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23rd International Conference of the

TOC Practitioners Alliance - TOCPA


www.tocpractice.com

21-22 March, 2016, Tennessee, USA

Exploiting Market Constraints


(For those who use salespeople)

Henry Fitzhugh Camp, TOC Equity Partners, USA


March, 2016

Henry Fitzhugh Camp


Henry is an entrepreneur
who started a private equity
fund specifically to earn
extraordinary returns using
TOC. His goal is to end
cyclical recessions and
depressions worldwide.
(Who knows what the weird orange lines mean?)

Your logo

Place for the photo of the


presenter

Contact info:

HenryCamp@ideallc.com
(502) 551-2359

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23rd International Conference of the TOC Practitioners Alliance - TOCPA

Market constraints

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Most companies have the capacity they need to grow sales


And, if it seems they dont, a dose of TOC expands their
capacity to the point that they can sell more
So, the real issue for most companies is:

How to exploit a market constraint?

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23rd International Conference of the TOC Practitioners Alliance - TOCPA

Going to market
Some companies sell:
through Retail Stores
across the Web
by Word of Mouth
using Brokers

www.tocpractice.com

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by Catalog
via TV
by Direct Marketing
through Referrals

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Going to market
Some companies sell:
through Retail Stores
across the Web
by Word of Mouth
using Brokers

Your logo

by Catalog
via TV
by Direct Marketing
through Referrals

This presentation is for companies who have answered the


question How to exploit a market constraint?

By deploying a Direct Salesforce!

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23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Inertia

Even a great salesforce isnt perfect.


You sense there is a better way to exploit your market
constraint.

But, you arent changing


And, you cant tell me why succinctly

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23rd International Conference of the TOC Practitioners Alliance - TOCPA

The normal process

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If your experience is like mine, everything seems fine at first.


1. You want more sales
2. Hire a salesperson
3. The salesperson gets some rudimentary training
4. The salesperson starts doing things that appear to be
associated with making sales
5. You move on to other initiatives

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23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

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First branch:
The sales person doesnt sell
Train some more
Ride with other sales people
Other stuff you can think of
Fire salesperson or they quit

The sales person sells


You offer praise
Congratulate yourself
Focus on other issues

This happens 2/3 of the time

This happens 1/3 of the time

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

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Later branch:
The sales person stalls low
You ride their butt
You coach them
Focus on other issues

The sales person stalls high


You offer praise
Congratulate yourself
Focus on other issues

This happens 1/2 of the time

This happens 1/2 of the time

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


[CATEGO
RY
NAME]

Salespeople

[CATEGO
RY
NAME]

[CATEGO
RY
NAME]
www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Example Assumptions:
Distribution Company
Salespeople get commission which is of 30% of T

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Example Assumptions:
You want to grow so
You dont give new salespeople many existing accounts
Beginning commissions are not enough to live on
A draw against future commissions makes take-home pay reasonable
The requirement to repay draws increases the incentive to sell fast
When paying back draws, the salesperson keeps of any overage

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Example Assumptions:
Since the salesperson is paid like a profit center, they must:
Do their own planning, marketing, prospecting, appointment setting,
travel, presentations, proposals, quotations, sourcing, problemsolving, customer service, relationship building and, when necessary,
even collections
The lucky 13
Like a chain, only as strong as the weakest link

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Good Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Good growth tempered by having to learn the products
Great growth high confidence (not totally warranted)
Good growth - focus on bigger opportunities
Focus on bigger opportunities
Focus on bigger opportunities
Focus on bigger opportunities
Some gains some losses slight growth
Balance shifts from opening new accts to maintaining
Problems increase fear of loss
Totally stagnant
Lost a few of accounts
Worked like dog to rebuild
Too many customer problems to prospect much
Too often in the office running issues down
Losing more than winning, even though discounting
Last resort price increases appear to help
More losses and price decreases to save them
Lower prices and refocus on big accounts
Lost a big account on price
Redouble efforts to replace big account
Redouble efforts to replace big account
Redouble efforts to replace big account
Good economy
Good economy
Good economy
Recession
Recession
Bad mutitasking a major issue
Bad mutitasking a bigger issue
Bad mutitasking the biggest inhibitor of progress
Bad mutitasking the biggest inhibitor of progress
Bad mutitasking the biggest inhibitor of progress

