Experiencing the Experience

Q) What is the toughest task for a line Manager?

A) Line Managers mental model of experience faced by his sales personnel being a close approximate of the experience as actually felt by the sales person while going about the task of attaining goals.

For any line manager to intervene and suggest changes, be it at the individual or business level, he has to know the experience as faced by his team.

To clarify the above, let me explain with my area of operation.

I was managing a team in Mumbai for an online product, where the Mumbai market was divided in 4 zones. Each zone had a designated sales person handling a given set of relationships with our channel partners viz. Bank Branches Each sales person had roughly the same assigned relationships

It was observed that business in different regions varied widely. South Mumbai was at top and West mumbai ahead of andheri was last. There are a series of question that I went through

1) Do the varying figures be a reflection of Sales persons ability or the inherent nature of market, Hence South Mumbai being on top can or cannot be assigned to Sales person.
2) What is the potential of each relationship that the sales person is handling and should the targets be a reflection of this.
3) What are the right things that south Mumbai person is doing that has led to results.
4) How is individual personalities of sales personnel (including mine) enabling or affecting a “relationship based sales model”.
5) How is the existing business model an enabler or otherwise for sales numbers

I guess there are no easy answers to above question but only choice left for Line manager is to himself be a part of the action and develop appropriate models if he has to meaningfully intervene.

Guess the above para applies at all all levels in corporate hierarchy.

PUSH PRODUCTS VS PULL PRODUCTS

I have been wondering if a marketing firm could design a table for every product or services and classify it in two broad categories – Mainly a push based product or predominantly a pull based one and drill it to show the extent of pull or push in each category. .

The words “mainly” and “ predominantly” being prefixed because all Pull based products would have some element of push and vice versa. Say in FMCG branding is extremely important (pull based) but also a recommendation from grocery shop owner or salesman would add the push element.

What the marketing firm could do is to show the relative extent of PULL or PUSH based products in every category. Not denying that the relative extent of Pull or Push would vary from firm to firm based on various factors.
To take an example, say in Push Based product in financial category – Insurance would have the maximum push, followed by MF, then bonds, etc. As the list would move from left to right, the push element would decrease and pull element would increase. Similarly a pull based product for financial category would have say Home Loans, Vehicle loans, personal loans, gold etc indicating the degree of pull element required.

Alternatively a number line merging the two above categories could show the proportion of Pull and push for each product.

Well you must be wondering how this classification would help. It could help the marketing and sales team to tweak its approach based on these findings and incorporate elements that suit the needs of the category the product belongs to. No use expecting tangential shift in numbers from sales team if the product is inherently pull based, similarly no use spending vast sums on marketing if the product is Push based.

Performance Measurement: An Application

In this blog, I wish to apply the Performance Measurement I had discussed in previous blog using the aid of a case. I have applied it in my daily area of operations and found it beneficial in understanding performance


Background

A broking firm has a tie-up with two banks a public sector and private sector bank (let’s call them bank A and Bank B) for sales of their trading account. The banks Savings and demat account is linked with the trading account of the broking firm. This linked accounts enables the bank customers to do seamless share trading i.e. On Buying Shares the shares will come directly into their demat without the need for delivery instruction slip. On selling shares money will come directly into their savings account.

Business Models

In Bank A (public sector bank), the client can trade in two forms,
1) Online with usage of his net banking id and password to transfer funds
2) Offline by calling a dedicated Dealer for these bank clients. Here he need not use his net banking id and funds will be automatically debited (in case of share purchase) from his savings account. The dealer even does outbound calling

In Bank B (Private sector) the client can again trade in two forms
1) Online with usage of his net banking id and password to transfer funds
2) Offline by calling a toll free number, but using his net banking to transfer funds before he calls these numbers, without which he will not be able to place his trades. This is only an inbound calling number

In Bank A’s case, there is a possibility of trading without resorting to net banking or need for internet; Bank B clients have no choice of auto debits

Metrics

I am going to use only one metric here to propound on the application of Performance measurement standards.

