Conference ilbbak::us_sales_service

Dave

Probably because Digital, even with the very finest systems and tools in the 
industry, is incapable of measuring an individual salesperson accurately
on either margin or, heaven forbid, profit.

The "New Management System" was SUPPOSED to provide the field the maens and 
information to arrurately plot account profitability.  This never worked, as
far as I can determine.  There are still too many fiefdoms in DEC doing their
own thing.  And how do you measure margin when many groups in DEC build their
own profit into the cost of the hardware/software/service.   

This SHOULD be simple.  Every product/service must have a base cost that can
be measured, including all the expenses that go into the manufacture and 
support of the product.  Same for services.  Add to that the insidious 
overhead factor and the direct expense of the account team.  Subtract that 
total from the revenue I generate, and voila!, my profit!  As I said, sounds 
simple, but not viable in practice today.

How the hell can we control this company if we can't measure it!

Bob


PS - Maybe BP can entice Ross Perot to run our Supply Chain modernization
effort.  


PPS - Maybe not.  Too much even for ole' Ross

    Re .1
    
    So does that mean that just because the problem is hard to solve the
    decision is not to solve it?
    
    I've read anecdotal evidence that people are upset that a lot of sales
    people spend their time making the easy sales to the installed base
    of low margin stuff because that's how they can best meet their metrics
    of CERTs per second. Then I hear people get upset that they do what
    they're measured to do. I'm not a sales rep but isn't that very
    demotivating to do exactly what you're encouraged by the metrics to do
    and then get told you did a lousy job?
    
    I predict that if Bob Palmer doesn't solve the general problem of:
    
    	We won't fix a problem because it is too hard to fix
    
    of which this is only one he won't last long. I'm wondering whether the
    hole at the head of the US Sales/Service organization has anything to
    do with the former incumbent not fixing the fundamental problem I'm
    alluding to.
    
    Dave 

    I could probably talk for a while about this subject but I haven't the
    time right now.  Let me make just one point.
    
    One of the problems is that no business makes a profit on every sale.
    The goal is to make sure your total business is profitable.
    
    It is clear in my account group that for the traditional end-user sales
    to large accounts there is an insufficient transaction volume at the
    _account set_ level, never mind the _rep_ level to have P/L management
    make a whole lot of sense.  The empirical evidence so far suggests that
    the account group is the only place that there is sufficient
    transaction volume to have any real management influence on P/L.  This
    does not mean that  the behavior of individual rep�s doesn't have an
    effect on P/L.  It just means that if (for example) you give a rep a
    $2.5M revenue budget with a margin goal of 8% and he has maybe 8 or 10
    transactions in which to hit the mark, we are probably setting them up
    for failure.
    
    A successful business will consist of a mix of low-volume/high margin,
    high volume/low margin, high risk and low risk sales.  Trying to manage
    that on too minute a level makes no sense to me.  It's the job of sales
    reps to sniff out the opportunities, close them and keep the customers
    happy.  It's the job of management to make sure the business is
    profitable and sustainable.  It is a poor management structure, in my
    opinion, which dumps it's goals on individual contributors as a
    substitute for leadership and management.
    
    Al
    

The local 7/11 is open 24 hrs a day.  It is only profitable from
6:00-9:00 AM, 11:00AM-1:30 PM, 5:00-8:00 PM, and 10:00 PM - 1:00 AM.

So along comes a smart manager who realizes that he can save money by
closing the store all of those hours.

He soon discovers the hard way that the only reason people go to a 7/11
in the first place is that they know it will always be open.  "Oh no! We
need milk!  Run down to the 7/11."

The moral of the story is that qualitative analysis is needed to run a
business.  Unfortunately, Digital has been managed by count the numbers
and Cert/second are the numbers that Digital counts right now.

re: .2

>>    So does that mean that just because the problem is hard to solve the
>>    decision is not to solve it?
  
No.  .0 asked why the company measures reps on certs/revenue and not margin
and/or profit.  My response was that the reason for not doing so is the
CURRENT inability to measure this accurately at an account level, much less
a rep level.

Perhaps I wasn't clear in my response.  I am all in favor of changing metrics
to margin/profit.  But don't do it unless the systems are in place to measure
and report them.  DEC has to decide what behavior it wants from the sales force,
establish the appropriate metrics and support this with viable systems.  To 
quote Perot, "It's just that simple".

Bob

    .0
    
    Digital's sales force is measured on Certs, which is anticipated
    revenue and Digital is having a hard time with the certs measurement. 
    I am a Sales rep today and I came from Account Support where I was
    measured on the revenue that came into the account set.  The major
    problem as I see it is that we have three finance departments (Customer
    services/Sales/Operations) and none of them seem to talk to each other.
    