www.tocpractice.com

# of Cust
25
45
55
60
64
67
69
70
68
69
66
74
72
70
65
64
61
63
62
64
68
71
73
77
79
80
84
89
93
97
100
98

Sales
$500
$1,100
$1,600
$2,000
$2,300
$2,500
$2,600
$2,700
$2,600
$2,600
$2,500
$2,700
$2,600
$2,500
$2,300
$2,700
$2,500
$2,600
$2,400
$2,500
$2,600
$2,700
$2,700
$2,800
$2,800
$2,500
$2,600
$2,500
$2,400
$2,400
$2,300
$2,400

1,000s
T T/Sales Comm
$130
26%
$39
$275
25%
$83
$400
25%
$120
$460
23%
$138
$506
22%
$152
$550
22%
$165
$572
22%
$172
$594
22%
$178
$546
21%
$164
$546
21%
$164
$525
21%
$158
$540
20%
$162
$520
20%
$156
$500
20%
$150
$437
19%
$131
$567
21%
$170
$500
20%
$150
$494
19%
$148
$456
19%
$137
$475
19%
$143
$494
19%
$148
$513
19%
$154
$513
19%
$154
$560
20%
$168
$560
20%
$168
$475
19%
$143
$494
19%
$148
$475
19%
$143
$456
19%
$137
$456
19%
$137
$437
19%
$131
$456
19%
$137

Draw
$6
($6)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0

Pay
$45
$77
$120
$138
$152
$165
$172
$178
$164
$164
$158
$162
$156
$150
$131
$170
$150
$148
$137
$143
$148
$154
$154
$168
$168
$143
$148
$143
$137
$137
$131
$137

I developed a story
for a good (not great)
salesperson over a 32
year-long career,
based on my 35 years
of direct experience

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Good Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Good growth tempered by having to learn the products
Great growth high confidence (not totally warranted)
Good growth - focus on bigger opportunities
Focus on bigger opportunities
Focus on bigger opportunities
Focus on bigger opportunities
Some gains some losses slight growth
Balance shifts from opening new accts to maintaining
Problems increase fear of loss
Totally stagnant
Lost a few of accounts
Worked like dog to rebuild
Too many customer problems to prospect much
Too often in the office running issues down
Losing more than winning, even though discounting
Last resort price increases appear to help
More losses and price decreases to save them
Lower prices and refocus on big accounts
Lost a big account on price
Redouble efforts to replace big account
Redouble efforts to replace big account
Redouble efforts to replace big account
Good economy
Good economy
Good economy
Recession
Recession
Bad mutitasking a major issue
Bad mutitasking a bigger issue
Bad mutitasking the biggest inhibitor of progress
Bad mutitasking the biggest inhibitor of progress
Bad mutitasking the biggest inhibitor of progress

www.tocpractice.com

# of Cust
Sales
25
$500
45 $1,100
55 $1,600
60 $2,000
64 $2,300
67 $2,500
$700 69 $2,600
70 $2,700
68 $2,600
$600 69 $2,600
66 $2,500
$500 74 $2,700
72 $2,600
70 $2,500
$400 65 $2,300
64 $2,700
61 $2,500
$300 63 $2,600
62 $2,400
64 $2,500
$200 68 $2,600
71 $2,700
$100 73 $2,700
77 $2,800
79 $2,800
$0 80 $2,500
84 1$2,600
3
89 $2,500
93 $2,400
97 $2,400
100 $2,300
98 $2,400

