managing change[1]

1

Managing ChangeManaging Change

Presented by:Presented by:The Ohio State University The Ohio State University

Distribution FacultyDistribution Faculty

Dr. H. Lee MathewsDr. H. Lee MathewsDr. John MonokyDr. John Monoky

October 7-8, 2005October 7-8, 2005San Antonio, TexasSan Antonio, Texas

Managing ChangeManaging Change

Presented by:Presented by:The Ohio State University The Ohio State University

Distribution FacultyDistribution Faculty

Dr. H. Lee MathewsDr. H. Lee MathewsDr. John MonokyDr. John Monoky

October 7-8, 2005October 7-8, 2005San Antonio, TexasSan Antonio, Texas

2

Program OutlineProgram OutlineProgram OutlineProgram Outline

• Sales and Marketing Management (Friday Sales and Marketing Management (Friday Morning)Morning)

• Understanding Profitability and Financial Understanding Profitability and Financial Impacts (Friday Afternoon)Impacts (Friday Afternoon)

• Distributor Operations (Saturday Morning)Distributor Operations (Saturday Morning)

• Human Resources Management (Saturday Human Resources Management (Saturday Morning)Morning)

• Sales and Marketing Management (Friday Sales and Marketing Management (Friday Morning)Morning)

• Understanding Profitability and Financial Understanding Profitability and Financial Impacts (Friday Afternoon)Impacts (Friday Afternoon)

• Distributor Operations (Saturday Morning)Distributor Operations (Saturday Morning)

• Human Resources Management (Saturday Human Resources Management (Saturday Morning)Morning)

3

Sales and Marketing ManagementSales and Marketing ManagementSales and Marketing ManagementSales and Marketing Management

Developed and Presented by:

H. Lee “Buck” Mathews, Ph.D.

Professor of Marketing and Logistics

The Ohio State University

6347 Plesenton Drive, Worthington, Ohio 43085phone: 614-848-8437

e-mail: [email protected]







pdownie

John Monoky says this is the most current presentation. Delete everything else except the Sao Paulo ESM materials.

4

Selling is getting rid of what you’ve got

5

Marketing is having what you can get rid of

• Customer Focused• “Silo” Mentality• Higher Profit

6

Product Life Cycle Impact: The Value Product Life Cycle Impact: The Value Added Wall for HPBA CompaniesAdded Wall for HPBA Companies

Time

Sales

Profits

Product

Value AddedServices Price

7

Product Life Cycle WorksheetProduct Life Cycle WorksheetProduct Life Cycle WorksheetProduct Life Cycle Worksheet

New Products New Services Price

8

The menu of value-added services for The menu of value-added services for distributors differs, but many include the distributors differs, but many include the following:following:

The menu of value-added services for The menu of value-added services for distributors differs, but many include the distributors differs, but many include the following:following:

• BasicBasic• pre-printed and customized client order forms;• pre-printed and customized client order forms;• usage reports;• usage reports;• scheduled quarterly business meetings to review • scheduled quarterly business meetings to review additional ways to take costs out of the system;additional ways to take costs out of the system;• technical or service hotlines;• technical or service hotlines;• onsite training;• onsite training;• customer educational seminars;• customer educational seminars;• video libraries;• video libraries;• customer specials and incentive programs.• customer specials and incentive programs.

• OthersOthers

• BasicBasic• pre-printed and customized client order forms;• pre-printed and customized client order forms;• usage reports;• usage reports;• scheduled quarterly business meetings to review • scheduled quarterly business meetings to review additional ways to take costs out of the system;additional ways to take costs out of the system;• technical or service hotlines;• technical or service hotlines;• onsite training;• onsite training;• customer educational seminars;• customer educational seminars;• video libraries;• video libraries;• customer specials and incentive programs.• customer specials and incentive programs.

• OthersOthers

9

Know your own servicesKnow your own servicesKnow your own servicesKnow your own services

•The first key to any successful introduction of value-added The first key to any successful introduction of value-added services is to make sure you understand the service and services is to make sure you understand the service and the worth to the customer.the worth to the customer.

• • • Does it improve efficiency?Does it improve efficiency?• Does it produce or enhance revenues?• Does it produce or enhance revenues?• How does this service add to the productivity or reduce • How does this service add to the productivity or reduce expenses?expenses?• Will it improve or simplify ordering?• Will it improve or simplify ordering?• If it will make ordering easier, why should the customer • If it will make ordering easier, why should the customer care?care?• Is there an attendant cost or reduction in cost to the • Is there an attendant cost or reduction in cost to the customer?customer?• If others offer the same or a similar service, how is yours • If others offer the same or a similar service, how is yours better?better?• What makes your offering different from someone else's • What makes your offering different from someone else's offering?offering?

•The first key to any successful introduction of value-added The first key to any successful introduction of value-added services is to make sure you understand the service and services is to make sure you understand the service and the worth to the customer.the worth to the customer.

• • • Does it improve efficiency?Does it improve efficiency?• Does it produce or enhance revenues?• Does it produce or enhance revenues?• How does this service add to the productivity or reduce • How does this service add to the productivity or reduce expenses?expenses?• Will it improve or simplify ordering?• Will it improve or simplify ordering?• If it will make ordering easier, why should the customer • If it will make ordering easier, why should the customer care?care?• Is there an attendant cost or reduction in cost to the • Is there an attendant cost or reduction in cost to the customer?customer?• If others offer the same or a similar service, how is yours • If others offer the same or a similar service, how is yours better?better?• What makes your offering different from someone else's • What makes your offering different from someone else's offering?offering?

10

Two Strategies Emerge from the Two Strategies Emerge from the Product Life CycleProduct Life Cycle• DifferentiateDifferentiate

– Sustainable Sustainable Competitive Competitive AdvantageAdvantage

• Low Cost PositionLow Cost Position

– Be Low Cost in Be Low Cost in Production, Production, Marketing, and Marketing, and DistributionDistribution

• Each Phase a Different Each Phase a Different ChallengeChallenge

11

Customer Needs by Market Segment

Cust. A Cust B Cust CProduct A

Product B

Product C

Prouct D

Basic Matrix

12

Basic MatrixCus

tom

er P

rodu

ct M

atrix

Ana

lysis

Indep

enden

t Flo

or Cove

ring R

etai

lers

Buying G

roup/F

ranch

ise

Affilia

ted R

etai

ler

Inst

alle

rs

Home

Impro

vem

ent C

ente

rs

Builder

s

All O

ther

s

Sales by Customer Category 46.20% 24.40% 9.80% 5.20% 3.70%

Sales by Product Category

Sheet Vinyl (18.1%) H

H

Pre-finished Wood Flooring (11.2%) M

H

Laminated Flooring (10.1%) L

H

Accessories (10.0%) L

L

Carpet Residential (6.1%) H

L

Carpet Pad (6.0%)

Unfinished Wood Flooring (5.5%)

Specialty Flooring (5.2%)

All Others

13

Market PotentialCompany Strength Customer Needs by Market SegmentProduct/Services

Ind

ep

en

de

nt

Flo

orc

ov

eri

ng

Re

tail

Bu

yin

g G

rou

ps

/Fra

nc

his

ed

Aff

ilia

ted

Re

t.

Ins

tall

ers

Ho

me

Im

pro

ve

me

nt

Ce

nte

rs

Ge

ne

ral

Co

ntr

ac

tors

Na

tio

na

l R

eg

ion

al

Ch

ain

s

Bu

ild

ers

En

d U

se

rs

Go

ve

rnm

en

t A

cc

ou

nts

All

Oth

ers

Sheet Vinyl H H L H L L L L L M

H H H L M M L H M H

Pre-finished Wood Flooring M H L L H H H M M M

L L L L H H L M L M

Laminated Flooring L H L H L L L L L M

M M H L M H L M M H

Accessories M H M H M M L L L M

L L H M M M L H M M

Carpet Residential L H L H L L L L L M

M M H L M H L M M H

Carpet Pad H H L H L L L L L M

H H H L M M L H M H

All Others H H L H L L L L L M

H H H L M M L H M H

14

Tru

ck M

fg

.

Mo

bl

Off H

wy.

Ind

ustria

l

Tru

ck A

frm

kt.

Au

to

Aftm

kt

Dis

trib

uto

r

SpicerC & MSecoFormspTyroneP.C.WeathrhdChelsea

Dana Auto Parts Corporation

15

Market PotentialCompany Strength Customer Needs by Market SegmentProduct/Services

In

tern

al M

ed

Su

rg

OB

GY

N

Ped

s

Big

L

ab

s

Sm

all L

ab

s

In

du

s

Liver Disease

Vir. Hepatitis

HBS Carrier

Prognosis

Immun

Vertial Trans

HepatitisControl

Tourist

Abbott Labs

16

IBM Distribution MatrixIBM Distribution MatrixIBM Distribution MatrixIBM Distribution Matrix

Market Potential Prospects CustomersCompany StrengthProduct/Services Small Large Small Large

Current Old Iron Current Old Iron

Mission Critical Systeme

PC Services & Training

Midrange Services & Training

Sales Force EffectivenessTools

Warehouse ManagementSystems

Customer ServiceTools

Computer NeedsAnalysis

Distribution ExecutiveServices

17

Coast Marine MatrixCoast Marine MatrixCoast Marine MatrixCoast Marine Matrix

Market PotentialCompany Strength Customer Needs by Market SegmentProduct/Services Small Med Large Service Retail Retail Marina

Marine D Marine d Marine d Center Store Store Med

Boat Covers/tops

TowingElectrical

Maintenance

RepairParts

Water Toys

Hardware

Safety Items

Trailer Acc.

18

Target Market: Single, young marrieds w/o kids, middle income, ages 18 - 30

Market Potential Key High Medium LowLoft Strength

Chart 1: The Loft Customer Product Matrix

Slipcovers

High Priority High Priority High Priority Med. Priority

Accent Fabricspillows, table skirtsetc. Med. Priority Why Bother High Priority Med. Priority

Window Treatments

Why Bother Why Bother Med. Priority Med. Priority

Bedding

Med. Priority Med. Priority Med. Priority Med. Priority

Accent Furniture

Why Bother Why Bother Why Bother Med. Priority

Bistro Sets /Patio


Chairs and Stools

Why Bother Why Bother Med. Priority Why Bother

Card Tables /TV Trays

Low Priority Low Priority Low Priority Low Priority

Office Furniture


Accessories

Low Priority Why Bother Low Priority Med. Priority

Rugs

Why Bother Why Bother Why Bother Why Bother

Lighting Lamps, Shades, etc

Why Bother Why Bother Why Bother Why Bother

Room Design Services

Med. Priority Med. Priority Med. Priority High Priority

New ProductsServices

19

The HPBA MatrixThe HPBA MatrixThe HPBA MatrixThe HPBA Matrix

Market PotentialCompany StrengthProduct/Services

20

Understanding Profitability and Understanding Profitability and Financial ManagementFinancial Management

Understanding Profitability and Understanding Profitability and Financial ManagementFinancial Management













pdownie


21

Understanding the Strategic Financials Understanding the Strategic Financials Understanding the Strategic Financials Understanding the Strategic Financials

• Introduce the strategic Introduce the strategic profit modelprofit model

• Review basic financial Review basic financial ratio analysisratio analysis

• Understand HPBA Understand HPBA Members and Members and competitors’ financial competitors’ financial driversdrivers

• Introduce the strategic Introduce the strategic profit modelprofit model

• Review basic financial Review basic financial ratio analysisratio analysis

• Understand HPBA Understand HPBA Members and Members and competitors’ financial competitors’ financial driversdrivers

Excessive downsizing and cost cutting are corporate anorexia, getting thin, but not healthy

22

Basis of the Profit ModelBasis of the Profit ModelBasis of the Profit ModelBasis of the Profit Model

• Assumption that the financial objective of a firm is to Assumption that the financial objective of a firm is to earn a rate of return for stockholders.earn a rate of return for stockholders.

