By Michael J. Webb

Process mapping is a well-known technique for creating a common vision and shared language for improving business results. It helped one management training and development firm realize that people within their sales department had been working at cross purposes, and crucial executive-level discussions with customers were not taking place. Based on sales process mapping, the leaders reorganized their sales operations so that job descriptions and performance measures focused more on the customer. In six months, they reversed a five-year slump and earned big bonuses for team members. In another case, sales process mapping helped a large manufacturer’s national account teams discover a powerful new way to coordinate with field salespeople, yielding far more new business opportunities than expected.

However, leaders in both large and small sales organizations often make mistakes that undermine the potential of process mapping. A common result, for example, is that salespeople ignore the process and operate “outside the system.” Based on work with several dozen clients, I’ve observed four common mistakes that tend to hinder their success:

This paper describes the consequences of these errors, as well as principles to follow in order to avoid them. By following these suggestions, you can derive the most positive results for your own organization.

Mistake #1: Map all the trees, but miss the forest

An enthusiastic VP of Sales for a technical services company spent considerable time developing a process map for his organization. The map he developed (Figure 1) is typical of a first attempt to map a sales process. Analytically trained individuals (such as Six Sigma Black Belts or IT Systems Analysts) often create similar maps, many pages festooned with decision diamonds and other complicated details.

This VP created a comprehensive snapshot of people’s activities across his sales organization. Unfortunately, his comprehensive process map did not help him train or lead his team. This process map illustrates Mistake #1 in two significant ways:

• The map is too detailed it captures more information than a person can take in all at once.
• All activities appear to have the same importance, with each activity equally dependent on the previous one. This isn’t an accurate reflection of reality.

Principle #1: Foreground goals in your sales process map

Figure 2 shows how this VP’s sales process map could be organized around goals. This technique places goals in the foreground, clarifying key issues. For example, even if team members have different ideas about how to qualify new accounts, they can agree that accounts must be qualified. With this goal in the foreground, some variation can be expected in how the goal is achieved. As individuals work toward consensus in the activity steps, they become best practices for achieving the goals.

Figure 2: Grouping activities according to goals creates focus.

Note that the goals are not the same as departmental boundaries. A single person might be involved in any of the top-level phases. This drives communication and collaboration, making process maps a powerful tool for generating a shared framework for accountability.

Another important feature is decision diamonds showing where the prospect (or the salesperson) might opt out. In real life, prospects can decide to buy from someone else, wait until next year, or call out of the blue and need service tomorrow. Identifying and measuring these decision points acknowledges that the process has a yield, as well as providing critical information for process improvement.

Mistake #2: Focus on the seller, instead of the customer

An administrator in a financial services company mapped her company’s sales process as her thesis for a master’s degree program. She dutifully collected statements from the company’s sales executives about what salespeople ought to do (she had never been a salesperson herself) and organized them into a hierarchical format. She achieved a thorough analysis that satisfied her professors. Unfortunately, her hard work did not benefit her organization.

Figure 3: This process map focuses on seller activities.

A portion of her company’s process map is shown in Figure 3. It is hierarchical, identifying a goal for each phase. Notice that the steps in the Winning New Business phase call for working with the CEO at each step. It would be nice if that happened, wouldn’t it? Now, consider the steps within the Contracting phase. Who do these steps create value for? From an internal administrator’s perspective, these procedures are important. But what value do they create for the customer? In fact, the benefit to the external customer was not considered at any stage of this process. Is it any wonder customers resisted it? Successful salespeople in this administrator’s company routinely operated outside the process, as any successful salesperson would have to do.

Principle #2: Determine how to create value for the customer.

Sales processes that work create value for the customer. Delegating the process mapping task to an administrator without sales experience or executive insight allowed this company to go through the motions without making a difference. Figure 4 shows what this company’s process might look like, recast with a customer focus. Figure 5 defines value to the customer.

Figure 4: Revised sales process focuses on customer interaction.

Figure 5: Value to the customer is identified.

These diagrams illustrate a lengthier, more complex sales processes often found in business-to-business services. Such an approach is important where substantial talent or time such as engineering, IT, legal, or other consulting is necessary to develop a solution proposal. These complex sales environments are notorious for their unpredictability and cost. Before committing costly resources to the sales effort, the selling organization must do everything possible to ensure success and avoid wasting those resources. This can be accomplished by reaching decision makers early, so as to verify their needs and priorities. But this usually requires tremendous effort and courage. Often it is never accomplished.

Ultimately, reaching the decision maker in your customer’s organization benefits both you and your customer. Without first-hand insight into the decision maker’s needs and priorities, you risk wasting everyone’s time. But if you can validate your own understanding of the business value you offer the decision maker, even helping the decision maker generate a consensus if necessary, you create value for everyone. Getting credit for these things is often the key to winning the business

Through sales process mapping, your team can keep a constant focus on your most mission-critical question: How can you create real value to the customer? If your business requires a contracting/administrative phase (like the financial services company in Figure 3), figure out how that phase can create value for the customer. If you can’t, place that phase in service of another goal that does.

Everything you do to find, gain, and keep customers should create clear value for them. If you do, customers and the best salespeople are sure to follow. You have no more powerful lever for ensuring an ever-growing stream of profitable business. Customer value is the number one defense against changing markets, competition, and technologies.

Mistake #3: Forget to “show them the money”

The training and development department of a major corporation spent several million dollars to develop a customized sales training program based on the company’s cultural values. The program was magnificent from an organizational development perspective. It illustrated the company’s conceptual goals clearly, and it built on existing training materials, which provided salespeople with many powerful skills (see Figure 6).

Figure 6: This process does not specify measurable results.

Unfortunately, statements such as “Use the relationship network,” “Facilitate decision making,” or “Confirm joint commitments” are not useful to salespersons trying to make their numbers. What is the concrete output of each step? How will it be measured? When are orders generated? Where is the process connected to the money?

Lacking measurable steps grounded in real-world sales operations, the training program defined a process in name only. Salespeople learned how the company’s world really worked on the job rather than from the course. Although many people agreed the course contained valuable skills, its value could not be proven. The sales organization in this company ultimately created its own measurement system outside the framework of the training program, crippling its effectiveness.

Principle #3: Integrate tools, skills, and results measurements with the process

Figure 7 illustrates how a sales process map (the same map appears in Figure 2) can include metrics. The sales organization’s performance is measured by the high-level goals of the process, rather than the detail steps. There are many advantages in this approach to selecting metrics.

Figure 7: Broad metrics assess each goal-driven phase of the sales process.

First, as products and services move through their economic life cycles, sellers must change their marketing and qualifying strategies accordingly. Over time, these metrics can provide powerful leading indicators of market shifts, affording sellers precious lead time to respond.

Second, these metrics allow the organization to identify its bottlenecks or weak links, allowing resources to be allocated most effectively. For example, if marketing is not generating enough good suspects, adding salespeople or engaging expensive training services will not help. Instead, the marketing process should be improved so as to create enough suspects.

Third, a mapping approach allows people to participate in setting their own goals by drilling into more detailed analyses and metrics to improve performance. Figure 8 illustrates how a process map can serve as a tool for integrating some support functions within an organization.

Figure 8: Link performance support, skills, and competencies to the sales process.

Individuals can use this kind of detail to identify skills they need to work on. An organization can use process detail to integrate software support as well as training. This kind of mapping, a current trend in the training and development community, can yield powerful results.1

Mistake #4: Buy somebody else’s “ideal” sales process

Sales processes often come prepackaged as sales training or Customer Relationship Management (CRM) software. Although these initiatives can be useful to an organization if they are selected and implemented appropriately, they sometimes do great harm.

For example, sales executives purchase sales training in an attempt to create improved sales results. Good sales training does in fact help salespeople become more effective at reaching their goals. But, like everyone else, salespeople are creatures of their environment. If the environment is not changed, behaviors tend to return to their pretraining state. Although this problem is well known, sales executives often do not recognize the impact of mismatches between their own organization’s sales environment and the assumptions of a sales training program. Many millions of dollars are wasted each year in training programs that are far less effective than they could be for this reason.

In the case of CRM software, a company is often faced with fitting its business to the software, instead of the other way around. Anxious to collect license fees, software firms generally recommend, “Let’s just get the software running vanilla for now; then down the road we can think about modifying it.” Down the road, most companies discover many dubious assumptions:

Many organizations have found CRM implementations to be extremely frustrating experiences. Why do so many organizations find themselves in this situation? One reason is that executives assume that everyone else already understands how their business works so someone else (such as the software vendor or an administrator) can map out the details.

