Applying TQM to the Sales Process

It is old news that in the late 70's and throughout the 80's, American manufacturing was taking a beating.  It seemed as though American manufacturers could do no right.

First, the leaders of the largest and most prestigious firms had seemed to have become arrogant, turning a deaf ear to complaints about shoddy merchandise. Instead of reacting to complaints proactively, many corporations seemed to blame the consumers themselves. The news reported the latest lawsuit or class action (One for all: class actions. Time, Dec. 13, 1971. They no longer say, 'I got a lemon'; nowadays, they say, 'I'll sue'. Forbes, April 15, 1972), and price increases (The day that no one could afford a car. ar and Driver, March '75) instead of the latest safety advance or leap forward in product convenience and value.

Second, the line management and workers responsible for crafting the product themselves seemed to lose their own pride, and the sense of what it meant to work with honor and dignity was severely undermined. Strife and friction between employees and their own companies made the news frequently, as headlines dealing with the automakers, truckers and others testified. (How you pay for boredom on the assembly line. Popular Mechanics, Oct. 1973. "Probing for the depths of trucker discontent. Business Week, Feb. 9, 1974. "Strike, strike, strike." Time, Aug. 12, 1974.)

Third, as a result of its lost ability to satisfy the consumer and management-labor's collective failure to set aside their problems and work with quality, America was losing its share of the global market hand over fist. From 1975 to 1990, the balance of global trade shifted from +$3.7 billion to -$118 billion. In 1987, we became a net debtor nation and have remained so since.

Those of us living through those times remember the feeling of impending doom. Prognosticators warned that America would have to get used to a lower standard of living, and critics pronounced that it was "about time;" that is, that we were just getting what we deserved. The handwriting was not only on the wall and in the press, but on the balance sheets and paychecks of America. From boardrooms to living rooms, the message got louder: get with it or face the consequences.

The reason for all of those problems?  Social cause-and-effect analysis aside, consumers simply exercised their options in a free market almost as soon as they had a genuine choice. Once the level of quality of foreign goods, in proportion to the price tag attached to them, exceeded our own, the consumer did what any intelligent organism would do: picked what they liked better.

Fortunately for all involved, the US has proven again and again that it has what it takes to meet great challenges. It is doing so now. In fact, the most progressive of all companies in the world are listening to the customer and meeting their need for quality items. While the buzzwords change, the principles remain the same: quality is back in manufacturing. In turn, customers are buying from American firms again (see, for example "How H-P Used Tactics of the Japanese to Beat Them at Their Game," WSJ, September 8, 1994). The battle is never-ending, but the tide has turned.

At this time of resurgence and building confidence, we offer two critical contentions and one powerful prediction.

First, we contend that a key player in the overall picture has been overlooked in the quest for improved quality, namely, sales--the side of business responsible for selling goods and services in the first place. Broadly speaking, we can include sales, marketing and customer service--that is, any group that is in direct contact with the customer -- in the remarks that follow.

That the opportunity for improvement in this field is huge needs little formal proof.   Daily, anyone standing on the customer's side of the counter will experience what experts define as a lack of quality: non-conformance to specifications.  A salesperson says he will return my wife's call before 4 pm: he doesn't. A salesperson tells me my new car will be ready for pick-up on Tuesday: it's not.  I get billed for an entirely new subscription for a magazine, when all I sent was a change of address form. Once received, the products were great; it's the sales-to-customer relationship that lacked.

Look around yourself.  You'll see companies placing foolish barriers in front of the customer, making it harder or annoying to get that great product!  All at tremendous costs to the companies themselves.  It may cost between $35 and $100 at many firms just to place an order the first time, let alone to correct the mistakes made when an order was set up.  We contend that the frequency and cost of such quality errors in the sales process impose a tremendous amount of drag on the flow of steps through the process.

