ADAPTING TOTAL QUALITY MANAGEMENT TECHNIQUES TO THE DISCIPLINE OF SALES LEAD MANAGEMENT ppt

Sales TQM Page ADAPTING ADAPTING TOTAL QUALITY MANAGEMENT TECHNIQUES TO THE DISCIPLINE OF SALES LEAD MANAGEMENT PREPARED BY KEITH D BURWELL SVP SALES, KALEIDICO Sales TQM Page Executive Summary All too often, organizations will continue to drive the notion that somehow sales personnel are to be measured qualitatively in the short term and by revenue output in the long term The idea that we should utilize standardized processes for manufacturing and technology, yet sustain a laissez-faire method of management towards our sales teams is not only antiquated but has been detrimental to the well-being of our economy as a whole This paper will examine many TQM (Total Quality Management) techniques as they are applied to the manufacturing discipline, their purpose, and how they can translate to increased productivity as well as sustainable, quantitative measurements in sales organizations within any vertical market Sales TQM Page What Hath Poor Sales Performance Wrought? According to the Bureau of Labor Statistics, the average American productivity increase since 1949 has decreased steadily While this means we are still improving how we work, we are steadily losing ground A popular study done by America Online and Salary.com several years ago backs up this data by indicating the amount of time wasted by age group each day of work per individual Year of Birth Time Wasted Per Day 1930-1949 0.50 hrs 1950-1959 0.68 hrs 1960-1969 1.19 hrs 1970-1979 1.61 hrs 1980-1985 1.95 hrs Source: Salary.com While these are simply correlating data, it is an indication that our economy is sorely underutilized and its performance is struggling as we move from a majority of blue collar manufacturing production to an increasingly large sales workforce Most of the great strides in performance measurement and Lean Manufacturing techniques have unfortunately not been translated from vertical market to vertical market as it is, by and large, two separate societal groups that comprise professional sales versus manufacturing Sales TQM Page In many sectors of the American economy, we have seen massive off shoring and outsourcing of manufacturing jobs that have found new employees around the globe, leaving many individuals skilled at performance measurement without an outlet Meanwhile, generations of American youth are growing up and taking jobs that are traditionally sales focused as we become a heavier retail and services oriented economy Therefore, the idea of productivity and performance measurement has unfortunately escaped much of our emerging workforce In order to effectively raise the productivity of the American sales sector, it is vital to begin to properly apply these traditional manufacturing techniques to our sales teams and organizations It is no longer enough to simply measure monthly or quarterly sales revenue and haphazardly adjust budgets accordingly Sales TQM Page The State of Most Sales Teams The typical sales organization has been the pointy end of the economic spear in many companies To continue the analogy, when dull they get sharpened through layoffs and cutbacks of poor performers and in strong sales periods they are the ones that are looked to for the production of revenue and are rewarded as such As long as the spearhead continues to provide dinner, the spearhead stays intact Unfortunately, it often takes a misstep by the sales group—a missed quarter, a blown projection, or a lost deal to suddenly and backwardly attempt to repair the damage Current methods of “control” are often the equivalent of dialing a thermostat left to right without seeing the temperaturesimply a guess based on instinct and feelings This has resulted in the unnecessary raising of marketing budgets, reduction of staff, pointless and often unobtainable sales goals, as well as alarmist reactions translated into inflated budgetary projections, allowances, and cutbacks Roaming targets set by worried sales executives simply translate to longer hours on the sales floor, an over anxious (and Sales TQM Page soon to leave) sales team, and ultimately a cutback in personnel in order to meet whatever “seems” to be the right number this quarter This may sound overly comical, unduly harsh, or simply counterintuitive to our expectations However, the fact is that many of these organizations are being run by someone skilled in “anything” other than sales Lead Management is Not a Skill Held by Most Business Owners According to statistics from the Small Business Administration, 99% of all American businesses are small, with an average of one location and 10 employees This sector is responsible for over half of the non-farm workforce in America and the entire net gain of 1.86 million new jobs in 2004 (the most recent year data is available) We can reasonably infer that the majority of business owners 1) did not start their shoe store, software company, mortgage brokerage, insurance branch, cookie manufacturer or other specialty concept because they were skilled at utilization of sales leads and were simply looking for an outlet for this managerial ability and 2) the typical 10 person shop is going to have a sales staff run by the owner or, more likely, a moderately skilled former salesperson Either of these two facts is grim if we are expecting a disciplined sales process, appropriate management techniques, and procedural adherence over extended periods