However, if people within the organization haven’t created a reasonable map of the sales process for themselves, how can they expect an outside supplier’s assumptions to be on the mark? In this regard, Dick Lee, author of The Customer Relationship Management Survival Guide, offers a valuable perspective:

Customer Relationship Management means implementing customer-centric business strategies, which drives redesigning of functional activities, which demands re-engineering of work processes, which is supported, not driven, by CRM technologies.2

CRM software is very powerful. It requires answers to questions such as, “How do we create value for customers?” and “How do we measure the value we create?” If leaders in the organization don’t fully account for the answers, the initiative will fail not because the CRM product is inadequate but because the organization didn’t create an environment in which it could work.3

Principle #4: Engage your people in process mapping to define problems and solutions

Software and training suppliers can provide valuable tools to support your sales process. But the sales process itself can’t be purchased from an outside supplier. It requires the hearts and minds of your people. It is the hearts and minds of your people. It is your customer relationship strategy. The leaders of a sales organization need to generate a common vision and implement it collaboratively. Process mapping is an ideal tool to engage people in creating and achieving this common vision.

Conclusion

The best salespeople in an organization often operate outside the parameters of whatever sales process or CRM system is in place. They get away with it because they provide the organization’s supply of oxygen customers with orders. Thank goodness!

It is time to challenge one of the traditional approaches of leaders who function as cheerleaders for their sales teams, while turning a blind eye toward internal roadblocks and constraints. Process mapping, accomplished through team collaboration, with clear focus on customer value at every stage, is a power tool for blowing away those roadblocks and constraints.

In sum, sales process mapping provides these mission-critical benefits to any customer-facing organization:

• It enables the team to tap into the customer’s oxygen pipeline and trace a path to your business.
• It ensures that the team can pull together to create real value, so salespeople don’t have to go outside the system to deliver desperately needed oxygen.
• It helps individuals understand and accept organizational changes across functions.
• It provides the framework for measuring performance goals, which people can set for themselves.

These are the reasons why process mapping brings such potential for creating breakthroughs in organizational sales performance.

When asked, “What is the criteria for a qualified prospect?,” the answers were all over the map. For example:

• The customer needed technical services from time to time.
• They had an engineering problem they couldn’t solve.
• There were specifications, but the project wasn’t budgeted.
• A project was designed and going out for construction bids.
• A project was in process with an engineering firm they already knew.

With so little in common with these “opportunities,” it was clear that the sales people had not been told what constituted a qualified opportunity. As a result, they were indiscriminately throwing customer situations into the sales “hopper” and grinding away, hoping a sale would happen. In manufacturing terms, it was as though they were attempting to add value to scrap.

Although most sales organizations might not be as lost as this utility, most sales executives would admit that qualification is a critical sales activity and they can’t afford to have sales people working overtime to try to get business the organization does not want.

Since qualifying is essentially comparing something to a standard, it is linked closely to measurement. Because sales people accept the idea of qualification in the first place, it may be a bit easier to gain their cooperation in a new approach: it might help make their time more productive.

There are three components to the concept of qualification that should be fairly intuitive to sales executives:

1. What’s in it for us: credit worthiness, size potential, market profile of prospect, logistic desirability, cost to service the account, market segment, etc.
2. What’s in it for them: characteristics of the prospect’s product fit, strength of value proposition, compelling events, impact on various individuals in their business, etc.
3. Characteristics of sales activity: presence or absence of request for proposal (RFP), level of coaching relationships, presence of gatekeepers, alignment with decision makers, competitive relationships, etc.

These categories of qualification can be detailed into criteria specific to product markets, and then deployed through a simple scoring assessment for sales people to use to assess (yes – measure!) their opportunities. Capturing these scores over time delivers powerful insight into sales activities. A pilot program comprised of a small group of sales people would help determine how well this initiative will work in a specific environment. Using Sales Force Automation (SFA) or Customer Relationship Management (CRM) software, the results can be tabulated and analyzed over a few months, depending on the length of the company’s average sales cycle.

Many positive outcomes typically come from such an initiative:

• Because it increases consistency, a positive impact on sales results is likely to be fairly short term.
• The simple fact of measuring behavior is likely to cause an improvement in results.
• Sales people find that they are calling on better accounts and not wasting their time.
• The inclusion of desirable characteristics of sales activity (such as which departments to generate coaching relationships with or which level of decision maker to reach) can provide a degree of guidance in handling the opportunities. (The utility mentioned earlier nearly tripled their close ratio and had a far more realistic picture of sales activity and future business potential.)
• Data is gathered that provide valuable insight to the strengths and weaknesses of sales operations.

The data gathered should provide the following insights:

• Do patterns of sales activity resemble what senior executives think? Actual sales activity data can validate or contradict important assumptions about selling capacity, volumes, coverage, cycle times, and pipeline yields.
• Are the prospects reacting as expected to the value proposition in the way marketing expects? Whether sales people are even hitting the targeted market segments can shed light on where the actual market exists and what its needs are.
• What are the qualification-assessment scores of prospects who buy? Prospects who don’t buy? Can this shed insights on ways to increase close ratios? Comparing the typical assessment scores of sales people who are more or less successful can provide highly motivating clues to enhance skills and effectiveness.

There are several other factors that can help make this initiative successful. First, sales organizations are usually open to refocusing their qualification criteria to create a positive result. What they haven’t often done well is to gather measurements and critically analyze them. That represents an opportunity for the quality function. Be careful, however. Sales people may be wary that this information will be used against them. In this example, the fact that sales people are assessing their opportunities – instead of being assessed themselves – reduces resistance to providing the information. The data generated are valuable for improving their sales environment and for providing positive and individualized coaching.

Qualification assessment is only one way for quality thinking to potentially create breakthrough results in the sales department. In situations in which the sales department might not be focused on the right prospects, it has a good chance of creating vital early wins that are so important to gaining the credibility needed for further improvement. An added benefit is that there will be improved communication and understanding between departments in order to work better as a team.

Trailer Vavricka, Inc.

Summary: This paper describes implementing a process management framework and performance measurements into a corporate sales organization. It begins with describing the traditional approach to sales management and the potential impact of improving sales performance on revenue and profits. Then, the company s process-based approach to sales management is described along with the key performance measures most relevant for monitoring sales revenue production across sales, marketing, and customer support departments. This case illustrates that viewing sales as a production process and implementing process performance measures will enable a company to significantly increase sales and improve sales predictability by increasing productivity throughout the process.

THE TRADITIONAL SALES MANAGEMENT APPROACH

Role of the salesforce

The purpose of the majority of corporate salesforces is twofold:

1. Keep sales revenue coming into the company at a rate that meets or exceeds budgeted revenue and growth targets.
2. Create customer expectations and relationships which will produce high satisfaction, desire to buy more in the future, and customers who are willing to act as references to influence prospects, generate referrals, and provide feedback that will help improve products and services.

The traditional sales approach

Sales departments traditionally operate informally, that is, without having a formal selling process followed by its sales people. Each salesperson works in his own ‘way’ which is a personally derived, non-documented and mostly non-measured approach pieced together from past experiences, training, and ideas gleaned by chance from hearing about other people s adventures. Consequently, management has no way to see how the company s selling function is actually operating as a process.

The common metaphor used to portray the process of sales development is a pipeline. As shown by Figure 1, a territory s sales opportunities are dispersed along a pipeline depending on the prospect s state of maturity toward making the buying decision. At worst, the salesperson merely reacts to what prospects ask for and prods them for an order. At best, the salesperson proactively brings the prospect through a joint-effort problem solving experience that builds credibility, confidence, and a desire to commit to a formal customer relationship. The overall cycle time of these types of sales can stretch from a few months to a few years, depending on the product.

Figure 1

At the point the sales opportunity is closed, it passes out of the pipeline and into technical implementation and ongoing customer support, a small portion of which, may be provided by the sales organization. From a sales perspective it is assumed implementation and support functions will follow through to fulfill the customer s expectations and maintain high satisfaction. Customers remain willing to buy more, act as a reference, and provide referral leads only as long as they receive support that meets their expectations.