Second, we contend that many of the principles and practices related to quality improvement that worked so well in the production and assembly of goods will also work to improve quality in the field of sales (again, we include marketing and customer service in this term). For example, the quality technique of counting the type and frequency of errors to help identify opportunities to improve should work directly in the field of sales. Instead of measuring a sample of a batch of pistons to see whether they were machined to a certain tolerance, in sales we'll measure the number of order entry errors. Some measurements will overlap between what is measured now in both modern manufacturing and sales, such as number of shipments that are delivered on schedule. Quality improvement practices should help improve the sales process.

Third, a prediction. We predict that improvements in the field of sales will have a roughly equivalent impact in terms of customer satisfaction as improvements in the field of manufacturing. In turn, this should lead to increased sales, relative to the competition, in any firm that improves the quality of its sales practices. Already, companies such as Ascom-Timeplex, Nalco Chemical and Mead School and Office Products are finding that when they improve their sales process, the financial rewards can be great.

If we agree that the opportunity for improvement is great, and that the effort to improve quality in this arena is worth making, the next question becomes, "What are the quality principles that apply in the field of sales, marketing and customer service?"

What follows is a brief description of principles drawn from what we feel are the four most important figures in the field of modern quality improvement, together with a translation of these principles into the field of sales. In our review of two of the major sales-related publications for the past decade (Sales and Marketing Management magazine and Personal Selling Power) we were unable to find a similar translation to date. Although this may be the first such formal "translation", we also predict that others will follow because interest in the area is building. Both the necessary knowledge and the technical infrastructure is growing -- witness the growth of an organization like the Sales Automation Association (expanding tenfold in four years). Cost and competitive pressures will dictate that all companies, large and small, study this area as if their future depended on it.

The Big Four of Quality

Do the quality leaders have something important to say to those in sales? Just remember that "Made in Japan" was a label that meant "cheap" as recently as 20 years ago. Yes, the quality proponents obviously have something to say, since in a very short period of time the phrase "Made in Japan" has come to mean "the highest quality." Three of the four leaders discussed below, Deming, Juran and Shingo, played a big part in Japan's quality turnaround, though for decades they were largely ignored in the US. The fourth, Crosby, helped to popularize the quality movement in the US, and contributed some of the quality movement's most memorable sayings such as, "Do it right the first time, every time."

W.E. Deming:
"In God we trust. All others must use data."

Deming taught that it isn't good enough to guess what our quality problems might be. He said that you have to know. Deming stressed that using measurement, graphing results, and a technique called statistical process control (SPC) are often necessary to identify and help remove undesirable variations in the process. Deming also taught that the purpose of quality improvement is not simply to find problems, but to prevent them.

If sales is a process that yields measurable outcomes or whose outcomes can be described using reliable measures of their attributes, the techniques of measurement and SPC should be applicable.

In sales, this type of data can be found in samples of order entry errors, a comparison between what is proposed and what is delivered, and in terms of whether a particular sales lead meets a certain level of specification prior to delivering it to a rep. In principle, we would expect that each relevant aspect of the sales process can be measured. Just as in manufacturing, an acceptable range of specifications can be established, and, using basic statistical tools, we can determine what is "out of spec" and work to correct it and prevent it from occurring in the future.

Mead School and Office Products measured their sales process and performed the courageous act of actually surveying their customers to find out what they liked and disliked about doing business with Mead. Mead found that it was granting some $2 million in deductions (dollars given back to appease unhappy customers) per year. The credits were due to approximately 21,000 pricing errors--discrepancies in what customers were told their bill would be versus what it actually was. Their analysis told Mead where to focus their corrective actions, and, thanks to a computerized pricing system, both Mead and customers alike are enjoying the benefits. Incidentally, Mead saved $100,000 in deductions and slashed pricing discrepancies by over 60%--from 21,000 to 8,000--in the first year improvements were instituted.

