January 21, 2009

Efficient or Effective?

Is it better to be efficient or effective?

Most of us would probably choose to be both. But for many years now, the focus in sales and marketing operations, including proposal centers, has been on measures of efficiency.

And for years it hasn’t worked.

Efficient or Effective?

Is it better to be more efficient or more effective? Before we answer that question, perhaps we need to define our terms.

Efficiency is a function of the volume of work we do. By doing more work in the same amount of time, we increase our efficiency. Efficiency goes up when we implement tools and processes that increase speed—the throughput rate—or when we save time by eliminating steps that are unnecessary.

The focus of Lean Production as developed by Toyota and implemented by hundreds of companies around the world is making the operation more efficient by eliminating waste. In fact, Toyota identifies seven forms of waste—quality defects, production in excess of market demand, transportation of products during the manufacturing cycle, idle time or waiting, excess inventory, and over-engineering the design. Obviously, these forms of waste are specific to a manufacturing environment, but the concepts underlying Lean Principles have been applied to knowledge work as well.

Effectiveness is a function of the results we get. For people who regularly read these messages, effectiveness is most likely to come from improving the way the sales organization (including the proposal operation) works. By implementing best practices, by working in ways that generate measurable improvements in results, we increase the size of the deals we’re working on, we decrease the duration of the sales cycle, or we increase the percentage of deals we win.

Efficiency improvements are worthwhile. There’s no debating that fact. But the risk is that the improvements to work methods—the increased efficiency we achieve—fails to produce the right results, which for a sales operation would be winning business. In that case, we are efficiently moving ourselves toward failure.

Recent surveys of senior executives have found widespread dissatisfaction with the millions invested in software intended to make the sales process more efficient. These sales force automation (SFA) or customer relationship management (CRM) systems were bought with the hope that they would automate and streamline major chunks of the sales organization’s work, making them more efficient.

They did that, all right. The problem is that the kinds of efficiencies they introduced had virtually no impact on effectiveness. With these SFA/CRM systems we can now create a pretty picture of the pipeline or produce a management report much faster. But we’re not able to close deals any better than before. In fact, research published by the Gartner Group, Aberdeen Group, and Yankee Group all indicate that most senior executives do not believe the investment in SFA or CRM has produced better results. For example, a Yankee Group found that 77% of the respondents said they would like to create more persuasive proposals, only 34% thought their SFA/CRM system helped them do a good job of that. Similarly, 49% rated their sales team’s ability to find appropriate marketing materials for a specific customer situation as very bad or bad, even though 86% thought that doing so was highly desirable.

For sales organizations the real breakthroughs come from improving effectiveness. For too long we have wasted time and resources in pursuit of the wrong goal. Merely automating an aspect of our work without also improving the results we get is a short-term gain. Applying the right methodologies to generate better results is the foundation for sustainable competitive advantage.

In a slow economy, senior sales executives want to help their sales people increase their closing or win rate, improve their ability to sell solutions, increase the value of contracts or the size of deals being sold, and shorten the length of the sales cycle. Those are measures of effectiveness, and if the typical sales manager can achieve even one of those, that manager won’t care a bit if efficiency is less than optimal. However, in the ideal world you would be able to get both: greater efficiency and improved effectiveness.

As you might imagine, we’re proud to say that our proposal automation tools within Sant Suite increase efficiency and dramatically improve effectiveness. And we have the research to prove it.


Mark Buzan said...

These are great but when are you going to go back to producing these in podcast format?

Brian Vass said...

Mark, thanks for the comment. I'm glad you like the audio podcasts. We hope to record another round of podcasts but I cannot commit to a date at this time. Stay tuned!