“Marketing” is the pre-pipeline work to find and develop prospects before they are ready to be entered into the pipeline as live opportunities. The marketing department s purpose is to supply prospects of adequate quality and in sufficient quantity so each territory can meet its monthly sales targets.

Operationally passing the buck to salespeople

Company management normally holds the salespeople ultimately accountable to produce the assigned revenue quotas. However, this amounts to a classic Catch-22 situation. The company s sales revenue production performance results are dependent on multiple departments. But salespeople have no visibility into, nor authority to control or make changes in the performance of the marketing and customer support departments.

Each salesperson s ability to close new accounts or expand business volume from existing ones, is highly dependent upon having highly satisfied customer references available when needed. High quality referral leads throughout the year also help to keep a territory s pipeline healthy and flowing.

The other requirement, of course, is a continuing flow of new prospects into the pipeline from direct mail, telemarketing, advertising, trade shows, and other marketing efforts. If the marketing department s campaigns do not consistently cultivate and unearth enough good quality prospects, then the burden of doing effective marketing work falls onto each salesperson by default. When this happens, not only does this drain time away from selling, marketing suffers because salespeople usually do not have the training, tools, or expertise to do effective marketing.

Nevertheless, traditional sales management often has its highly paid salespeople trying to create marketing wheels from scratch and keep them rolling on their own. Therefore, territories are ineffectively and inconsistently cultivated, leading to an unreliable flow of prospects into the pipeline.

Furthermore, under the tremendous pressure to produce revenues, salespeople resort to working whatever prospects they happen to have at-hand regardless of their low quality. Consequently, the close rate remains chronically low. Desperate to close anything to achieve revenue targets, the company aggressively discounts price, agrees to special terms, makes commitments it can t meet, and gives away normally paid consulting, training, or support services. Ironically, these very situations have a tendency to turn into post-sale nightmares because of high expectations and poor quality throughout the sales production, delivery, and support processes.

Today s sales quotas and market competition are generally much heavier compared to a decade or two ago. Just as a home mortgage for $300,000 @ 9% is a wholly different burden to carry than $50,000 @ 4%, salespeople don t have the capacity to accomplish marketing and customer hand-holding along with their selling responsibility. When they are operating with an unstructured sales approach, it is no wonder that many sales organizations are not as effective as they could be.

Traditional sales forecasting inaccuracy

Sales forecasts are usually produced by each salesperson estimating for each prospect: the potential revenue for each product involved; the probability of closing; and the date it will close. Since every salesperson is estimating from significantly unique perspectives, biases, experiences, understandings, and selling approaches, the company s resulting forecast accuracy is all over the map. Without common understanding of the relationships between inputs, events, and outputs, process outcomes will vary in ways that nobody can predict.[2]

To make matter worse, upper management then massages these numbers to satisfy any number of political ends and beliefs that have no factual basis. This procedure produces forecasts that are generally regarded by department heads as being so unreliable as to be worthless. This poor predictability significantly handicaps a company trying to plan and structure its operations in order to profit from the business that does materialize.

Hockey-stick quarterly revenue performance

Along with chronically poor sales predictability, inconsistent monthly revenue production is another side effect of traditional “hands off the processes” operating style. In its extreme, pipeline output flow can develop into a recurring “hockey stick” revenue curve. For the first ten weeks of each fiscal quarter sales merely trickle in. Then, 60-80% of the quarter s total purchase orders floods in during the final two weeks. However, the revenue surge results from a desperation frenzy of unnatural acts – giving away excessive discounts, training, consulting, support, financial terms, etc., in order to close sales.

Executives may be relieved that the revenue number was made, but the workers are repeatedly buried under avalanches of work. Wholly understaffed to properly handle such workloads, quality drops and costs increase. Customers get their first taste of the real relationship – experiencing much less satisfaction than they expected.

Turnover multiplies performance problems and cost-of-sales

Under repeated siege conditions created by end-of- the-period sales panics, morale collapses, employees burn out, and increased turnover is inevitable. Sales personnel turnover has steadily risen over the last dozen years. Turnover rates exceeding 30% are common and we have seen many companies with much higher rates. A vacated territory means a vacated pipeline. Its flow will drop, making it necessary for the new person to work hard just to get back to the starting point. This will usually take at least several months. An annual turnover rate of 30% could reduce sales as much as 30% depending on how quickly positions could be filled by qualified people and length of the sales cycle. Add to this the costs of recruitment and training, and the impact on profits becomes very substantial. Unfortunately, the lost profits don t show up in accounting reports and the direct costs caused by turnover are so well accepted and hidden, they are all but invisible.

The potential for improving profits by increasing sales performance

There is enormous potential to increase a company s profit by improving sales performance. As Figure 2 shows, the increase in a company s profits can be four times the increase in sales, but reducing sales expenses will have minimal effect on profits.

THE EFFECT OF SALES EXPENSE, SALES VOLUME, AND PRICE ON PROFITS

Figure 2

Typically most corporations have their sales pipelines operating at only a 10-20% close rate. Although this level of performance is not anything to brag about, this low performance level means a relatively small improvement in effectiveness can yield very large increases in revenue.

For instance, the company that can raise its close rate from 20% to 30%, while maintaining all other pipeline performance measures constant, could increase its sales revenue by 50%. Per the above table, this increase in sales volume could create a 200% increase in gross profit performance for the company with plenty of room to improve beyond the 30% close rate in the following years!

The “Price” column on the above table shows that a 10X profit leverage can come from effectively increasing prices by giving away less discount, training, consulting, support, and financial terms in order to close sales. Working on higher quality prospects with greater selling effectiveness, stronger references, and less desperation to close, generally softens pressure to discount price, directly raising profit. If the average discount given drops only 2.5 percentage points, it could increase profits 25%!

Improving sales performance can also reduce the sales cycle time. A reduction of average cycle time from six months to five adds two months of selling time which can increase sales revenue over a fiscal year by 20%, assuming all other factors remain the same.

THE COMPANY: The Situation and the New Sales Operating Vision

The product

The company sells a “Customer Relationship Management” [3] software system along with implementation consulting, ongoing technical support, and continual enhancements in system functionality. This type of information system is termed an enterprise wide application in that users from sales, marketing and customer support departments all access and update the same customer information system database — integrating all sales, marketing, support and communication history notes. Having access to the central data, each department can be immediately aware of everything happening with each customer or prospect. The information system helps improve the quality of every interaction with each customer, contributing to the overall quality, depth, and longevity of the business relationship.

Issues in selling the product

The company sells the software system through its own salesforce, directly to other corporations worldwide. For an information system of this scope, the prospect s buying process is complex. This makes selling a system very challenging. The salesperson must effectively communicate with multiple departments and levels of management including the CEO, CFO, COO, and executives of Sales, Marketing, Customer Support, and Information Systems (IS). Senior users from these departments, as well as consultants who may help evaluate the solution, may also be involved in the buying decision. The salesperson has to identify and convince each involved person of the system s value, and of his company s ability to successfully implement and support the system. References from current customers are strong evidence of that capability, which is why they can make or break a sale.

Selling information system software that can affect a whole company is not merely an exercise in communicating the logical solution to a company s needs. The salespeople must handle inordinate emotional resistance to change. Some of the prospect s employees fear they ll lose heavily if the system were to fail, whereas others think they will lose if it succeeds.

The company faced these same issues in deciding to implement selling as a process into its own operations. Nevertheless, the company became its own best example of using its Total Customer Management software and the formal selling process orientation it supports. Using its own product well establishes strong understanding of the system as a business solution, and genuine credibility for the salesforce, management team, and company as a whole.

The organization

The company had been engaged in a very difficult, two-year, high-growth phase calling for 300%+ growth in the second year, as shown by Figure 3. At the end of the third quarter (Q3) of Year 1, management decided it needed to implement selling as a process and performance measurement to improve sales performance and control.

SALES DEPARTMENT GROWTH OBJECTIVES

Figure 3

In Year 1, the direct field sales force had a VP of sales, two sales managers, and six salespeople, all of whom carried sales quotas and direct selling responsibility. All field salespeople except one were remote from headquarters (HQ), working from their homes or small regional offices in their own ways. Four inside sales assistants were put in place to do first pass follow-up contact on all potential prospect leads. After prospects were deemed truly interested and qualified to purchase the product, inside sales transferred them to the appropriate field salesperson, which would take over the remaining steps of the sales cycle.

