in the core discipline – getting to the sales interview and then closing the sale. That’s not optimizing the mix!

    Other functions such as writing introductory letters, drafting quotations or contracts, designing literature and anything else you can think of which contributes to the winning of a sale was handled by someone else, because those people did it better, because they couldn’t sell (Or didn’t like selling) and that the sales person’s time was wasted if it was not spent entirely on the sales process. Yes, I admit that it might be a long and drawn out chain of things which had to be achieved, but rather like key-account selling, you score a bit of a sale when you close each stage of the negotiation. Only once you have ticked most of the boxes and finally someone says yes do you see the order and the money.

    You have hit on one of the key elements which I am struggling with. By working smarter, rather than harder, you cut your close ratios through using referrals and targeting groups of the willing. This is good work, but nothing which you had to do cannibalise your key selling time. What I am trying to discover is a way of optimising the way which a modern sales person has to work so that they and their company can operate in a way which maximizes revenues by getting the key activities in the right proportion and I suspect that the answer is quite difficult.

    Take any small company like one of mine mine. If we work as individuals, selling and consulting on CRM, sales forecasting, business process and marketing, we can get rather well paid for our work. Let’s say that it is around $2000 a day. Now in a year of about 220 available working days, (That’s 365, less 104 for weekends, less 10 bank holidays, less 20 vacation days, less 7 national holidays and 4 days for sick leave) we theoretically could earn $440,000 in fee income. Ah, but we need to book out our time to get these fee earning days. Smart marketing will land me with about 1600 good leads for about $40,000 expenditure which is fine. Only, I have to spend at least 40 days talking to these guys to get about 400 people who are worth pitching to. That’s 180 days left to earn some money, which could be $360,000 less my marketing costs of $40,000, or $320,000. Now I don’t get paid for pitching, but pitch I must to win the business. If I am very, very clever, I can do four pitches a day, so that’s 100 days pitching for my fee income. That only leaves 80 days to earn my living which equates to $160,000. Subtract from that the $40,000 marketing costs and the $200 / day to get around seeing people to pitch to and I earn $100,000. If I can only do 2 pitches a day, I actually lose money!

    If a small company is a super-set of a one man band where we can all play to our strengths, there has to be a way of calculating how to divide our time between marketing activities to get leads, prospecting to augment leads, making appointments in order to set up sales meetings and carrying out the sales meetings so that we can close business and make some money.

    My problem is, that I can’t see what the connection is and despite all that maths I have learned, I can’t see an equation which will allow me to say “OK, On Monday, we’ll do the following, then on Tuesday this is what we’ll do and so on until we reach our goals.

    That’s not to say that in the past and even at the moment we haven’t set, met and exceeded our goals. What we don’t know is how we could have maximized our achievements because we haven’t been able to discern the relationships we should be looking at beyond how to excel at the elements of a sales and marketing plan. It’s when you add the whole thing together that it gets rather too difficult to see the whole picture.

    Help!


    Regards


    Steve Alker
    Unimax Solutions

  • Posted by telemoxie on 10/3/2006 at 9:07 PM Accepted
    The area of handoff from marketing to sales, and the management of sales pipelines, has been my major focus for ten of the last fifteen years. My original perspective was that sales folk should NOT prospect, and I would handle that as an oursourced function... but I now believe sales folks should schedule time weekly for prospecting... and my typical clients for outsourced lead generation are Presidents of very small technical companies (who, in my opinion, should NOT prospect themselves, in part because it makes their company look small, in part because the opportunity cost of their time is much greater than sales folk).

    Someone in the above discussion had said that, if the preliminary work is done well, closing the sale is anti-climactic. I agree - the other pre-sales activities become more important (and more technical) with time, and the need for ongoing sales training increases daily.

    I think you are asking the wrong question.

    Suppose you were consulting for an apple orchard. The sales folk are analogous to the apple pickers. It would be silly to optimize activities to make things best for the pickers. It makes more sense to view the productivity of the orchard as a whole - which means you need to focus on tree planting, and fertilizing, and tree trimming (none of which your pickers will do).

    You need to avoid, at all costs, building a CRM system which rewards your sales teams for sandbagging. Yes, they should prospect - but they should also focus 90% of their energies on qualified prospects, rather than spending more and more time having friendly conversations with people who are not ready to buy.

    Continuing the agriculture analogy, I'd suggest that sales folk are well suited to inspection and reaping, but poorly suited for planting and cultivation. Yet, in the long run, it is the cultivation of a growing pipeline of business which pays off for the specialized technical company.

    I've implemented over 100 long-term lead cultivation programs for technical companies in a variety of industries, and I've made just about every mistake imaginable in the process. If you'd like to discuss further, I'd welcome a call anytime.
  • Posted by steven.alker on 10/5/2006 at 6:23 AM Author
    Dan

    I looked up Boxpilot and have asked for a demonstration of their capabilities. I have to admit to a bit of scepticism about how well a voice mail messaging service could work when we have a 90% failure rate to communicate with a decision maker using skilled, live, trained sales people. It is for that reason that we do not use cold calling – the maths work against a successful outcome. For example, a recent trial had us make 500 calls which resulted in 50 connections (If you include call-backs that makes 2000 phone calls in total). Out of those, 10 expressed an interest in what we did, but only 3 had a budget to do something, because we had contacted them, rather than the reverse. The result was one sale for what were probably 2000 phone calls to 500 prospects.

    We repeated the exercise with a professional telemarketing agency and out of 500 contact calls (Lord knows how many calls in total, call back’s were not reported) we got 25 expressions of interest. These resulted in zero sales opportunities, because the telesales agents did what they do best – they whipped up an interest and an enthusiasm in what we supplied, but when it came to making a sales presentation, there was a lack of budget, a lack of will or a general diminution of interest which had been expressed on the phone to the professional agents.

    Now I am certain that if we had utilised a more focussed agency who understood our aims better (Telemoxie can probably vouch for this) we would have achieved a better result, but the overall picture, viz-a viz the optimisation of our resources for a sales outcome was not good. I can’t imagine that having our prospects receive a recorded message about our services would be of any use at all, but I await feedback from Boxpilot with interest.