of time to come from our largest business sector What becomes necessary then is to adapt large business models of effective management for small businesses Typically, as we see individuals stay in their respective disciplines and become more refined and specialized, sales performance management Sales TQM Page isn’t a primary focus Therefore, more often than not, poor habits of under-managing and over-correcting in other departments becomes the quasi-norm In order to correct for such an imbalance and to right a listing ship, some level of discipline must be understood and placed within our sales economy Too many business owners and managers rely solely on sales “techniques” to drive to the next level Often the focus becomes about “changing the pitch” or selling “differently” as opposed to addressing the fundamentals of the environment, the process, and all of the steps leading up to the conversation and then the follow through When the engine is failing, neither putting more fuel in the tank nor going faster will correct the issue at hand, yet that is the overarching strategy employed by the majority Organizations reliant on a sales team for revenue generation, either in part or whole, need to evaluate their functional groups for proper efficiency and re-calibrating Simply pressing Marketing to add leads or creating inflated budgetary targets and using strong arm techniques to drive goals are no longer considered strategies worthy of companies attempting to gain market share, hit targets, and continue to grow The remainder of this paper will focus on specific methods typically found in manufacturing settings that have very strong correlating results within sales teams These techniques are typically foreign to most professionals within a group dedicated to engaging potential clients and working directly with external individuals However, this paper will address the methodology, the purpose, the expected results, as well as the typical application in order to create a complete picture and understanding of not only how to apply the techniques to one’s organization but why one would and should strive for full implementation Sales TQM Page Understanding TQM Methodology- a Primer Total Quality Management, as it is called, is the concept of reducing waste from a process Typically it is structured within a manufacturing setting with the goal being the highlighting, removal, and resolution of waste within a given process It is meant to make the machine, assembly line, worker, or team as productive, efficient, and streamlined as possible While TQM is agreed to be a conceptually lofty goal, it is nonetheless, a target that is always attempting to be reached Arguably no organization has completely removed waste in toto, but this is one of the more salient points regarding the process—it is indeed a continual process designed to be a recurring and always present reminder of what should be as opposed to simply what is It is hard to argue with the success of the methodology as it has been utilized over the last half century Countless organizations, most notably Toyota, and consequently many auto industry giants, have seen enormous savings through implementation and by creating a culture wherein TQM can be embraced GM has seen $9 Billion in savings through only three years of system implementation Sales TQM Page Does TQM Translate To Sales? In order to determine whether the methodology will actually be an effective tool within a sales environment, it is necessary to find symmetry of problems between Manufacturing and Sales groups If, in fact, there are similar problems, then we can reasonably assume that the solutions may indeed fit What, then, are the problems in manufacturing that are solved by TQM? First, wasted time is one of the most egregious harms inherent in a manufacturing environment Wasted time is found in machine spacing, work levels, amount of work, behaviors, and many other processes Can we see this in Sales organizations? Yes We know that a sales organization will have issues with work levels, processes, behavior, and time between work functions Therefore, we can begin the discussion at wasted time as a symmetrical problem in both types of environments Sales TQM Page 10 Other areas of like occurrence would fall into categories of inventory (where raw material is equal to leads), process setups, workloads, changeovers, work environment issues, as well as development of a value stream We could rightly say that the Sales team is a work cell dedicated to manufacturing It is in the business of manufacturing closed deals The variables are the raw materials, the suppliers of those materials, how the material is stored, accessed, worked, developed, the quality of effort placed into the final product, as well as the time spent to create the product, the efficiency of the work environment, and the communication between necessary groups When viewed in this way, a sales team can be assessed, valued, monitored, and controlled much more efficiently than we typically have done in the past The remainder of this paper will discuss in detail various techniques found in Total Quality Management methodology, their intended purpose and problem it solves, the explanation of the same problem in the sales function, and finally the application of the technique within the sales discipline TQM Techniques and Their Implementation Technique: 5S Definition: 5S describes a workplace organization method (five words