Operating issues

In Year 1, the managers and original salespeople were very technically competent with the product s functional capabilities and had intimate product application knowledge. Combined with exceptional selling insight, the core sales group had somehow been able to pull off successive “miracle” finishes each quarter to make the prior revenue targets. This produced a severe hockey-stick revenue performance pattern, which heavily taxed the staff s ability to keep customers satisfied.

Faced with Year 2 s 300% revenue growth target and doubling of the sales force, management realized they would have to significantly improve the effectiveness and consistency of how they were operating in order to have a prayer of achieving the new goals. Field sales turnover and the 6-month period needed to get a new field salesperson productive, also had to be reduced. To help shorten the learning period, three field system engineers were added during the first half of Year 2 to team with the salespeople. This was intended to add more technical depth to their selling efforts and make the challenges of the job less formidable to new people.

New operating vision

The company decided to bring process structure and performance measurement into the traditionally informally operating sales and marketing departments. The primary objectives were to significantly improve:

Sales revenue production per person;

Sales revenue predictability (forecast accuracy);

Management s ability to grow the company s infrastructure while keeping all departments operating as a single team, maintaining 100% of its customers as good references, and preserving the attractive quality of the internal work culture.

The executive team believed that to accomplish these objectives, just adding more sales people and marketing resources would not be sufficient. They determined that the company s operational capability in producing sales revenueneeded to increase significantly and continuously improve to support its growth.

Management believed that given a competitive product/service, and a good corporate reputation, the generation of a company s sales revenue involves a continuous work-flow across Marketing, Sales, and Customer Support departments as shown by Figure 4. Together they constitute the components of the revenue production system. Optimizing revenue production as a system would eventually call for close coupling and synchronizing of these departments.

DEPARTMENT RESPONSIBILITIES

Figure 4

Management laid out a summary of their sales revenue production process. They captured what needed to be done to continuously initiate, cultivate, build, and support the company s customer relationships, which in turn produces the company s sales revenue. The diagram (Figure 5) clearly revealed that this business process was cross-departmental. To name this process they adopted the acronym “CARE” (Customer Acquisition, Retention, & Expansion).

THE CARE PROCESS

Figure 5

The heart of the CARE revenue production process is the sales pipeline. It contains an ever-changing volume of potential sales revenue, in the form of individual sales opportunities as they flow through the selling process. The never-ending challenge facing every corporation is keeping its sales pipelines flowing at full capacity with good quality prospects. Each week prospect sales opportunities can and do scrap out of the pipeline anywhere along their way as “fall-out,” for a myriad of reasons. New and different sales opportunities are being entered as “input.” Others are closed as booked business, moving out of the pipeline as “output.” The volume and content of “sales-in-process” is in constant flux. Some prospects are maturing, moving forward in the selling/buying process, while others stay put or even move backwards.

From the CARE model, the responsibilities of the field sales staff and their corresponding performance measures were determined. Each field person would be accountable for getting their pipeline s operating performance measurements healthy and keeping them in balance. Sales managers, in addition to improving the performance of their consolidated regional pipelines, would be accountable for improving and synchronizing cross-departmental activities to attain it.

All managers, including the VP of Sales, were to have the same operating performance measures as salespeople in their territories. This made the performance picture consistent over the whole salesforce. The ability to compare performance between territories and to the sales force average, provides an ongoing objective basis for managers to identify where they need to focus their coaching efforts. Everyone will see the graphs and differences in marketing and selling process behaviors. By identifying what methods work better than others, management can systematically improve revenue production and reduce overall variation in performance. This will result in both increased revenue and better revenue predictability.

This unified picture of operating performance would serve as the driver for organizing and synchronizing marketing s functions as supplier to the territory pipelines. Marketing will be able to determine future prospect requirements and will be called upon to systematically improve its lead generating effectiveness. The system will provide the sales history database from which marketing can get feedback on wins, losses, lead sources, industry segments, competition, and other prospect parameters.

To manage the all-important customer references, customer support would regularly update a “Customer Reference Availability” database, while sales and marketing would likewise update the database on all uses of customers as a reference.

To begin to significantly increase revenue, management first needed to determine how well the operation was currently performing. After that, it would need to see the measurements on a regular basis in order to keep the revenue production system components synchronized.

IMPLEMENTATION: The Selling Process and Performance Measures

The selling process map

A “customer relationship” is the result of two or more independent processes combining and groups of people interacting. Two processes always present in any customer relationship are the selling process of the vendor and the customer s buying process. Other processes can be involved if other parties are involved in the relationship for buying, selling, implementing, or supporting the products.

Unlike manufacturing environments that are set up to control the entire fabrication process, Sales can only try to influence the actions of the prospect. Even in executing the fundamentals of its selling process, Sales must accommodate the needs of the prospect s buying process.

This points to why many veterans insist that selling is an “art” and that “talent” is what sells. Insofar as art is a medium to convey knowledge, meaning, and emotion, salespeople indeed educate and create interpersonal rapport, trust, and confidence with prospects. They must certainly inspire emotional desire in the prospect to want to commit to a relationship.

Yet, as a repeating business operating function, there is also mechanical process or science underlying selling. A sales manager once described selling as being like a bicycle. The gears, chain, sprockets, pedals, frame, and wheels are the process the bicycle s capability and capacity. However, the steering, balancing and quality of energy powering it that s talent.

The selling process map is a common framework for guiding and measuring selling workflow through the sales pipeline. Development of the map started with Trailer Vavricka, Inc. facilitating a two-day session for the salesforce to map its own “best-methods” selling process. This identified and captured what seemed to produce the most consistent closing and best quality of customer results.

The salesforce defined six macro-steps to their selling process. Each step contains an objective (what it is designed to accomplish), a desired result (how to determine the objective is accomplished), and two subsets of detail step actions that usually lead to achieving the desired result. One set of actions list what the selling team generally needs to accomplish, while the other set lays out what the prospect s buying team typically needs to do at each point in the cycle.

In the same session, the group also derived their prospect quality criteria, set its team operating rules for using the process consistently, and loaded their pipeline database with all current sales-in-process. This produced a unanimously agreed upon selling process in sufficient detail to serve as the common structure to meaningfully measure operating performance for each individual territory and every management level.

Sales operating performance measures

Performance measures can show how effectively the combination of process and talent is operating as in Figure 6, which shows pipeline revenue input rate. The performance measures can also identify significant changes in performance as they start to occur and the pipeline s bottlenecks. With such early warning signals, sales, marketing, and support managers will be able to take timely action to keep the revenue production in control and more predictable.

PIPELINE INPUT REVENUE RATE – PERCENT FULL

Figure 6

Managers reasoned that implementing sales process performance measures would enhance four fundamental management capabilities. They would provide all three CARE departments with quantified operational feedback, fact-based understanding, and clear requirements for:

1. Maintaining the production of sales revenue on-target to current FY budget goals;

2. Increasing sales production capacity at least a sales cycle length ahead of when increased sales targets call for greater monthly output;

3. Continuously improving the processes within each CARE department, as well as the daily execution of them, to increase operating capability;

4. Synchronizing the CARE departments to operate as a single team, with the common goal of optimizing the overall operating performance of the sales revenue generation system.

Sales process performance measures would also directly support the salesperson, who s role was defined as a Territory Business Manager, responsible for:

1. Producing 100% or more of the current FY s assigned quarterly revenue targets;

2. Developing a continuous business pipeline flow adequate to meet the monthly revenue targets across fiscal quarters and fiscal year boundaries – with 100% customer satisfaction;

3. Improving quarterly forecast accuracy to within +/- 15% of actual.

Due to the dynamically changing status of each pipeline s performance and capacity, everyone s measures need to be recalculated each week, in order for the feedback graphs to effectively reveal changes in performance. The following measures were selected to monitor the performance of the sales process with respect to the given objective.

Producing 100% or more of the quarterly revenue targets

Input revenue flow per month is the amount of new revenue needed by each pipeline, and would be calculated according to how the territory s pipeline was actually operating. For example, a pipeline operating at a 20% close rate with a $100K/month quota would need $500K of new input each month to keep its flow going; but only $250K if its close rate had improved to 40%.