• Useful to assess your own performance plus help Useful to assess your own performance plus help customer improve their performancecustomer improve their performance

• Assumption that the financial objective of a firm is to Assumption that the financial objective of a firm is to earn a rate of return for stockholders.earn a rate of return for stockholders.

• Useful to assess your own performance plus help Useful to assess your own performance plus help customer improve their performancecustomer improve their performance

Margin Management Asset Management Financial Managment

Net Sales 100 Current AssetsLess Cost of Goods Sold -80 Inventory 13

Accts Receivable 13 Total Assets / Net WorthGross Profit Margin 20 Other 4Less Operating Expenses -18 " The relationship between

Fixed Assets 10 debt and equity"Net Profit 2

Total 40 "The other half ofthe balance sheet"

23

Profit Margin ManagementProfit Margin ManagementProfit Margin ManagementProfit Margin Management

Sales

Cost of Goods Sold

Gross Margin

Net Profit

Net ProfitMargin

TotalExpenses

Sales

÷

24

Look at Key Boxes (Red): How do we Look at Key Boxes (Red): How do we impact:impact:Look at Key Boxes (Red): How do we Look at Key Boxes (Red): How do we impact:impact:

• SalesSales

• Cost of Goods SoldCost of Goods Sold

• ExpensesExpenses

• SalesSales

• Cost of Goods SoldCost of Goods Sold

• ExpensesExpenses

25

The Relationship between Margin and The Relationship between Margin and Prices: Scary InformationPrices: Scary InformationThe Relationship between Margin and The Relationship between Margin and Prices: Scary InformationPrices: Scary Information

Assuming a Regular Gross Profit Margin of 25%

When you cut prices To enjoy the same dollar profit margin

5% Handle 25% more merchandiseDo 18% more dollar volume

10% Handle 66 2/3% more merchandiseDo 50% more dollar volume



26

Managing Assets: Inventory and Managing Assets: Inventory and Accts Rec. are the keysAccts Rec. are the keysManaging Assets: Inventory and Managing Assets: Inventory and Accts Rec. are the keysAccts Rec. are the keys

Inventory

AccountsReceivableCurrent Assets

Sales

AssetTurnover

FixedAssets

Total Assets

÷

Other CurrentAssets

27

How do we impact the Red Boxes?How do we impact the Red Boxes?How do we impact the Red Boxes?How do we impact the Red Boxes?

• InventoryInventory

• Accounts ReceivableAccounts Receivable

• Other current assetsOther current assets

• Fixed assetsFixed assets

• SalesSales

• InventoryInventory

• Accounts ReceivableAccounts Receivable

• Other current assetsOther current assets

• Fixed assetsFixed assets

• SalesSales

28

Calculating Return on AssetsCalculating Return on AssetsCalculating Return on AssetsCalculating Return on Assets

Inventory

Accts Rec.Current Assets

Sales

AssetTurnover

FixedAssets

Total Assets

÷

Other CurrentAssets

÷

Net Profit

Net ProfitMargin

Sales Total Expenses

Gross MarginSales

Cost OfGoods Sold

Return onAssets

Net Profit/Total

Assets

x

29

Financial Leverage: Financial Leverage: Financial Leverage: Financial Leverage:

Assets Liabilities

30

The Total Profit ModelThe Total Profit ModelThe Total Profit ModelThe Total Profit Model

Inventory


SalesAsset

Turnover

FixedAssets

Total Assets

÷

Other CurrentAssets

÷

Net Profit

Net ProfitMargin


Gross MarginSales

Cost OfGoods Sold

Return onAssets

Net ProfitTotal

Assets

xx

FinancialLeverage

Total AssetsNet Worth x

=

Return OnNet Worth

31

The Total Profit ModelThe Total Profit ModelThe Total Profit ModelThe Total Profit Model

Inventory


SalesAsset

Turnover

FixedAssets

Total Assets

÷

Other CurrentAssets

÷

Net Profit

Net ProfitMargin


Gross MarginSales

Cost OfGoods Sold

Return onAssets

Net ProfitTotal

Assets

xx

FinancialLeverage

Total AssetsNet Worth x

=

Return OnNet Worth

32

Cost ofGoods Sold

Sales

Gross MarginPercentage

GMROI

Avg. Inventory

Inventory Turns

Gross Margin Return Inventory Investment

x

Sales

Gross Margin

Sales

Beg. Inventory _______End. Inventory _______Total Inventory _______÷ 2 = _______

÷

÷

33

Using GMROIUsing GMROIUsing GMROIUsing GMROI

Sales Gross Margin InventoryDollars %Total COGS Dollars % Total % Dept Dollars % Total T/O GMROI

Dept A $1,613,326 21.4 $1,340,674 $272,652 18.3 16.9 $415,132 27.6 3.2 66

Dept B $2,382,045 31.6 $1,913,060 $468,985 31.5 19.7 $395,176 26.2 4.8 119

Dept C $1,139,482 15.2 $900,191 $239,291 16 21 $243,295 16.2 3.7 98

Dept D $2,397,147 31.8 $1,887,075 $510,072 34.2 21.3 $452,397 30 4.2 113

Total $7,532,000 100 $6,041,000 $1,491,000 100 19.6 $1,506,000 100 4 99

34

Measuring Customer Profitability: Controlling ReceivablesMeasuring Customer Profitability: Controlling ReceivablesMeasuring Customer Profitability: Controlling ReceivablesMeasuring Customer Profitability: Controlling Receivables

Warehouse Sales 10,000.00$

Whse Gross Profit 2,500.00$

A 25 10 (37) 250 Avg Accts Receivable 1,000.00$

B 25 10 (37) 250

C 15 16.7 (22) 250

Company 15.8 7.8 (49) 123

Gross Margin Return On Receivables

AR Turn

Gross MarginReturn On

Receivables (GMROR)

COMPARATIVE DATA

Customer Gross Profit

CUSTOMER XCUSTOMER PROFILE 19YY

Gross Profit Margin

Gross Profit

x

A/R Turn(Days)

GMROR(%)

÷

Net Sales

Net Sales

Accounts Receivable

35

Direct ExpensesDirect ExpensesDirect ExpensesDirect Expenses

Warehouse Sales 10,000.00$

Whse Gross Profit 2500

Sales Commission 625

Discounts Taken 100

Returns & Allow 0

Delivery 135

Handling 79

Other - Selling 100______

Total Direct Expenses 1039

______Contribution 1461

# Of Deliv. Orders 25

# Of Line Extens. 35

Contribution Dollars

CUSTOMER XCUSTOMER PROFILE 19YY

Contribution

Gross Profit

Dir Exp

Sales Commissions

Discounts Taken

Returns & Allowances

Delivery & Handling

Other

36

CMRORCMRORCMRORCMROR

Accts RecTurnover

Contribution MarginReturn On

Receivables (CMROR)

Contribution Margin Contribution

x

÷

÷

Sales

Sales

Accounts Receivable

37

Home Work AssignmentHome Work AssignmentHome Work AssignmentHome Work Assignment

• Adjust the Model to Your NeedsAdjust the Model to Your Needs

– What revenues and expenses do we control?What revenues and expenses do we control?

– What assets do you control?What assets do you control?

– What do we do with financial leverage?What do we do with financial leverage?

• Adjust the Model to Your NeedsAdjust the Model to Your Needs

– What revenues and expenses do we control?What revenues and expenses do we control?

– What assets do you control?What assets do you control?

– What do we do with financial leverage?What do we do with financial leverage?

38

Buck’s Profitability AnalyzerBuck’s Profitability AnalyzerBuck’s Profitability AnalyzerBuck’s Profitability Analyzer

• Send e mail to:Send e mail to:

• [email protected]@islc.net

• Send e mail to:Send e mail to:

• [email protected]@islc.net

mailto:[email protected]

mailto:[email protected]

39

Sample Corporation Consolidated Sample Corporation Consolidated Annual PlanAnnual PlanSample Corporation Consolidated Sample Corporation Consolidated Annual PlanAnnual Plan

• Analyze the attached annual financial planAnalyze the attached annual financial plan

• Discuss appropriate benchmarksDiscuss appropriate benchmarks

• Analyze the attached annual financial planAnalyze the attached annual financial plan

• Discuss appropriate benchmarksDiscuss appropriate benchmarks

40

Evolution of Business MetricsEvolution of Business MetricsEvolution of Business MetricsEvolution of Business Metrics

SalesGrowth

ReturnonSales

ReturnonAssets

ValueCreation

Top Line Revenue

Comp Stores

Returns

Gross Margin

Operating Margin

Net Margin

Sales expense

Overhead

ROM

Marketing $

ROI

Inventory $/Turns

Ts & Cs

RONA

RONC

GMROII

ROIC

ROCE

EVA

WACC

Early 90s 2005

41

Value Creation Model:Value Creation Model:How does your Customer make money?How does your Customer make money?Value Creation Model:Value Creation Model:How does your Customer make money?How does your Customer make money?

Value Creation/ Destruction

Operating Income Total Assets WACC

Gross Profit Cost Structure

Current Assets Fixed Assets

Revenues Cost of Goods

WorkingCapital

Other Assets & Liabilities

Inventory

Debtors

Creditors

-

-

-

+

+

-

+

( )x

Long TermLiabilities+

42

What drives a Partner’s ability to What drives a Partner’s ability to make money?make money?What drives a Partner’s ability to What drives a Partner’s ability to make money?make money?

Value Creation/ Destruction

Operating Income TotalAssets WACC

Gross Profit Cost Structure

Current Assets

FixedAssets

Revenues Cost of Goods

WorkingCapital

Other Assets & Liabilities

Inventory

Debtors

Creditors

-

-

-

+

+

-

+

( )x

Long TermLiabilities+

43

Drivers Of/Barriers to ChangeDrivers Of/Barriers to ChangeDrivers Of/Barriers to ChangeDrivers Of/Barriers to Change

What’s driving you to

make these changes?

What’s stopping you from making these

changes?

??

44

The Dealer Sales TeamThe Dealer Sales TeamThe Dealer Sales TeamThe Dealer Sales Team


John F. Monoky, Ph.D.

Monoky AssociatesUniversity of Michigan

4412 Forestview Drive, Toledo, Ohio 43615phone: 419-536-7637 fax:419-536-0414



John F. Monoky, Ph.D.