    Thanks for “Thinking out of the box” (Ugh! I hate management speak) but I don’t feel that this is a cost effective route to optimising sales results. And optimisation is what this posting is all about.

    Best wishes


    Steve Alker
    Unimax Solutions
  • Posted on 10/5/2006 at 7:49 AM Accepted
    Sales Force Effectiveness(SFE) can actually be studied. Have someone shadow 10 of your sales executives throughout the day for a week. Have the observers note time spent on telecalling prospects, fixing appointments, making the call, closing the call, result of that call in quantitative formats. Discard Day1 data on account of biases due to constant observation. Collate the data for all. Draw up mean and median values of time spent on each major head. The differentiate the Value Added(VA) Activities from the Non VA.

    Once that data is available brainstorm into ways of minimising NVA and maximising VA activities.

    For eg. if a lot of time is spent travelling to meet the prospect for a meeting which is a relationship building meeting and not a final call closure one then, could that meeting have been done on a web conference mode?

    Or could a beat plan have been generated minimising time for the salesperson by the SFE software once the meeting times and addresses by Zipcode are updated?

    Filing status reports and updating last meeting minutes directly into the SFE software through blackberry or laptops also help sales people. That way they can work out of Star bucks and minimise time spent in office.

    If you have data of sales person productivity along wth calls made, appointment fixed etc then drawing up a regression equation with coefficients for each variable will help you identify good prospects at an early stage.
    Y=f(X1, X2,X3,...,Xn)= C1X1+C2X2+C3X3+...+CnXn

    Y= Final Sales/ Revenue
    X1= Numbers of cold telephone calls made
    X2= Number of personal appointments
    X3= Number of people involved in the prospecting activity
    X4= Amount of money spent on prospect
    etc etc.
    Each coefficient will give you the positive or negative correlation that each factor. Also the absolute number of the coeff will give you how strong a correlation ( +ve or -ve) that factor has on the Final result.


  • Posted by steven.alker on 10/5/2006 at 9:13 AM Author
    Dave (Telemoxie)

    I totally accept that your business focus is to get sales organisations to hand over the non face-to-face aspects of the “Selling process” to those who can handle it in a more cost effective manner. What I question, however, is whether in a complex sale, where the introduction to the vital sales meeting, where a sales transaction can be initiated and even be prepared for a “Close” can be handled by a third party for most of the time.

    I’m not going to indulge in sycophancy here, but I think that if you were on my doorstep, I would be very comfortable about handing over the appointment making to you, after having given you a suitable brief. There are two reasons for this. Firstly, and this is cruel, I would rather you battered your brains out whilst trying to have a meaningful discussion with a decision maker or a sales influencer, rather than ask our sales team, or as you put it, “Have the VP” do it. But let’s face it – on the evidence from the telemarketing industry and from our own experiences, hard work and skilled work doesn’t usually produce results.

    What I am looking for is an optimal way to spend time and budget in order to maximize the sales result, and taking your’s and other contributors comments into consideration, I’ll admit that the result might not be a sale in the current cycle, but perhaps one which is stored for future success, through the CRM system. Because I’ve seen evidence of your work and heard testimony to it’s effectiveness, I’m more than tempted to accept your premise that you could optimise our (Or my client’s) sales outcome’s by simply giving them the pre-qualified contacts who they should be speaking to. Any cock-ups after that are then down to the sales people involved. But there aren’t many of you around!

    Right, let’s get onto your premise that I’m asking the wrong question. I think that to an extent that you are right, though a question which asks, “How do I optimise the sales / marketing mix within the stated variables, constraints and supposed relationships” can’t be all that wrong, even though it might be a bit academic. Academic in that it relates to nothing apart from some hypothecated sales situation, but, come off it, you’ve experienced this in your work haven’t you?!

    I think that the real kernel of your comment is that we should not concentrate only on the execution of the closing part of the sales process. Well, I agree with you, but I have to revert back to you when you concern the activities of a smaller organisation and where the sales people are asked to engage in most of the pre-sales and post sales activities. If you accept that the only time whereby a sales person actually earns their crust, how do you optimize the ratio of time which they spend on precursive activities which must of needs precede a successful sales call and those which are needed to maintain the momentum after a call to conclude a sale?

    Yes, it would be silly to organise an organisation purely for the purpose of allowing sales people to attend sales visits and to close them, but that was the purpose of the question! In a larger organisation, there should be an infrastructure which allows the sales people to do just that, but increasingly, even in larger companies, they are asked to split their time between garnering sales opportunities and than going out to close them. I think that you recognise that to be as counter-productive as I do, but in line with your thinking, the sales person SHOULD prospect and, depending on their organisational structure, they should set appointments, or perhaps leave that to someone like you. I admit that my statistic of having an appointment setting team which led to a 45% reduction in productivity was based on a personal experience, again based on a sample of one! But I have heard similar tales of woe elsewhere from clients.

    Until we close the question, I’d prefer to keep the discourse on-site, but I’d be delighted to hear from you directly.

    Best wishes


    Steve Alker
    Unimax Solutions




  • Posted by steven.alker on 10/5/2006 at 9:54 AM Author
    Dear shghosh

    Some maths at last! – Not that I don’t appreciate the normative contributions. I’ll get back to you along with my attempts to digest Jay’s suggestion from 230 pages of SalesForce.com reading. Your suppositions look to be very interesting and deserve deeper thought.

    As a matter of decent prospect follow-up, Salesforce.com got back to me within 24 hours of me downloading their paper, to see how they could help!

    Regards

    Steve Alker
    Unimax Solutions
  • Posted by telemoxie on 10/5/2006 at 6:24 PM Member
    Steve -Please don't close the question just yet... I'd like to thoughtfully respond to your post, but I'm headed out of the office for a few hours.