1,000s
T T/Sales Comm
Draw
Pay
$130
26%
$39
$6
$45
$275
25%
$83
($6)
$77
$400
25%
$120
$0
$120
$460
23%
$138
$0
$138
$506
22%
$152
$0
$152
$550
22%
$165
$0
$165
$572
22%
$172
$0
$172
$594
22%
$178
$0
$178
$546
21%
$164
$0
$164
$546
21%
$164
$0
$164
$525
21%
$158
$0
$158
$540
20%
$162
$0
$162
$520
20%
$156
$0
$156
$500
20%
$150
$0
$150
$437
19%
$131
$0
$131
$567
21%
$170
$0
$170
$500
20%
$150
$0
$150
$494
19%
$148
$0
$148
$456
19%
$137
$0
$137
$475
19%
$143
$0
$143
$494
19%
$148
$0
$148
$513
19%
$154
$0
$154
$513
19%
$154
$0
$154
$560
20%
$168
$0
$168
$560
20%
$168
$0
$168
$475
19%
$143
$0
$143
$494
5
7 19%9 $148
11 13 $015 $148
17 19 21
$475
19%
$143
$0
$143
Years on the job
$456
19%
$137
$0
$137
$456
19%
$137
$0
$137
$437
19%
$131
T $0 $131
# of Cust
$456
19%
$137
$0
$137

My data looks like this:

Good Salesperson
160
140
120
100
80
60
40
20
0
23

25

27

29

31

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Average Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Good growth tempered by having to learn the products
Really good growth still a few things to learn
Good growth pretty good confidence
Focus on bigger opportunities
Balance shifts from opening new accts to maintaining
Problems increase fear of loss
Some gains some losses slight growth
Some gains some losses slight growth
Some gains some losses slight growth
Totally stagnant
Lost a couple of accounts and one big account
Worked like dog to rebuild
Too many customer problems to prospect much
Always in the office running issues down
Losing more than winning, even though discounting
Panicy price increases appear to help
More losses and price decreases to save them
More losses and price decreases to save them
Some gains some losses slight growth
Some gains some losses no growth
Some gains some losses slight growth
Big new customer
Relaxes
Price increases
More losses and price decreases to save them
Redoubled efforts
Redoubled efforts
Relaxes
Getting tired
Doesn't care, raises prices
Tired
Tired

www.tocpractice.com

# of Cust
15
40
60
65
72
77
90
110
125
134
131
150
152
147
138
120
115
112
115
118
120
118
115
111
107
112
115
106
103
99
91
95

Sales
$300
$800
$1,000
$1,400
$1,600
$1,700
$1,700
$1,700
$1,700
$2,000
$1,700
$1,900
$1,900
$1,850
$1,700
$1,600
$1,500
$1,400
$1,500
$1,500
$1,600
$2,100
$2,000
$2,100
$1,900
$2,000
$2,100
$1,900
$1,800
$1,800
$1,700
$1,600

1,000s
T T/Sales Comm
$78
26%
$23
$192
24%
$58
$230
23%
$69
$308
22%
$92
$336
21%
$101
$340
20%
$102
$340
20%
$102
$340
20%
$102
$340
20%
$102
$380
19%
$114
$323
19%
$97
$342
18%
$103
$342
18%
$103
$333
18%
$100
$289
17%
$87
$304
19%
$91
$270
18%
$81
$238
17%
$71
$270
18%
$81
$255
17%
$77
$288
18%
$86
$357
17%
$107
$340
17%
$102
$378
18%
$113
$323
17%
$97
$340
17%
$102
$357
17%
$107
$323
17%
$97
$306
17%
$92
$342
19%
$103
$323
19%
$97
$304
19%
$91

Draw
$22
($7)
($12)
($3)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0

Pay
$45
$51
$57
$89
$101
$102
$102
$102
$102
$114
$97
$103
$103
$100
$87
$91
$81
$71
$81
$77
$86
$107
$102
$113
$97
$102
$107
$97
$92
$103
$97
$91