that begin with S) in which the worker is continually making their workstation efficient by ensuring its cleanliness, order, and standardization Sales TQM Page 23 Technique: Work In Progress (WIP) One cannot define WIP much better than using the term itself WIP refers to work that is in process and unfinished It is by TQM standards an unwanted entity and in its worst form, most definitely, considered to be waste Total Quality Management views WIP as a poor allocation of resources Whenever something is not being used directly in the current manufacturing process then it is representative of 1) risk / liability 2) potential spoilage and 3) a misuse of funds that could be bearing interest if it was still liquid Sales TQM Page 24 Therefore, reduction of WIP conversely lowers risk, reduces potential spoilage and allows cash to bear interest until needed as an investment in raw materials When evaluating WIP as it relates to sales leads, we can see several correlations First, we need to define WIP in sales lead management Work In Progress is defined as leads that have been obtained by the sales professional and are being managed but not closed For example, a typical sales cycle for an organization may be 10 days from receipt of lead to signed deal Outlying leads in the pipeline that are outside this time frame could be considered WIP and should have been allocated differently If there are leads in the salesperson’s pipeline that are for instance, 15 days old, then the true effect these leads are having on the organization are the following—1) poor allocation of funds in that the lead should have been purchased days later in order to fit into the standard time frame (If the average lead closes in 10 days from purchase, then a lead that hasn’t closed by the 15th day was purchased days early and the capital used to make the purchase could have bore interest for more days) 2) A lead outside of the standard time frame (15 days to continue our example) runs a high risk of spoilage—if 10 days is our “production” average than our “raw material” that is aging could be a wasted resource by the time it is ready for purchase 3) Just like in a manufacturing setting, WIP in a sales setting needs manpower to oversee and monitor it Within a sales group, WIP, or leads outside of the standard cycle, require sales team attention that is being diverted from other leads that fit into the production cycle While sales people are busy trying to “convince” the outliers, they are actually wasting resources (time and effort) that could and should be spent on leads that fit within the established parameters, not considered WIP Sales TQM Page 25 Eliminating WIP in the Sales Process What, then, is to be done with sales lead WIP? Reducing it and managing becomes very important, but 1) most organizations will currently have an abundance of it and 2) there will always be a lingering level of WIP to manage Just as in manufacturing, the goal of WIP is to very quickly use it in the process to reintroduce it to the production process Many plants that I have worked with will break the WIP down to usable parts in other processes so that the components are then utilized, if not the whole Can this be done with sales leads? To an extent, yes, but more importantly it is about recognizing the WIP, and addressing it at the organization level by 1) moving it to a separate team that focuses solely on driving it to a decision, 2) placing it into a drip email, direct mail or other communication vehicle that will reduce manpower and further effort until the client initiates, or 3) much like reallocating, driving the client to a different product even if it is at a different profit margin Is the WIP stalled and an outlier to the standard time process because they are up on price? Drive them to a less expensive model so that the WIP is eliminated as well reducing potential of spoilage (lead loss because they go elsewhere for a deal), reduced manpower, as the sales team will no longer focus time and effort, as well as making WIP profitable by putting into the production process, albeit at a different level (the same as breaking it down to component parts and reallocating) WIP is the proverbial Moby Dick—the big fish that too much time, effort, and resources are spent on trying to land, when in fact, if the team would focus on strictly the ones in production, then efficiency, revenue, and utilization will soar Sales TQM Page 26 Technique: TAKT Time TAKT Time is a concept that derives its name from the German word for “clock cycle”— taktzeit It is also used to describe “heartbeat” The concept is that production should equal demand in a one for one method For instance, if a specific make of car is sold at a rate of per day, then production should equal per day When demand drives up to per day, then production will spike to per day This method, while seeming to be simplistic, must incorporate many TQM concepts to work effectively In order to maintain proper balance in production to demand, then the production staff must be keenly aware of the level of work contained in each finished product Proper measurement and monitoring of each phase of the process will have been understood and therefore, maintained to satisfy demand How, then, can this correlate to sales leads? We know that we cannot simply obtain one lead every time a deal is closed and expect this to translate into proper sales This is correct but we know some very important things about