Why CRM sucks!

Why your CRM has no hope of delivering the expected ROI and why you should probably keep it anyway.

A Customer Relationship Management (CRM) application seemed like such a great idea, didn’t it?

The rest of the organization had reaped such enormous rewards from automation, and the sales process was certainly in need of productivity improvement.

So why is it that the expected return on the (not insignificant) investment in the CRM following what seemed an exhaustive evaluation and selection process never been realized? Why does it deliver so little value to the organization? Why is it so hard to keep the data in the thing current and accurate? And why do salespeople hate it!

To understand what went wrong, let’s start by considering how we expected to benefit from a CRM in the first place:

1. Improve salespeople’s productivity
2. Ensure salespeople apply best-practice in the pursuit of sales
3. Provide everyone in the organization with a view of the customer and their interactions with the firm (360° view)
4. Provide management with access to (valuable) information

Let’s consider each of these objectives in turn.

1. Improve salespeople’s productivity

It’s hard to argue with this objective. Most business owners recognize that, compared to others in the organization, salespeople operate unproductively. Evidence of that is the fact that an average salesperson performs just two true business-development meetings a week. This is downright scary when you consider that business-development meetings are the primary driver of sales volume.

The promise of CRM, then, is to ensure that salespeople can get their non-sales responsibilities fulfilled faster — leaving them more time to sell.

In practice, this isn’t what happens, for three reasons:

1. It takes salespeople longer to enter data into the CRM than it does to use a traditional calendaring system (think Daytimer or similar)
2. The addition of a CRM is generally accompanied by the requirement for salespeople to do more clerical work than they were previously
3. A salesperson who has grown accustomed to spending most of their time on (relatively enjoyable) customer-service activities is highly unlikely to engage in (less than enjoyable) prospecting activities just because of an incremental increase in their availability of time

2. Ensure best-practice in pursuit of sales

Again, this sounds like a worthy objective. But let’s take pause and consider how, exactly, a piece of software is supposed to cause a salesperson to sell better.

Obviously, a software application won’t:

1. Equip salespeople with (technical) product knowledge
2. Train salespeople in communication principles
3. Cause salespeople to drill and role-play their sales presentations

What a CRM will do is ensure that salespeople:

1. Categorize all sales opportunities according to their location in the workflow
2. Record information about the status of opportunities

Now, if you think about it, neither of these causes salespeople to sell better. Formal categorization may be useful for management (we’ll discuss that soon) but it’s of no use to salespeople. Salespeople are perfectly capable of understanding (and recalling) where a prospect is in their decision-making process, without a complex piece of software.

Unlike accounting data, opportunity status information ages rapidly. A sales opportunity is a fluid (non-linear thing). A salesperson needs to recall the current status of an opportunity (and the opportunity’s history) for a month or so, but after that, the data becomes worthless.

3. Provide everyone in the firm with a 360° view of the customer

So, here’s the thinking:

If all notable customer interactions are recorded in the CRM, then our firm can have just one conversation with the customer — in spite of the fact that multiple parties participate (asynchronously) in this conversation

To test whether this is actually achievable in a typical organization, let’s consider the two pre-conditions for this 360° view:

1. All workflows (sales, delivery, customer service, etc) must be carefully engineered and rigidly adhered to
2. Both your organization and your customers’ organizations must embrace the idea of multiple parties participating in the one conversation — this, of course, is contrary to the idea of a single point of contact

In a typical sales environment, the salesperson essentially owns the customer relationship. Accordingly, the salesperson is involved in sales, delivery and customer service. Of course, the salesperson eschews formal workflows, and even if they didn’t, it’s all but impossible to synchronize multiple parties when the salesperson operates remote from internal resources, and those internal resources have limited capacities.

It should be obvious that the idea of a 360° customer view cannot co-exist with the idea of a single-point of customer contact. And you can guess which of these visions is embraced by most salespeople!

4. Provide management with access to valuable information

There’s no question that, without information, management is impotent.

But CRM systems in traditional sales environments do not and cannot provide management with information. Volumes of inaccurate and outdated data: yes; but information: no!

Consider how data finds its way into the CRM:

Salespeople enter it — generally long after customer interactions have occurred (Friday night, perhaps, in a hotel room, at the end of a busy week).