I did the same for an


average salesperson

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Average Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Good growth tempered by having to learn the products
Really good growth still a few things to learn
Good growth pretty good confidence
Focus on bigger opportunities
Balance shifts from opening new accts to maintaining
Problems increase fear of loss
Some gains some losses slight growth
Some gains some losses slight growth
Some gains some losses slight growth
Totally stagnant
Lost a couple of accounts and one big account
Worked like dog to rebuild
Too many customer problems to prospect much
Always in the office running issues down
Losing more than winning, even though discounting
Panicy price increases appear to help
More losses and price decreases to save them
More losses and price decreases to save them
Some gains some losses slight growth
Some gains some losses no growth
Some gains some losses slight growth
Big new customer
Relaxes
Price increases
More losses and price decreases to save them
Redoubled efforts
Redoubled efforts
Relaxes
Getting tired
Doesn't care, raises prices
Tired
Tired

www.tocpractice.com

# of Cust
15
40
60
65
72
77
90
110
125
134
131
150
152
147
138
120
115
112
115
118
120
118
115
111
107
112
115
106
103
99
91
95

Sales
$300
$800
$1,000
$1,400
$1,600
$1,700
$1,700
$1,700
$1,700
$2,000
$1,700
$1,900
$1,900
$1,850
$1,700
$1,600
$1,500
$1,400
$1,500
$1,500
$1,600
$2,100
$2,000
$2,100
$1,900
$2,000
$2,100
$1,900
$1,800
$1,800
$1,700
$1,600

1,000s
T T/Sales Comm
$78
26%
$23
$192
24%
$58
$230
23%
$69
$308
22%
$92
$336
21%
$101
$340
20%
$102
$340
20%
$102
$340
20%
$102
$340
20%
$102
$380
19%
$114
$323
19%
$97
$342
18%
$103
$342
18%
$103
$333
18%
$100
$289
17%
$87
$304
19%
$91
$270
18%
$81
$238
17%
$71
$270
18%
$81
$255
17%
$77
$288
18%
$86
$357
17%
$107
$340
17%
$102
$378
18%
$113
$323
17%
$97
$340
17%
$102
$357
17%
$107
$323
17%
$97
$306
17%
$92
$342
19%
$103
$323
19%
$97
$304
19%
$91

Draw
$22
($7)
($12)
($3)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0

Pay
$45
$51
$57
$89
$101
$102
$102
$102
$102
$114
$97
$103
$103
$100
$87
$91
$81
$71
$81
$77
$86
$107
$102
$113
$97
$102
$107
$97
$92
$103
$97
$91

My data looks like this:

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Bad Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Fair start trouble learning product lines
Good growth many things still to learn
Good growth pretty good confidence
Fair growth disincented by owing $37.5k in back draw
Quits doesn't think paying back draw is fair

www.tocpractice.com

# of Cust
12
20
30
40

Sales
$200
$500
$700
$800

1,000s
T T/Sales Comm
$48
24%
$14
$115
23%
$35
$161
23%
$48
$176
22%
$53

Draw
$31
$10
($2)
($4)

Pay
$45
$45
$47
$49

This time the person


quits or gets fired but
it doesnt happen right
away. A total washout
might complete four
years! Ouch.

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Bad Salesperson:
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Comment
Fair start trouble learning product lines
Good growth many things still to learn
Good growth pretty good confidence
Fair growth disincented by owing $37.5k in back draw
Quits doesn't think paying back draw is fair

# of Cust
12
20
30
40

The problem is often the


same salesperson who
negotiated for a draw
against future earned
commissions to gain a
reasonable starting
income feels disincented
and underpaid while
repaying these
accumulated draws

www.tocpractice.com

1,000s
T T/Sales Comm
$48
24%
$14
$115
23%
$35
$161
23%
$48
$176
22%
$53

Sales
$200
$500
$700
$800

Draw
$31
$10
($2)
($4)

Pay
$45
$45
$47
$49

Bad Salesperson
$700

160

$600

140
120

$500

100

$400

80
$300

60

$200

40

$100

20

$0

0
1

11

13

15

17

19

21

23

25

27

29

31

Years on the job

# of Cust

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Comparison of Good and Average Salesperson:

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Analysis:
As the salesperson exhausts his or her capacity, their
production of T tails off and even declines.

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Analysis:
As the salesperson exhausts his or her capacity, their
production of T tails off and even declines.
Why would a salespersons capacity be exhausted?