    Regarding your comment, "there aren't too many of you around" - the closest I've found is Shaun Gisbourne, who runs the Ecademy Forum - Telemarketers Club.

    Are you a member of Ecademy? If not, you might want to do a trial membership, and check out the postings in the Telemarketer's club.
  • Posted by steven.alker on 10/5/2006 at 7:32 PM Author
    Dear Bob (DeStefano)

    Thanks for the references to Accenture. I have a lot of respect for those guys, even though the last one I worked with still hasn’t returned my watch, which he borrowed in order to charge me for telling him what time is was. OK, Old joke, but what do you actually think of these papers?

    They strike to the heart of my business which is CRM and sales forecasting and sales and marketing analysis, but again, until I’ve had a chance to understand them, rather than read them, they seem to press all the right buttons, but without actually moving me in the direction of an answer to SFO (as we used to call Sales Force Optimisation) – before some other creator of TLA’s (Three Letter Acronym) borrowed the term.

    Could I be so bold as to ask you about what you think of Eric Gist’s papers?

    Best regards and thanks again for the reference. Hope to hear back from you.

    Steve Alker
    Unimax Solutions
  • Posted by steven.alker on 10/5/2006 at 8:24 PM Author
    Dear Marcus

    Thanks for coming back – I’m starting to wish that I’d offered twice the points for this one because the quality of discussion is rather high and you guys are really putting some thought into this tricky question. Well, it’s tricky to me because I’ve never been able to explain it to either a client or an employer in less than about 120 pages, which probably means that I was wrong. Apparently ask any mathematician – if the proof takes a week to write out, it isn’t right!

    Prospecting was the subject of a previous posting – is it a sales or is it a marketing activity. The votes appeared to be cast in favour of it being something which sales should do and I agree. I appreciate your view on using “Passing Time” to prospect for new clients whilst in the filed. We used to do it all the time and suddenly, hey-presto I’m told that it is “Old Sales Technique” I don’t agree with that sentiment and I can’t see a better use of my time between appointments than scouting around companies on an industrial or commercial park and finding out something about them. Or going for a coffee! Your suggestion that these days, with mobiles, PDA’s and Blackberry’s that HQ should do some research on the spot is a useful addition and one which should be factored into my quest for optimisation.

    As to data mining, too many small companies fail to accumulate enough data to mine it successfully and then they wonder why their analysis of the data is around +/-100% of what they were looking for and their sales forecasts are even worse. If they were to record your 8 points in some positive (Numerical) manner, they might get some reasonable insights even from a fairly small body of data. We do sales forecasting based on the assessments of individual members of the team and even with few data points and few prospects, if we measure expected performance over time, we can split the bullshit from the real projections. And surprise, surprise, when we look at the consistent performers and what they do and try to show the inconsistent and poor performers how to improve simple elements of their sales process, their results improve. Or they get the sack.

    Having read the other contributions as well as yours, I am coming to realise that I am being a bit “Stalinist” in my approach to wasted time. I think that I’ve got to find a way of factoring non face to face time into the optimisation as a positive element, rather than seeing it as a waste. How we go about that though is a quandary. As you have said – If a sales person is not selling, then they are not earning. There must be an elusive equilibrium between preparative work and closing work which we can try to find. What people are saying so far is that no (sales) man is an island and that no sales man is a robot, so we should not attempt to push them in that direction.

    Which leads me to your closing points – if the rest of the organisation is behind the sales person and providing them with the information they need via the CRM system then we have a different scenario: The attendance to the right sales calls which have the highest value and the best chance of a win or a close.

    Now I think that’s a great insight, but how on earth do we factor that lot into optimising a small to medium size sales organisation. Is it maths or management? Getting people to abandon a hot sounding prospect who is in reality a poor business proposition, because it fills up an empty corner of their diary is actually rather hard to do.

    Best wishes

    Steve Alker
    Unimax Solutions
  • Posted by telemoxie on 10/5/2006 at 10:59 PM Accepted
    I'd like to address two issues: 1) job satisfaction, and 2) sales productivity.


    1) Job satisfaction issues

    Regarding the first issue, in your question, you seem to be looking for a solution which will NOT cause job dis-satisfaction. Good for you. I'd like to climb on my soap box to comment on the "CRM vs Job Satisfaction" issue just a bit.

    There was a time when sales people were professionals.

    Once upon a time, before laptops, before cell phones, before CRM, sales was a noble profession.

    I remember my first sales job. I had one number to hit: a quota. If I hit that number, all was fine. How I did it was my business.

    My, how times have changed. Are you tracking your sales reps using GSM and their cell phones? You can, you know. Not only that, you can install special software on their PCs so that you can tell when they are working... But just because you can do something, doesn't neccessarily mean it's a good idea.

    Sorry to digress, but from my somewhat unique perspective, some of the suggestions in this discussion seems to be focused on finding ways to meddle and micromanage and interfere with the sales team, rather than to treat them as competant professionals, and to provide them with helpful support.

    Back in 1986, a bit over 20 years ago, I took a cut in pay to be the marketing director for an innovative sales force automation software package. This package was ahead of it's time in many ways, and did a few things extremely well, but did not have the same polished look of the competition. So I would ask folks who called in what their primary objective was, so that I could identify my best prospects. I was suprised that 100% of the folks who called in were primarily interested in finding ways to reduce the pay and the power of their sales teams.

    I started my business as a defense against overzealous ivory tower marketing busybodies who would make sales folks lives miserable with a series of ill-advised short term oriented half-baked programs.

    The past twenty years has seen a steady erosion of the sales profession. Steve, we've never met, and I know precious little about your CRM implementation strategies and business practices, but I would observe that sales folks are usually justifyably concerned when a CRM consultant shows up to fix things.

    Personally, I always liked the old IBM philosophy. I had heard there were two jobs at IBM: sales, and service to sales. If you want to have happy and effective sales people, focus on building an organization which provides service to them.

    So, how can we serve sales? That brings us to point 2...


    2) Sales effectiveness issues.

    Let's compare a sales organization to an agricultural one.