New sales project quality is another key leading performance indicator, along with input revenue flow. Better quality prospects typically close at significantly higher rates, taking less average cycle time. The opposite is true for poorer quality prospects. To develop a consistent way to measure the relative quality of each prospect opportunity, salespeople agreed on the top five most important determinants of a prospect s quality. These criteria went beyond merely arbitrary demographics into the characteristics most germane to forming a long-term customer relationship. A rating scale of 5 to +5 was used for each criteria. This measure showed the average quality of the input stream as well as the overall pipeline contents.

Close rate by process step is the calculated probability to close from each step of the sales process, for each pipeline. This is also used in calculating several other measures such as input rate, pipeline %full, and projected output.

Pipeline %full shows whether the revenue of sales-in-process is enough to support the monthly revenue objective. This is a good indicator of how healthy the pipeline is according to its current close probability, cycle time, and its volume-in-process capacity. Figure 7 is an example of a performance chart.

Average project revenue size is calculated across all the sales projects currently in a pipeline. Revenue growth can be significantly increased by the pipeline s population of prospects becoming larger in average size, requiring a lower total number of projects to be found and worked. In the company s case, it takes almost the same amount of effort and time to win a small contract as it does for a large one.

Output revenue percent to fiscal quarter target is simply the actual revenue recognized per fiscal quarter as a percentage of the territory s revenue quota for the same quarter. This is the traditionally used results measure.

SAMPLE PERFORMANCE CHART

Figure 7

Developing a continuous adequate pipeline flow

Pipeline forecast projection by month and YTD cumulative position shows the salesperson and manager how the current pipeline contents, will probably flow out in future months and accumulate in YTD revenue. This is based on the individual performance measures of each pipeline, giving each person a relevant picture of where they stand and are likely to be in future months. Everyone can see whether their projected sales revenue position is below or above their target. The projection spans fiscal period boundaries to keep visible the need to maintain continuity in each pipeline s adequate flow at all times.

Cycle time by process step is the total time in weeks that the average sales project takes to go through the pipeline s sales process steps. Steps with large time sinks should be candidates for investigating what is causing delays to see if the process can be improved. Cycle time is also used in calculating several other measures such as projected revenue output, pipeline %full, and course correction. A sample chart is shown by Figure 8.

SELLING CYCLE TIME COMPARISON CHART

Figure 8

%Fall-out by process step shows the portion of potential revenue of sales projects that were lost or otherwise scrapped out of the pipeline. Large portions of fall-out early in the sales cycle usually points to low or misgauged prospect quality, whereas late in the process, it suggests a need for selling process or execution improvement. Reducing fall-out has the effect of raising the close rate and reducing overall average cycle time. Moving fall-out forward in the sales cycle prevents wasting time and resources on future scrap, enabling them to be applied to better opportunities. This can raise the close rate and improve sales volume. A sample chart is shown by Figure 9.

REVENUE FALL-OUT BY PROCESS STEP

Figure 9

The fall-out in each step can also be analyzed by competitor, product, industry segment, and selling team. The patterns of fall-out can provide insight into what is causing it and how it might be reduced. Similar analysis can be done on closed opportunities to see where particular people or approaches are stronger, so those tactics can be deployed to all territories.

Improving quarterly forecast accuracy

Quarterly forecast accuracy is measured by the difference between forecast and actual revenue as a percentage of the forecast. The forecast is what was predicted as of the last day of the previous fiscal quarter. Each quarterly period is calculated each month on a rolling quarterly basis.

IMPLEMENTATION: Consistent Daily Use and Feedback

Management consistently encouraged all the salespeople to adopt and regularly execute the sales process procedures as a daily habit. The goal was to establish the process as a standard framework for managing sales opportunities as individual projects. Management felt this framework would accelerate getting every salesperson up to a high level of selling competency and provide managers with the information they needed to become effective coaches. Managers reinforced the process orientation by using the sales process as the context for every sales opportunity discussion, resource and quotation request, forecasting, planning and debriefing every sales call, and all interfacing of the field with marketing, inside sales, technical consulting services, and customer support groups.

The sales force information system was upgraded to incorporate the mapped sales process steps, prospect quality criteria rating, pipeline per territory, and to regularly capture the needed data on all sales project movement through closing or fall-out. The system would serve as the company s sustaining mechanism for deploying the cultural continuation of its best process behaviors throughout the involved departments. Management felt the sales measurement and management system would provide the degree of control it needed – and had never had before.

The sales management system needed to have algorithms built into it to make the performance measurements each weekend for each remote salesperson, up through the consolidated VP Sales level. The system would have to:

Measure the chosen vital signs of in-process sales revenue production flow, and show statistically significant changes and forming trends in actual operating performance;

Provide on demand the sales forecast projection based on the actual operating statistics as measured each week;

Report the measures graphically so everyone could easily understand and monitor performance.

Due to limited internal programming resources, implementing a complete sales management system with these capabilities was going to take much longer than management desired. To get started as quickly as possible, an interim system was put in place to measure the pipelines for current territories and the aggregate national pipeline. Tools such as Excel s database query, pivot table, and graphing were used to summarize the data and track changes in the operating measures. Although not as sophisticated as the new sales management system would be, the patchwork system was capable of providing reliable performance measures.

Each remote salesperson had a computer, which would automatically send all sales project updates made each week to the central database. Salespeople made up a common set of system updating procedures so they all understood how to consistently use the sales process and do timely and accurate system updating as sales projects progressed. This made the data very complete and reliable.

IMPACT ON OPERATING PERFORMANCE

The sales operation was able to increase both its headcount and output rate over the first two quarters of Year 2. The YTD performance measurements of Figure 10 show an interesting picture of current sales operating conditions and reveal the challenge for attaining the next two quarter s sales targets.

IMPACT ON PERFORMANCE – FROM YEAR 1 TO YEAR 2

Figure 10

The most striking improvement is the close rate jumping from 14% in Year 1 to 31% for the first two quarters of Year 2. This was partially due to improved selling effectiveness, resulting from everyone using the “best methods” selling process. Also, the executive management team relentlessly assisted the salespeople in actively meeting with prospects by traveling to prospect sites and hosting prospects during their visits to the company. However, Q3 s revenue target is 40% higher than Q2 s. Besides that, counting on maintaining the 31% closing rate without improving selling capability in some fashion was risky. Accordingly, sales management began formal sales opportunity reviews and initiated planning for all above average size sales projects that moved into the solution demonstration phase of the selling process.

Although new field sales people are quickly becoming competent to manage system sales as a result of the structured selling process and better training, they are having difficulty keeping their pipelines full. The company s initial effort to fill the pipelines was centered on beefing up the inside sales group s capacity. They were being counted on to find and follow-up more of marketing s general leads in order to stock the new territory pipelines as new salespeople were hired. While this helped fill the national pipeline, all the newer territories were far behind their objectives going into Q3.

Average prospect quality, cycle time, and project revenue size have also improved. Another important contribution to performance improvement is through the reduction in turnover. When turnover is low, the territory development effort can be continuous with most management time being dedicated to coaching instead of repeated hiring and training.

Quarterly forecast accuracy has greatly improved so far for Year 2. However, the hockey stick nature of more than 70 % of the closed revenue coming in the last month of the quarter, is restraining management s confidence in overall revenue predictability. It is also costing the company in having to discount, provide special terms, and give away normally fee training and services to get orders closed before the end of the quarter. There has been a large amount of slippage in expected close dates and revenue (additional operating performance measures), but this appears to be more of a problem with estimating than with operations performance or customer behavior. Rules for the salesforce to consistently estimate project revenue as well as close date, and close probability are being instituted to decrease the estimating errors.

What is now crystal clear to management is that new territory marketing cultivation has a 1-2 sales cycle lag time (5-10 months) before it can establish an adequate input flow of qualified prospects. In Q1 of Year 2, Marketing started a rudimentary on-going contact pattern for any prospects field salespeople or inside sales provided to them. They are now starting Q3 with resources to launch support for larger scale, multiple-contact-points-per-prospect cultivation of each territory. Unfortunately this will take about the next two quarters to really kick in. Until then, the salespeople will have to employ guerrilla prospecting tactics in an all out effort to get enough prospects into their developing pipelines to make revenue targets for this year and be in position to start next year at full pace.

Some specific instances where the performance measures were instrumental in initiating corrective or other actions to improve performance are given below.