the “sales production” process (or should know) and together we can evaluate a TAKT time 1) An organization should be Sales TQM Page 27 able to tell their sales team what the average lifecycle is for any closed deal 2) They should know what their historic and current levels of production (closed sales) are 3) They can define how many leads it takes to close one deal (conversion rate) 4) Once completing an in-depth understanding of their sales process, they should be able to understand the amount of work that goes into each closed sale (# of calls, length of communication, etc.) All of these facts, when looked at together, allow an organization to understand the following—when a sale closes, the organization now needs to obtain X number of new leads, reduce WIP by X, and expect X hours of work to obtain the next closed deal TAKT Time as it relates to sales lead management is about creating a cycle around an organizations closed sales In retail environments, when a television purchase is made it triggers a number of steps that drive the inventory to be replenished in a matter of days which sends triggers all the way through the supply chain Likewise, a new way of looking at closed sales is to evaluate the supply chain of leads and the necessary effort to ensure that 1) pipelines are not getting out of balance, which reduces focused effort on appropriate leads, and 2) creating a process “trigger” that forces sales teams to standardize or tune their process so that a closed deal creates a series of coordinated actions that would otherwise be disjointed and haphazard TAKT time in sales lead management creates a “true north” that sets the clock for the entire lead process Sales TQM Page 28 Technique: Cost of Quality (COQ) The Cost of Quality is not what it costs to create a quality product but rather what mistakes (or lack of quality) add to the finished product For example, if in a production environment, a specific part is painted the wrong color and needs repainted, the COQ is what the painting mistake added to the final cost (labor, materials, energy, etc.) In sales lead management, COQ can be looked at from the perspective that a conversion rate of 100% equals Perfect Quality Knowing that conversion rates are substantially below 100%, we can then assume that there is a significant Cost of Quality quotient to be obtained Building a Sales Cost of Quality Quotient What, then, are the criteria to be used in building this quotient? There are a number of internal as well as external components to review For instance, one area of significant cost would be Rework What percentage of sales leads had to be sent to another Sales TQM Page 29 salesperson for “fixing” due to 1) inexperience, 2) poor technique, 3) lack of product knowledge, or 4) simply lack of execution? Each one of these may account for lost opportunities which can certainly be measured by their failure to close, but they may also be responsible for added workload and effort which is a cost shouldered by the organization An external Cost of Quality criterion may be the evaluation of lead sources It can successfully be argued that if the lead source can be proven to be providing the organization with subpar leads (raw materials) then the effort and time placed into these leads would be part of the Cost of Quality quotient Improving the Quotient How then can the quotient be improved? While it is unlikely to drive the conversion rate to 100%, it is likely that by evaluating this area of your processes, gains of varying sizes can be the result In order to begin the evaluation, look at the areas which cause a lead to fall away They may be training issues, behavioral issues, load balance, or method Externally, set up evaluation of lead sources, quality analysis, supplier capability surveys, as well as quality improvement meetings and projects Work to perfect quality, thereby reducing any deviation from standardizing closed deals This reduction in the Cost of Quality will drive best practices across the organization and will allow you to focus on making the process error free Sales TQM Page 30 Technique: Critical Path / Bottlenecks Likely, most organizations that utilize sales leads have examined and refined their critical path even if they did not call it as such The Critical Path method is, by definition, a list of all activities required to complete a process, the time each step will take to complete, and the dependencies between the steps In a sales organization, this would be considered the “sales process” Most sales teams have a defined method or process that is a rough guide moving from lead to closing Steps may include allocation, distribution, research, review, contact, pitch, analysis, contract review, and closing Each one of these generalized categories may hold numerous differentiated component activities that comprise your unique industry as well as organizational sales strategy Therefore, by generating the guide, or sales guidelines, you are in effect determining the critical path that raw material (leads) must pass through during production (sales process) One could argue that most Critical Path Analysis was most likely performed quite some time ago in these companies and has not been refined or reviewed for efficacy in the Sales TQM Page 31 recent past Consequently, errors, omissions, inefficiencies, and gaps could be considered part of the daily routine This sales process, or critical path, should be examined frequently by