Monoky AssociatesUniversity of Michigan

4412 Forestview Drive, Toledo, Ohio 43615phone: 419-536-7637 fax:419-536-0414


pdownie


45

"THE BREAKTHROUGH"

YEAH, I SOLD THEM.

BROKE THE SALES BARRIER AT SCIOTA BANK !!I UNDERSTAND YOUR SALES PITCH WOWED 'EM…THECONGRATULATIONS, VERNON! I HEAR YOU FINALLYFACILITIES MANAGER CALLED IT "HISTORIC"…

THEY SEEMED TO LIKE IT.

LIKE IT! I HEAR YOU HAD TO DO A COMPLETE REPLAYFOR THEIR BOARD OF DIRECTORS! THEY FLEW GUYSIN FROM VANCOUVER… HALIFAX…EGYPT…

THEY MADE A BIT OF A FUSS.

HOW DID THEIR DESIGNER DESCRIBE YOURPROPOSAL—"A MIRACLE" OF ERGONOMIC INGENUITY?

THE SPECS CHECKED OUT.

IT'S WHAT THEY TELL ME.

IS IT TRUE—THEY'RE ZAPPING ALL THEIR OLDSUPPLIERS AND MAKING YOU THEIR SINGLE SOURCE? HOW MUCH IS THE PROJECT WORTH ?

WELL, IT'S JUST FANTASTIC, VERNON…

ABOUT $500.

46

Your Scarcest Resource

TOTAL DAYS IN THE YEAR 365Less:

• Weekends 110• Vacation 20• Holidays 10• Personal absences 5 145

WORKING DAYS AVAILABLE IN YEAR 220Less:

• Meetings, Trade Shows, etc.• Training• Distributor unavailability• Miscellaneous

TOTAL

47

Face-to-FaceSelling29%

Face-to-FaceSelling30%

PhoneSelling25%

PhoneSelling25%

Administration16%

Administration16%

Travel17%

Travel18%

HOW SALESPEOPLESPEND THEIRTIME

2004

2005

Acct. Service/Coordination

13%

Acct. Service/Coordination

11%

48

WHAT IF………WHAT IF………WHAT IF………WHAT IF………• MOST OF YOUR EXISTING BUSINESS AND GROWTH IS MOST OF YOUR EXISTING BUSINESS AND GROWTH IS

FROM YOUR CURRENT MARKETS AND CUSTOMERS, ANDFROM YOUR CURRENT MARKETS AND CUSTOMERS, AND

• YOUR CURRENT MARKETS ARE FLAT OR DECLINING, ANDYOUR CURRENT MARKETS ARE FLAT OR DECLINING, AND

• YOUR KEY CUSTOMERS ARE UNDER PRESSURE FROM YOUR KEY CUSTOMERS ARE UNDER PRESSURE FROM COMPETITORS, ANDCOMPETITORS, AND

• YOUR CURRENT CUSTOMERS PRACTICE EXTORTION YOUR CURRENT CUSTOMERS PRACTICE EXTORTION ECONOMICS, ANDECONOMICS, AND

• YOUR TARGET OPPORTUNITIES ARE IN YOUR YOUR TARGET OPPORTUNITIES ARE IN YOUR TRADITIONAL SEGMENTS/CUSTOMERS AND RECEIVE TRADITIONAL SEGMENTS/CUSTOMERS AND RECEIVE VERY LITTLE ATTENTION FROM YOUR SALES FORCE, ANDVERY LITTLE ATTENTION FROM YOUR SALES FORCE, AND

• THE MAJORITY OF YOUR RESOURCES ARE TIED UP THE MAJORITY OF YOUR RESOURCES ARE TIED UP SERVICING YOUR CURRENT BASE OF BUSINES, ANDSERVICING YOUR CURRENT BASE OF BUSINES, AND

YOU WOULD LIKE TO GROW AND GENERATE PROFITS!!!!!YOU WOULD LIKE TO GROW AND GENERATE PROFITS!!!!!

• MOST OF YOUR EXISTING BUSINESS AND GROWTH IS MOST OF YOUR EXISTING BUSINESS AND GROWTH IS FROM YOUR CURRENT MARKETS AND CUSTOMERS, ANDFROM YOUR CURRENT MARKETS AND CUSTOMERS, AND

• YOUR CURRENT MARKETS ARE FLAT OR DECLINING, ANDYOUR CURRENT MARKETS ARE FLAT OR DECLINING, AND

• YOUR KEY CUSTOMERS ARE UNDER PRESSURE FROM YOUR KEY CUSTOMERS ARE UNDER PRESSURE FROM COMPETITORS, ANDCOMPETITORS, AND

• YOUR CURRENT CUSTOMERS PRACTICE EXTORTION YOUR CURRENT CUSTOMERS PRACTICE EXTORTION ECONOMICS, ANDECONOMICS, AND

• YOUR TARGET OPPORTUNITIES ARE IN YOUR YOUR TARGET OPPORTUNITIES ARE IN YOUR TRADITIONAL SEGMENTS/CUSTOMERS AND RECEIVE TRADITIONAL SEGMENTS/CUSTOMERS AND RECEIVE VERY LITTLE ATTENTION FROM YOUR SALES FORCE, ANDVERY LITTLE ATTENTION FROM YOUR SALES FORCE, AND

• THE MAJORITY OF YOUR RESOURCES ARE TIED UP THE MAJORITY OF YOUR RESOURCES ARE TIED UP SERVICING YOUR CURRENT BASE OF BUSINES, ANDSERVICING YOUR CURRENT BASE OF BUSINES, AND

YOU WOULD LIKE TO GROW AND GENERATE PROFITS!!!!!YOU WOULD LIKE TO GROW AND GENERATE PROFITS!!!!!

49

THE STRATEGIC GAPSTHE STRATEGIC GAPSTHE STRATEGIC GAPSTHE STRATEGIC GAPS

•HOW MUCH GROWTH IS LEFT IN MY CURRENT HOW MUCH GROWTH IS LEFT IN MY CURRENT MARKETS? CUSTOMERS?MARKETS? CUSTOMERS?

•WHERE WILL MY FUTURE GROWTH COME FROM?WHERE WILL MY FUTURE GROWTH COME FROM?

•HOW WILL I CAPTURE MARKET SHARE?HOW WILL I CAPTURE MARKET SHARE?

•WHAT ARE THE COMPONENTS OF MY WHAT ARE THE COMPONENTS OF MY DIFFERENTIATION STRATEGY? DIFFERENTIATION STRATEGY?

•WHERE DO I GENERATE PROFITS? WHERE WHERE DO I GENERATE PROFITS? WHERE COULD I GENERATE PROFITS?COULD I GENERATE PROFITS?

•HOW MUCH GROWTH IS LEFT IN MY CURRENT HOW MUCH GROWTH IS LEFT IN MY CURRENT MARKETS? CUSTOMERS?MARKETS? CUSTOMERS?

•WHERE WILL MY FUTURE GROWTH COME FROM?WHERE WILL MY FUTURE GROWTH COME FROM?

•HOW WILL I CAPTURE MARKET SHARE?HOW WILL I CAPTURE MARKET SHARE?

•WHAT ARE THE COMPONENTS OF MY WHAT ARE THE COMPONENTS OF MY DIFFERENTIATION STRATEGY? DIFFERENTIATION STRATEGY?

•WHERE DO I GENERATE PROFITS? WHERE WHERE DO I GENERATE PROFITS? WHERE COULD I GENERATE PROFITS?COULD I GENERATE PROFITS?

50

POSITIONING

Which segments / customers will we concentrate on ?

Whom will we challenge for these customers?

What incentives will we provide to get them to buy from us… rather than from competitors?

CUSTOMERTARGETS

COMPETITORTARGETS

CORESTRATEGY

51

BUSINESS STRENGTHS

ACCOUNTATTRACTIVENESS

High

Low

Strong Weak

THE ACCOUNT PORTFOLIOTHE ACCOUNT PORTFOLIO

• Size• Growth• Profitability• Location• Purchasing

criteria and processes

• Current suppliers

• Status of customer (prestige)

• Product range• Product efficacy• Service quality• Price• Technical services• Reputation/image• Past experience• Quality of sales staff• Quality of relationships

Invest / GrowSelectively

Invest

MaintainManage for

Cash / Withdraw

52

Strong Strength of Position Weak

High

AccountOpportunity

Low

ACCOUNT PORTFOLIO ANALYSISACCOUNT PORTFOLIO ANALYSIS

Attractiveness:Accounts are very attractive since they offer high opportunity and sales organization has strong position.

Sales call strategy:Accounts should receive a high level of sales calls since they are the sales organization’s most attractive accounts.

Attractiveness:Accounts are potentially attractive since they offer high opportunity, but sales organization currently has weak position with accounts.

Sales call strategy:Selected accounts should receive a high level of sales calls to strengthen the sales organizations position.

KEY TARGET

MAINTENANCE WHY BOTHERAttractiveness:

Accounts are somewhat attractive since sales organization has strong position, but future opportunity is limited.

Sales call strategy:Accounts should receive a moderate level of sales calls to maintain the current strength of the sales organization’s position. And, efforts should be made to replace field sales calls with telephone sales.

Attractiveness:Accounts are very unattractive since they offer low opportunity and sales organization has weak position.

Sales call strategy:Accounts should receive no field sales calls and a minimum of inside sales resources.

53

HighA

CC

OU

NT

AT

TR

AC

TIV

EN

ES

S

Low

Strong WeakYOUR STRENGTH OF POSITION

ACCOUNT SEGMENTATION AND PRIORITIZATIONACCOUNT SEGMENTATION AND PRIORITIZATION

KEY ACCOUNTS

• 10-20% of your account base

• 80% of your GP$

• Receives less than 50% of your resources

TARGET ACCOUNTS(Your competition’s Key Accounts)

MAINTENANCE ACCOUNTS WHY BOTHER? ACCOUNTS

• Gets very little attention


• 10-15% of your GP$

• Receives 30-40% of your resources


• Less than 5% of your GP$

• Receives 20-30% of your resources

• Creates 90% of your “headaches”

54

Definition of Value PropositionDefinition of Value PropositionDefinition of Value PropositionDefinition of Value Proposition

Statement which clearly specifies Statement which clearly specifies the key leverage impacts on the key leverage impacts on customer value by the firm’s customer value by the firm’s offering relative to the competition. offering relative to the competition. This statement concisely presents to This statement concisely presents to the buyer the key reasons why they the buyer the key reasons why they should do business with you rather should do business with you rather than with the competition (Points of than with the competition (Points of Difference).Difference).

Statement which clearly specifies Statement which clearly specifies the key leverage impacts on the key leverage impacts on customer value by the firm’s customer value by the firm’s offering relative to the competition. offering relative to the competition. This statement concisely presents to This statement concisely presents to the buyer the key reasons why they the buyer the key reasons why they should do business with you rather should do business with you rather than with the competition (Points of than with the competition (Points of Difference).Difference).

55

ELEMENT OFSTRATEGY

KEY / TARGET MAINTENANCE WHY BOTHER

• Order Processing Top priority. Secondary priority. Lowest priority.

• Technical Support Top priority Secondary priority. Not available.

• Training Yes. Yes. Hourly fee. Not available.

• Fill Rates X% Y% 100%. No backordersship complete.

