Chapter 4 described the basics of process engineering. This chapter will briefly review a number of additional concepts that are important contributors to sustaining continuous improvement. They are all factors that need to be measured. Keep in mind that the process of process engineering, like any other process needs its own metrics.
Constraints
A constraint is something – anything – that slows down or stops progress through a process. Constraints need to be identified, defined and prioritized. Next they need to be addressed, alleviated or removed by the sales rep and/or team.
Some constraints will be immediately obvious to your Sales Excellence Council. They might, in fact, already be obvious. Therein lays the danger. Don’t assume that the easily observable constraints are the key constraints. Sales people especially, with their instinctive bias to action, have a strong tendency to leap into “fix-it mode,” and might well expend substantial energy attacking a secondary problem.
The vast majority of the key constraints will not be identified so easily. It will first be necessary to define the overall sales process, define performance standards and metrics for each major step, collect actual performance data, analyze it, set priorities and then act. Arm yourself with the facts before committing valuable resources.
Also, be aware of and don’t get frustrated by the one immutable law of constraints. As quickly as you find and fix one key constraint, another one pops up in an unexpected place. Sales Process Engineering ends only when all the constraints to selling more have been eliminated. In other words, never. It’s simply the nature of a firm commitment to continuous improvement.
Dependencies
A dependency is a special type of constraint that results from the need to have something done/delivered by another person, department, or company. It’s not enough to know only your own process. Others on whom you depend must know it too, and it’s you that needs to make sure they know it. Not in as much detail, but enough to know that when X happens, they need to start working on A so that when you get finished doing Y, they’ll have completed B so that you can deliver C to the tech support rep so he can take the C and Y to accomplish Z (Yes, it does get that complex!)
The mirror image of the above is also true. You as the sales rep or manager need an appreciation of other people’s processes, especially those of your customers.
Rework
Do it right the first time. The cost of doing something for the second time is far more expensive than doing it the first time. For example, assume a rep entered the wrong “bill to” address on an order. While it only took a few seconds for him to enter the wrong information and just another few seconds to correct the order, think of what else happened.
The customer wasted time contacting your Accounts Receivable department to point out the mistake. You’re A/R person wasted time identifying and then tracking down the rep to point out the error and ask him to correct it. The Billing department wasted time sending out a new invoice and the customer wasted time processing it – again.
Meanwhile, your Finance department had to re-do their cash flow analysis because the expected receipt from that customer did not arrive. And then… And then… And then… You get the point.
Never underestimate the magnitude of the ripple effect caused by rework.
Work In Process (WIP)
In sales, Work-In-Process consists of all the opportunities in your sales funnel or pipeline. Is it possible to have too many opportunities? The knee-jerk answer is, “No,” but in reality the opposite is true.
Let’s say that you have been really focused on working ten specific opportunities. Closing three of them will put you over quota. You’ve worked hard, finished up “Discovery” of customer requirements for all ten and all that’s needed now is a well-written proposal for each. Since you did such a great job of creating customer enthusiasm, all ten want their proposals by Friday. The technical support you need to create the documentation can get two of them completed in time. Oops!
Because you didn’t consider the well-known constraints and dependencies, you find yourself with too much WIP at the “Proposal” stage of your funnel. Several of the deals will probably fall through because of long proposal turn-around time.
Here’s the point. Figure out the capacity at each stage of the sales process. Know the optimal number of opportunities for each stage and work to maintain balance. For example, You need to close 5 deals each month, so you need to deliver10 proposals per month, which means you need 20 deals in the “Discovery” stage at all times and therefore 50 at the “Interest” stage.
Cycle Time
How long is your sell cycle? It’s an innocuous question that shockingly few sales reps and managers can answer with anything beyond a wild guess. It is, however, arguably the most important sales metric.
First, foremost and obviously, shortening the sell cycle enables a greater number of cycles in any given time period and therefore results in more total sales. Less time required also means a lower sales cost per dollar of revenue. In other words, a detailed understanding of cycle time means not only more revenue, but also a greater profit margin.
Think about breaking cycle time down into its component parts. How much time does each stage of the sales funnel require? Find the longest stage and focus on reducing it. For each stage, how much of the total cycle time is spent working and how much time is spent waiting for something? A high wait to work time ratio indicates that a significant constraint and/or dependency is present or that there is too much work in process. At what point does your wait to work ratio become too high? Do you know?
Cycle time is one of those things that becomes more and more valuable the more you think about. The more you know about it – i.e., the quantitative detail for each sales task including how long, how much and the wait/work ratio – the more you can think about it. If you do nothing else with regard to Sales Process Engineering, become an expert regarding the details of your sales cycle time.
Yield
Knowing the yield percentage for each rep on your team for each stage of the sales funnel is an extremely powerful means to identify best practices. For example, say on average that 50% of your company’s proposals result in a sale. Looking at the yield statistics shows that 80% of Ed’s proposals are winners. Without a doubt, Ed is doing something different and better. Find out what it is and teach it to Amy, whose yield is only 20%.
The stats may also show that Amy gets 60% of her “Interest” stage opportunities to move along to the “Discovery” stage in 15 days. Ed only gets 30% and it takes him 45 days. In other words, Ed and Amy have much to teach each other. In any sales force, different people are good at different things. Find out who is best at what and have that person share best practices with everyone else on the team. (Also, note the added insight provided by combining yield data with cycle time data in the last example.)