They must do some work for which they are ill suited
They switch between 13 different jobs due to changes in priority
Customers change a salespersons priorities
Coworkers change a salespersons priorities
Bosses change a salespersons priorities
Suppliers change a salespersons priorities

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Analysis:
As the salesperson exhausts his or her capacity, their
production of T tails off and even declines.
Why would a salespersons capacity be exhausted?

They must do some work for which they are ill suited
They switch between 13 different jobs due to changes in priority
Customers change a salespersons priorities
Coworkers change a salespersons priorities
Bosses change a salespersons priorities
Suppliers change a salespersons priorities

Salespeople suffer enormously from Bad Multitasking

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic analysis:
I built a model from the above assumptions by rolling dice
Roll
1.
2.
3.
4.
5.
6.

www.tocpractice.com

Outcome
Bad salesperson
Bad salesperson
Bad salesperson
Bad salesperson
Average salesperson
Good salesperson

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic analysis:
I began with a start-up deploying 3 salespeople
1.
2.
3.
4.
5.
6.
7.

Complement
Bad + Bad + Ave
Bad + Good + Bad
Bad + Bad + Bad
Ave + Ave + Bad
Good + Bad + Bad
Bad + Bad + Bad
Good + Ave + Bad

www.tocpractice.com

Result
Company failed
Company failed
Company failed
Company failed
Company failed
Company failed
Company survived!

Odds
7%
7%
30%
2%
7%
30%
2%

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic analysis:
As profits accumulated, I added salespeople
Complement
Result
7. Good + Ave + Bad
Company survived!
In year 2, I added another salesperson
Good!
In year 4, I added another salesperson
Good!

Odds
2%
17%
17%

This was unbelievably lucky


no wonder so many startups fail

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Whats the problem?


Holistic analysis:
Early Results:

Whole Company
1,000s
Year
1
2
3
4
5
6

Total
Sales
$1,700
$2,900
$4,100
$5,700
$6,850
$7,350

Tput Sales Pay


$508
$760
$983
$1,352
$1,672
$1,654

$144
$223
$280
$382
$393
$470

OE *
$504
$695
$831
$1,221
$1,319
$1,506

NP %NP
$4
$65
$152
$131
$353
$148

0.2%
2.2%
3.7%
2.3%
5.2%
2.0%

*OE = Budgeted in years one through three. 13% of sales in years four through
six, plus a random variation of 0% to 2% of sales
www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic Analysis:
I took the simulations out 50 years:
I added salespeople when I thought it financially prudent
Recalculating the spreadsheet gives different results depending on
the random fluctuations of OE, 0% to 2% above that years base

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic Analysis:
This calls into question the title of the last 25 slides
What the heck is the problem with this?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Whats the problem?

Your logo

Holistic Analysis:
Well, OE (complexity) is growing slightly faster than T
High early-life mortality rate (a large majority fail in 1st 5 yrs)
Maybe you have to live with 20 salespeople to feel it

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

Your logo

Assumptions:
Since the salesperson is paid like a profit center, they must:
Do their own planning, marketing, prospecting, appointment setting,
travel, presentations, proposals, quotations, sourcing, problemsolving, customer service, relationship building and, when necessary,
even collections

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Direction for Solution


Creative
Analytical

Craftsman

Assumptions:
Since the salesperson is paid like a profit center, they must:
Do their own planning, marketing, prospecting, appointment setting,
travel, presentations, proposals, quotations, sourcing, problemsolving, customer service, relationship building and, when necessary,
even collections
Informal
Expert

Operational

13 separate jobs. Why imagine anybody could be suitable for all?


www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

Your logo

Assumptions:
Since the salesperson is paid like a profit center, they must:
Do their own planning, marketing, prospecting, appointment setting,
travel, presentations, proposals, quotations, sourcing, problemsolving, customer service, relationship building and, when necessary,
even collections

13 separate jobs. Why imagine anybody could be suitable for all?


www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

Your logo

the salesperson is paid like a profit center


WHY?
Because my dad and his dad did it that-a-way?
Because unlimited potential pay attracts the best?
Because it wouldnt be fair to pay them so much unless
they self-manage?
Because it gives them the incentive to grow Throughput?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

Your logo

the salesperson is paid like a profit center


WHY?
Humm?