    To make the problem even more complex, none of the finance departments
    are using the same profit models, or sharing information with each
    other.  The problem is very complex, and the answer is to do away with
    the entire system and start over, and I believe that is something
    Digital is not looking at doing!
    
    TLA

    I don't think it is realistic to expect an individual sales
    rep to be measured on margin or profit.  But it is not 
    unreasonable to expect that sales reps could be measured on
    revenue rather than certs.
    
    Certs are future revenue only in theory.  In fact, there is often
    a disconnect between the two, as anyone who has had a customer
    cancel an order can testify.  Measuring certs is in large part
    responsible for the fact that we always cert much more than we
    actually sell, a hardware sale not being recorded until passage
    of title/shipment.
    
    We have shadow credits and shadows of shadow credits.  We measure
    each dollar in several ways, depending upon who needs to make
    a forecast for what reason.  I declare, Rube Goldberg never made
    a machine as complex, to do such a linear task, as Digital does
    in the area of sales goals and measurements and financial reporting.
    
    Joel
    

>>    I don't think it is realistic to expect an individual sales
>>    rep to be measured on margin or profit.

I disagree.  Every account/territory should be run like a business, the
objective of which is to contribute to DEC's overall profit. 

BTW, distributor reps are measured and paid on profit.


Bob

    A very, very, big part of the CERTS (ie orders)/revenue gap is that
    fact that we can't ship immediately.  We give the customer the time to
    shop around and potentially cancel his order.  (But that's no problem
    really, since we take an average of 76 days to collect payment after he
    has the goods.)

    The problem with measuring sales reps or any employee for that matter
    on profit and loss (really revenue net expenses) is that while the sales
    rep is fully responsible for revenue, how much of the expense side of
    the ledger is at the sales reps discretion?

    Bob, you and I are in some pretty expensive real estate.  Do you
    believe that should be part of the sales reps' job to control? The
    amounts of discretionary money for customer lunches and travel are
    trivial compared to the millions in facility costs, salaries, etc.
    
    I've been to many meetings where a manager exclaims "I don't control
    that number."

Pat

Good point about the real estate, but this could be averaged over all sales
country-wide.

My real gripes are:

	1- DEC has NO CLUE how to measure profit at a rep, account set
or account group level.  If you can't measure it, you can't control it.

	2- We have some VERY high priced sales talent with relatively low 
certs budgets.  With margins shrinking the way they are, how can we continue
to reward people whose businesses aren't contributing to the company's
profitability?  Can we afford to pay a sales rep $100K, give him a $1M
budget and pay him a big bonus if he exceeds it?  And all without 
knowing if the business is profitable?

I know that our admin systems are antiquated, but the fact that we can't 
measure profitability should not disuade Palmer, etal from going in
that direction.

Bob

    We have an entire management structure that demands the inconsistent
    of the sales reps:
    
    (1) Focus on quick-closing hardware business.  Close it in one day.
    
    (2) Obtain the margins that come from value-added systems-integration
    business.
    
    Sales reps are still required as a function of the complexity of the
    product offerings.
    
    No "800" number is going to be able to establish what the customer
    wants and needs in non-trivial cases and transform that into a price
    quote when the system is a Alpha, DECsystem, or VAX.
    
    There isn't enough "time budget" in a account manager's week to master
    the product catalog and internal information systems for all those
    items that cost less than the price of a PC but are exceedingly complex
    to configure.

    Patrick,
    
    You mentioned how cvonfusing it is to configure systems...find your CTS
    rep in NY and ask for some assistance...then get Bob Palmers attention
    to the fact that we could use more of these....
    
    In NY you have three, Mike London, Ken Frankel and Tom Hammel.
    COnfiguration Technical Specialist.
    
    Good Luck, 
    
    Jim

    I understand that there are people to help in configuring systems.
    There are many problems that come up each day that are big enough to be
    irritating but too small to involve someone else and share the
    irritation all around.
                                                
    Does Dell, Apple, HP, or Sun need a staff of configuration specialists?
    No, they have a smaller catalog and simpler configuration rules.

    I don't think the sales force should be concerned about "selling
    profitably".  They should be concerned about selling competitively. 
    That means they should know their market, product, competition and
    customer's problems.  Those are all things that keep the sales rep
    "outwardly" focused.  When you talk profitability, you force the sales
    rep to turn his focus inward and THAT'S WRONG.  Digital has structural
    problems right now that its management needs to address.  It is not the
    sales reps fault and forcing him to make decisions based on Digital's
    management problems will cause us to lose market share.
    
