----------------------------------------------------Business Index & ASAP------ AUTHOR(s): Amisano, Guy TITLE(s): Wouldn't it be nice? (shifting focus from volume only to volume and margin) (Computer Close-Up) Summary: The beverage industry needs to shift to 'quality-oriented' and 'statistical process control' (SPC) management techniques to remain profitable. Quality-oriented management refers to the idea that quality is an elusive, ongoing effort. SPC is the measurement of all raw materials, labor and equipment used in the making of a quality product. SPC also allows workers to receive statistical feedback on the profitability of the product. Beverage World p64(1) August 1992 v111 n1521 Suppose we shifted our focus from volume only to volume and margin, and provided our line managers the necessary data to make ongoing advancements. This is a pop quiz. It's multiple choice: What do you do to a sales rep who dumps hundreds of cases into a customer's back room on the very last day of the promotion at your deepest discount price? Answers: A) Pay him his commission. B) Praise his outstanding sales performance. C) Bring to his attention the fact that he just wasted a lot of money by selling in product on deal which will be retailed at regular shelf prices. It is a perplexing question, but it illustrates, if nothing else, that the game has changed. Traditional sales management techniques--ever refined to move volume--are ill-suited to deal with the problem of managing value. Maybe it's time to recognize that line sales people and their immediate supervisors, merely by pursuing their own ends, exert tremendous--some would say disproportionate--influence on the ultimate profitability of a company. Policy statements, parameters, exception reports and other external devices to control profitability are of minimal value when neither the motive nor the means to manage value exists in the system itself. (Owners need only remember the last time that a hot volume quarter was followed by a shocking P and L.) But there is a way. There is a management technique--pioneered by an American, W. E. Deming, and used by the Japanese since the late 1940s--to build consumer products of ever-increasing quality and affordability. Deming teaches that quality can be achieved and improved for any product or process, and selling beverages is no exception. "Quality-oriented" and "Statistical Process Control (SPC)" are terms which will seem pretty nonsensical to sales professionals, but they are well understood on the modern manufacturing floor. Quality-oriented refers to a philosophy that sees quality as an ongoing endeavor, something to be continuously improved but never fully achieved. SPC refers to the ongoing measurement of the "system," and how variables in the system (such as raw materials, handling equipment, machines and people) affect the quality of the product. SPC also is a technique of pushing this statistical feedback all the way out to the people on the line, the people who actually run the system. The operation of a quality-oriented organization requires a new kind of relationship between top management and line managers and workers. Education, feedback, personal responsibility and authority displace quotas, reviews and other forms of supervisory control. There is, in effect, a new form of accountability to the product and, ultimately, to the customer. Net net? Cheaper and better] Happy customers] Competitive advantage] Let's transpose this management methodology--with a slight stretch of the imagination--to the sales organization. The "system" is the marketplace, in which the "process" of buying and selling yields a "product," which is profit (the dearest concern of owners, the ultimate customers). Suppose that we shifted our focus from volume only to volume and margin. We would carefully teach our line managers--and, perhaps, learn from them as well--about the variables and the product. We also would provide them both the statistical feedback necessary to continuously measure the process (SPC) and the authority to continuously improve it based on those measurements. We would then have a quality-oriented sales organization whose primary and continuing focus would be on improving profits (the product) and not just volume. Line managers would feel as if they actually were running the business because, indeed, they would be. Statistical feedback would show them, with increasing precision, where and how their own initiatives affect the system. They would quickly see the out-of-line variables--wasteful price promotion, mismatches of product to market or channel, unproductive capital investments, etcetera--and would possess the authority to adjust the system without unnecessary and cumbersome loops through the company hierarchy. Their accountability would be to the product. They would themselves be measured and compensated for quality volume and margin). *Net net? Greater volume and share] Higher profits] Energized sales managers] Happy customers] Competitive advantage] Is this kind of management method appropriate for you? It will be costly. It will mean a shift in culture from volume" to "value," from "most" to "best." It will displace some high level managers who cannot accept the distribution of authority. It will require significant investments in hardware and software to push vital statistical data from the centralized "mainframe" out to "the street." It will take time to educate (about the method) and train (in the use of the tools). Most importantly, it will require resolute and complete commitment from top management. A tall order? Certainly. Worth the trouble? If you subscribe to the notion that volume and share are the only considerations, and you are prepared to risk the company to achieve them, then, probably not. You won't need to change anything. But if you'd rather have your people compete with their eyes wide open, conscious of efficiency and dedicated to value, then, very definitely, you will find the journey most worthwhile.