Because my dad and his dad did it that-a-way?


Because unlimited potential pay attracts the best?
Because it wouldnt be fair to pay them so much unless
they self-manage?
Because it gives them the incentive to grow Throughput?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

the salesperson is paid like a profit center


WHY?
Humm?

Your logo

Necessary
because the
job is so
difficult

Because my dad and his dad did it that-a-way?


Because unlimited potential pay attracts the best?
Because it wouldnt be fair to pay them so much unless
they self-manage?
Because it gives them the incentive to grow Throughput?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

the salesperson is paid like a profit center


WHY?
Humm?

Your logo

Necessary
because the
job is so
difficult

Because my dad and his dad did it that-a-way?


Because unlimited potential pay attracts the best?
Because it wouldnt be fair to pay them so much unless
they self-manage?
Is self-management aligned holistically?
Because it gives them the incentive to grow Throughput?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Direction for Solution

the salesperson is paid like a profit center


WHY?
Humm?

Your logo

Necessary
because the
job is so
difficult

Because my dad and his dad did it that-a-way?


Because unlimited potential pay attracts the best?
Because it wouldnt be fair to pay them so much unless
they self-manage?
Is self-management aligned holistically?
Because it gives them the incentive to grow Throughput?
Then, why to they
all stall out?
www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Solution

Your logo

the salesperson is paid like a profit center


Not only should salespeople not be paid as profit centers,
companies should evolve away from salespeople!
WHY?

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution

Why move away from salespeople?

To align the company in exploiting its constraint


So the company can succeed with ordinary employees
So folks arent saddled with unsuitable jobs they hate
Because global purpose is more inspiring than just me
It removes the effective glass-ceiling on T generation
It facilitates T growing faster than OE

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution

Does this mean fire the salespeople?


No
Segregate jobs based on skill sets not functionality
Find people whose personalities fit the jobs (not vice versa)
and apply people along their strengths

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution

Lets start with a conventional start-up company,


restructure it,
work forwards again in time and
see if it works better

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution
Conventional Starting Point Year 1

Year 1
Sales
$1,700
T
$508
Sales Exp
$144
Other OE
$360
NP
$4

www.tocpractice.com

Year 2
Sales
$2,900
T
$760
Sales Exp
$223
Other OE
$472
NP
$65
+ Salesperson
+ Service Tech
+ Exec Assistant

Year 3
Sales
$4,100
T
$983
Sales Exp
$280
Other OE
$551
NP
$152
+ Customer Serv.
+ A/R Clerk

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution
Division of Labor Company Year 3

In year 3 this company earns more than


the conventional one did in all 3 years!

Year 1
Sales
$250
T
$60
Sales Exp
$75
Other OE
$54
NP
($69)
Working out of the
President's house
on the cheap

www.tocpractice.com

Year 2
Sales
$1,168
T
$280
Sales Exp
$135
Other OE
$178
NP
($33)
Raises for Presenter,
Scheduler & President
Add Implementer
and Truck Driver

Year 3
Sales
$6,040
T
$1,450
Sales Exp
$315
Other OE
$852
NP
$283
Per Org Chart above

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Your logo

Solution
Comparison after 17 years

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Managing without using $


To bribe employees

Your logo

This is a serious challenge that needs its own presentation


1. Build Trust (listen and act on what you heard)
2. Enjoying the Job
3. Autonomy (align authority with responsibility)
4. Mastery (allow people to become true experts)
5. Purpose (help employees know how they contribute to the
global picture)

6. Pay fairly (plus a little bit more, when you can afford it)

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Managing without using $


To bribe employees

Your logo

Material to investigate:

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Managing without using $


To bribe employees

Your logo

Material to investigate:

www.tocpractice.com

23rd International Conference of the TOC Practitioners Alliance - TOCPA