    In agriculture, there are some basic steps:

    - Selecting a field
    - Plowing
    - Planting
    - Irrigating, cultivating
    - Inspecting
    - Reaping
    - Storing (i.e. in a barn)
    - Distributing the fruits

    Each of these has an analogy in modern marketing:

    - Selecting a field - selecting a market
    - Plowing - "Creative selling, creating a need"
    - Planting - tradititional lead generation
    - Irrigating, cultivating - SEE BELOW
    S - Inspecting - qualification, sales managment
    S - Reaping - Closing the sale
    S - Storing (i.e. in a barn) - technical support, proj mgmt
    - Distributing the fruits - finance and accounting

    Sales people perform three of these functions, which I have indicated with an S.

    The process of irrigating and cultivating deserves special mention. In most sales situations, there is a two way flow of information. But the process of irrigation and cultivation is a one way deal. You are watering and fertilizing the plants, and at this point, the plant is giving you nothing in return. (This is my particular area of focus, which I refer to as 'prospect centered marketing' )

    Part of the discussion above seems to indicate that sales teams should manage large piplelines. I strongly disagree. Sales folks are trained to ask some simple qualification questions, like 1) are you ready to buy? 2) do you have the authority to buy, and 3) what do we have to do to get this deal done today? They are, in general, poorly suited to provide white papers over time, etc. and manage very long sales cycles. They will repeatedly qualify, to the irritation of the prospect, rather than providing (unqualified) prospects with the information they need to grow over time into qualified prospects.

    For a variety of reasons, sales reps should prospect, possibly including a strategy such as expoused here:
    https://www.honestselling.com/
    (This is basically a qualification strategy, and so it works quite well for the sales person.)

    In addition, Marketing should "plant" by sending out direct mail, eMarketing, etc - and in my opinion these leads should be given to the sales team for qualification. If there is a "black art" to selling, it is in the area of qualification. Every sales person knows the 80/20 rule - that 80% of results will come from 20% of leads. Let the professionals make the qualification call, rather than having some junior trainee with a script make the call.

    There are many reasons that sales folks should prospect - and if it were my company, I would allocate my "sowing" dollars to generate leads for sales people who were prospecting, and feeding fresh names into the CRM system. I would give them a stream of leads, but force them to qualify and to choose the hottest ones to work on. Pour the rest into the "cultivation" bucket - reserved by territory for the sales guys - and let experts in long term lead qualification ( I can help in this area ) grow your pipeline of business over time.

    Thanks for reading this long comment. I hope that my perspective is of help to you in some way.
  • Posted by steven.alker on 10/6/2006 at 4:39 AM Author
    Dear shghosh, or what do I call you after “Dear” apart from “Professor!?”

    Concerning shadowing, reporting and analysing how a sales team works, we did that and actually found the outcome so insightful that we’d like to offer it as a service to our clients. The problem is that at the moment, I don’t know what to do with the data.

    Your equations (And I am the first to admit that this forum is not the best place to express mathematical functions or graphs which is perhaps why skilled and knowledgeable contributors tend to avoid the subject – unless that is, they write their expression in Visual Basic or C++ which at least comes over in text. It’s just incomprehensible to the other 90% of the members!) (Whoops! Big bracket back there!) Utilise constants and measured variables which I think that you would agree are hard to arrive at. As one activity is either cannibalistic from another (Say, prospecting vs. sales meetings) which is negative feedback with a time delay of zero, or activities involve positive or negative feedback with a time delay of either days or perhaps weeks. As soon as you start to factor what you can’t do next week because someone told you that you shouldn’t call them next week but that someone else said that it would be fine for you to call in two weeks, we have the horror of negative non-linear feedback. That renders all projections which are iterative to be subject to chaos dynamics and therefore unpredictable in the long term.

    To keep things simple, we kept more to your model and ignored how the real world might work with feedback and all that, just measuring what people did.

    We discovered (for home based sales people) that despite the average sales day being from 7.30 am, on leaving the house, returning at 6.30pm with about 1 hour of report writing in the evening (Heroic stuff, what?! That’s a 12 hour day!) that the sales guys spent 2 hrs and 35 minutes actually in front of the prospects out of which they spent only 2 hours on sales conversations. (The rest of the contact time was spent in politeness) We already knew that they averaged 4.1 calls a day and that the balance was spent travelling and prospecting. As they already utilised a crude but effective territory plan, we could only gain incremental improvements in their transit times. Face to face times could be extended, but to what point? A successful sale was closed when it was closed. An unsuccessful pitch was not going to be closed because the guy droned on for a further 30 minutes.

    So we ended up saying that we needed to increase the number of appointments. That is contrary to your logic, but we had no way of being able to tell if a sales call would be fruitful or a disaster until the salesperson got in front of the prospect. Assuming that they had qualified authority, budget and technical “Fit-for-purpose” the only way we could judge whether a sale would go ahead was by how the interview and demonstration progressed. Indeed, contrary to our current desire to stop sales people booking up hopeless appointments, we often used to make an appointment for the sake of it, knowing that once we were on site, we could control and enthuse the prospect and turn them from a hopeless case into a warm buyer!

    So, today, I have the means to carry out optimized territory planning via Post Codes. I have to admit though that as a CRM practitioner, I have the devil’s own job in getting the clients to agree to record enough information so that they can analyse it and do something about it.

    One of my best customers recently told me that his CRM system had become a main cause of losing good sales people because they didn’t like ticking all the boxes after a visit. They had forgotten or never known what a slog it was to report before we introduced Maximizer, but that is manageable. As for forecasting – they try their best but really give it about 10% of the effort needed to make it work and a good sales forecast can double the profitability of a company and double the bonus of a sales person.

    As to your equation, I’m sorry but I don’t believe it! The relationships are not that straightforward and perhaps more importantly, the ability of people to carry out cold calls and to carry out personal appointments are interconnected as they must both come out of a finite number of hours in a day or a week.