Activity ratio is one way of evaluating steady revenues.
Activity ratio is defined as no: of customers traded in a month/total number of customers in the channel*100

Performance measurement(PM)

I am going to measure performance using terms used in the previous blog- actuality, capability and potentiality and apply the same framework to one task at hand(please refer to these terms explained in the previous blog)

Bank A- On an average, the Activity ratio hovers around 45%

Bank B -On an average, the Activity ratio hovers around 10%




My analysis for the difference in activity ratio amongst both bank is due to ease of transferring funds and a dedicated dealer for bank A accounting for these figures

Here the figures 10% and 45% stands for actuality

Applying the framework

I am going to use the PM framework on Bank B

My understanding is that capability for bank B is around 15% (based on activities that can be carried out without any disruption of other metrics)

Suppose the management decides that we need to increase the activity ratio. Then I believe the course of discussion would be as follows

Step 1- the productivity ratio should be increased

Productivity ratio (actuality/capability) for Bank B is 0.66


To increase the productivity ratio, a series of activities that can be carried out without hampering other function. These activities could be as follows
1) Telecalling exercise asking clients to trade, by the sales personnel without affecting his sales calls. Say around One hour a day.
2) Demos to inactive clients by sales personnel’s. (Again without dropping sales calls). Within the given constraints of personnel this cannot be a full time activity in the channel and has to be carried out alongside sales calls.
3) Engaging client by sending trade reports. This can be sent from time to time by sales force to keep the client interested
4) A one time activity involving customer care department to carry a telecalling activity finding out reasons for inactiveness and resolving technical issues etc if any. E.g. client must have lost his trading password, net banking not enabled for shopping mall transactions, not having net banking password etc.

.This would definitely increase the productivity ratio up a few points.

The second course of discussion would be what the extent of Latecy is and how it can be eliminated.

My assumption is that Potentiality would be around 55% active ratio( we already see it at 45% in Bank A) Hence to increase and measure performance of activity ratio without disruption on other metrics the management will have to change its model.



Latency (capability/potentiality) currently is around 0.27
Performance (latency*productivity) is around 0.1782

Now I propose the following steps that can be used to decrease latency

1) Bank B also having the option of trading without resorting to net banking. This can be done changing the product in such manner where customers can block fund instead of transferring fund using netbanking. This is already present in the market.
2) A dedicated dealer who not only can place trades on behalf of client but also block funds in his savings account as soon as a trade is placed.
3) Dealer involved in outbound calling and maintaining relationship

There will be an additional cost of dealer and product upgradation but the benefit will far outweigh the cost.

Conclusion

What I have just proposed is framework that helps in not only measuring performance but the direction one can take with these aids. Also the discussion on numbers is far more solid with these tools.

Definitely there are a lot more factors that can affect activity ratio such as market conditions, but the factors apply to everyone uniformly. Also in such a case, the potentiality itself will change without change in performance numbers. Hence absoluteness on measurement would not be valid.

PERFORMANCE LED GROWTH VS PROFILE LED GROWTH

On an average, people with profiles on the revenue side of the organization have more importance within the system than others. Simple rule is the more revenue the department brings into the system, the more its relative importance.

But the next question comes to mind is whether Revenue contribution is equal to performance and should employees be evaluated or promoted based on their revenue contribution or Performance.

One cannot rule out the possibility that certain profiles have an inherent advantage in contributing growth as well as revenue to their organization, primarily due to external circumstances (industry growth, city, policy change etc) rather than the talent of those employees. So, if revenue led promotion is the norm which according to me is in most cases, than talent assessment itself is a myth.

Partly the reason for Revenue Led promotion is the norm is due to the extremely difficult nature of measuring performance. For e.g., unless the understanding and application of Statistical Variation (special and common causes) is not there, one cannot judge two salespersons in different markets/regions based on revenue contribution and pass a decision on their performance without factoring things such as client base, purchasing power of clients, etc. etc.