1. At the end of the 4th quarter of Year 1, the Sales VP saw that the revenue projection based on the system s calculated performance data showed that the next two quarters were going to fall far short of objectives. This was in contrast to his own estimates that were based on a much rosier picture. He called an emergency meeting with the Marketing and Inside Sales managers to develop a plan for keeping the pipelines full with a steady stream of new prospects. They worked out an approach to target the top 50 potential customers in each territory for sustained cultivation – combining specifically designed direct mail, seminars, and teleselling programs. This increased the Pipeline %Full measure 20 points, making achievement of the sales goals at least a realistic possibility.
2. The Inside Sales group contacts raw sales prospects to determine which are worth passing on to the field. In an effort to increase the number of prospects getting into the pipelines, the Inside Sales manager put incentives in place in some groups. The incentives were based on the number of prospects each Inside salesperson passed on to the field. Two weeks later, the pipeline showed a marked increase in prospects, but prospect quality, as assessed by the salespeople, also showed a sharp decline. Quality was apparently suffering in favor of quantity. This was confirmed by a more detailed analysis, which showed the drop in quality was happening only in the areas that were under the incentive plan.

The incentive plan was subverting the primary purpose of Inside Sales, which was to screen out poor quality prospects so they would not waste the field salespeople’s time. To prevent this, the incentive plan was changed to include prospect quality criteria and subtract prospects rejected by the field as poor quality. Prospect quality quickly got back to normal with little decrease in prospect volume. Had the quality measures not been present, it undoubtedly would have taken several months for the quality problem to become evident.

3. At one point, the Southern Regions’ close rate was 14% lower than the average. Investigation showed the largest cause of the problem was the quality of customers that could be used as references and for getting referrals into other companies in the region. Surveys of the key accounts for referrals revealed that most of them were only using about 20% of the product’s capability, which was certainly not resulting in highly satisfied references and great referrals.

A customer CARE team was formed to raise the customers’ level of understanding of the system’s scope and everything that it could do. As a result, the key customers began additional training and implementation efforts, quickly realizing significantly greater benefits and return on their investment. In return, they became very strong references and referral generators for the Southern Region, speaking to prospects one-on-one and through organized sales seminars. This increased the region’s overall close rate by 17% in the ensuing five months.

4. A Western Region sales rep had the largest amount of pipeline fall-out, most of which was happening on the last step of the sales process. He also had the lowest closing rate of anyone in the region. The sales rep and the regional manager examined what was happening and concluded that the primary cause of the problem was poor execution in getting to upper management in the selling process.
   1. Selling is a production process that can be measured. It may not be possible to measure sales as precisely as a manufacturing process, but the process can be measured well enough to give management relevant, useful, and timely information for making operating and strategic decisions.
   2. The performance measures that were developed made a significant contribution to improving performance throughout the sales process. Management had to make the decisions and take action, but there is no question that the performance measures were effective in identifying problems on a timely basis and also in helping to solve them.
   3. Using a structured process framework and performance measures had no negative effects on performance or morale. Instead, the effects were all positive. Most of this can be attributed to the leadership of the company s top management, but this experience illustrates there is nothing inherently objectionable about measuring individual and group performance in sales and marketing.

Querying the system, the regional manager then identified other salespeople across the company who had high close rates and the least fall-out in the last steps of the pipeline. Along with the other regional managers, they were then surveyed to determine what techniques for getting to and selling to upper management worked best for them. This included telephone scripts, questions asked of customers, benefit statements, article reprints, meeting agendas and formats to run meetings.

In six months, the sales rep’s close rate was above the regional average and his last step fall-out was reduced 70%. In this case, the performance measurement system not only identified a specific problem; it told management where to look for the solution. Without the performance information being available, identifying and correcting the problem would have taken much longer – probably at least another year, if ever. The sales training manager is organizing this into an education module for the regional managers to present to all salespeople to improve everyone s performance.

IMPACT ON THE ORGANIZATION

The company s CARE departments, along with the executive committee, have become galvanized in their effort to contribute to the company achieving the needed operating performance improvements. Everyone is focused on finding ways to improve their individual performance in order to support the team effort.

The performance measurements have been instrumental in helping management to understand and zero in on what areas in the CARE process would contribute most to improving the Company s revenue production performance. Having the common, fact-based picture of what is happening in sales operations has enabled more rapid concurrence on deciding what needs to be done, priorities, and who needs to do it.

Both inter-department and management-worker unity has noticeably improved as a result of having common objectives, clear responsibilities, and reliable, objective performance information. Departments are operating as a team and all members are playing with heart. The quality of the culture is itself improving even amidst the demands, strains, and pains of rapid growth.

As investments in continued process improvement, management decided, among other items, to:

Build up the Inside Sales infrastructure and hire a manager to analyze their process and continuously improve its capability to provide qualified prospects to all field pipelines.

Utilize Inside Sales as a filter to prevent field salespeople from wasting their limited selling time and resources running after sub-quality prospects which salespeople tend to do when that s all they have available.

Hire vertical market industry experts to build specialized marketing plans, produce education programs for field personnel, develop customized solution demos, and generate other initiatives.

Implement sales opportunity reviews and planning sessions where a salesperson and manager will formally review sales projects that are near closing to develop comprehensive selling plans to win the business.

Develop a customer reference system to enable quick identification of available references that match the prospect’s profile and track reference usage, actual involvement, and effectiveness.

Add more field system engineers to team with salespeople in custom demo modeling of prospects selling, marketing, and support processes.

A considerable operating benefit of the measurement system will be better predictability of when and what business will be materializing. Armed with this information, department managers will be able to make better staffing and training decisions further ahead of when the business will actually materialize. This is how the company sees it will be able to better maintain the quality of the internal work environment and 100% customer satisfaction.

Potential System Improvements

The information system currently has several additional enhancements underway to add other key performance measurements and expand the reporting capabilities to include control charting of all the weekly performance measurements. New measures will include:

Sales process step and step action execution tracking across sales projects.

Close date and revenue slippage.

Rolling 1-6 month forecast accuracy.

Rate of flow within each pipeline.

Project age tracking to identify where action/scrap/recycle decisions must be made.

Correcting additional input revenue amounts needed each month to compensate for projected revenue shortfalls in each territory.

Control charting the weekly performance measurements helps put each week into the context of all the previous weeks. Seeing the series of performance points graphed over time shows the natural band of variation around its “normal” average. In the same way for each territory and manager s pipeline, control charts detect and give exception ALERT signals for taking timely corrective action.

There will also be better ways to analyze closed and fall-out projects for finding the largest areas for potential improvement and identifying where better methods are emerging which can be used to improve performance.

Marketing will begin to directly help improve field close rates for each product line by looking across the territories for standout patterns in effectiveness against particular competitors in specific industry segments. Marketing will then collect the best methods, documenting where each fits best within the standard sales process. These changes will then be sent to all salespeople as they begin pursuing opportunities fitting those profiles. Product line performance data will also help better manage the decision process for introducing new products and deleting non-productive ones.

CONCLUSIONS

Although there are many improvements to be made to the sales performance measurement and management systems, some firm conclusions can be drawn from this study:

This case study is reprinted in the book titled Operational Performance Measurement Increasing Total Productivity by Will Kaydos, 1998, St. Lucie Press, (Amazon.com search “kaydos”) with the permission of Trailer Vavricka, Inc. TVI has since entered into a joint development agreement with SalesWare, Inc. to continue with developing our third version of the process management and performance feedback system from all that we learned in live-testing the second Sales Naviguide prototype. It will be named Sales Process Management / Vital Signs and made available for licensed use with all leading Sales Force Automation/CRM software packages, as well as private in-house developed opportunity management systems. In parallel TVI consults with clients to define, implement, and sustainably improve their sales operating process effectiveness and performance. The company also speaks and writes on the subjects of Sales Operating Fitness/Performance Improvement, CARE/Revenue Production Management, and Sales Mastery. For an outline of services, please contact: Joe Vavricka, VAVRICKA ASSOCIATES, 319 Shoemaker Lane, Solana Beach, CA 92075, Ph: 858-755-1994; E-mail: joevav@alumni.princeton.edu. Website: www.raisesales.com.

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[1] This case study is included in the landmark book by Will Kaydos, President of The Decision Group, entitled: Operational Performance Measurement — Increasing Total Productivity, published by St. Lucie Press 7/98. For the book’s preface/outline see website: www.decisiongroup.com.

[2] William Lareau, American Samurai, Warner Books, 1992, p. 66.

