Is it possible to apply the principle of first time right (FTR) in a sales context? This two-part article looks at what happens when companies do just that. Part one defined FTR in sales, and outlined some of the obvious advantages. Part two looks at FTR in sales’ effect on revenue, profits, and productivity.
An outcome of non-FTR sales is lost business or revenue. Companies often overlook this, perhaps because they have never measured FTR in sales, and hence are unaware of what they are losing. One company noticed that only about 20 percent of the sales applications brought by its sales people were FTR. In other words, in 80 percent of the sales applications, the company had to go back to the customer more than once to complete some requirement that was missed the first time. What was really worrisome to the company was that nearly half of those 80 percent had changed their mind when the company went back to them and were no longer interested in buying.
There could be several reasons for the customers having changed their minds. Some of them felt they had found a better deal with a competitor, some did not need the product any longer, while some customers actually said that their first impression was that here was a company that couldn’t do its job right the first time, and they didn’t want to deal with such a company.
Although the reasons were several, the impact on the company was serious—lost business or lost revenue. Its revenue was about 40-percent lower than what it could have been if only its sales people did their jobs right the first time (with the same number of sales applications from the same number of customers, mind you). In the CEO’s words, “This was money almost in our hands, that we were unable to hold on to.”
The company realized that it was running after customers and sales applications, only to put them into a leaking bucket, where a large percentage of them would not result in revenue to the company. The company decided to do something about it. As the CEO put it, “What’s the point in running after more customers and more sales if most of them don’t result in revenue? Instead, can we must first figure out a way to convert a much larger proportion of the ‘nearly-done’ deals we have on hand to ‘done’ deals.”
The company introduced a serious training program on FTR for all its sales people, beginning with the senior levels and working down to the “feet on the street” employees. It also trained distributors and agents. A significant part of sales people’s and distributors’ performance appraisals and incentives were linked to FTR sales and not merely total sales.
In a few months, the company’s efforts started paying off. The percent of FTR applications to total sales applications sourced went from 20 percent to more than 90 percent. A year later, the CEO acknowledged that the company’s revenue for the year was 35-percent higher than what it would have been otherwise, solely because of the increase in FTR sales.
The effect on profit was even more spectacular. The company estimated that its profit for the year was about 50 percent higher than what it would have otherwise been—given that, now, an overwhelming majority of sales applications were FTR. Compare this to the situation a year ago, when 80 percent of the applications were incorrect or incomplete, calling for additional costs due to rework. Even after incurring this cost, half of the non-FTR applications never got converted into actual sales.
The additional revenue and profits were achieved with the same number of customers and sales applications, at no additional cost and no additional sales effort (in fact, with significantly less effort because the effort that was earlier made on rework was now almost entirely eliminated).
Over time, the increasing FTR also led to dramatic improvement in sales productivity. That is, the number of sales successfully closed per salesperson or per distributor each week. This was logical because all the time that was previously spent on rework and multiple trips to the customer to correct and complete the same incorrect or incomplete sales application was now freed up for new FTR sales.
We believe that the impact of FTR on morale of employees and distributors is also positive. Seeing their sales numbers grow with every unit of effort is always more satisfying to a salesperson than spending time and effort on rework.
The most difficult part in implementing FTR was not in defining or measuring it, but overcoming mental blocks. A large services company with nearly nine million customers decided to measure the effect of FTR of sales. Everybody made the right noises in meetings that FTR was important and should be measured. However, when we tried to actually measure FTR and make salespeople accountable for it, it became obvious that some of the seniors, whose involvement was vital, were not serious. These were people with more than 20 years of selling experience in the industry. They had worked with several large industry players, including the market leader. In their decades of selling, they had never heard of the concept of FTR in sales, let alone it being measured—or being held accountable for it.
It took months of dogged persuasion. However, I suspect what really convinced the skeptics were the results. Who doesn’t like more sales (and bonuses) without more effort? As with many other things in life, perhaps most of us are convinced only when we measure and see the results for ourselves.
During our experimental phase, we learned an important lesson. I am sharing it here so you don’t have to learn it the hard way, as we did. Some of us tried to take a shortcut. In many companies, there is an attitude that sales is a sacred cow that must not be bothered by mundane things (such as FTR), and this company was no exception. Instead of “burdening” sales people with the task of doing their jobs right the first time, one company let sales continue to bring in a high proportion of junk (read: incorrect and incomplete sales applications) and put an army of operations staff to separate the good from the bad. The operations staff was also responsible for returning to the customers to get missing documents or information.
After wasting a few months with this arrangement, the company realized that neither FTR nor revenue was increasing. Customers were angrier than before because now they had to deal with different people from the company for the same purchase. These people didn’t seem to talk to each other, and often the customer had to repeat the same story separately to different people. Naturally, many customers started taking their business elsewhere.
The company realized that it was only fooling itself. It learned the important lesson that a job must be done right the first time by the person whose job it is in the first place. Otherwise, it is not FTR. Separating the good from the bad, whether it is done by sales or operations, is not FTR. The company realized that there was no option but for the sales department to take ownership of sales and the customer. It was only after this realization that the company started truly working toward FTR in sales.
We learned (again the hard way) that FTR by itself is merely an enabler (though an important enabler) and not an end in itself. When the company started using FTR as a measure of sales people’s performance, the FTR numbers in several locations started suspiciously improving. Some of the numbers seemed too good to be true. On investigation, it was found that some of them were cooked to make the charts look good.
After this experience, the company, while continuing to retain FTR as one of the performance measures for sales, also started linking the input measure (e.g., percent of FTR sales applications) to one or more of the five measureable outcomes described in part one this article. The measureable outcomes of FTR in sales are reduced cost of rework, and contribution to customer satisfaction, revenue, profits, and sales productivity. Once this link was done, there was no incentive to cook up the FTR percent numbers because a salesperson reporting high FTR would also need to show its impact on one or more of these five outcomes. Over a period of time, sales people realized that FTR was helping them and the company to achieve higher revenue, profits, and bonuses. This was when the true pursuit of FTR in sales began in the company.
If you are a CEO or business leader, remember that often the company pays for sales efforts—irrespective of whether the sales efforts result in revenue. For the companies in the above examples, it was only when the CEOs became serious about FTR in sales, and made their seriousness known, that others in the companies become serious. Once convinced, the CEOs ensured that training, performance measurement, remuneration, and bonuses for sales people at all levels, including distributors, was tied to FTR. The FTR-increase examples mentioned here were the result of structured, time-bound, quality-improvement projects sponsored by the CEO and championed by the company’s sales leader. We also learned through experience that FTR is not merely a measure, but a culture. An companywide culture that values everybody in every function doing their jobs right the first time can give any organization a huge edge over its competition. But only the CEO can build this culture.
If you are the quality leader, this could be your next big project—an opportunity to bring huge value to the business. In the examples above, it was the quality leader who initially helped the business define and measure FTR, acted as a culture change-agent to make the organization serious about it, and facilitated the FTR improvement project. The project was run as a pilot in a few selected locations to begin with. After seeing the results of the pilot, it was spread to all locations across the company.
So, regardless of what business you are in, start measuring FTR, make your sales leaders accountable for it, and see the results.