• On-time Shipment

Stock items sameday if order placeby 4:00 p.m.

Stock items sameday if order placedbefore 1:00 p.m.

Stock items shippedwithin 48 hours.

• Product Mix Stock & non-stock from stock & non- stock suppliers.

Stock and non stock from stocking suppliers only.

Stock, in stock only.

• Non-stockSourcing

Yes. Yes, from stockingsuppliers only.

No non-stocks.

• Minimum OrderSize

No minimum. No min. on stock items; $200 minimum on non-stock items.

$200.

DIFFERENTIATING CUSTOMER SEGMENTS

Customer Segment

• Returns Yes. No restockingfee.

Yes, restocking feeof $X.

Only if over $Y,restocking fee of $X.

56

Implications of Market StrategyImplications of Market StrategyImplications of Market StrategyImplications of Market Strategy

Strategic Implications:Strategic Implications:

Role: Role: What role will the sales force play in implementing strategy?What role will the sales force play in implementing strategy?

Function:Function: What functions will the sales force be required to perform?What functions will the sales force be required to perform?

Competencies:Competencies: Does the dealer sales force have the knowledge and skills required to perform the functions?Does the dealer sales force have the knowledge and skills required to perform the functions?

Size:Size: How many salespeople will be required to implement the strategy?How many salespeople will be required to implement the strategy?

Deployment:Deployment: How will the sales force be expected to invest its time?How will the sales force be expected to invest its time?

Organization:Organization: How will the organization be structured?How will the organization be structured?

Territory Structure:Territory Structure: How will the sales territories be set up?How will the sales territories be set up?

Strategic Implications:Strategic Implications:

Role: Role: What role will the sales force play in implementing strategy?What role will the sales force play in implementing strategy?

Function:Function: What functions will the sales force be required to perform?What functions will the sales force be required to perform?

Competencies:Competencies: Does the dealer sales force have the knowledge and skills required to perform the functions?Does the dealer sales force have the knowledge and skills required to perform the functions?

Size:Size: How many salespeople will be required to implement the strategy?How many salespeople will be required to implement the strategy?

Deployment:Deployment: How will the sales force be expected to invest its time?How will the sales force be expected to invest its time?

Organization:Organization: How will the organization be structured?How will the organization be structured?

Territory Structure:Territory Structure: How will the sales territories be set up?How will the sales territories be set up?

57

Implications of Market Strategy (cont’d.)Implications of Market Strategy (cont’d.)Implications of Market Strategy (cont’d.)Implications of Market Strategy (cont’d.)

Tactical Implications:Tactical Implications:

Training/Coaching: Training/Coaching:

What training and coaching is required to meet the desired level of What training and coaching is required to meet the desired level of competency?competency?

Compensation/Motivation:Compensation/Motivation:

How will we motivate & reward the sales force?How will we motivate & reward the sales force?

Performance Evaluation:Performance Evaluation:

How will we assess the performance of the sales force?How will we assess the performance of the sales force?

Recruitment and Selection:Recruitment and Selection:

How will we determine that the sales force is staffed appropriately?How will we determine that the sales force is staffed appropriately?

Tools for Monitoring Deployment and Success:Tools for Monitoring Deployment and Success:

Tactical Implications:Tactical Implications:

Training/Coaching: Training/Coaching:

What training and coaching is required to meet the desired level of What training and coaching is required to meet the desired level of competency?competency?

Compensation/Motivation:Compensation/Motivation:

How will we motivate & reward the sales force?How will we motivate & reward the sales force?

Performance Evaluation:Performance Evaluation:

How will we assess the performance of the sales force?How will we assess the performance of the sales force?

Recruitment and Selection:Recruitment and Selection:

How will we determine that the sales force is staffed appropriately?How will we determine that the sales force is staffed appropriately?

Tools for Monitoring Deployment and Success:Tools for Monitoring Deployment and Success:

58

Three Important QuestionsThree Important QuestionsThree Important QuestionsThree Important Questions

Is the salesforce strategically

focused?

Is the salesprocess a

leveraged activity?

Are we effectivelymotivating and enabling

our sales team?

• Supports business design

• Highest profit potential customers and prospects

• Differentiated and relevant value propositions to specific segments

• Time spent on highest value activities

• Unambiguous roles and responsibilities

• Optimally sized and skilled territories

• Performance metrics and compensation

• Leveraging non-cash recognition techniques

• Relevant training, critical information and compelling sales tools.

Focus Leverage Enablement

59

The JOB:The JOB:

Lack ofWell-Defined Jobs

The PERSON:The PERSON:

Seeks… yet resistssupervision

“Boundary agent”…loyalties

External and/orinternal seller

Lack ofDirect Supervision

Timing of Results

60

Perspectives on the Sales Management FunctionPerspectives on the Sales Management Function

Traditional View New View

Do-er

Responsible for Volume

Short Run

Individual Customers

Field Work Rather Than Desk Work

Driver

Manager of ScarceResources

Profit Planning

Long Term and ShortTerm

Customer Types and Segment Differences

Systems for Market Analysis, Planning and Control

Leader

Developer of Sales Developer of People

61

Better Understanding of Customer’s Needs

Better Selectivity

Better Selling Strategies

Better Time & Territory Management

TheSelling

Ballgame

Changing BusinessEnvironment

Leads to

Changing SellingEnvironment

Resulting in

Harder to Get and Hold Customers and

It Costs More!

Implications

62

THE CHANGING ENVIRONMENTTHE CHANGING ENVIRONMENTTHE CHANGING ENVIRONMENTTHE CHANGING ENVIRONMENT

1.1. What are some of the pressures that are What are some of the pressures that are impacting the way your customers conduct their impacting the way your customers conduct their business?business?

2.2. How have they changed their buying practices?How have they changed their buying practices?

3.3. How have these changes impacted the role and How have these changes impacted the role and behaviors of your sales team?behaviors of your sales team?

4.4. What issues or problems have been created in What issues or problems have been created in your sales team?your sales team?

5.5. What changes will have to be made in the way What changes will have to be made in the way your sellers conduct business?your sellers conduct business?

1.1. What are some of the pressures that are What are some of the pressures that are impacting the way your customers conduct their impacting the way your customers conduct their business?business?

2.2. How have they changed their buying practices?How have they changed their buying practices?

3.3. How have these changes impacted the role and How have these changes impacted the role and behaviors of your sales team?behaviors of your sales team?

4.4. What issues or problems have been created in What issues or problems have been created in your sales team?your sales team?

5.5. What changes will have to be made in the way What changes will have to be made in the way your sellers conduct business?your sellers conduct business?

63

Catch“22”Sales

Manager

IncompetentSalespeople

No time to develop

salespeople

Overworkedsales

manager

64

Customer ResultsCustomer Results

Sales Force ActivitySales Force Activity

Company ResultsCompany Results

THE INTEGRATED MODELTHE INTEGRATED MODELTHE INTEGRATED MODELTHE INTEGRATED MODEL

People and CulturePeople and Culture

Sales Force DriversSales Force Drivers

65

PURPOSE OF A BUSINESSPURPOSE OF A BUSINESSPURPOSE OF A BUSINESSPURPOSE OF A BUSINESS• Purpose of a business is to create a customer.Purpose of a business is to create a customer.

• Profit is only a test of management decision making.Profit is only a test of management decision making.

• Profit is required to maintain the customer.Profit is required to maintain the customer.

• A business only has two primary functions, sales and A business only has two primary functions, sales and innovation, everything else is just cost.innovation, everything else is just cost.

INNOVATION MARKETINGINNOVATION MARKETING

The world according to Peter DruckerThe world according to Peter Drucker

• Purpose of a business is to create a customer.Purpose of a business is to create a customer.

• Profit is only a test of management decision making.Profit is only a test of management decision making.

• Profit is required to maintain the customer.Profit is required to maintain the customer.

• A business only has two primary functions, sales and A business only has two primary functions, sales and innovation, everything else is just cost.innovation, everything else is just cost.

INNOVATION MARKETINGINNOVATION MARKETING

The world according to Peter DruckerThe world according to Peter Drucker

66

Implementation

Analysis of target market

Definition of the tasksto be performed

Evaluation of best performer of those tasks

Development of the sales program

What, When, Why, How, Where

Selling, Servicing, Order-Taking, New Products/Markets

Type of “Seller”

Rules of Engagement

What Does What, When, How, Why and Who Gets Paid

67

BALANCED SALES TEAM

THE LOGICTHE LOGICTHE LOGICTHE LOGIC

Communicating and Linking Communicating

and educating Setting goals Linking rewards

to performance measures Planning and

Target Setting Setting targets Aligning

strategic initiatives

Allocating resources

Establishing milestones

Strategic Feedback and LearningClarifying the Focus Articulating the

focus and strategy Facilitating

strategy review and learning

Clarifying and Translating the Focus and Strategy Clarifying the

focus Gaining

consensus

68

TRADITIONAL vs. LEVERAGEDTRADITIONAL vs. LEVERAGED

• Go after every opportunity• Regardless of transaction

profitability

Key/TargetAccounts

Maintenance

Small Customers

Sales force: 30% of selling time

50%

20%Key/TargetAccounts

Maintenance

Small Customers

• Focus on large, complex accounts• Leave smaller opportunities to

other channels

Sales force: 100% of selling time

OtherChannels

Traditional Model

Leveraged Model

69

THE LEVERAGED SALES FORCE:THE LEVERAGED SALES FORCE:WHAT IT LOOKS LIKEWHAT IT LOOKS LIKE

1. Large AccountFocus

Increased emphasis on getting field reps out of small accounts and intothe right selling opportunities.

2. Complex ProductFocus

Increased emphasis on transferring simpler products to other channelsso the sales force can focus on selling complex, customized solutions.

3. Fewer Accounts Reduction in the number of accounts assigned to each rep, with higherexpectations per account.

4. Effectiveness Focus More emphasis on making the right calls and winning the right deals,rather than just generating activity.

5. ŅInsideÓ Sales Increased use of Ņinside salesÓ organizations to leverage the time andenergy of outbound field reps.

6. Integration withOther Channels

Increased focus on integrating field sales other channels (e.g. callcenters) throughout the sales process.

7. Enhanced SalesTraining

More emphasis on giving field reps the specific skills they need to growlarge, complex accounts.

8. Emphasis onPartnering

More emphasis on building long-term, mutually beneficial relationshipswith key customers.

9. New CompensationSystems

Realignment of sales rep compensation plans to reward key accountsuccess and discourage low-end (small sale, simple product) selling.