What’s more, in most environments, salespeople have enormous flexibility to flavor data as they enter it — and, what’s more, salespeople are actually under pressure to employ creative license (for example, if management pressures salespeople to maximize their conversion rates, it’s highly likely that they will report the existence of opportunities later in the engagement process than they otherwise would).

The sad reality is that most sales managers were better-off without the CRM. Before the CRM, sales managers had the opportunity to artfully interrogate salespeople to determine what they were up to. Today, everyone knows that the data in the CRM is two-parts rubbish — but salespeople are off the hook because they’ve followed due procedure!

What were they thinking?

Is it any wonder that a significant percentage of of organizations that have implemented a CRM report that they have failed to meet their ROI target?

So what went wrong? Why have so many smart executives made such a dumb decision?

Our contention, at Ballistix, is that, in prescribing a CRM, these executives were medicating the symptoms and ignoring the underlying disease.

The irony is that the disease — the core problem — was staring these executives in the face all along. Our imaginary executives ruminated on the question:

• How do we improve the performance of our sales process?

Without, first, stopping to ask:

• Is sales actually a process?

Had they considered this more fundamental question, our executives would probably have had to conclude that:

• No. Sales ain’t no process!

The disease … and an appropriate prescription

Elsewhere in the organization, we use the word process to mean more than just a procedure.

Consider a production environment (or a project environment, for that matter). When we use the word process the implication is that we have:

1. Division of labor (specialization)
2. Standardized routings (the path that work-in-progress follows through activities and resources)
3. Centralized scheduling (a central drumbeat that ensures synchronization of all resources)
4. A formal management regime (to compensate for the fact that specialization causes work environments to become more fragile)

If these are the four pre-requisites for process (and it’s our contention that they are), let’s consider how a sales environment scores.

Obviously, a typical sales environment falls at the first gate. And, in the absence of division-of-labor the remaining three pre-requisites become redundant.

We must resolve then that a typical sales environment is not a process. And herein lays the problem (as well as the direction of the solution).

A modern sales environment is essentially a craftshop. And a salesperson is a artisan — a craftsperson who owns not just the entire sales function but, in most cases, the entire customer interface!

If, then, the sales function is a person (not a process) does this person need a CRM? The answer is obvious:

1. They don’t need it!
2. They don’t want it!
3. And if you force it on them it will impact negatively on their productivity and on their relationship with their manager!

Of course, this line of reasoning — as well as liberating us from the requirement to spend gobs of money on a CRM — leads us to consider a more fundamental question:

Should sales remain a craftshop — or should we engineer it so that becomes a process in the true meaning of the word?

Fortunately, history helps us out here. It’s obvious that in the 100-odd years since production (and project) environments have transitioned from craftshops to true processes, productivity has increased by several orders of magnitude (measure it against whatever standard you wish: return on capital, return on labor-hours, etc). What’s more, quality has also improved — also by orders of magnitude.

So, in production environments, we’ve done the impossible we’ve simultaneously increased volume and decreased defects. Who would ever have thought that was possible 100 years ago?

If we want to improve the performance of sales then, here is our recommended approach:

1. Recognize that, today, sales is NOT a process (and admit that process-automation tools – CRM – are of little value in the absence of a process)
2. Conclude that, the key to eliminating the litany of problems that afflict the sales environment is to transform this environment from a craftshop to a true process
3. Recognize that this means:
   1. Division of labor (how about salespeople sell and other people do other stuff?)
   2. Standard routings (every opportunity is prosecuted using the same combination of activities and resource types)
   3. Centralized scheduling (all the activities that are performed in order to both originate and prosecute an opportunity are coordinated from the head-office)
   4. Formal management regime (in this new environment, there’s actually a requirement for management — and the potential for management to control what occurs on a day to day basis — imagine that!)

An engineered sales environment

Now you know what I mean when I talk about an engineered sales environment.

I’m actually suggesting that you engineer your sales environment to look like — and to operate like — a production environment (or more accurately, a project environment).

Why, I can almost hear you asking, would you want to do that?

Let’s leave the technical discussion behind for a second and explore what our clients’ sales environments look like when we’re done with them:

Salespeople sell. The most obvious characteristic of the sales environments we build is that salespeople sell. And that’s all they do. Our client’s salespeople spend all their time in the field performing (exclusively) business-development meetings.