    Likewise, the number of people involved in prospecting and the amount of money spent on doing it comes out of a finite pot. Your expression has merit, but if I accepted it at face value, we’d just make millionaires out of all sales people by putting in figures which would either bankrupt the company or could only be achieved by Dr Who or another Time Lord!

    I congratulate you however on having advanced the argument.

    Best wishes

    Steve Alker
    Unimax Solutions


  • Posted on 10/6/2006 at 5:33 AM Member
    Steve,
    I kind of agree with you. A sales call cannot be classified into coefficients and R square tests. There is a science and art to it. The science can be applied in call targets, dialers in call centres which work on statistical probability of dialling 5 numbers and that 3 would be correct or answered and routing them to 3 agents.
    Statistics also works very well in gauging propensity to buy.
    But sales calls at the end of the day will be about making that sale and human interface which statistics will find difficult to predict.
    However there are areas in which these equations can be used well. Feedback on individual sales person productivity- strengths and developmental areas. The trouble with feedback is that its subjective and often salespeople tend to ignore it coming from ivory tower bosses.When the data is presented- its difficult to ignore and you will see improvements.

    What i dont agree is that companies will continue to lose good sales people because of CRM data collection hassles. While it might have been true some time back( e.g your client)- most sales people are now quite comfortable punching in numbers/ ticking boxes. They have come to appreciate the processes built to enhance productivity and continuance. Because that data is captured and used by them effectively when they churn leads more than 2 months old( the trade calls it reactivation) or they get leads first called on by someone else. Today a good salesperson will check at interview time what lead management software your company uses!
  • Posted by kannanveeraiah on 10/6/2006 at 6:57 AM Accepted
    Dear Steve,

    You have presented an interesting case study and summed up your premises well; and sought answers for the very relevant issues that concerns not only your client company but also many big companies that go for over-specialization of functions losing in the bargain an effective co-ordination of activities resulting in demoralized work force. Ultimately such situation leads to drop in the overall performance.

    When I go to my family doctor (a general physician) for a treatment for general eye-sore I won’t expect him to refer me to an ophthalmologist. But, today it has become very common being referred to various specialists for general ailments that were treated by general physicians in the past. Specialization is good to a great extent where it is relevant and must.

    The point is, as you have rightly put it “that at a modern small company this blending of roles is common”. Is it desirable or should companies opt for role specialization ?. When there are too many people involved - some for lead generation – some for prospecting - some for fixing up appointments - some for closing out the sale - there would be distortion in the communication process. When I say communication, it is not just the words that are uttered; it is the tone, reaction, emphasize, pitch etc..etc.. through all which the person understands the others’ message, feeling or reaction and to certain extend reads the mind of the other.

    There is a saying that if you want a thing to be done well do it yourself. This is true to a great extent in the sales process which starts with lead generation and continues with prospecting, fixing up appointment and ends up with actual sales (and in some products & services follow up call for customer satisfaction). I feel that the strike rate of the sales person would be comparatively very high if he himself prospects, fixes up appointments and closes the sales himself. Because, throughout the process he is in touch with the prospect and understands well his expectations and so he is able to make more effective presentation giving the emphasize on that part of the presentation which might appeal well to his prospect. Through his communication at various stages of this process, an effective sales person do develop a bond (howsoever limited it might be) and a familiarity with the prospect which enables him to close well the sales.

    I don’t think the salesmen would be performing conflicting activities if they prospect, fix-up appointment, make presentation and close it with sales. It could at the best be called extension of sales activity.

    Regarding your basic premises, I would like to comment that :

    1) Though actual closing of deals earn the revenue for the company, the rest of the activities do contribute and lead to the success of the deal. Unfortunately, only the sales could be measured in monetary terms. But, rest of the activities have added value to the process which is yet to bear fruit. By resorting to “blending of roles” model, if you could achieve better strike rate certainly you could measure how worthy the sales person’s other activities are/were.

    2) It is to a certain extent true that the more the presentation they make the more closes they will achieve. The question is the quality of their presentation. To a great extent this would depend on the training they get and experience they gain. But, still to some extent this would depend on their understanding of the customer and his expectation. This understanding he gains to some extent when he himself prospects and he himself fixes up appointments. Naturally his preparation for presentation would be in line with his understanding of the customer.

    3) To improve their presentation as well as to sharpen their selling skill they need training. This certainly would come from their own sales time. They too are needed to be taken off the routine to relax. During training sessions they are diverted a bit from the routines and their skills are sharpened. Otherwise, the routines and its monotony would bring down their enthusiasm which ultimately result in drop in sales. (You might be aware of the story of two wood cutters - one takes break every 30 minutes while the other works without any break; the former cuts more woods than the latter as he gives rest to his body and recoups his energy during rest and also sharpens his axe during the rest preparing himself for the task again.).

    4) Further, you have touched upon the importance of reporting and forecasting. These all are not waste of valuable times of sales person. While reporting they do review themselves as to what they did (to certain extent introspect within). This is very good as it is a refresher. It would depend upon the quality of the report format - the format must induce them to review their performance, at least themselves. Further, forecasting helps them to set guidelines to themselves. It enables them to plan. A thing well forecasted and well planned is half done. Of course, reports and forecasts should not end up in dust bin. It has to be read, reviewed and responded with proper guidance to motivate further the sales team.

    Of course, the company should expect the sales team to do all this during their usual week days. If an individual prefers to extend these activities during the weekends for his own conveniences it would be up to him. Things would be taken care of if there is an incentive system for actual sales that would reward their efforts.

    Though, in short term it would be difficult to measure the effectiveness of blending of roles, a period of six months to one year would enable the company to measure the performance well. When sales persons continue for longer period their past efforts in prospecting, presentation etc would be bringing results and they too would be realizing that after all their times were not wasted in other roles which are in fact the extension of their own role.

    A direct reading of your basic premises and a reading in between the lines suggests that basically you have strong convictions about positives of blending of roles (at least in small company). Be re-assured that you are not wrong. On your these strong basic premises you need to build a model for optimising the sales persons performance.