    Digital's management needs to figure out how to "deliver profitably"
    goods and services that are "sold competitively".  Like Ross says: "its
    that simple."
    
    Jim Furlong

While I don't disagree with -1, I still have this emotional problem about
compensating a rep who sells $1M worth of low margin PC's the same as one who
sells $1M in high margin SI (as an exagerated example).  

I still say that Digital needs to decide what it wants us to sell and design
a compensation plan accordingly.

Bob

    Bob,
    
    It's really binary.
    
    	0. We either sell competitively or we don't sell.
    
    	1. If we sell competitively but can't delivery profitably then we
    will also go out of business.
    
    Let's figure out if management can get this company structured right
    and do it.  If not, let's fold the tent right now and go home!  But
    profitability is beyond the control of and scope of the job of the
    sales force.
    
    If a sales rep can sell 500 PC's for $2k each for $ 1m sale in a day or
    so, who cares if its low margin, its still POSITIVE margin.
    
    Intel and Microsoft do a pretty good job of selling high volume
    products at a profitable rate.  Their management has structured the
    Company right and got a competitive product in the market.  And they're
    not in the SI business either!
    
    One final comment, I did not know in this company that SI=High Margin. 
    If we are supposedly one of the top three SI houses in the world; how
    come we're still bleeding red ink?  Answer: we are still structured
    wrong.
    
    Profitability is still management's problem, not the sales force.
    
    Jim

    
>>    Profitability is still management's problem, not the sales force.
  

Can't argue with that.

Bob

    The statement "Profitability is still managements problem, not the
    sales force" is wrong and is a sign of an old, obsolete selling model
    that died a long time ago.  This is as good as saying "its not my job"
    or "I was just following orders".  .
    
    If you are a professional sales rep (I have been one for 20+years) and
    have the slightest idea of what is happening in the industry and this
    company, then it is your responsibilty to search for deals that bring a
    substantial level of profit to this company.
    
    If you have a prospect that wants to buy 100+ PC's, go for it.
    If you have aprospect that wants 1 PC, send him to the appropriate
    channel
    The same is to be said for the guy who wants to upgrade a microvax or
    buy some disk drives.
    
    Here is a good rule of thumb-- what can I sell that is not offered by
    PCbyDEC, DECDirect or one of our distributors?  What value add do you
    bring to the customer?  If I need to tell you this we have a basic
    sales training problem here.
    
    Now, just to show you that I agree with a smallpart of your rationale,
    try this on for size-- we have let management handle problems in the
    past and look where it got us.  Let management do whatever it is that
    they do and lets take it upon ourselves as professional sales people to
    search for and bring in the right kind of deals that can help this
    company out!
    
    Having said all that, now I can go to lunch.
    
    Ron

    I'm making the assumption that a sales rep will try to get the best price
    for each sale and not leave money on the table.  However, price is
    still the operative word here.  He still sells in a competitive
    environment and the market still determines the price and it is not a
    function of this individual companies cost.  Hopefully that competitive
    price will result in profit for this individual company.
    
    What I am stating is an economic fact of life, selling price is
    determined by market forces, not by Digital's sales reps.  Do you
    really sit in front of your customer and say: "I've got to get another
    $100 for this PC so I can make a profit".  No, your customer would
    throw you out.  You evaluate what your competition is selling their PC
    for and try to determine if you can get more or less depending on how
    much better or less functionally we are to our competition.
    
    Let me throw a hypothetical question at you.  You've just put together
    a $10M deal.  That's the selling price.  Now the cost of the deal
    consists of two parts--variable costs (cost of goods sold) and fixed
    costs (DEC overhead).  The variable cost is $6M and the fixed cost
    allocatable to the sale is $5M.  Do you do the sale?  The economic
    answer is in the "short run" you do the deal as long as selling price
    is greater than the variable cost.  So you lose $1m to avoid the
    opportunity cost of losing $4M by not doing the deal.  If you are still
    confused see your Econ 101 book.  And when this makes sense to you help
    DEC management get their fixed costs down so in the "long run" your
    $10M makes a profit.
    
    DEC sales reps, sell competitively.  Your competitive selling price is
    probably higher than your variable costs.  Hope DEC management gets our
    Fixed Costs in line before we go bankrupt.  Its not your job to worry
    about profit, get the best price you can, and focus on your customer.
    
    Now I can go to dinner!

re .19;

Amen to that.  We have a similar situation in PS (or EIS or whatever it's 
called this week);  we can make margins that verge on obscene, yet add up 
to a net loss by the time all the overhead gets applied.

On the other hand, if we didn't do the business, the loss would be even
larger.

\dave