J. M. Juran:
Process Mapping to Find Bottlenecks

Juran pointed out that there are at least two important aspects of quality: product performance and freedom from deficiencies.  Product performance refers to how well a product meets the customer's needs. Freedom from deficiencies means absence of defects. Quality must have both aspects. If the product performance is just what the customer ordered, but it has one or more defects, the customer will not buy it. Likewise, if a product is completely defect free, but it isn't what the customer wants, it will also not be purchased. Juran emphasizes mapping the entire process to expose bottlenecks that hinder the process in some way. Once a bottleneck is identified, it can be corrected and the process will improve. Then the next bottleneck can be exposed and eliminated.

How can Juran's precepts be applied to sales?  Juran's concept of product performance and freedom from deficiencies certainly apply. Those who have studied the subject know that sales is a process with many steps, each delivering a "product" to subsequent steps for use by the next customer (who may be internal to the organization) within the process. Some of the sales products delivered (in the sense that leads are a "product" delivered to reps, and quotes are "products" delivered to customers) either meet the reps' or the end customers' needs (product performance) or they do not. Some of the products in the sales process contain outright defects, such as mistakes (a lead classified as hot when it was cold or a proposal containing math or pricing errors). Juran's recommendation to map a process to help point out bottlenecks applies, too. If we mapped out the cycle times, costs, quality levels of the outputs at each step of the sales process (such as lead generation - contract - presentation - estimation- proposal development - closing - order entry - servicing, etc.), glaring bottlenecks would be revealed.

When Ascom Timeplex applied this technique to their sales process, they found that it took ten days to simply enter the order, more than six weeks for the total order cycle from entry to delivery to be completed, and as many as four days just to give customers a quote or proposal. Mapping the process highlighted these problems. They were able to identify the bottlenecks and fix them. In this fashion, they were able to reduce order entry to four days, reduce the total order cycle to four and a half weeks, and proposal generation to a matter of hours. Once the bottlenecks were solved, the quality of the entire sales process was greatly improved.

Shingo:
100% Inspection or Foolproofing

Shigeo Shingo is the father of hundreds, and possibly thousands, of fool-proofing (poka-yoke) techniques now used throughout modern manufacturing and assembly. Shingo emphasized devising mechanical means so that mistakes would be prevented through their physical impossibility. Modern wiring harnesses, for example, combine both a unique shape and a physical locking device to simultaneously prevent connecting two lines "backwards," and lock them together so that normal day-to-day vibration cannot work the connection loose. To Shingo, waiting to sample a batch of goods or parts after they were created or assembled was too late. Thus, the very act of fool-proofed assembly produced 100% inspection at the source of each operation.

In the sales process, to apply foolproofing, we have to creatively find ways to prevent mistakes so that errors physically cannot happen. The specific solutions to individual problems will vary.  To test whether the principle makes sense without saying what the specific solution is, just ask yourself a few simple questions.  Do you like seeing hundreds of dollars wasted through non-deliverable mail in each mail campaign you oversee? Wouldn't it be desirable to develop a procedure where names that should have been purged from a cold call or mailing list, are, in fact, removed prior to their use?   Is it good for salespeople to mismatch product components in their quotes? Wouldn't it be better to physically prevent such mismatching? Is it smart to allow salespeople to quote discounts that means products are unintentionally sold below costs? Wouldn't it be better to automatically head off such a possibility? Incidentally, solutions to each of these problems now exist. If you think about it, you'll probably come up with dozens of areas where, conceivably, you could prevent mistakes through mechanical or computerized devices.

Modern computer firms such as Dell and Gateway use an automated product configurator to allow order entry telephone personnel to electronically call up all the allowable add-on components that may be combined with, say, a 486-based PC being ordered. The non-compatible options do not even appear in the list from which options may be selected. In this way, errors cannot even occur because orders can only be placed with compatible configurations.

Crosby:
COQ--The Cost of Quality

"Quality is free," says Philip Crosby. "What costs money is not doing things right the first time." Aside from the contribution he made by popularizing quality in the US, Crosby helped work out the cost/benefit economics related to quality. Crosby's cost of quality (COQ) formula takes into account all the costs accrued when things aren't done right, including more than 30 factors in three key areas: failure-related costs, inspection-related costs, and costs associated with prevention. Taking economics into account, Crosby was able to demonstrate two critical points: first, that quality is "free," and secondly, that improving quality is a profit-maker. Crosby calculated that, on the average, each dollar not spent doing things wrong or having to fix things not done right the first time yields an additional fifty cents to the bottom line. In this way, he pointed out that improving the quality of what you were doing right now might be even more of a priority than, say, simply trying to increase sales.

