Aligning Strategy & Sales: Workshop

ThinkSales Conference: October 10, 2012

Frank V. Cespedes
fcespedes@hbs.edu

Focus of Todays Sessions: Implementation

Two-Part discussion of some core dimensions of strategy implementation in most firms:

- Part I: Managing Selling and the Salesperson Use a case study to consider lessons learned: + and -

- Part II: Application Workshop Focus on specific topics Small Groups, Report-Outs, Discussion Some Suggestions, Guidelines, Warnings, Dos and Donts

Effective Strategies: The Goal is Profitable Growth

POSITIVE Economic Value Added NEGATIVE LOW

Top-Line Revenue Growth

HI

Importance of Implementation

Great Strategy

Poor Implementation

FAILURE

Average Strategy

Great Implementation

SUCCESS

You Can Come Up With The Best Strategy In The World - The Implementation Is 90 Percent Of It.

What is Effective Implementation of a Strategy?

The process of ensuring that your strategy or plan is first understood, and then . . . is embodied and reflected in your organizations activities, behaviors, capabilities, and allocation of resources (Money, Time, People).

What is Effective Implementation? (continued)

For leaders, this means answering the following questions

Is this a place where we have clearly articulated the capabilities and behaviors we need to get the results expected? If not, why not? Is there agreement about which processes and behaviors are crucial to achieving results? Are these attributes regularly communicated and developed?

A Case-in-Point: Cabot Pharmaceuticals

Page 1: Has a reputation for excellent management practices

- Determine whether Marshs discharge was a management failure and, if so, what could be done to correct the situation.
Final Page: The central question seemed to be, how could this possibly happen to someone like Bob Marsh in a company like Cabot?

- What happened here? Why? - What should they do about it? Why?

Learning Journal: Cabot Pharmaceuticals

1. What was the most important thing I learned from this discussion?

2. What questions did the case raise about my company?

3. Does my strategy make clear the basis for my sales recruitment, selection, training, and compensation policies? How (if at all) should those policies change in the current economic climate? What is the impact of global competitors and new technologies on required sales tasks? How do we best align our selling approach and talent with our strategy?

The Cabot Case Raises Three Key Questions About Strategy, Sales, and Implementation at Many Companies
What Is a Salesperson?

- And, how good or bad a salesperson was Bob Marsh?

What is Sales Management?
- And, how well or poorly does Cabot manage this core activity?

So What, Now What? - How Important is this for profitable growth? - How Get Better and More Productive at this Activity?

What Is a Salesperson?
Volume Generator?

Quantifier of Business Opportunities?

Source of Market Knowledge? Vendors Advocate With the Customer? Clients Advocate Within the Vendors Organization? Product or Solution Coordinator? Service Catalyst? Team Manager? Expense or Asset?

Business Strategy

Salesperson
11

Market Selection

Boundary Role Person

Communication Communication

Selling Organization Marketing Strategy Internal Other salespeople Sales managers Product specialists Service providers Operations support Finance, credit, administrative Top management

Sales Rep

Buying Organization Procurement Strategy

External Gatekeepers Decision makers Customer perceptions of: Needs Our company Our products Our value vs. competition

What Is Sales Management?

Sales Management Task Recruitment & Selection Training Supervision Evaluations Cabot Pharmaceuticals - Boy Scout Criteria; Ignores Selling Tasks - On-the-Job + Corporate Philosophy - Field Visits by DM (But Span of Control?) - A Genius of Inadequacy

and Behaviorally Useless

Compensation - Inconsistent with Managers Evaluations

Aligning Strategy and Sales: A Framework

Sales Force Control Systems Organizational Structure Performance Measurements Compensation and Incentives

Sales People Experience & Competencies Career Paths Training and Development

Sales Force Environment Communication Flows Sales Management Performance Reviews

Selling Behaviors

Sales Tasks

Business Strategy

Market/Account Characteristics

So What, Now What? How Important Is This Anyway?