70

COMPELLING SELLING COMPELLING SELLING PETER LUND, 1970PETER LUND, 1970

COMPELLING SELLING COMPELLING SELLING PETER LUND, 1970PETER LUND, 1970

• THE AUTHOR ADVISED SELLERS TO:THE AUTHOR ADVISED SELLERS TO:

– “ “ CONCENTRATE EXCLUSIVELY ON THE PRODUCT “CONCENTRATE EXCLUSIVELY ON THE PRODUCT “

– “ “ NOT TO LET THE CUSTOMER TALK MORE THAN IS NOT TO LET THE CUSTOMER TALK MORE THAN IS ABSOLUTELY NECESSARY “ABSOLUTELY NECESSARY “

– “ “ TO CLOSE WHENEVER POSSIBLE EVEN IF YOU’RE TO CLOSE WHENEVER POSSIBLE EVEN IF YOU’RE MILES FROM THE ORDER “ MILES FROM THE ORDER “

• THE AUTHOR ADVISED SELLERS TO:THE AUTHOR ADVISED SELLERS TO:

– “ “ CONCENTRATE EXCLUSIVELY ON THE PRODUCT “CONCENTRATE EXCLUSIVELY ON THE PRODUCT “

– “ “ NOT TO LET THE CUSTOMER TALK MORE THAN IS NOT TO LET THE CUSTOMER TALK MORE THAN IS ABSOLUTELY NECESSARY “ABSOLUTELY NECESSARY “

– “ “ TO CLOSE WHENEVER POSSIBLE EVEN IF YOU’RE TO CLOSE WHENEVER POSSIBLE EVEN IF YOU’RE MILES FROM THE ORDER “ MILES FROM THE ORDER “

71

INCREASEBENEFITS

REDUCECOST

Lessen cost and effort of acquisition

Create extraordinary value for a few

very largecustomers

Intrinsic Value Customers(buying on product value alone)

Strategic Value Customers(leveraging supplier’s

enterprise competencies) Extrinsic Value Customers

(buying beyond product value)

Create new value through sales efforts

STRATEGY DEVELOPMENT

72

Intrinsicvalue

buyers

“a cheaper, no hassle pie”

Extrinsicvalue

buyers

“a bigger pie”

Strategicvalue

buyers

“a balanced diet”

Customer Value Type Selling Mode

VALUE = BENEFITS - COST

EnterpriseAssets

EnterpriseAssets

++

CUSTOMER VALUE AND SELLING MODES

TransactionalSelling

ConsultativeSelling

EnterpriseSelling

73

Str

on

gW

eak

AC

CO

UN

T

OP

PO

RT

UN

ITY

Strong COMPETITIVE POSITION Weak

Sales Team and Selling EffortSales Team and Selling Effort

Sales Channel: Field Selling and Inside Sales

Selling Effort: Heavy

KEY TARGET

MAINTENANCE WHY BOTHER

Sales Channel:Major AccountPROGRAMS

Selling Effort:Heavy by Specialist Sales Channel: Direct Marketing and

Field Selling

Selling Effort: Heavy (best prospects)Low (other prospects)

Sales Channel: Inside Sales,Electronic Commerce,Field Selling andTeleselling

Selling Effort: Moderate

Sales Channel: Teleselling,Catalog, Self Serve, Electronic Commerce,Direct Marketing,and Some Inside Sales

Selling Effort: Low

74

WHAT PROBLEMS HAVE YOU WHAT PROBLEMS HAVE YOU OBSERVED IN THE RECRUITMENT OBSERVED IN THE RECRUITMENT AND SELECTION OF SELLERS IN AND SELECTION OF SELLERS IN YOUR ORGANIZATION?YOUR ORGANIZATION?

WHAT PROBLEMS HAVE YOU WHAT PROBLEMS HAVE YOU OBSERVED IN THE RECRUITMENT OBSERVED IN THE RECRUITMENT AND SELECTION OF SELLERS IN AND SELECTION OF SELLERS IN YOUR ORGANIZATION?YOUR ORGANIZATION?

75

RECRUITING AND SELECTINGRECRUITING AND SELECTING

KNOWLEDGE SKILLS TRAITS

The "Professional" Salesperson

76

PEOPLEPEOPLEPEOPLEPEOPLE

• HuntersHunters

• FarmersFarmers

• ScoutsScouts

• SkillsSkills

• KnowledgeKnowledge

• TraitsTraits

• ValuesValues

• MotivationsMotivations

• HuntersHunters

• FarmersFarmers

• ScoutsScouts

• SkillsSkills

• KnowledgeKnowledge

• TraitsTraits

• ValuesValues

• MotivationsMotivations

77

““Bottom Line”Bottom Line”

A business can no longer rely on the uniqueness of their

products to retain customers or grow new sales revenue.

Customers will align their business with strategic suppliers who understand their business and bring a unique offering which adds value by

impacting their “bottom line” through increased sales revenue or reduced costs

78

Natural Sales SkillsNatural Sales SkillsNatural Sales SkillsNatural Sales Skills

60%

5%

35%

5% “Possess the requisite selling skills that make them stand out”

35% “Just manage to pay their way”

60% “Just there for the beer”

79

Size of SalesSize of SalesForce:Force:

WorkloadWorkloadAnalysisAnalysis

Accounts /Prospects

CallFrequencies

Number ofAccounts

RequiredCalls

Key

Target

Maintenance

TOTAL CALLS (A)

Size of Sales Force = AB

Calls Per Day Working Days Total Call Capacity (B)

X =

Supply of Calls

80

Inadequate Sales PerformanceInadequate Sales Performance

Aware of whatwas expected

Aware of ownperformance

Uncontrollablenegative factors

Lack of ability

Lack of want-to

How can goals and standardsbe made clear?

How can the salespersonbe sensitized?

How to avoid, eliminate,or ignore?

How to train?

How to motivate?

No

No

Yes

Yes

Yes

Yes

Yes

No

No

81

Evaluating Sales PerformanceEvaluating Sales Performance

InformationSources

Data Analysis

Observation

Interview

82

Possible Situations...Possible Situations...

Fix theproblem(ROTI)

Forget theproblem

orTerminatethe person

Causes of the problem are fixable

Causes of the problem are fixable, butnot work fixing

Causes of the problem are not fixable

83

THE SALES REPRESENTATIVE THE SALES REPRESENTATIVE THINKS…THINKS…

The Planning ProcessPrioritiesProgramsProcessesThe Numbers

1. What is expected of me?

The Feedback ProcessMetricsPerformance AppraisalsField coachingMeetingsCompensation

2. How am I doing?

The Adjustment ProcessCorrective actionsContinuous ImprovementKIP’s, PIP’s New planning for the

future

3. How do I need to change?

84

QUOTES FROM PERFORMANCE APPRAISALS

• “This individual has talents but has kept them well hidden.”

• “Combs his hair to one side and appears rustic.”

• “A quiet, reticent, neat appearing individual— industrious, tenacious, diffident, careful, and neat. I do not wish to have this person as a member of my staff at any time.”

• "His leadership is outstanding except for his lack of ability to get along with his subordinates.”

• “He hasn’t any mental traits.”

• “He needs careful watching since he borders on the brilliant.”

• “Believes sincerely in the power of prayer and it is astonishing to note how many times his prayers are answered.”

• “He never makes the same mistake twice but it seems to me that he has made them all once.”

• “Gives the appearance of being fat due to the tight clothes he wears.”

85

QUOTES FROM PERFORMANCE APPRAISALS–2

• “Is keenly analytical and his highly developed mentality could best be used in the research and development field. He lacks common sense.”

• “An independent thinker with a mediocre mentality.”

• “Recently married and devotes more time to this activity than to his current assignment.”

• “Tends to create the impression of unpositive personality through needless and undiscerning gentility and soft spokenness.”

• “Of average intelligence except for lack of judgment on one occasion in attempting to capture a rattlesnake for which he was hospitalized.”

86

• “His men would follow him anywhere, but only out of curiosity.”

• “I would not allow this employee to breed.”

• “Since my last report, he has reached rock bottom and has started to dig.”

• “Works well when under constant supervision and cornered like a rat in a trap.”

• “When she opens her mouth, it seems that this is only to change whichever foot was previously there.”

• “He would be out of his depth in a parking lot puddle.”

• “This young lady had delusions of adequacy.”

• “She sets low personal standards and then consistently fails to achieve them.”

• “This employee should go far—and the sooner he starts, the better.”

• “This man is depriving a village somewhere of an idiot.”

QUOTES FROM PERFORMANCE APPRAISALS–3

87

Sales training without systematic coaching wastes 87

cents of every training dollar

Time

Imp

rove

men

t

Training

87% losswithin one

month

88

The Key ChallengeThe Key ChallengeThe Key ChallengeThe Key Challenge

Implications

1.Less discounting.

2.Selling higher margin products.

3.Selling more product lines to each customer (cross-selling).

4.Being more selective and discriminating in qualifying potential buyers.

5.Better use of selling time (deployment).

Sales Productivity =G.M.

C.O.S.

Where: G.M. = Gross Margin DollarsC.O.S. = Cost of Sale in Dollars

89

J F M A M J J A S O N D

$ Value of Sale

Number of Sales

Introduction of Activity ManagementSystem Here

Focus on Small SalesFocus on Small SalesFocus on Small SalesFocus on Small Sales

90

EFFECT OF MORE CALLS

• Focus on small sales.

• More paperwork.

• Wrong part of selling cycle.

• Demotivation of best people.

Source: The Klompmaker Consulting Group

91

Demotivation of Best PeopleDemotivation of Best PeopleDemotivation of Best PeopleDemotivation of Best People

1 Restrictions Compensation

2 Job satisfaction Prospects

3 Prospects Job satisfaction

4 Compensation Relationships

5 Relationships Restrictions

Why did you leave the company?

Rank Top Performers Poor Performers

92

SUMMARYSUMMARYSUMMARYSUMMARY

Defined Getting in front of Using skills and abilitiescustomer at minimum to maximize salescost potential

Mechanisms Working harder: Working smarter:for improving – time management – coaching

– incentives – skills training– call reports – account strategies– territory design

Measures – penetration – success rates– call rates – repeat business– cost / call – sustainable margins

Sales EfficiencySales Efficiency Sales EffectivenessSales Effectiveness

93

MOVING TO ACTION

• Efficiency:– Can be driven top down

• Effectiveness:– Acting differently– Hard to drive top down– Salespeople and managers do it

Source: The Klompmaker Consulting Group

94

Implications for OperationsImplications for OperationsImplications for OperationsImplications for Operations













pdownie


95

Logistics Management – The Key to Improved Logistics Management – The Key to Improved Operational ProductivityOperational ProductivityLogistics Management – The Key to Improved Logistics Management – The Key to Improved Operational ProductivityOperational Productivity

• TransportationTransportation

• WarehousingWarehousing

• Customer serviceCustomer service

• Inventory –Mgmt/CostInventory –Mgmt/Cost

• Information TechnologyInformation Technology

• TransportationTransportation

• WarehousingWarehousing

• Customer serviceCustomer service

• Inventory –Mgmt/CostInventory –Mgmt/Cost

• Information TechnologyInformation Technology

96

Logistics – A Strategic PerspectiveLogistics – A Strategic PerspectiveLogistics – A Strategic PerspectiveLogistics – A Strategic Perspective

• Measured by CostMeasured by Cost

• Technology allows firms to manage inventory Technology allows firms to manage inventory they cannot see and sometimes do not ownthey cannot see and sometimes do not own

• DisintermediationDisintermediation

• Creating wholesaler valueCreating wholesaler value

• Measured by CostMeasured by Cost

• Technology allows firms to manage inventory Technology allows firms to manage inventory they cannot see and sometimes do not ownthey cannot see and sometimes do not own

• DisintermediationDisintermediation

• Creating wholesaler valueCreating wholesaler value

97

Two Views of Inventory ManagementTwo Views of Inventory ManagementTwo Views of Inventory ManagementTwo Views of Inventory Management

Velocity

Level

98

Logistics Cost EquationLogistics Cost EquationLogistics Cost EquationLogistics Cost Equation

• Asset BaseAsset Base

• Operating Cost BaseOperating Cost Base

• Base Case ModelBase Case Model

• Asset BaseAsset Base

• Operating Cost BaseOperating Cost Base

• Base Case ModelBase Case Model

Go Back to Profit Model Data

99

Return on Assets (ROA)

Sales100.00$

Gross Margin20.00$

Net Profit Subtracted by2.00$

Subtracted by 80.00$ Net Profit Margin 18.00$

0.02 Divided by COGSTotal Expenses

100.00$ Return On Assets Inventory

Sales 130.05 Times

Sales100.00$ Added to

Current Assets2.5 Divided by 30 13.00$

Asset Turnover 40.00$ Accounts ReceivableAdded to

Total Assets 10 Added to4

Fixed AssetsOther Current Assets

100

Improving Customer ServiceImproving Customer ServiceImproving Customer ServiceImproving Customer Service

• Do you have a good record for customer returns?Do you have a good record for customer returns?

