Companies usually describe their sales process, if they even have one, by a sequence of sales stages describing key activities that are to be carried out by the sales person in the respective phase. I am not going to repeat my opinion on the pitfalls such a concept - focusing on the activities from the sales person’s perspective- can have in understanding where opportunities really are in the sales cycle. I think I have said it loud and clear in last Monday’s entry (September 4, 2006).
It is another odd thing I want to draw your attention to today. Quite often you can find in those sales process descriptions a sales stage called “closed lost”. The typical rule on how this is to be used is that all lost opportunities have to be put to that stage. Does this not leave the impression, that opportunities are only lost in the close phase? Where do you put the opportunities that you are losing in earlier stages of the process? Or do you really believe this never happens to you; loosing an opportunity before the close phase?
Chances are that when constructing the sales process no distinction was made between a sales stage and the status of an opportunity. The status of the opportunity though is exactly the additional data element I talked about two days ago, If the right rules are applied on how to use the opportunity status, this data become the basis for calibrating the conversion rates at each stage transition of your leaking sales funnel. The status is also an important element for “win/loss” reviews. I will come back to this topic in a future entry. I will show you then how these reviews can be used for calibrating sales methodologies. If used right, the opportunity status also allows you to benchmark how you stand with carrying opportunities in the forecast that will end up with no decision by the customer. Actually, you will be able to detect this rate for each sales stage. Be prepared the opportunity status is an element to discover a maybe painful truth. But it is worth the pain, as it can help you detect the waste of the most precious resource: time of your sales people.
What are the values you should foresee for the status of an opportunity? In my experience, the following list of values has proven sufficient to gain a wealth of additional insight on how your organization handles opportunities and the detection of potential room for improvement:
“Active”, “abandoned by us”, “abandoned by customer”, “lost to competition”, “won”.
The rules how to use these values could not be simpler. If one of the described events arrive you just change the status accordingly, but you do not change the funnel stage, the opportunity is currently in.
You then can run statistics to find out in what stage what status appears in what frequency. These statistics will allow you to detect potential flaws in the execution of your sales process. Here are a few examples of what those statistics might tell you: If you find very few opportunities with status “abandoned by us” you might want to look into how your people qualify opportunities. Qualification done correctly, should actually lead to this opportunity status quite often with opportunities in early stages. Finding the status “abandoned by us” only with opportunities in the last stage, might also hint at a not rigorous enough qualification process. Should you find the status “lost to competition” frequently with opportunities in early sales stages, check if your people detect opportunities considerably later than your competitors.
There is however an important prerequisite that these statistics lead to meaningful results. Your people must tell you the truth of what really happened. It is my experience that if your people can trust you, they will be more honest. I guess it is nothing new to you that the way you manage your people is an important factor for establishing trust. If you turn each anomaly you detect in the opportunity status statistics into an inquisition why on earth your people could let this happen, do not expect that you will be given a very accurate picture. Chances are that understanding these observations from your statistics as an opportunity for a coaching event and turn it into a learning experience for your people, so they can be do better next time, you will also get a fairer picture of what happened. The uncomfortable truth is that change management needed for introducing the rules on how to use opportunity statuses might start with you as their manager.
Who could say it better I no uncertain terms than Jeffrey Gitomer. He ran a story in one of his recent eZines entitled “Manager, put yourself to the test before you test your people.”
For many of the issues discussed so far in this Blog, change management is the essential incredient to improve the situation. In future entries, I will give you my opinion, why it is especally hard to introduce change to sales organizations.