[3] “Total Customer Management” is the Registered Trademark of the ONYX Software Corporation, Bellevue, WA Website: www.onyx.com

by Jonathan Byrnes

You are what you sell. Sales is the front-wheel drive that pulls a company forward in the marketplace. But in many companies, top managers are frustrated because the sales process seems disconnected from corporate objectives. This presents a serious impediment to management's efforts to manage profitability effectively.

Why does this occur so often, and what can managers do about it? I gratefully acknowledge Paul Bergeron, former president of a number of companies requiring revenue and profit turnarounds, for co-developing and co-authoring this material.

The process of transforming top management's goals into concrete sales typically breaks down for one or more of the following reasons:

• Lack of top management clarity about objectives.
• Difficulty translating objectives into an operational business plan.
• Vagueness communicating objectives and business plan to the sales force.
• Failure to align compensation with the objectives.
• Problematic individual sales plans and managerial coaching.

Each of these can be remedied through thoughtful management.

A five-step remedy
In order to reconnect sales management to profitability, address each of the points of breakdown. Managers can do this through a five-step process.

Understand profitability. A surprisingly frequent underlying reason why the sales force does not succeed in maximizing company profitability is that the senior managers themselves do not have a clear understanding of the company's key profitability drivers. This makes it impossible for them to communicate to the sales force clear, implementable objectives and systematic procedures to accomplish them.

Some senior managers feel there is no time to analyze and understand the factors affecting profitability, and to devise concrete measures to guide managers in their efforts to maximize profits. (See "Bridge the Gap between Strategy and Tactics" for an explanation of how to do this.) This is a major error.

The core responsibilities of senior management are to set strategy and objectives, secure resources, and maximize profitability. It is imperative that top managers have a deep enough knowledge of profitability management to be able to communicate that wisdom to the sales force. It is futile to simply instruct the sales force to produce the most profitable results.

Translate into business objectives. All companies have business plans, but often these plans, which feature mainly company and market analysis, sets of programs, and numbers, are not adequate to guide a sales force.

The core questions that must be addressed every day by the sales reps and sales managers are who to call on and what each call needs to accomplish. A sales rep can accomplish a limited number of things, such as increasing sales in an existing account, changing a customer's product mix, up-selling, cross-selling, obtaining a new customer, minimizing discounts, minimizing returns, etc. Effective business plans must give guidance to the sales force about which objectives they should pursue in given situations in order to produce the highest payoffs. The sales reps cannot maximize everything.

Effective business plans have three essential roles: first, to state clearly the company's objectives; second, to specify new initiatives, required resources, and expected results; and third, to guide the day-to-day activities of the company toward maximum profitability. In most companies, the first objective is usually met, the second is sometimes met, and the third is often neglected. When this occurs, it causes the sales force to become disconnected from profitability.

Communicate the business objectives. In some companies, business objectives and plans are simply not communicated to the sales force. They are created by department heads or staff, and shared only with upper- and middle-level managers. Sometimes business plans are considered confidential. This causes the sales force to be disconnected.

There is a parable about three bricklayers who are asked what they are doing: the first replies, "laying bricks," the second replies, "building a wall," and the third replies, "building a cathedral." In the absence of an understanding of business objectives that guide profitability maximization, the sales force is simply laying bricks. They never see the cathedral, and the company loses the inspired performance.

In effective companies, the top managers communicate the company's objectives to the sales force. If the objectives have changed, they explain the decision and why the new objectives are good for the company, the customers, and the sales force. They do not hand off to the head of sales the responsibility for this vital communication.

This direct communication creates two important benefits. First, because most top managers have a deeper understanding of the factors that create profitability across the company, they are able to communicate the nuances of how to maximize the company's profitability in the everyday decision-making that is the heart of the sales process, and they can communicate why this is important to the sales force and the company. Second, the mere fact that the top managers personally communicate the objectives to the sales force strongly underlines their commitment to accomplishing these goals. By demonstrating that they have taken the time to understand and explain how to maximize profitability, these top managers display the "body language" that motivates the sales force.

Translate into a compensation plan. In some companies, objectives are changed each year, or more frequently, with little or no change in the compensation plan. There is an old saying that a person can understand a vision and can buy into the vision, but in the end will do what you pay him to do.

Conversely, if a person does not understand how to accomplish the vision, it does not do a lot of good to tie her compensation to its realization. The difficulty with tailoring an effective sales compensation plan is that it requires a set of well-thought-out business objectives that are specific enough to guide the sales force every day. The sales force should be driven by the compensation plan. "Work your pay plan" is one of the central tenets of sales management. Simply telling the sales reps to maximize profitability without giving them an understanding of how to do this, and compensating them to do this, will render the compensation plan largely ineffective.

Sometimes, the sales force is asked to maximize many objectives, or a set of objectives that cannot be simultaneously maximized. In these cases, the sales force defaults to the simplest way to maximize their compensation. Sales compensation is so critical to a company's success that top management should directly review the plan.

Create individual sales plans. In many companies, sales plans for individual sales reps do not exist or are too vague. This is like writing a paper without taking the time to develop an effective outline. For example, a rep may simply plan to increase revenues by a certain percent for a cluster of accounts. This is a hope, not a plan. By contrast, an effective individual sales plan must be specified at the account/product level, so the rep and sales manager can track progress and continuously improve the rep's performance.

The building blocks for a tightly-connected sales force are three-fold: 1) clear business plans, which include guidance on what to do to maximize profitability in particular types of situations, and which reflect top management clarity and commitment; 2) compensation that has been tailored to direct the sales reps to meet the company's objectives; and 3) well-specified account plans that will enable the reps to fulfill the business objectives and allow the sales managers to monitor and coach the reps' progress. These plans must be developed by the individual sales reps, and include step-by-step, account-specific initiatives to obtain new accounts, to increase penetration in existing accounts, and to increase account profitability.

Every aspect of the account plans should be measurable. They should provide specific answers to the questions: Where will I get sales? How will I get sales? How will I meet my objectives and the company's objectives? How will I make money? Well-specified account plans provide the basis for management coaching. They also protect the company against losing sales in the event of rep turnover.

Here's an example of the power of effective account plans. The top management of a company had looked carefully at its profitability and sales force productivity. It determined that the highest-payoff sales objective was to "turn around" high potential, under penetrated accounts that were clustered in areas that minimized installation costs. However, the reps were focused on increasing revenues in a vague way, and consequently spent inordinate amounts of time with "easy" or "friendly" accounts, many of which were only marginally profitable to serve.

In order to increase sales force productivity, top management devised a clear set of business plans to guide the reps in account selection and managing their time. They helped the sales managers work with the reps to identify the highest-potential underperforming accounts in each territory, and to create step-by-step account plans to map the buying center and systematically position the company for the sale. Management understood that turning around an account could be a three-month process, and set up milestones to monitor progress with compensation tied to achieving specific milestones. Sales managers coached the reps account-by-account, milestone-by-milestone.

The initiative was extremely effective, with sales increasing by more than 30 percent in a number of target accounts within a month. Top management had succeeded in reconnecting the sales force to profitability.

"Top Gun" sales managers
Several years ago, the U.S. military developed "Top Gun" training programs to increase the effectiveness of fighter pilots. These programs were based on the finding that, although technology had improved considerably, many pilots were becoming less effective. The problem was that these pilots were having difficulty with information overload. The best pilots had learned to focus on the few things that mattered most. Once the other pilots were taught what to focus on in specific situations, their effectiveness skyrocketed.

In a similar way, top managers can reconnect their sales management to profitability. A sales rep is most productive when focused on accomplishing the few things that really matter in each sales call. It is management's responsibility to identify those few things, and to tie compensation specifically to their accomplishment. It is the rep's responsibility to get the job done.

The biggest problem in sales force productivity is often that management has not given the reps the necessary goal clarity and focused compensation. This five-step process will ensure that top managers give the sales force what it needs to succeed, in the process ensuring the success of the whole company.

Stage 1: Leads

First you have to get leads in the door.  What is a lead?

A lead is a potential customer at its earliest stage.

Some people call this a sales “prospect.” So, what is a prospect and what’s the difference between lead and prospect?

I think using either “lead” or “prospect” is fine, though in sales I tend to prefer to use lead to define my earliest stage potential customer. I then use prospect more as a verb as what I have to do to find leads (e.g. when I read about a potential customer in the newspaper or on a Web site I am “prospecting.”).