• Do you track and report fill rates, and delivery Do you track and report fill rates, and delivery performance?performance?

• Do you perform cycle counts of inventory and Do you perform cycle counts of inventory and measure accuracy?measure accuracy?

• Have you implemented process improvement?Have you implemented process improvement?

• Link to your customer satisfaction surveyLink to your customer satisfaction survey

• Do you have a good record for customer returns?Do you have a good record for customer returns?

• Do you track and report fill rates, and delivery Do you track and report fill rates, and delivery performance?performance?

• Do you perform cycle counts of inventory and Do you perform cycle counts of inventory and measure accuracy?measure accuracy?

• Have you implemented process improvement?Have you implemented process improvement?

• Link to your customer satisfaction surveyLink to your customer satisfaction survey

101

What are Value Added ServicesWhat are Value Added ServicesWhat are Value Added ServicesWhat are Value Added Services

• Important to CustomerImportant to Customer

• Enable DifferentiationEnable Differentiation

• Sustainable from CompetitionSustainable from Competition

• Important to CustomerImportant to Customer

• Enable DifferentiationEnable Differentiation

• Sustainable from CompetitionSustainable from Competition

102

ImportanceQuestion: How Important (Satisfied) Importance ADS Natls Big Boy ACME Watermark Others

High quality product 7.00 6.68 6.57 6.43 6.65 6.10 6.75Shipments received as promised 6.90 6.16 6.25 6.27 6.25 5.90 6.25Product is available (in stock) 6.60 5.53 5.89 5.57 5.85 5.70 5.50Availability of documentation 6.60 6.33 6.31 6.42 6.80 6.30 7.00Hours of operation convenient 6.30 6.72 6.22 6.35 6.25 6.70 7.00Cost of part 6.30 5.84 6.04 5.42 5.30 5.40 6.50Warranty 6.30 6.33 6.41 6.11 6.00 5.44 6.67Ordering process easy 6.00 6.05 6.43 6.22 6.10 5.90 6.50Package quality of product received 6.00 6.21 6.39 6.04 6.45 6.60 6.50Quick backorder information 5.90 5.56 5.69 5.02 5.95 5.90 3.50No minimum order quantities 5.80 6.29 6.12 6.42 6.47 6.00 7.00Ordering time on phone minimal ( low hold time) 5.80 6.26 6.25 6.35 6.25 5.75 6.67Credit terms and prompt pay discounts 5.50 6.11 6.40 6.24 6.28 5.56 6.50Catalogs are up to date 5.20 5.94 5.65 5.57 6.43 5.00 5.00Catalog pricing current 5.20 5.47 5.54 5.45 6.00 4.75 7.00Weekend product availability 4.80 6.00 4.44 5.42 6.00 5.38 6.50Computerized quoting and order entry 4.60 6.39 6.05 5.87 6.27 6.10 7.00Fill parts needs from a single source of supply 3.90 5.53 5.70 5.52 5.89 5.20 5.75

Outside sales reps: Importance ADS Swifty Big Boy ACME Watermark Others

Have product knowledge 6.00 6.00 6.04 6.08 6.71 6.50 7.00Represent customer perspective to mgmt 5.70 5.95 6.04 5.95 5.73 5.14 7.00Relationship is positive 5.50 6.21 6.23 6.20 6.22 5.00 7.00Are professional in making sales appointments 5.30 6.11 5.96 5.66 6.44 4.83 7.00Provide inventory information 4.40 5.82 5.42 5.33 5.63 4.80 7.00Call often (once per month) 4.00 5.63 5.64 5.48 5.76 5.00 7.00

Inside sales reps: Importance ADS Swifty Big Boy ACME Watermark Others

Return calls promptly 6.70 5.41 6.16 5.95 6.05 5.30 6.67Have product knowledge 6.40 6.06 6.12 5.93 6.30 6.10 6.67Have developed a good relationship 5.90 6.41 6.32 6.16 6.25 5.10 7.00

Complaint handling process: Importance ADS Swifty Big Boy ACME Watermark Others

Speed of return phone calls with bid information 6.70 5.95 5.93 5.53 5.68 5.60 5.25Price discount program 6.00 5.89 6.33 5.91 6.05 5.90 6.50Stocking program reduces customer inventory req. 5.80 6.05 5.64 5.22 5.70 5.22 6.00Shipping costs are part of cost structure for evaluation 5.20 6.39 6.00 5.45 5.63 4.22 6.25

Exhibit G: Raw Data From ADS Customer Satisfaction StudySatisfaction Scores

103

Inside the Buyer’s MindInside the Buyer’s MindInside the Buyer’s MindInside the Buyer’s Mind

• What do you offer?What do you offer?

• What do you offer that no one else has?What do you offer that no one else has?

• What do you offer of value?What do you offer of value?

• Does it really fill my need?Does it really fill my need?

• Is it real world?Is it real world?

• Will it work?Will it work?

• Will it work in our environment?Will it work in our environment?

• How will it impact our people?How will it impact our people?

• How could it impact our success?How could it impact our success?

• Will senior management buy in?Will senior management buy in?

• Will my people use it?Will my people use it?

• How will we produce as a result of the purchase?How will we produce as a result of the purchase?

• How will we profit as a result of the purchase?How will we profit as a result of the purchase?

• Do I trust the people I’m buying from both as people and for their ability to deliver what they promise?Do I trust the people I’m buying from both as people and for their ability to deliver what they promise?

• How will it come together?How will it come together?

• How do we buy it?How do we buy it?

• Do I have the comfort to sign off now?Do I have the comfort to sign off now?

• What do you offer?What do you offer?

• What do you offer that no one else has?What do you offer that no one else has?

• What do you offer of value?What do you offer of value?

• Does it really fill my need?Does it really fill my need?

• Is it real world?Is it real world?

• Will it work?Will it work?

• Will it work in our environment?Will it work in our environment?

• How will it impact our people?How will it impact our people?

• How could it impact our success?How could it impact our success?

• Will senior management buy in?Will senior management buy in?

• Will my people use it?Will my people use it?

• How will we produce as a result of the purchase?How will we produce as a result of the purchase?

• How will we profit as a result of the purchase?How will we profit as a result of the purchase?

• Do I trust the people I’m buying from both as people and for their ability to deliver what they promise?Do I trust the people I’m buying from both as people and for their ability to deliver what they promise?

• How will it come together?How will it come together?

• How do we buy it?How do we buy it?

• Do I have the comfort to sign off now?Do I have the comfort to sign off now?

104

Calculation of Gap to Perfection(Perfect Score - ADS Satisfaction) * Importance

Calculation of Gap to Best Competitor(Best Competitor Score - ADS) * Importance

105

Gap/Perfect Top Ten Importance

0.00 2.00 4.00 6.00 8.00 10.00 12.00

High quality parts (known qualitydocumentation)

Shipments received as promised

Part is available (in stock)

Availability of documentation

Hours of operation convenient

Cost of part

Warranty

Ordering process easy

Package quality of goods received

Quick backorder information

106

Gap/Perfect Next Importance

0.00 2.00 4.00 6.00 8.00 10.00 12.00

No minimum order quantities

Ordering time on phone minimal ( lowhold time)

Credit terms and prompt paydiscounts

Catalogs are up to date

Catalog pricing current

Weekend goods availability

Computerized quoting and orderentry

Fill needs from a single source ofsupply

107

Outside Sales Perfection

0.00 2.00 4.00 6.00 8.00 10.00 12.00

Have product knowledge

Represent customer perspectiveto mgmt

Relationship is positive

Are professional in making salesappointments

Provide inventory information

Call often (once per month)

Gap/Perfect

108

Inside Sales Perfection

0.00 2.00 4.00 6.00 8.00 10.00 12.00

Return calls promptly


Have developed a goodrelationship

Gap/Perfect

109

Complaint Handling Perfection

0.00 2.00 4.00 6.00 8.00 10.00 12.00

Speed of return phone calls withbid information

Price discount program

Parts program reduces customerinventory req.

Shipping costs are part of coststructure for evaluation

Gap/Perfect

110

Best Competitor Gap Top 10

-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

High quality parts (known qualitydocumentation)

Shipments received as promised

Part is available (in stock)

Availability of documentation

Hours of operation convenient

Cost of part

Warranty

Ordering process easy

Package quality of goods received

Quick backorder information

111

Best Competitor Gap Next Imp.

-10.00 -8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

No minimum order quantities

Ordering time on phone minimal ( lowhold time)

Credit terms and prompt paydiscounts

Catalogs are up to date

Catalog pricing current

Weekend goods availability

Computerized quoting and orderentry

Fill needs from a single source ofsupply

112

Best Competitor Outside Sales

-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00


Represent customer perspective tomgmt

Relationship is positive

Are professional in making salesappointments

Provide inventory information

Call often (once per month)

113

Best Competitor Inside Sales

-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

Return calls promptly


Have developed a good relationship

114

Best Competitor Complaint Process

-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00

Speed of return phone calls with bidinformation

Price discount program

Parts program reduces customerinventory req.