    Best Wishes,

    kannan
  • Posted by steven.alker on 10/6/2006 at 7:41 AM Author
    Dear Kannan

    A lot of points to respond to there, and I’m getting my replies out of order! But I just had to highlight one point that you made – that of the wood-cutter who works for flat out and the one who stops every 30 minutes to re-charge his batteries and sharpen his axe.

    I don’t understand why I’ve been so short sighted about this. There was a classic management study carried out in the early part of the 20th century into working practices in the steel industry un the USA. I can’t remember who carried it out but I think that it was for Bethlehem Steel or Carnegie Steel. A management consultant measured the work rates of two groups of labourers unloading steel or ore or billets, one which worked to the traditional “Work until you drop” method and another “Liberal Enlightened” method which gave the workers a 15 minute break every 45 minutes.

    The work rates, as measured by impartial consultants were about 30% higher in the group which took off 15 minutes in every hour.

    It looks like you are onto something there!

    I’ll comment in greater depth later, but thanks for that insight.

    Steve Alker
    Unimax Solutions
  • Posted by steven.alker on 10/10/2006 at 7:52 PM Author
    I apologise to everyone for not responding over a couple of days – its World Mental Health day this week and a few of us have been involved in trying to raise awareness of the problem in the workplace for people who suffer from, perhaps depression, or raise money for charities or both. Or in my case also being driven round the bend by trying to get to grips with all the answers I’ve got to my question.

    That last part is in no way disrespectful to people who have a mental problem – I just don’t feel that we help anyone (And I have to be included in “Anyone” back in 1992) by being politically correct about these things, so if you feel that getting the balance of your sales job is making you depressed or driving you round the twist, at least you know that there people out here that you can talk to or more likely write to.

    And my client Jason, who runs Academy Internet, a distance learning and internet company raised over £300 for an alcohol and drugs rehabilitation charity two months ago by playing cricket, so come on, we can all do our bit for this!

    OK, Charity plug over.

    What is appearing to fall out of this discussion are two threads. One is how to divide time in a small organisation with few resources, where the guy or gal who closes the sales also has to perform other tasks. I thought that this might be complex on the algebra front, but it appears to be a simple 2 dimensional linear programming question, where the optima is maximizing sales turnover and the constraints are the number of hours in a week or a month or a year. The variables are the number of appointments which can be made per hour and the number of sales appointments which can be converted into sales over a defined period of time. If anyone can come up with an algorithm for this, I would be grateful. Perhaps Wayde is listening?

    For the more complex corporate situations, the answers are a lot more mixed.

    Marcus (mbarber) and Dave (Telemoxie) you have both given me some fascinating and challenging points which I want to reply to. I can’t do justice to your responses tonight, but will attempt to do so tomorrow.

    In the meanwhile, my thanks to everyone who has contributed to this subject? I think that I now understand how the copywriters feel when they are asked for a slogan or a tag-line.

    On the face of it, it looks easy, but jokes apart; I can’t do those pieces of word art. This has made me understand how difficult it is to get something which, initially, I thought would just fall out as some equations, where actually we start to analyse it in detail to make sense of everything.

    My very warmest regards


    Steve Alker
    Unimax Solutions

  • Posted by telemoxie on 10/11/2006 at 8:50 AM Member
    I wondered what had happened to you. Upon reflection, I'd like to clarify a bit.

    In my post, I had said that "There was a time when sales people were professionals". This was poorly stated. Clearly there are a great number of professional sales folk out there. The issue I'm trying to address is the way these folks are treated - that they are increasing treated as clerical staff, checking boxes, rather than as competant professionals. For example, if I hire a house painter, I don't tell the person which brush or ladder to use. My belief is that most sales people are as professional or more professional than house painters - but they are rarely treated that way.

    In my post, I also took a shot at "short sighted marketing folk". In my experience, most marketing folk I know would love to take a long term view, but are overly pressured by management for immediate and tangible results.

    As you respond, I'd like to suggest that you consider the following scenerio. Suppose that you were personally engaged as a consultant to provide Maximizer training. As you worked with the company, their sales increase dramatically, you developed rapport, and they offer you a position as a sales guy. You said no, but they raised the offer, and then you couldn't say no.

    Over the next year or two, you have the time of your life, using Maximizer software to set sales records, developing marketing programs and materials, and collaborating with your sales team. You are loving life - not only as a successful sales person, but you are writing and lecturing on effective CRM implementation issues.

    However, down the road, the company is sold. The new owner wants to have a consistent CRM system. They also want consistency in their marketing communications. Maybe they have developed something themselves, maybe they use something off the shelf. Either way, your existing CRM system and marketing materials go out the window. You no longer have the creative freedom to sell in the most effective manner. You are now subject to some fellow who spends his time analyzing just how many appointments you should have in a week... and your productivity is dropping, not increasing, since you are now using inferior tools. Yet, your quota is increased, and your territory is reduced.

    If you were personally in such a situation - if you personally had to give up a system which works, and loose money every day from lost commissions... if you were frustrated by a centralized but inefficient program, how would you personally react?

    I believe that the "top down" approach and rapidly changing corporate and marketing environment sends a clear message to sales that they cannot afford to invest in the long term. I would go so far as to say that in many situations, it is unfair to ask sales folks to work on long term projects, because by the time the deals come to fruition, they will probably be working for a different boss, or for a different company, or in a different territory, or under a different commission plan. Management, it seems, is addicted to change.

    (There are also dangers in over-specialization... and what happens when a competitor logs into your centralized system? - but those are questions for another day)
  • Posted by Frank Hurtte on 10/12/2006 at 9:53 AM Member
    Telemoxie...
    Your comment about sales people being professional...
    I would divide the group into 4 categories:
    1) those who understand the dynamics of sales and have the dicipline to push forward on their own (20%)
    2) those who understand some of the dynamics of sales and have some of the discipline (50%)
    3) those who lack the understanding and may or may not have discipline (20%)
    4) those too new or in termoil to be considered (10%)

    A sales manager can truly provide resources and tools to group 1... but needs to provide hands on coaching to group 2... and intense coaching to group 4
    Unfortunately, lots of managers inherit 3's and fail to figure out ways to get them out of their system.
    Frank Hurtte
  • Posted by telemoxie on 10/12/2006 at 11:06 AM Member
    Maybe Frank's numbers are right. And maybe they illustrate the danger of a "one size fits all" approach.