the entire sales team to review quality, effectiveness, and for new best practices The idea behind improving the critical path is about the quickest, most effective way to take the lead from the beginning point to the end point We have already seen what the effects of WIP can be, which could be caused due to an elongated step in the Critical Path For example, is it part of the established path to wait 48 hours after the first attempt before making the second attempt? This may have had usefulness at one point but is no longer helping the organization as it can create 1) raw material spoilage (a lead goes elsewhere) 2) WIP (wasted resources such as cash or manpower) or 3) Artificially extending a component of the critical path could drive the lifecycle of a lead outside the standard deviation, thereby creating waste which then needs to be removed from the pipeline These time gluts within the process are called bottlenecks Whether or not the process seems to be efficient, even after careful review of the Critical Path, sales management should always be finding and correcting their longest cycle time A bottleneck is simply the area of your process that causes a “traffic jam”, so to speak Again, the common paradigm is not to worry about these things as Sales has a different mindset than Operations However, after seeing the process laid out as has been discussed, one can easily see that if bottlenecks are not addressed, the organization will suffer in Cost of Quality, labor excesses, creation of WIP, and ultimately, raw material spoilage Slower points in the process can no longer be chalked up to “personal style” or “necessary evils” It is the role of the sales manager to address and improve Sales TQM Page 32 Technique: Kanban When looking at JIT, as well as Pull/ Push distribution and the 5S approach, it is very important to understand and implement Kanban Kanban is a borrowed Japanese word meaning, literally, visual board Kanban is a system used with Pull distribution that is a visual indicator of the need to replenish supply If I am working on a production line and I am getting low on cast iron wheels, it is important for me to create a visual cue that I am getting low on their supply The last thing that should happen in a TQM environment is that I would get to the point that the production line must shut down in order for me or someone else to retrieve more raw material so that I can then get the line up and running once again Kanban allows me to make everyone aware visually of where I am in the stock level, allowing those charged with replenishment to stay ahead of the curve, ensuring no down time Within a sales environment, this is more critical than one would expect, however, most sales managers not even address the symptoms nor the root cause because most utilize an inefficient Push method of supply, thereby covering any problems simply by flooding the production worker (sales team) with raw material (leads) so that they never run out As we know from previous scenarios, this leads to poor resource allocation, inefficiency, and definite raw material spoilage Sales TQM Page 33 The typical method of allocating sales leads If a sales manager is using a Pull method and has implemented a Kanban style of notification, then sales team members will only be getting leads when they have met the desired criteria (ex.- 100 total pipeline leads, 20 attempted leads, etc.) and the sales manager will be alerted with plenty of notification that her sales team is going to soon be in need of leads because they have hit an established threshold, yet are not slowing down in the production process because they have not run out of current work, thereby giving the sales and marketing managers time to allocate and distribute leads as needed when it is appropriate Further, sales managers are not MASKING the problem, simply by throwing X number of leads to every production worker each day and ASSUMING proper resource allocation and efficiency, which brings us to our next technique Technique: Load Balancing It can be argued that even in the same organization, sales cycles vary Why? A number of reasons are 1) different production processes (sales techniques), 2) different product creation (selling different products), or even 3) complexity of raw material by source (lead source variations) Therefore, often an organization is asking its sales team members to accomplish a set revenue or closing target, static across the entire team, yet providing Sales TQM Page 34 them with varied sources of leads, each with more or less complex cycles than others They may be tasked with selling a certain product line which may have a longer sales cycle than another product line, thereby using more resources, time, and effort, disabling the salesperson and potentially creating or contributing to missed targets Load balancing as it relates to sales lead management is about understanding each point in the process and the expectations based on historical data Load balancing can then be generated based on quantitative data which will then drive sales managers to more effectively set target numbers taking into account inherent variables in the process, as opposed to setting revenue numbers and trying to dump raw material on the production staff in the hopes that they work “harder” Load smoothing would also be an appropriate term as it entails the manager taking control of the overall process and making each component part, each product