Shipping costs are part of coststructure for evaluation

115

Future Value Added ServicesFuture Value Added ServicesFuture Value Added ServicesFuture Value Added Services

• Simple Pricing SystemSimple Pricing System

• Competitive PricingCompetitive Pricing

• Back Order AlertBack Order Alert

• Educational SessionsEducational Sessions

• Check Shelf StockCheck Shelf Stock

• Simple Pricing SystemSimple Pricing System

• Competitive PricingCompetitive Pricing

• Back Order AlertBack Order Alert

• Educational SessionsEducational Sessions

• Check Shelf StockCheck Shelf Stock

• Sales Force RelationsSales Force Relations

• Forecasting Product Forecasting Product NeedsNeeds

• Profit AnalysisProfit Analysis

• Sales Reps. KnowledgeSales Reps. Knowledge

• Sales Force RelationsSales Force Relations

• Forecasting Product Forecasting Product NeedsNeeds

• Profit AnalysisProfit Analysis

• Sales Reps. KnowledgeSales Reps. Knowledge

116

Add to the customer surveyAdd to the customer surveyAdd to the customer surveyAdd to the customer survey

• FrequencyFrequency

• CausalityCausality

• FrequencyFrequency

• CausalityCausality

117

Implications for Customer Service ImprovementImplications for Customer Service ImprovementImplications for Customer Service ImprovementImplications for Customer Service Improvement

The MetricThe Metric Used forUsed for

Order fill rateOrder fill rate Overall customer service inventory and Overall customer service inventory and warehousewarehouse

Order cycle timeOrder cycle time Order processing, warehouse, and shipping Order processing, warehouse, and shipping performanceperformance

Shipping accuracyShipping accuracy Order processing and warehouse Order processing and warehouse performanceperformance

Reasons for customer returnsReasons for customer returns Overall customer service – vendor, order Overall customer service – vendor, order processing, warehouse, shipping processing, warehouse, shipping performanceperformance

Inventory turnsInventory turns Inventory performanceInventory performance

Sales lost to stock outsSales lost to stock outs Inventory managementInventory management

Receipt discrepanciesReceipt discrepancies Purchasing and vendor performancePurchasing and vendor performance

Physical inventory accuracyPhysical inventory accuracy Warehouse and inventory performanceWarehouse and inventory performance

118

Order Fill Rate: Percentage of Customer Orders Delivered Order Fill Rate: Percentage of Customer Orders Delivered on Time on Time Order Fill Rate: Percentage of Customer Orders Delivered Order Fill Rate: Percentage of Customer Orders Delivered on Time on Time

Source: The NAW Toolkit

119

1. Determine the % of customer orders1. Determine the % of customer orders1. Determine the % of customer orders1. Determine the % of customer orders

LineLine ItemItem Qty ordQty ord Qty shpQty shp PercentPercent

Order 1Order 1

11 ½” fin½” fin 1010 1010 0,33,65,900,33,65,90

22 Wall stripWall strip 55 00

33 AdhesiveAdhesive 100100 100100

Order 2Order 2

11 ½” maple½” maple 1212 1212

22 Nail driverNail driver 11 11

All or nothing

= 0;

complete

quantities but not all lines = 33;

average line fill =

65;

portion of

ordered units

shipped = 90

120

Determine when order is delivered and determine on timeDetermine when order is delivered and determine on timeDetermine when order is delivered and determine on timeDetermine when order is delivered and determine on time

ImportanceImportance DateDate DetailDetail

11 PromisePromise Committed del. Committed del. DateDate

22 RequestRequest Customer Customer requestrequest

33 Original PromiseOriginal Promise Doesn’t changeDoesn’t change

44 Original RequestOriginal Request Doesn’t changeDoesn’t change

121

Order Cycle Time: Elapsed Time from Order Placement Order Cycle Time: Elapsed Time from Order Placement until Deliveryuntil DeliveryOrder Cycle Time: Elapsed Time from Order Placement Order Cycle Time: Elapsed Time from Order Placement until Deliveryuntil Delivery

122

Shipping Accuracy: Percentage of Order Lines that ShippedShipping Accuracy: Percentage of Order Lines that ShippedShipping Accuracy: Percentage of Order Lines that ShippedShipping Accuracy: Percentage of Order Lines that Shipped

Method Pro Cons Customer Feedback. Whenever a customer calls with an error against his packing slip, this is recorded on the original order.

Records actual customer experience.

Lowest cost – you have to take their phone calls anyway, the only additional effort is to record the information.

Customers may not report over-shipments or mis-shipments of higher value items (some companies automatically double their error rates to account for this).

Reported errors could be due to customer loss.

Warehouse Inspection. A knowledgeable inspector examines orders before they are shipped. The picker, the packer or a dedicated inspector could perform the inspection. Could be audit of specific workers or customers or a 100% inspection.

Helps improve quality in addition to tracking accuracy.

Errors caught closer to their source so correction is easiest.

High cost. May miss downstream

problems in packing, palletizing, loading and shipping.

Customer Site Audits. A knowledgeable inspector is present at the customer’s site periodically to check orders when they are received.

Records actual customer experience.

Demonstrates commitment to the customer.

High cost. Only a small percentage

audit is feasible so the sample size may not be valid.

123

When and Why are Customers Unhappy?When and Why are Customers Unhappy?When and Why are Customers Unhappy?When and Why are Customers Unhappy?

125

How Accurate are the Products on our Shelves?How Accurate are the Products on our Shelves?How Accurate are the Products on our Shelves?How Accurate are the Products on our Shelves?

Location Expected Qty

Actual Qty Dollar Difference

Unit Accuracy

Location Accuracy

100 50 50 $0 100% 100% 101 40 45 $50 87% 0% 102 60 57 -$40 93% 0% 103 100 90 -$100 90% 0% 104 25 25 $0 100% 100%

Financial Inventory Accuracy: Error is $90 in

$2750 total value =97%

Unit Inventory Accuracy:

Average of unit

accuracies = 94%

Strict Location Inventory Accuracy:

2 of 5 locations

correct = 40%

126

Inventory TurnsInventory TurnsInventory TurnsInventory Turns

127

Sales Lost to Stock OutsSales Lost to Stock OutsSales Lost to Stock OutsSales Lost to Stock Outs

128

Order vs. Zone PickingOrder vs. Zone PickingOrder vs. Zone PickingOrder vs. Zone Picking

130

Order Picking is a good choice if: Zone Picking is a good choice if: You have low “picking density” (e.g. few aisles are visited more than 30 times per shift).

You have high “picking density”.

Most items are easy to pick with a single type of equipment.

Many items require special equipment (e.g. lift truck) or specially trained pickers to be picked.

Your warehouse is fairly small (less than 40,000 square feet).

Your warehouse is larger.

You use paper based picking and your business system has little warehouse management functionality.

You have a WMS or RF based stock locating system that could readily support order consolidation.

131

Cycle CountsCycle CountsCycle CountsCycle Counts

132

ABC Analysis Based on Annual Dollar Volume Annual Dollar Volume Percentages

1 2 3 4

Item Unit Cost

Annual Usage (units)

Annual Usage (dollars)

% of Total Dollar Usage

1 4.00 1,000

2 2.50 1,500

3 3.00 5,000

4 30.00 4,000

5 31.00 10,000

6 1.20 8,000

7 25.00 1,500

8 20.00 100

9 8.00 625

10 6.00 2,000

Total 100% 1. Now rank the answers from the highest annual dollar usage to the lowest:

1 2 3 4 Item Annual Usage

(dollars) % of Total Cumulative % Classification

133

InventoryInventoryInventoryInventory

• ForecastingForecasting

• Inventory management modelInventory management model

• Fill ratesFill rates

• Economic order quantityEconomic order quantity

• Key ratiosKey ratios

• ForecastingForecasting

• Inventory management modelInventory management model

• Fill ratesFill rates

• Economic order quantityEconomic order quantity

• Key ratiosKey ratios

134

These relationships can be seen in the graphic representation of EOQ: Order Quantity Example: Ordering cost estimated to be: $5.00 Carrying Cost: 25% Units 1,000 Price: 20.00

Costs

EOQ

Total costs

Holding costs

Order costs

2 X 1000 X 5 = 44.7 units 20 X .25

EOQ =

135

InventoryInventoryInventoryInventory

137

PurchasingPurchasingPurchasingPurchasing

• The Branch Managers ImpactThe Branch Managers Impact

• NegotiatingNegotiating

• Best PracticesBest Practices

• Purchase PlanningPurchase Planning

– What to buyWhat to buy

– When to buyWhen to buy

– How much to buyHow much to buy

• The Branch Managers ImpactThe Branch Managers Impact

• NegotiatingNegotiating

• Best PracticesBest Practices

• Purchase PlanningPurchase Planning

– What to buyWhat to buy

– When to buyWhen to buy

– How much to buyHow much to buy

138

Human Resources IssuesHuman Resources IssuesHuman Resources IssuesHuman Resources Issues













pdownie


139

Human Resources TopicsHuman Resources TopicsHuman Resources TopicsHuman Resources Topics

• Session OverviewSession Overview– Industry concernsIndustry concerns

– Expectations of managers and employeesExpectations of managers and employees

– Current practicesCurrent practices

– Policy optionsPolicy options

• Recruitment and Selection IssuesRecruitment and Selection Issues– ConstraintsConstraints


– Legal considerationsLegal considerations

• Performance Management SystemsPerformance Management Systems– Critical componentsCritical components

– Importance of a good systemImportance of a good system

– Alternative programsAlternative programs


• Session OverviewSession Overview– Industry concernsIndustry concerns

– Expectations of managers and employeesExpectations of managers and employees


– Policy optionsPolicy options

• Recruitment and Selection IssuesRecruitment and Selection Issues– ConstraintsConstraints



• Performance Management SystemsPerformance Management Systems– Critical componentsCritical components

– Importance of a good systemImportance of a good system

– Alternative programsAlternative programs


140

What is strategic human What is strategic human resource management?resource management?What is strategic human What is strategic human resource management?resource management?

• The acquisition, deployment and The acquisition, deployment and management of our most valuable assets – management of our most valuable assets – our employeesour employees

• How we manage our employees must fit our How we manage our employees must fit our company’s overall strategic plancompany’s overall strategic plan

• The acquisition, deployment and The acquisition, deployment and management of our most valuable assets – management of our most valuable assets – our employeesour employees

• How we manage our employees must fit our How we manage our employees must fit our company’s overall strategic plancompany’s overall strategic plan

141

HPBA Industry ChallengesHPBA Industry ChallengesHPBA Industry ChallengesHPBA Industry Challenges

• Locating and attracting top talentLocating and attracting top talent

• Pay-for-performance plans should be the Pay-for-performance plans should be the normnorm

• Attention must be given to professional Attention must be given to professional developmentdevelopment

• Succession planningSuccession planning

• Locating and attracting top talentLocating and attracting top talent

• Pay-for-performance plans should be the Pay-for-performance plans should be the normnorm

• Attention must be given to professional Attention must be given to professional developmentdevelopment

• Succession planningSuccession planning

142

Measure your organizations Measure your organizations employee relations climateemployee relations climateMeasure your organizations Measure your organizations employee relations climateemployee relations climate

• Take the HBPA test – see handoutTake the HBPA test – see handout

• Score the test and put your score on the Score the test and put your score on the Climate GridClimate Grid

• Take the HBPA test – see handoutTake the HBPA test – see handout

• Score the test and put your score on the Score the test and put your score on the Climate GridClimate Grid

143

Human resource policy optionsHuman resource policy optionsHuman resource policy optionsHuman resource policy options

• Recruitment, selection, and developmentRecruitment, selection, and development

• Employee voice or influenceEmployee voice or influence

• Reward systemsReward systems

• Work systemsWork systems

• Recruitment, selection, and developmentRecruitment, selection, and development

• Employee voice or influenceEmployee voice or influence

• Reward systemsReward systems

• Work systemsWork systems

144

Human resource outcomes in the Human resource outcomes in the short-runshort-runHuman resource outcomes in the Human resource outcomes in the short-runshort-run