    Maybe 20% of sales teams have the discipline and skill to find business. But what if you are in the top 10%? The top 5%? The top 2%?

    Companies may say they want sales to prospect and build pipelines, but if Frank's numbers are correct, implementing standardized programs which has been "dumbed down" and simplified so that it can work with the majority of sales staff will HURT the best prospectors and hunters. (Been there, done that...)

    Using Frank's figures, clearly there is a market for sales training in the area of pipeline management (his numbers show that 50% of the sales force need this and could benefit from it) - but is such training (and re-training, and retraining) in the best interest of the organization?

    If Frank's numbers are correct, then 80% of the sales team is poorly suited to building and managing large pipelines. If so, then why ask the bottom 80% to do it, and why discourage the top 20% who are trying?

    Wouldn't it be better to simply let sales folk sell?

    Rather than a "pre-sales" model which often puts the lowest level folk in touch with the most prospects, wouldn't it be better to put your best foot forward, and to reorganize to let the "top" people cultivate the most strategic asset: the companies pipleine of future business?
  • Posted by wnelson on 10/12/2006 at 4:56 PM Accepted
    Steve,

    This problem is very complex indeed and would make a very good PhD dissertation. The math is particularly complex – maybe not as complex as the economic formula for Gross National Product..hmm, come to think of it, the GNP is probably a variable in the equation. I doubt if it’s as complex as the grand unification equation in physics, however – but close. Another problem is that the equation isn’t linear so traditional linear programming won’t work – more on this as we develop the equation.

    Let me start by defining the alphabet of variables we’ll need:
    R = sales or revenue
    W = total work time
    S = sales time (presentations in front of customers)
    Ts = training time for sales
    Tm = training time for marketing
    P = prospecting time
    A = appointment setting time
    D = data collecting time (feeding the CRM, reports, etc)
    U = Utility of CRM data
    O = other time that keeps sales away from customers: driving, smoke breaks, lunch, etc
    Lm = number of leads from marketing
    Lp = number of leads from sales prospecting
    M = impact of territory/sales manager
    C = number of closes per hour
    V = value of the sale
    Q = number of prospects from prospecting
    Y = experience of the sales person
    E = expenses
    Em = marketing expenses
    Es = sales expenses
    Eo = operating expenses (delivering the product or service including cost of sales)
    Ega = overhead expenses
    Et = taxes
    I = income
    e = is the base for the natural log
    ^ is “raised to the power of”

    Then a bunch of K’s with are constants – K1 – Kn (as many as I need)
    That should be enough for now. OK, in general, the firm is in business to increase the its value – to owners, to share- or stake- holders, etc. To do that, generally, they want to maximize income – I. So whatever our equation, it should have I as the resultant. So, simply:
      I=R-E
      E=Em+Es+Eo+Ega+Et

    Revenue is the result of the sales effort and is:
      R=C*S*V

    C comes about from making appointments and is given by
      C=K1*A*M

    Sales time is as follows:
      S=W-(Ts+P+A+D+O)

    So far so good, we’re still linear. Now let’s look at the things that effect these factors. First, the Closing rate (which is really K1):
    Training has a non-linear effect. You can keep adding training, but after a while, it doesn’t add much. Also, experience has an effect too. Further, the effect of training lessons with more experience – the old “you can’t teach an old dog new tricks” factor. And then the closing rate also is dependent on the sales budget; if you pay more in incentives and/or buy better sales people, you get better closing rates (theoretically, anyway). There’s a “sales management factor in there too. So:
      K1=M*K4*Y+K5*(1-e^(-K5*Ts*(K6*1-e^(-K7*Y))))+K8*Es

    This is a “guess” on my part – the shape of the curve feels about right and given that many psychological/learning things very logarithmically, it’s probably close. It could always be a quadratic relationship – a squared power relationship – one needs to see data to know this. But, this’s probably close.

    Leads depend on the marketing budget (better leads cost more and more marketing people can mean more leads) and sales budget:
      Lm=K9*Em
      Ls=K10*Ea


    Appointment setting is affected by training too – in a similar non-linear fashion as closing rate:
      A=K11(K2*Lm+K3*Lp*(1-e^(-K12*Ts*(K13*1-e^(-K14*Y)))) (conversion of leads from marketing into appointments may be different than from sales)

    Sales management is affected by the sales budget – if you pay more, presumably you can get better sales management, the utility of the CRM data (a sales manager can glean information from the data to manage his territory better – so:
      M=K15*Es+K16*U

    And the CRM data time is affected by the sales budget, as is the utility of this data – if you spend more money, you can devise more effective CRM systems:
      D=K17/Es
      U=K18*Es


    So what are we up to now….a non-linear system with 41 variables. And you marketing guys out there think sales is simple! Of course, all these variables can be substituted in to give one giant equation with income (I) on the left and all the stuff that goes into it on the right. I’ll leave that to the reader! lol The next step, as a modeler, would be to pull together a bunch of data on sales given all of these factors and estimate the parameters. Once that’s done, one could use Monte Carlo to simulate and optimize. Of course, this is just a first round so a lot of validation has to take place. If I ever get a chance to resume my DBA (Doctorate of Business Admin) - maybe I'll make this my dissertation! Won't that be riveting!

    I hope this helps!

    Wayde
  • Posted by steven.alker on 10/16/2006 at 6:14 AM Author
    Dear everyone.

    After Wayde’ s most welcome Magnum Opus, I think that we have reached an appropriate time to conclude. Initially, I asked for both normative and positive contributions and I think that the depth to which Wayde has needed to go to take a view on how to do some calculations involving variables and constraints rather show why we tend to manage largely in normative terms.