Page 2: Turnover in the Cabot sales force was much lower than the industry average, only about 8%

- c. $2 Billion in annual sales and 500+ sales reps = c. $4.0 Million/Rep

- 500 Reps x 8% Turnover Rate = 40 Reps/Year = c. $160 Million in Sales Volume at Risk Annually

Note: Degree of risk depends upon how important you rate relationships vs. unique product in your industry and strategy

Some Conclusions
Talent Comes In All Shapes and Sizes . . . Especially in Sales BUT ultimately the sales person is NOT an individual contributor; must be seen and managed as a key agent of business strategy A major function of strategy is to guide field efforts (including selling efforts). That should be made explicit in the strategy and in its performance management implications Effective implementation in the field requires an understanding and buy-in to firm goals, choices, and trade-offs. This is a Leadership responsibility, not only a Sales requirement.

Next
Break

Application Workshop:

a) Big Picture: Articulating Strategy and Sales Implications b) Daily Field Performance Management: Performance Reviews

17

I. Articulating Strategy and Aligning Sales Goals

A Problem: Most Firms Do Not Have a Strategy That They Can Communicate in Ways the Field Organization Understands. Why? - No strategy (just a spectrum of opportunities) - A strategy that is a 100-page document (ignored and locked securely in the file cabinets of 2-4 officers of the company) - A vision at 30,000 feet that many sales managers simply dont understand: What does this mean for money, time, people? - A strategy that means different things to different people - A tactical plan: a series of incremental initiatives for the next year (dangerous in an economic climate where an industry may be facing a structural realignment, not only a recession)

A Hierarchy of Company Statements

Mission statements: Why we exist; our core contribution(s) to society, the economy, customers and other stakeholders of the enterprise Values statements: What we believe in and how we behave; specifies in general terms the norms and performance expectations for our people Vision statements: What we want to be and why; direction & aspirations STRATEGY statements: What our competitive game plan will be in the market(s) where we choose to compete how we achieve aspirations Balanced Scorecard statements: How we will monitor our actions, behaviors, initiatives, and performance via on-going metrics - Do Not Confuse Mission or Values or Vision with Strategy - As you work your way down the hierarchy, the statements should become more concrete and specific

Core Components of Any Strategy

Objectives, Scope, and Advantage capture fundamental elements of any good strategy - Ends and Goals (Objectives) - Domain: Where We Do and Dont Play (Scope) - Activities and Differentiators (Advantage) Clarifying these three elements: - forces business leaders to sharpen external positioning - essential for clarifying required selling tasks - makes it easier to communicate required internal behaviors across the organization to support and monitor selling initiatives

Objective
The primary goals(s) that motivate behavior and resource allocations in the organization - Quantitative and qualitative: appeal to wallet and will Dimensions can be chosen from a range of targets - Profitability, ROIC, Size, Market Share, Brand . . . . - If there are multiple objectives, the hierarchy should be clear Choice or redefinition of objective can have big impact on a firm and required selling metrics, behaviors, and capabilities - e.g., Share vs Profits; Scale vs Premium Service, etc.

Advantage
Description of what the firm does differently, better, or worldclass compared to relevant competitors and substitutes Can be divided into two components - What is the value proposition to the customer?

- How will we sell and deliver that value distinctively?

Strategy ultimately rests on what companies do and do not do: a reinforcing pattern of activities, behaviors, and skills, not only what they say they do BUT, if you cant say it (clearly, concisely), then they will have more difficulty implementing it

Whats Right or Wrong With This Picture?