So is there a way out and more importantly what is Performance. I have come across the closest definition of performance proposed by the legendary cybernetician – Stafford Beer. The explanation in terms of ratios is as below

ACTUALITY/CAPABILITY = PRODUCTIVITY
CAPABILITY/POTENTIALITY = LATENCY

PRODUCTIVITY*LATENCY=PERFORMANCE

(Note: 1) Capability stands for given the constraints, what is the ability of the system?
2) Potentiality stands for, if certain processes/constraints are addressed, what would be the ability of the system? )

The closer the answer for performance is to 1 the more effective the individual, department is.


I admit the fact that determining the capability, potentiality is a itself a complicated task, but the above ratios gives us a framework to measure performance and have a fair evaluation for individual/departments.(as sated above, statistical variation can be good start for measuring sales performance across regions and determining capability)
Perhaps than talent assessment and Performance Measurement systems would lead to a fairer performance led growth.

Absolute Surety And Sales

Carlos Castaneda has beautifully described that every individual who seeks knowledge has to approach it as a warrior. He mentions 4 conditions that have to be satisfied for the same viz.
1) High Alertness
2) Fear
3) Respect
4) Absolute surety


The interesting point to notice is the 4th point which mentions that if an individual does not believe, he is going to win, he/she will surely loose. One cannot have the time to entertain thoughts of loss et al when you are in the firing zone.

The question is, do all the conditionalities mentioned above apply while approaching Sales Targets? To a large extent, my answer is Yes. There has to be alertness to Sales opportunities, Fear of no knowing where it’s going to come from, Respect – Well not sure how this applies, But definitely, without the belief and surety that Sales targets are going to be met, it is difficult to consistently meet expectations (The role of target setting and shaping of belief/surety can be debated but perhaps in a later blog)

On Models Reality and Models

Since any business is too complex to comprehend, each and every employee has a model of the realities of business in his head. Most conflicts or solutions are a clash or agreement of the models we hold.

I believe there are two broad ways every manager comes to a decision of the model he holds.
The first types are those who bring their personalities, values, taste, background etc into the model of the business they operate in. This model in their head bears their imprint very sharply. Typically these managers would keep harping the same point and same solutions as they face their day to day difficulties. E.g. I come across sales managers saying we need to increase pressure if sales are not happening. The model here being that pressure is everything and there can be no other complexities of the business that can be addressed.

The second types are those who wrestle with the realities and likewise go through the stage of developing, modifying re-developing and solidifying the models in their head. Their model factors the realities faced on ground and role of their belief system is to a large extent minimized in the formation of the model. The second type acknowledges that there is more to business than what meets the eye and hence would bring the same out in the open.

My take is that the second approach has a capacity to deal and hence direct energies in more productive manner bearing better results. In the first case, the manager can impinge on the solutions without the critical issue being taken care of.

SALARY TRAP AND ATTRITION

In every organization, revenue is generated by the most frontline Sales staff. Hence these soldiers of organizations are subjected to more stress and accountability than any other personnel’s in the entire organization. A level up and everything is an exercise in creative vocabulary. (Except in cases where managerial talent is well rounded)

In a recent article I read in economic time, it was mentioned that 90% of financial jobs are comprised of Sales function. We also see a very high attrition amongst the same group. Since demand exceeds supply for these jobs in financial sector, there has been an explosion in salary offered to the sales employees.

Here comes the interesting part. Being revenue generators, every sales staff has not only to justify his salary but also justify the salary of his seniors and higher ups. With rising salaries, there has been an exponential increase in targets set for this group. My take on retail sales is that there are limitations in the extent of target that can be achieved since the there is hardly any scope for innovation in sales function. It is an exercise in discipline rather than mental agility (such as creating new channels or product innovations leading to windfall earnings). The job of a frontline sales staff is to run and his running is limited by the time available to him. Since his targets are huge, he has to keep running till the time he is completely exhausted. Yet the salary offered is not justified. This leads to frustrations leading to these employees looking for change.

Of course the employee will change provide he gets a better package? Profile change is not that easy (90% jobs comprised of sales). Organisations are left with little choice but offer higher salaries or else struggle to cope with lack of personnel’s. Which means the cycle of higher salaries and proportionate targets for the personnel is again reinforced leading to same events being repeated. It appears a never ending cycle till industry stabilizes.