Crosby's inspiration to examine costs associated with defective processes offers great potential to inspire top management to support sales process improvement efforts.  If we counted the costs associated with management inspection of sales decisions made in the field, the costs associated with correcting poor impressions made on potential customers viewing a flawed sales presentation, or the costs associated with winning back a now-unhappy customer, most organizations would immediately take action to prevent another single dollar from being lost in this fashion. In manufacturing, Crosby estimated that up to 20% of all income received was spent on the cost of (poor) quality. What do you imagine the percentage of all income wasted on poor quality is, thanks to faulty sales processes?

When the U.S. Postal Service sought to improve its sales effort, it examined problems associated with its sales presentations.  After the quality of the presentation was improved, $5 million in incremental revenue came from the region using the new presentation. Yes, quality is not only free, it pays.

By the way, all four major quality figures recommend that companies act in a way that gives the customer what will help the customer. Many process improvement efforts focus on helping internal customers (employees) within a process, especially salespeople and their managers. Nalco Chemical Company, a billion dollar-plus specialty chemicals firm, chose to focus on the needs of its external customers in its improvement efforts. Nalco installed monitors on its customers' equipment, which automatically call Nalco's chemical engineers the minute it looks like the specifications set up for that process are about to go out of spec. In some cases, Nalco is able to inform its customers own personnel, even before the customer has spotted the problem itself. Customer-oriented systems such as this and others have earned Nalco more than $14 million in saved jeopardy accounts. That's customer orientation that pays off.

The four quality leaders we have reviewed have much more to say, of course. In this article, we could only touch on some of the more notable aspects of these four   distinguished quality figures. We obviously feel that quality principles aimed at improving manufacturing and design-related processes also apply to the sales process. Unfortunately, as the reader who explores this topic further will find, these great men were not familiar enough with the field of sales to directly comment at length on how the principles of quality, so successful in manufacturing, apply to sales. In this article, we have briefly shown that, not only is such a translation possible, it is well worth performing. Both common sense and the financial success of companies already engaged in sales process improvement argue for a strong push to translate and apply the techniques of quality improvement to the sales process.

A word of caution. It is possible to move too fast and with too little thought in the name of sales process improvement.  Today, we have observed that companies often place people in charge of sales automation and re-engineering efforts who have little background in either field. This can easily result in the misapplication of technology and/or principles.

What usually happens is that an inexperienced project leader, someone who has neither read the most basic primers in the field, nor even attended the most fundamental of workshops or other professional development activities, puts notebook computers, E-Mail, a spreadsheet package, and a word processing program into the hands of the sales reps and then wonders why sales don't magically improve. That this is allowed to happen borders on professional negligence, but is probably more a case of well-intentioned enthusiasm coupled with old-fashioned ignorance. From a practical point of view, slap-dash approaches don't work in industries where an extensive body of knowledge is available, let alone in a fledgling field such as sales process and quality improvement.

A recent statistic from Operations & Fulfillment magazine (October, 1993) makes this point. The results of their analysis show that equipment alone does not improve productivity. Companies who use an engineering study approach claimed 31% productivity increases when installing new equipment, while those simply investing in new equipment without the use of such advance planning actually experienced a decrease in productivity of 1%.

By recognizing sales as a process, the principles of TQM can be used to bring about dramatic increases in sales productivity and profitability. Even as we learn more about the specific techniques for doing so, let's keep in mind one of the most fundamental of guiding questions that all of the quality experts repeatedly stress. It may be the simplest of all: what best serves the customer? Those of us who believe in the Golden Rule recognize that particular quality rule with no surprise.