production line, and each channel, effectively even so that quantitative goals can be correctly evaluated by comparing “apples to apples” Technique: Kaizen The final technique is an embodiment of the entire process into one word Kaizen means continuous improvement Kaizen looks at the organization each day and measures the possibilities by measuring the inefficiencies Too often, organizations implement and then control through adherence to the process Kaizen says adjust the process and implement, but always be examining the process to see if there is a better way In practice, Kaizen is about standardizing a process (sales cycle), measuring the process components for adherence to plan (cycle times, levels), comparing measurements against where the Sales TQM Page 35 organizations requirements are set, creating a dialogue among production staff (sales team) about best practices and effectiveness of tools, implementing new ideas to increase productivity, and monitoring and measuring the new cycle to ensure it is meeting requirements This process is continual, it is open, and it is collaborative In order to use the techniques laid out in this paper, sales teams should take the following steps to begin their discovery of TQM principles within sales lead management Review and understand the components of the sales process This will no doubt be a challenge, both in time and resources, but it is critical in order to make advances later a Evaluate Lead Sources- Are they quality sources? Can I objectively measure their performance with external resources? Can I relate quality to revenue, cost, and effort for each source? Can I rank or sort lead sources with other lead sources, thereby standardizing internal response? Quantify lead sources on measures related to internal requirements—Lead Source A Sales TQM Page 36 is weighted higher as a converted lead due to cost, effort, or typical revenue generated When at all possible, use actual numbers for comparative purposes rather than qualitative “gut” feelings about sources b Lead Allocation and Distribution—are your sales managers “pushing” leads inefficiently? Examine the process of distribution and allocation What are the decisions which predicate allocation? Is it simply a function of purchasing power? Is it a function of an expected revenue amount? Are your production personnel simply reacting to whatever comes through the channels-no matter the amount, large or small? Take account of WHY leads are allocated the way they are and then what the distribution methodology entails c Lead Pipelines—where is the WIP kept? Is it hidden from management and hoarded by the sales team in the hopes of hiding poor performance? Is it measured and truly managed by sales managers when it needs to be moved? Are leads being appropriately tagged and placed in the proper production cycle as opposed to sitting in a queue wasting the time of salespeople and spoiling in the process? d Sales Process—Are leads correctly channeled into the right sales process? Are there extra steps in the critical path that are unneeded or ready for further evaluation? Engage the production team to find out what they think of the steps in the critical path-are there inefficiencies that they see? Are there tools they use that maybe the entire staff could benefit from and change the Sales TQM Page 37 process? Constantly evaluate for efficient utilization and shortened cycles— thereby creating improved resource allocation Conclusion TQM is an approach that looks at the entire production cycle and finds improvement where others may see tradition, comfort, or policy TQM has traditionally been used in manufacturing settings but has not made a clear jump into sales organizations as put forth earlier Our sales professionals have not had the exposure or the opportunity to encounter TQM principles in the workplace Further, the majority of businesses in the United States are built and founded upon skill sets outside of sales lead management Much like accounting, marketing, advertising, or warehousing, most business owners are experts at something outside sales lead management, yet they rely on this steady stream of opportunity to stay in business It is of critical importance that small business begin to embrace Total Quality Management principles and examine their sales lead management to not only improve revenue, but to improve the customer experience, as well as streamline the way company/client interaction is expected in the future Kaleidico is the leader in sales lead management systems Our solutions have helped hundreds of organizations improve their resource allocation as well as their efficient use of sales leads in numerous industries Founded in 2005, we have been the choice of numerous Top 10 lenders, banks, and financial institutions Contact us to see how we can help your organization to manage your inquiries ... use their sales lead demand to potentially discover reasons for performance—too few closed deals—is it the result of too few leads as compared to their peers? Or are they taking too many leads... that if the lead source can be proven to be providing the organization with subpar leads (raw materials) then the effort and time placed into these leads would be part of the Cost of Quality. .. discuss each of these in detail and how they relate to the effective implementation of JIT inventory of raw material Technique: Push / Pull The method of Push vs Pull as it relates to sales leads is