    However, since my last brief reply, there are valuable postings which deserve comment. It will probably take a couple of replies!

    Telemoxie: Straight to the heart! After leaving St Andrews and going into sales, many friends and relations wanted to know why I wasn’t taking up a profession, one like the law or accountancy, I guess, but they could have meant bank robbery as well. I took sales very seriously and convinced almost everyone that it was as profession and that I was a professional. What has happened over the last 20 years would appear to somewhat of a slide to “Doing” and “Volume” at the expense of quality. And that includes commitment to an organisation, the goals of that organisation and the professionalism which differentiates someone mediocre from someone who is a star.

    Initially, I took my instructions from the sales manager and to be truthful, fought against him for a year and a bit. There was no question about it, he was the Cockney geezer and I was the graduate. His maths were rubbish, mine weren’t. I was constantly in danger of getting the boot. He wasn’t. He drove a Jag and I had a Ford Cortina. Suddenly my eyes were opened, maybe listen a bit, and maybe do as suggested. There was nothing robotic about the approach we were asked to take, but we were expected to do certain sales things which had been shown by experience to produce the results. So I did – I guess that I accepted that I needed to be managed and that within the broad framework of “Professional Selling” I had huge latitude to innovate and to be creative. Just woe help me if he attended a meeting and I did not ask those all important questions, carry out a trial close and then, when the product matched the requirement, get the order.

    I do agree with you that there are limits to the “top down” approach in sales. If as you suggested that I had worked successfully to have some new management force me into a new and unproductive way of working, I think that I would be tempted to spend some time sabotaging everything in sight whilst looking for pastures new. And isn’t that the case in general – disenchantment through poor management and a formulaic approach to sales work has led to a shortening of the average tenure on a sales position, from something like 5 years 20 years ago (in the UK) down to 1.7 years now or less than a year in software sales. That means that people are hardly finding their feet before they decide or are forced to move on.

    And as the subject of the question was optimisation, that is no way to get the best from your sales assets!

    More in a few minutes

    Steve Alker
    Unimax Solutions
  • Posted by steven.alker on 10/16/2006 at 10:22 AM Author
    Dear Frank (Hurtte)

    From experience, shooting those in group (3) tends to be a useful way forward, but only where the law permits. It is curious that you identify 20% as having the understanding of the dynamics to be able to do it for themselves. Some of these are mavericks and are occasionally an embarrassment, but usually they are achievers who get the job done, in their own personal way.

    I’ve often been asked to characterise the sales achievers and the truth, I think, is that there are few generalisations. The quietest guy on the block, with a spare deployment of his questions and his words can be as strong a performer as someone much more forward and outgoing. It is the skill and application which counts, but how to measure that other than through results - I don’t know.

    What I have learned through this discussion is the imperative of getting balance into a salesperson’s work. What is unfolding here is that this can be inherent in their way of working - and to impose anything else would be counterproductive, or it is managed and to an extent imposed. The latter point seems to have a very important caveat – if the sales people are to last the course and prosper, imposition cannot involve turning them into robots.

    And that brings me onto Wayde’s magnificent calculations. It’s taken me 2 days to digest them, but I think that in essence they are the kind of analysis which I was seeking but could not do from scratch myself. It is the distillation of the science of understanding that you can’t do everything at the same time, but that if you don’t do some of everything, then nothing happens.

    OK, the LP (Linear Programming) elements were there in my original posting to handle the fact that we are working with finite resources, at that time undefined variables (And they still are undefined) and some constraints on the resources which exist. As such, I can’t argue with the first set of equations. Where you take the argument non-linear, again, I really don’t have a problem with the basic conjecture – there is a diminishing return for further endeavour and further expenditure in all areas you have considered, so we needed to look at that, and my Lord, you have done that in more detail than I could have managed.

    What concern me here are a few things:

    1. To optimise a situation of the utilisation of sales time, do we really need to look at the optimisation of profit - hence the expense elements on the equations and some of the non-linearity?

    2. If we accept that we ought to look at profit, rather than just maximizing the operational activities of a sales person or sales team, means that we then need to look at forecasting both sales revenue and profit from activities on the ground (Or on the phone!)

    3. Doing that from an analysis of individual effort is relatively straightforward – it is canonical in the sense that the whole is, as long as you follow some rules, the sum of the parts.

    4. If we take your approach, which I accept has a compelling logic to it, the predictive approach, were one to try to use it to fine tune (or even to tune) a sales operation hits my usual forecasting bugbear in that you have included elements to your equations which are both non-linear and have the effect of containing negative feedback, when you iterate them over a period of time.

    Unless I have misread your intent there, the implication of this is that you might have started to define a potential optima for sales resources, but when it comes to using it to set criteria to work to and to predict the outcome, you can’t do it because the iterative outcome becomes chaotic. (Simple strange attractor)


    That said, for setting an optimal result, without wishing to go into the business of long-range forecasting, I think that this is perhaps the best analysis that I have seen.

    I would like to conclude by thanking all contributors to-date; you have been fantastic in handling a very perplexing subject and one which I have been thinking on deeply with respect to my CRM customers, many of whom want the system to tell them how best to do everything, including making the tea.

    Well, if we accept what you have all written, there are no trite solutions, no deus-ex-machina and if we do go into the positive side of the maths, it becomes so complex, that rather like those Excel macros beloved of CFO’s I think that most people would be taking a bit of a risk in taking the equations and trying to apply them to a company. I’d be more than prepared to do some further work on this to see if we can refine it into something workable though.

    I mentioned some work I had done with Hugh Walton with his “Simutron” Analogue Computer which used LP techniques. The device was fiendishly complex as a chunk of electronics, but once you knew how to bang in the variables, constants, constraints and other relevant information, it was a real cutie to work with. It took a leap of faith to believe the results, but after a few trials and tests, most were won over. It is curious that in the digital age, that I have not come across anything which can touch it on the “Interaction” front for optimisation

    Best wishes.

    Steve Alker
    Unimax Solutions


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