That means that salespeople perform four face-to-face meetings a day, five days a week, week in and week out. It also means that the purpose of all of these meetings is to win a new account or to sell a new service line to an existing account (not to perform customer service or take a repeat order).

Sales coordinators own and manage sales opportunities. To enable salespeople to relinquish responsibility for non-sales activities (prospecting, solution design, proposal generation, calendar management, reporting, customer service, project management, and so on) we first transfer the ownership of all sales opportunities to sales coordinators.

Each salesperson has a sales coordinator and each sales coordinator is essentially an executive assistant. That’s right, in addition to owning sales opportunities, sales coordinators own salespeople’s calendars.

The sales coordinator manages each sales opportunity as if it were a project because … well … it is! Specifically, the sales coordinator breaks each opportunity into a sequence of activities and pushes each activity to the appropriate resource at the appropriate time.

Customer service representatives perform customer service. Salespeople are no longer responsible for managing accounts. If our client’s firm has healthy operations, customer service will improve when salespeople have no involvement with it. (The reality is that salespeople are ill-equipped to deliver good customer service.) So, the end result is that all issues and all repeat transactions are processed by the customer service team. In many cases, customer-service makes outbound calls to stimulate repeat transactions.

The quality of customer relationships improve. The new model impacts positively on customer relationships for four reasons:

1. Customer service personnel can contact existing customers by phone more frequently than salespeople ever could in the field
2. Salespeople also visit existing customers more frequently (of course, the difference is that those visits are designed to sell new service lines — not to service existing ones)
3. Customers’ issues are resolved faster
4. In this structured environment, it’s possible to enforce more rigid procedures — which enables the 360° customer view

Project leaders design solutions and lead projects through delivery. In technical sales environments, perfect hand-offs between sales and delivery are impossible. This results in salespeople becoming entangled in delivery.

Our clients resolve this by ensuring that salespeople partner with project leaders. Project leaders are technical people with an appreciation of the commercial implications of projects —and with decent communication skills.

Project leaders are responsible for the technical component of each sales opportunity (freeing salespeople to focus on the critical commercial component). Project leaders discover clients’ requirements, conceptualize and design solutions and (ultimately) chaperone projects through delivery.

More sales activity: fewer salespeople. So, this engineering thing has endowed the sales environment with quite a cast of characters! It’s intriguing, then, to note that our clients make the transition to this new model, in almost every case, without increasing payroll costs.

The reason for this is that, almost every organization has far too many salespeople! In most cases we will reduce sales teams to 20% of their previous size — but we’ll simultaneously increase the total volume of sales meetings performed by each remaining salesperson by a factor of 10 (remember that a typical salesperson performs just two true business-development meetings a week currently).

The result of 20% of the sales team performing 10-times the volume of business-development meetings is that the total volume of meetings doubles.

The remaining salespeople are redeployed to fill other roles or — if they lack the requisite capabilities — the funds released by downsizing the sales team are more than sufficient to cover the cost of additional sales-support personnel.

No increase in promotional costs. You’ll also be interested to know that, in almost every case, we can double the volume of business development meetings, without additional promotional expenditure. The reason for this is that most salespeople disqualify the greater majority of sales opportunities. Because salespeople are time-poor, they are careful to engage only with high-probability prospects (those with a budget, who are currently in the process of purchasing). This qualification (as it’s caused) is good for conversion rates, but it causes salespeople to believe that they have a chronic shortage of sales opportunities.

But qualification has far worse consequences! Qualification causes salespeople to engage late with potential customers — meaning that every selling situation becomes a bidding situation. This impacts negatively on the size of deals won and the margin earned in those deals.

Our approach to promotion, then, is not to spend more money on ads, but to eliminate qualification. We are happy for conversion rates to drop if it is balanced by:

1. A greater volume of sales
2. An increase in the size of an average sale (a total solution, instead of a commodity)
3. More margin (because our client was bidding against fewer — if any — competitors)

The case for CRM

Obviously, this engineered sales environment differs quite considerably from a typical sales environment.

But the implications for your organization are as exciting as this new model is different:

1. Twice the volume of business-development meetings (exciting, because meeting volume is the primary driver of sales)
2. Improved customer service
3. Elimination of tension between sales and delivery
4. Increased deal flow, volume and margin
5. No increase in operating expenses

Of course the critical question, at this point, is what about CRM?