Scope
Definition of the domain over which we will (and will not) operate Can be defined in multiple dimensions - Customers, channels, geographies, products, and/or services Not a precise statement of everything we do, rather . . . . - A delineation of the boundaries we should not go beyond (given the current strategy of the company) - A template for framing and debating inevitable trade-offs as customers, competitors, suppliers, regulators generate options that make competing demands on limited time, talent, or capital

Clarifying Where to Play (Scope) & How to Win (Advantage) are Core Choices in any Coherent Selling Approach
How to Win (Competitive Advantage)
Low Cost Broad Differentiation

2 Dimensions Capture Many Possibilities

Differentiation Product performance Brand messaging Customer care: service Sales approach or channel Delivery performance Location Etc. Low Cost Scale economies Sharing of activities/assets Learning-curve economies Sourcing/Supply-Chain mgmt. Unique configuration of activities Etc.

4 Common Dimensions
Geography Product Mix Channel Selection Customer segments

Where to Play (Scope)

Focus

Strategic Positions: Lodging Industry Example

Source of Competitive Advantage
Low Cost
Differentiation

Broad

Holiday Inn

Hilton Hotels

Scope
Focus

Motel 6

Four Seasons

Where do they play? How do they play?

Strategic Positions: Business Unit Example

Source of Competitive Advantage
Low Cost Differentiation

Broad

Courtyard

Marriott Hotel

Scope
Focus

Residence Inn

Ritz Carlton

Where do they play? How do they play?

The Challenge
Can you articulate core components of your companys strategy?

- Objectives, Scope, Advantage

Can you then specify what it means: for required sales capabilities? for talent? for acknowledged trade-offs? for selling metrics? Spending time to do this with your colleagues is valuable: - Dialogue and understanding about what the strategy statement means - What it includes, what it excludes: Who We Are (and are not)

- Facilitates leadership communication in Sales and throughout the firm

Application Workshop A: Can You Say What Your Strategy Is?

Objectives (What: our goals; quantitative and/or qualitative) Scope (Where we do, and do not, focus in terms of types of customers, products, services, etc. in our served markets) Advantage (How: what we do that does, or can, support our advantage in those areas where we do focus) Implications for the Sales function in your company: - Capabilities and Talent : Who We Hire and Why? - Trade-Offs: What is and is not the role of Sales in our firm? - Selling Metrics: What we really measure, and why?

Application Workshop A: Can You Say What Your Strategy Is?

De-brief discussion:

- Objective, Scope, Advantage: where are we clear? Where are we unclear? Whats hardest to specify? Why?
- What are examples of good-practice in strategy sales articulation and communication?

- In your experience, what are the barriers to linking overall strategic goals with on-going selling activities and behaviors?
- What are the barrier-busters?

II. Managing Performance

The process of working with and + through others to develop specific competencies that a) Get Results in the relevant external environment, Get Results and b) Build Capabilities for achieving current and future individual and organizational goals.

Build Capability

People Who Perform People Whose Performance You Invest In

31

Human Performance

Key Links in Performance Management

Operating Performance

External Market Performance

32

Delegation, Development, and Managing Performance: What Are We Aiming For? Competence and Commitment
Competent and committed people:

Who get the job done with relevant experience, skills, and attitudes
Who give 110% and work as a team Who drive a reputation that attracts the next generation of high performers Competence Commitment

And an organization that can: Capture discretionary energy, attention and effort of the best talent Has a reputation as the place-to-be

This must be earned jointly by the organization and individual leaders

33

The Message From Research About How People Learn & Develop Over Time: Its in Your Circle of Influence
Source: The Lessons of Experience, M.W. McCall, Jr., M.M. Lombardo, A. M. Morrison, Lexington Books

Work Experience

Jobs, Projects, Assignments: Performance Reviews (70%)

Classes, Reading, Research (15%)

The other things you do and love: perspective, insight, maturity (15%)

Training

Life Experience
34

Application Workshop B: Field Management: Performance Reviews

In your experience, what inhibits effective performance reviews and performance conversations in Sales? In your experience, what supports effective performance reviews and performance conversations in Sales? What advice or key principles have you found useful in delivering feedback?

Can you cite any specific good-practice examples?