For example, here are the criteria I used for qualifying sales leads (qualifying leads may be quite different based on what industry you are in):

• I have their first and last name
• I have their company name
• I have a quantity metric helping me to understand that they have enough value to merit me working for them (examples of a quantity metric might include the number of employees they have, the amount of revenue they generate or their Web site’s traffic ranking).
• I have a quality metric helping me understand if they are the type of lead I’m looking for (examples include: the vertical market they are in or the title of the individual)

Prospecting sales leads is a full-time job. There are two main types of leads:

1) Inbound Leads

To generate inbound leads, you can simply run advertisements (leaving your phone number, email or Web site information) or it may be as simple as you have a Web site with a “Contact Us” link that leads to a sales lead form (which of course would ask for the type of information (such as their size, type of business, etc.) that helps you define whether someone is a good lead.

2) Outbound Leads

Outbound lead generation consists primarily of having an outbound marketing program or outbound sales (such as outbound telesales). The point is that generating outbound leads consists of proactively making a day to day effort to find leads.

The next stage after qualifying a lead is turning it into what I call an “opportunity.” I have three stages of opportunities: 10%, 50% and 90% — let me explain each.

Stage 2: Opportunity (10%) (”We have connected with the right people at the right business”)

I define a 10% Opportunity as having the following qualifications:

• I have made contact with them
• I have confirmed that the quantity is there for my type of customer (for example, they have a top 1,000 Web site if I’m looking to sell to the largest Web sites in the world).
• I have confirmed a quality metric such as they are in a vertical market that has worked for me in the past or another example is that the person I’m talking to is the proper decision-maker for closing a deal with me).
• Finally, and this sounds obvious, but I define a 10% Opportunity as one that has a 1 in 10 chance of closing — duh!

Stage 3: Opportunity (50%) (”We’re in the ballpark on this deal”)

I define a 50% Opportunity as having the following qualifications:

• The details of the product or partnership have been discussed and it’s agreed it’s a good fit for both sides
• The pricing of the deal is in the ballpark (within 20%)
• The rough timing of the close of the deal has been discussed

Stage 4: Opportunity (90%) (”Negotiations are complete”)

I define a 90% Opportunity as meeting the following criteria:

• Agreement on pricing
• Agreement on product specs
• Agreement on closing date
• Agreement on delivery date of product
• Contract has been reviewed (just not signed  yet)

Stage 5: Closed Won (or Lost)

Finally, when you close a deal you have two scenarios:

1) You closed the deal meaning you won it. That means that you have the contract in hand and you’re off to the races!

2) You closed the deal because you lost it. This is ok. Think about the old story of the vacuum cleaner salesman who sold vacuums for $100 but had to knock on 50 doors to get a sale. Well, each “Closed Lost” deal of his was worth $2 each, right!?

Salesforce Automation

Finally, there are plenty of customer relationship manager software prorams (aka CRM software) available to help you with the stages above. Most include the basics of:

• Sales pipeline management
• Sales pipeline templates
• Sales pipeline reports

http://www.purchase.com/blog/increase-sales/how-to-create-a-sales-pipeline

The Opportunity Management system can be customized to fit your internal sales methodologies and processes, making it easier for managers to monitor their sales pipelines.

Benefits:

• Standardize sales processes and methodologies
• Identify bottlenecks and shorten sales cycles
• Proactively counter competitive threats
• Facilitate collaboration across your teams
• Effectively manage multiple deals simultaneously
• Track deal progress and milestones
• Close more deals and increase sales productivity

Details:

• Opportunity Tracking
  Centrally track all opportunity-related data, including milestones, decision makers, partners, customer communications, and all other custom information unique to your company.
• Sales Methodologies
  Use built-in support for branded sales methodologies such as Miller Heiman, or set up your own customized sales methodology or sales process.
• Multiple Sales Processes
  Set up different sales processes and page displays for different sales situations, whether it be different business units, different product lines, or different sales channels.
• Product Tracking
  Track product-level information on each sales opportunity, including quantity, standard price, quoted price, and product codes. Additionally, set up revenue and quantity schedules for each product to mirror payment and delivery terms.
• Opportunity Update Reminders
  Ensure sales teams keep opportunity information up-to-date with scheduled email reminders. Managers can set up automatic, recurring emails for themselves and their teams.
• Competitor Tracking
  Track the competition and key competitive issues on each deal. Roll up competitive data in win-loss reports to understand competitive trends and emerging threats.
• Opportunity Analysis
  Easily analyze your sales pipeline so you can quickly identify and eliminate any bottlenecks in the sales cycle or determine the cause of downgraded sales opportunities.

The opportunity management capabilities of the Opportunity Management system give sales professionals complete visibility into each sales opportunity. Capabilities provide the ability to capture, manage, and monitor the business contact and account information of potential opportunities, including identifying key decision makers, sales histories, milestones, progress, outbound activities, and internal tasks.

Opportunity Management CRM provides sales reps with a framework for managing sales projects from the very start and tracking their progress to the very end. This enables more control over the sales cycle maximizing the changes of winning customers and dramatically lowering sales times. With the opportunity management capabilities of CRM, sales professionals can easily:

Plan sales approaches

1. Assign and manage critical tasks and activities
2. Identify key decision makers, influencers, and critical ­relationships
3. Manage competitive threats while pursuing add-on revenue
4. Promote team selling and sales coaching
5. Estimate closing dates and sale volumes

Opportunity Management capabilities also allow organizations to:

1. Determine an opportunity’s sales planning figures and revenues. The opportunity management capabilities enable users to define planning figures such as market share, sales revenues, and quantities for the complete opportunity. They can also determine sales revenues and quantities for individual projects. Organizations can analyze cumulative planning figures, which they can use to plan sales and production.
2. Create opportunity hierarchies linking related sales opportunities and projects. Organizations can structure master sales projects into several sub-projects, allowing for separate opportunities for subsidiaries, divisions, or separate departments within the same master project.

Manage complex sales projects more effectively by seamlessly integrating project and resource management capabilities. Sales reps can plan each project, define and manage each task, and allocate resources more effectively with easy access from the sales rep portal to project management capabilities.

Prospect Stage:

• Prospect fits our target customer criteria
• Prospect's vision and key operating goals documented
• First contact made (phone, letter, email, or personal)
• Potential opportunity identified
• Initial meeting scheduled and confirmed

Qualified Stage:

• Written Sales Call Plan completed for initial meeting
• Agenda and preliminary information sent to prospect
• Initial meeting completed
• Need-to-buy confirmed – prospect is a real opportunity for us
• Decision making process participants and roles identified
• Problem owner identified
• Potential Inside Sales Person (ISP), sponsor, identified
• Prospect agrees to follow-on meeting

Discovery Stage:

• Buying Issues and Decision Criteria identified and prioritized
• Competition and competitive strengths and weaknesses identified
• Allies, Enemies and Neutrals identified
• Decision making process charted and confirmed with our ISP
• Our team agrees on our proposed solution and presentation strategy
• Project funding identified

Developed Stage:

• Prospect agrees to contact/visit our reference customers
• Proposed solution presented to prospect
• All prospect’s issues and questions captured
• Preliminary business case (ROI & Payback) completed
• Implementation plan and resource plan completed
• Pricing, implementation & resource plan approved by our management

Proposed Stage:

• All prospect’s issues and questions resolved
• Final proposal completed and submitted to prospect
• Proposal review meeting completed with prospect
• Legal contracts submitted to prospect's legal department
• Decision date confirmed with prospect

Closed Stage:

• Order received and accepted
• Signed contracts received and accepted
• Implementation initiated
• Invoice sent to customer
• Revenue booked and credited this month
• Won-Loss report completed
• Customer satisfaction confirmed
• Customer agrees to be a reference site

Applies to: SQL Server 2000, SQL Server 2005

Exact numerics

numeric and decimal are Fixed precision and scale data types and are functionally equivalent.

Approximate numerics

datetime and smalldatetime

Character Strings

Unicode Character Strings

Binary Strings

Other Data Types

• sql_variant: Stores values of various SQL Server-supported data types, except text, ntext, and timestamp.
• timestamp: Stores a database-wide unique number that gets updated every time a row gets updated.
• uniqueidentifier: Stores a globally unique identifier (GUID).
• xml: Stores XML data. You can store xml instances in a column or a variable (SQL Server 2005 only).
• cursor: A reference to a cursor.
• table: Stores a result set for later processing.