How To Build A High-throughput Sales Process

Applying the Theory of Constraints to the design, resourcing and management of the sales process
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* Toc

* Brisbane - Queensland - Australia

June 9, 2008 - PRLog -- The traditional sales process is hard to manage and all but impossible to scale.

This paper introduces a radical new approach to sales process design, resourcing and management.

The result of this approach is a process where:

Salespeople consistently perform five appointments a day, five days a week.

Appointments are programmed into salespeople's diaries in descending order of probable contribution.

A buffer of sales opportunities is generated and maintained, without requiring any involvement of salespeople.

Budgets, targets, bonuses and commissions are eliminated and all activities are synchronised (in real-time) with the goal* of the organisation.

The problem with the sales process

Most sales processes are not processes in any useful sense of the word.

In a production context, the word process conjures up images of a production line — a series of tightly-coordinated activities that deftly converts raw materials into finished goods.

A typical sales process hardly fits this description.

A typical sales process consists of a number of individuals, each of whom is responsible for the entire sales function (and for a number of non-sales activities). Rather than following any formal procedure, these individuals engage in a broad range of ad hoc activities — using intuition to make resource allocation decisions.

A typical sales process is not dissimilar to a manufacturing process prior to the industrial revolution:

All tasks are performed by skilled technicians.

There is minimal automation.

Each technician operates in parallel with others — rather than in series. Accordingly, each worker is responsible for his own end-to-end process.

There is enormous variation in output.

Because there are no economies of scale, the system is difficult to scale.

Technicians receive performance pay, meaning that they are inclined to behave like sub-contractors

There are no disincentives for technicians to set up their own competitive businesses.
(Technically, it makes sense to apply the word 'process' only to the latter configuration in the diagram above.)

Fortunately, if we are looking to increase the productivity of the sales process, modern manufacturing provides us with clear guidance.

Applying TOC to the sales process

TOC's five focusing steps* advise us to begin by identifying the constraint.

Because the salesperson is the traditional sales process's only resource, it's obvious that the salesperson is the capacity constrained resource (CCR).

To determine how to exploit the CCR, we'll perform a simple time and motion study.

As illustrated, a typical salesperson conducts just two business-development appointments a week.

The balance of his time is allocated to:

Project management: managing the delivery of prior sales

Customer service: receiving and processing repeat transactions

Opportunity management and clerical tasks: activity programming, diary management, data entry and literature fulfilment

Social activities: appointments with no formal business objective, as well as a range of overtly non-commercial activities (often involving sport)

Prospecting: identifying sales opportunities
Where the contribution to Throughput is concerned, project management, customer service and social activities are marketed as not applicable. This is because it simply does not make sense to treat these activities as part of the sales process*.

While the exclusion of social activities from the sales process is contentious, we do so for two reasons:

We consistently find that we can get a better return on scarce resources from commercial activities than we can from social activities.

Even if social relationships are an antecedent of commercial relationships (which is debatable**), such relationships should be regarded by management as a contingent liability.

Of the three remaining activities, business-development appointments obviously make the greatest contribution to Throughput.

These appointments are a higher-probability activity than prospecting. While opportunity management and clerical tasks are necessary, they do not make a direct contribution to Throughput.

Because the conduct of business-development appointments is the salesperson's most productive activity, we will establish the appointment slot as our unit of constraint. In our experience, a salesperson's maximum sustainable capacity is likely to be five appointments a day.*

For this reason, the pie chart on the preceding page, displays time allocated to activities in terms of appointment slots consumed.

It should now be obvious that:

Our sales process will be at its most productive when we have maximised Throughput per appointment slot available (T/ASA).

The measure of the contribution of our salesperson to the process as a whole will be Throughput per appointment slot consumed (T/ASC).

Accordingly, our focus should now be on:

Ensuring that our salesperson is fully utilised (all his available appointment slots are consumed).

Programming activities into our salesperson's diary so as to maximise T/ASC.

A word on programming

In our experience, neither salespeople nor management are ever likely to have considered a formal approach to the programming of sales activities.

Consequently, salespeople's time tends to be programmed by salespeople themselves — with intuition as the prevailing method.

Unfortunately, as is illustrated by the popularity of casinos, the human brain does not excel at performing estimates where probability is involved. The result is that low-probability activities are likely to be given priority over higher-probability activities. (Salespeople over-estimate the value of the unknown.)

This has a deleterious effect on both process throughput and conversion rates.*

The sales coordinator

In order to maximise both the utilisation and the productivity of the CCR (the salesperson), we focus the salesperson exclusively on business-development appointments and add an upstream resource called a sales coordinator.

The sales coordinator is responsible for ensuring that the salesperson is fully utilised at all times (five business-development appointments a day, five days a week).

Consequently, the sales coordinator takes total control of the salesperson's diary (just as a personal assistant would take control of an executive's diary).

In order to maximise the salesperson's productivity (T/ASC) the sales coordinator allocates appointments in the descending order of their probable contribution. Because the sales coordinator's intuition is no more capable of estimating this contribution than the salesperson's, these critical programming decisions are made using a formula provided by management.

Feeding the constraint

As suggested previously, we are only interested in the salesperson performing business-development appointments.

These are appointments with a commercial agenda that has been approved in advance by the potential client.

At some stage, the sales coordinator is likely to find it difficult to schedule appointments that comply with this precondition.

This is because, prior to agreeing to such an appointment, the potential client (prospect) must acknowledge a requirement for the product or service that the salesperson is representing.

While, for most organisations, there is no shortage of prospects, there is a shortage of prospects with a current acknowledged need (this is what we call a sales opportunity).

At this point, we are in danger of the constraint shifting from the salesperson to the sales coordinator.

More to come next week...
Email:Contact Author
Location:Brisbane - Queensland - Australia

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