With this new model, not only is there a case for CRM — but the model cannot operate without it.

However, our attitude towards CRM has undergone a subtle shift.

Previously, we looked to CRM to drive productivity improvements — and those procedural changes that did occur occurred as a consequence of the CRM implementation.

Now, we recognize that a meaningful increase in productivity requires drastic procedural changes — and that the requirement for CRM is a consequence of those changes.

Let’s summarize the four key reasons why you need a CRM in an engineered sales environment:

1. Sales coordinators need a view of the status of all opportunities
2. Opportunities must be prioritized
3. Marketing, sales and customer service must work together
4. Management needs information

1. Sales coordinators need a view of the status of all opportunities

As we’ve discussed the engineered sales environment is essentially a project environment.

The sales coordinator needs a CRM for the same reason that a project manager needs a project-management application.

Because the sales coordinator does not have face-to-fact contact with each prospect they will never have the deep (visceral) understanding of the opportunity that the salesperson does. The CRM provides the sales coordinator with a simplified model of each opportunity. This model is detailed enough only to enable the sales coordinator to synchronize the various resources that are participating in the prosecution of the opportunity.

2. Opportunities must be prioritized

Even though salespeople in traditional environments qualify aggressively, they still end-up with more in-progress opportunities than the have the capacity to manage. (Consider how many times you’ve had a salesperson clamor to perform an initial visit with you, only to discover that the salesperson lacked the capacity to provide you with a proposal within a reasonable time horizon.)

In the engineered environment, salespeople have significantly more capacity — but they still have finite capacity. This means that opportunities must be prioritized to maximize their velocity (minimize opportunity lead time).

When you consider that a salesperson may be working across 80-100 opportunities at any one point in time it’s easy to see why software is required to manage the resulting complexity.

3. Marketing, sales and customer service must work together

In point one (above) we touched on the requirement to synchronize resources within the sales function.

However, in this new environment, other functions must also synchronize with sales:

1. Marketing must ensure that there is a sufficient queue of opportunities to enable sales coordinators to keep salespeople fully utilized
2. Customer service must continue to support existing clients’ ongoing service requirements — failure to do so will obviously interfere with the organization’s ability to sell more services
3. Finance must be able to determine when invoices are required (in many complex sales environments, potential clients will buy services during the opportunity-management process)

As does the sales coordinator, these functions all require opportunity-status information. And this information must be current. It must be accurate. And it must be unambiguous.

4. Management needs information

As suggested previously, management needs information to be able to manage. In the absence of this information, a sales manager is not a manager (a hustler, perhaps, but not a manager!).

As with all other environments within the organization, the sales manager’s information requirements can be broken into three categories:

1. Status information: how many opportunities are at each state of the opportunity-management workflow?
2. Flow information: what is the velocity of opportunities (how fast are they moving)?
3. Resource utilization: what is the load on process resources (is there a bottleneck and where is it)?

The sales manager must be able to view reports that summarize these categories of information and then to drill-down to identify particular opportunities or particular resources that require attention.

What now?

If you have a CRM, then, the news is not all bad.

In and of itself, the technology will provide you with very little value. However, it happens to be a pre-requisite for a very necessary – and very beneficial – sales improvement initiative: engineering your sales environment.

My suggestion is that you do the following:

1. Make CRM usage optional for salespeople (stop trying to achieve the impossible)
2. Plan your engineered sales process (you’re welcome to solicit our assistance with this critical step)
3. Re-configure your CRM to look like it did when you first loaded it (perhaps, [a] export the address book data, [b] do a clean-install of your CRM, [c] import the address book data)
4. Provide CRM access only to sales coordinators and customer-service representatives
5. Keep customizations to an absolute minimum (only add a user-defined field if you are prepared to enforce 100% compliance with its usage)

Just DON’T, whatever you do, buy any more technology!  (If you purchased your CRM in the last 5 years, it is almost certain to be capable of doing everything that you need in order to get your new engineered sales process up and running.)

If you proceed carefully, it’s likely that you will produce the outcomes you were looking for when you initially purchased your CRM. Then you can pat yourself on the back and congratulate yourself on your foresight.

Just be warned, if your CRM vendor gets wind of your success, they’ll be knocking on your door, begging for your permission to showcase your organization as another CRM success story!