• CommitmentCommitment

• Congruence or fitCongruence or fit

• CompetenceCompetence

• Cost effectiveCost effective

• CommitmentCommitment

• Congruence or fitCongruence or fit

• CompetenceCompetence

• Cost effectiveCost effective

145

Recruitment constraintsRecruitment constraintsRecruitment constraintsRecruitment constraints

• Image of the organizationImage of the organization

• Attractiveness of the jobAttractiveness of the job

• Internal organizational policiesInternal organizational policies

• Government influenceGovernment influence

• Recruiting costsRecruiting costs

• Image of the organizationImage of the organization

• Attractiveness of the jobAttractiveness of the job

• Internal organizational policiesInternal organizational policies

• Government influenceGovernment influence

• Recruiting costsRecruiting costs

146

Selection criteria under the lawSelection criteria under the lawSelection criteria under the lawSelection criteria under the law

• BFOQBFOQ

• Weighted application formWeighted application form

• Performance simulatorPerformance simulator

• Work samplingWork sampling

• HonestyHonesty

• BFOQBFOQ

• Weighted application formWeighted application form

• Performance simulatorPerformance simulator

• Work samplingWork sampling

• HonestyHonesty

147

Farewell, formalityFarewell, formalityFarewell, formalityFarewell, formality

Interview styleInterview style Accuracy in predicting Accuracy in predicting performanceperformance

Standard sit down affair Standard sit down affair with managementwith management

7%7%

Resume analysis: Quasi Resume analysis: Quasi scientific resume shiftingscientific resume shifting

37%37%

Work sample test: pen and Work sample test: pen and paper skills testspaper skills tests

44%44%

Assessment center: Assessment center: lengthy, off-site skills, lengthy, off-site skills, personality workuppersonality workup

44%44%

Situational interview: Situational interview: candidates role-playcandidates role-play

54%54%

The interview is disappearing as we

turn to more accurate alternatives

148

Interviews are most valid for:Interviews are most valid for:Interviews are most valid for:Interviews are most valid for:

• Organizational fitOrganizational fit

• Level of motivationLevel of motivation

• Interpersonal skillsInterpersonal skills

• Organizational fitOrganizational fit

• Level of motivationLevel of motivation

• Interpersonal skillsInterpersonal skills

149

Unstructured does not mean unprepared Unstructured does not mean unprepared (make the most of the interview)(make the most of the interview)Unstructured does not mean unprepared Unstructured does not mean unprepared (make the most of the interview)(make the most of the interview)

• Be preparedBe prepared

• Put applicants at ease in the first few Put applicants at ease in the first few minutesminutes

• Don’t be ruled by snap judgments or Don’t be ruled by snap judgments or stereotypesstereotypes

• Ask results-oriented questionsAsk results-oriented questions

• Don’t underestimate the power of silenceDon’t underestimate the power of silence

• Close the interview with careClose the interview with care

• Be preparedBe prepared

• Put applicants at ease in the first few Put applicants at ease in the first few minutesminutes

• Don’t be ruled by snap judgments or Don’t be ruled by snap judgments or stereotypesstereotypes

• Ask results-oriented questionsAsk results-oriented questions

• Don’t underestimate the power of silenceDon’t underestimate the power of silence

• Close the interview with careClose the interview with care

150

Employment at will: (don’t promise Employment at will: (don’t promise more than you can delivermore than you can deliverEmployment at will: (don’t promise Employment at will: (don’t promise more than you can delivermore than you can deliver

• Avoid making promises to applicantsAvoid making promises to applicants

• Everyone in a position of responsibility should Everyone in a position of responsibility should understand this principleunderstand this principle

• Review application materials to be sure they clearly Review application materials to be sure they clearly inform applicants that employment is not guaranteed inform applicants that employment is not guaranteed for any specific period of time and that you reserve for any specific period of time and that you reserve the right to terminate an employee for any reasonthe right to terminate an employee for any reason

• Pay similar attention to letters for contracts in which Pay similar attention to letters for contracts in which you offer candidates employmentyou offer candidates employment

• Pay particular attention to your employee manualPay particular attention to your employee manual

• Avoid making promises to applicantsAvoid making promises to applicants

• Everyone in a position of responsibility should Everyone in a position of responsibility should understand this principleunderstand this principle

• Review application materials to be sure they clearly Review application materials to be sure they clearly inform applicants that employment is not guaranteed inform applicants that employment is not guaranteed for any specific period of time and that you reserve for any specific period of time and that you reserve the right to terminate an employee for any reasonthe right to terminate an employee for any reason

• Pay similar attention to letters for contracts in which Pay similar attention to letters for contracts in which you offer candidates employmentyou offer candidates employment

• Pay particular attention to your employee manualPay particular attention to your employee manual

151

Performance managementPerformance managementPerformance managementPerformance management

• Strategic purposeStrategic purpose

– Link employee activities with organizational goalsLink employee activities with organizational goals

• Administrative purposeAdministrative purpose

– Use for salary decisions, promotions, retention, Use for salary decisions, promotions, retention, termination, recognition of individual performancetermination, recognition of individual performance

• Developmental purposeDevelopmental purpose

– Providing training and feedback on deficiencies in Providing training and feedback on deficiencies in performance, motivation, or other problemsperformance, motivation, or other problems

• Strategic purposeStrategic purpose

– Link employee activities with organizational goalsLink employee activities with organizational goals

• Administrative purposeAdministrative purpose

– Use for salary decisions, promotions, retention, Use for salary decisions, promotions, retention, termination, recognition of individual performancetermination, recognition of individual performance

• Developmental purposeDevelopmental purpose

– Providing training and feedback on deficiencies in Providing training and feedback on deficiencies in performance, motivation, or other problemsperformance, motivation, or other problems

152

Potential uses of performance Potential uses of performance appraisal proceduresappraisal proceduresPotential uses of performance Potential uses of performance appraisal proceduresappraisal procedures

153

Guidelines for performance Guidelines for performance standardsstandardsGuidelines for performance Guidelines for performance standardsstandards• Specify the action to be takenSpecify the action to be taken

• Focus on an identifiable target resultFocus on an identifiable target result

• Time limitedTime limited

• Specify costSpecify cost

• Measurable, tangible, or verifiableMeasurable, tangible, or verifiable

• ChallengingChallenging

• Realistic and attainableRealistic and attainable

• Relevant and importantRelevant and important

• Consistent with organization plans, polices, and proceduresConsistent with organization plans, polices, and procedures

• Specify the action to be takenSpecify the action to be taken

• Focus on an identifiable target resultFocus on an identifiable target result

• Time limitedTime limited

• Specify costSpecify cost

• Measurable, tangible, or verifiableMeasurable, tangible, or verifiable

• ChallengingChallenging

• Realistic and attainableRealistic and attainable

• Relevant and importantRelevant and important

• Consistent with organization plans, polices, and proceduresConsistent with organization plans, polices, and procedures

154

A defensible appraisal processA defensible appraisal processA defensible appraisal processA defensible appraisal process

• Conduct job analysis to ascertain characteristics required for successful job performance Conduct job analysis to ascertain characteristics required for successful job performance ( timely job completion)( timely job completion)

• Job analysis performance standards performance appraisalsJob analysis performance standards performance appraisals

• Make sure definitive performance standards are provided to all raters and rateesMake sure definitive performance standards are provided to all raters and ratees

• Use clearly defined individual dimensions of job performance rather than undefined global Use clearly defined individual dimensions of job performance rather than undefined global measuresmeasures

• When using graphic rating scales, avoid abstract trait names such as loyalty, honesty When using graphic rating scales, avoid abstract trait names such as loyalty, honesty unless they can be defined in behavioral termsunless they can be defined in behavioral terms

• Employ subjective supervisory rating (in terms of essays, for instance) only as one Employ subjective supervisory rating (in terms of essays, for instance) only as one component of overall appraisal processcomponent of overall appraisal process

• Train supervisors to use instrument properlyTrain supervisors to use instrument properly

• Allow appraisers substantial daily contact with employeesAllow appraisers substantial daily contact with employees

• Have more than one appraiser conduct processHave more than one appraiser conduct process

• Document evaluations and reasons for terminationDocument evaluations and reasons for termination

• Where appropriate provide corrective guidance to assist poor performers to improve Where appropriate provide corrective guidance to assist poor performers to improve performance ( courts like this)performance ( courts like this)

• Conduct job analysis to ascertain characteristics required for successful job performance Conduct job analysis to ascertain characteristics required for successful job performance ( timely job completion)( timely job completion)

• Job analysis performance standards performance appraisalsJob analysis performance standards performance appraisals

• Make sure definitive performance standards are provided to all raters and rateesMake sure definitive performance standards are provided to all raters and ratees

• Use clearly defined individual dimensions of job performance rather than undefined global Use clearly defined individual dimensions of job performance rather than undefined global measuresmeasures

• When using graphic rating scales, avoid abstract trait names such as loyalty, honesty When using graphic rating scales, avoid abstract trait names such as loyalty, honesty unless they can be defined in behavioral termsunless they can be defined in behavioral terms

• Employ subjective supervisory rating (in terms of essays, for instance) only as one Employ subjective supervisory rating (in terms of essays, for instance) only as one component of overall appraisal processcomponent of overall appraisal process

• Train supervisors to use instrument properlyTrain supervisors to use instrument properly

• Allow appraisers substantial daily contact with employeesAllow appraisers substantial daily contact with employees

• Have more than one appraiser conduct processHave more than one appraiser conduct process

• Document evaluations and reasons for terminationDocument evaluations and reasons for termination

• Where appropriate provide corrective guidance to assist poor performers to improve Where appropriate provide corrective guidance to assist poor performers to improve performance ( courts like this)performance ( courts like this)

155

The firm is squeezed:The firm is squeezed:The firm is squeezed:The firm is squeezed:

Big customers exert power

Small customers requiredisproportionate amountsof time and attention

The base of mid-sizedCustomers is shrinking.Large customers are gettingBigger, more complex.Large numbers of small Customers.

156

The largest customersThe largest customersThe largest customersThe largest customers

Big customers exert power Large customers are

“touched” in multipleWays, from productSpecialists to telemarketing,From distributors to directMail…

Marketing and sales must decide jointly how to bestManage the customers at the top.

Golf carts at Wal-Mart!

157

The smallest customersThe smallest customersThe smallest customersThe smallest customers

Small customers requiredisproportionate amountsof time and attention

Sales force competes withDiverse distributionChannels

Marketing and salesMust make JOINTArchitecture decisionsTo avoid sub-optimizationOf resources and conflict

Who are our high priority and primeFocus customers? Who are “why bother?”

158

Customer/Product ProfitabilityCustomer/Product ProfitabilityCustomer/Product ProfitabilityCustomer/Product Profitability

List

Case

Dis

count

Cash

Dis

cou

nt

Pro

moti

onal

Allo

wance

Reb

ate

PocketPrice

159

Customer/Product Customer/Product ProfitabilityProfitabilityCustomer/Product Customer/Product ProfitabilityProfitability

• Pocket Price BandPocket Price Band• Pocket Price BandPocket Price Band

Num

ber

of

cust

om

ers

Net Realized Price – Low to High