Workshop Wrap-Up Slides

About Strategy About Performance Conversations

Articulating Strategic Choices: Summary Points

The foundation for any strategy must be a clear understanding of what is truly happening out there with customers and, therefore, with competitors, substitutes, suppliers, regulators, technologies, etc. Whatever is true about the external environment today can quickly change. So, its not about taking a snapshot, but staying connected with the environment with customers, trends, colleagues, trade-offs, etc.

Theres diagnosis and theres action! Its a core leadership responsibility and it almost always involves dealing with change
Strategy is not just what companies say. It is their pattern of actual resource allocation across investment needs/opportunities, people and process capabilities, and product/service segments But it begins with strategy articulation and communication: if you cant say it, they probably cant understand it, and implementation is more difficult!

Human Performance

What kind of talent is necessary? Have we clarified the key capabilities?

Operating Performance

What are the key activities in the business? How are they affected by market dynamics?

Market Performance

What attracts and retains customers: Today? Tomorrow?

Financial Performance

How do we extract value and make money: Today? Tomorrow?

A Common Trajectory for Sales Careers and Productivity Over Time: Costs Outpace Performance
A Sales Challenge: How to remain at the top of ones game over time How ensure that a specific technical expertise remains important to the organizations mission How offer a better deal than recent graduates who cost less, may be more technically up-todate, and provide 80% of the job for 50% of the fully-burdened cost
Contribution Cost Line

Performance Line

Time

Performance Conversations: What Makes Them Hard?

Keeping your emotions in check - fight or flight instincts

Avoidance you would rather not have it and spoil the day
Delivering bad news: Concern about hurting someone Feeling awkward or worried; Afraid of backlash or resistance Conflict avoidance wanting to be liked and linked-in The all-purpose rationalization: I am currently too busy for this . . .

Understand that whatever makes the conversation hard is precisely why you probably need to have it!

40

Delivering Performance Feedback: A Few Actual Examples (How NOT To Deliver Feedback) . . .
This employee has reached rock bottom and has started to dig.

"This person should go far, and the sooner she starts, the better."
"He doesn't have ulcers, but he's a carrier."

She brings a lot of joy whenever she leaves the room."

"When his I.Q. reaches 50, he should sell." "Donated his brain to science before he was done using it." "The wheel is turning, but the hamster is dead."

41

Key Performance Skills: Giving Effective Performance Feedback

Descriptive and Specific, Not Broad and General

Overly general feedback is little more than an overall perception, and likely to increase defensiveness because it involves broad judgment
The report is terrible.

Descriptive feedback describes observed performance/behavior and encourages open discussion

The report didnt include information on demographics and budgets. Feedback in terms of specific, observable actions and performance sets the stage for discussion and improvement
42

Key Performance Skills: Giving Effective Performance Feedback (cont.)

Focus On The Behavior, Not The Person

To maintain and reinforce the persons self-esteem and ability to listen non-defensively, focus on the specific behavior or action.
You interrupted people throughout the meeting. This resulted in people being less open to listening to your ideas.

Feedback relative to the person as a whole does not add value and may deter, not motivate, improvement.
Youre a terrible communicator.

43

Giving Performance Feedback: Before the Review

In your on-going work as a manager with your people:

Make clear the standards by which performance will be judged (what you consider truly important and how much you expect), including ethical or other process standards
Make the time to provide feedback on performance, versus rushed drive-by comments Care for your people and their true best interests, and be worthy of their trust: admit errors and, when you cant keep a commitment, explain why

Make the decisions that are yours to make and let people know when a decision has or has not been made

44

Giving Performance Feedback: During the Review

Convey your positive intent

Describe specifically what you have observed

State the impact of the behavior or action

Ask the other person to respond

Focus the discussion on options and solutions

45

Some Final Words . . . About Strategy, Sales & Leadership

A desk is a very dangerous place from which to view the world. ~ John Le Carre

There aint many customers at headquarters! ~ Sam Walton

Thank You!
And Best Wishes for Continued Success in Your Marketplace, and in Your Careers . . . .
Frank Cespedes