1. McKinsey on Marketing
An in-depth look at the challenges facing senior managers Published by The McKinsey Quarterly July 2004
Organizing for CRM
Companies should treat a customer-relationship-management solution as a product or service and
its users as internal customers—by making it valuable, pricing appropriately, advertising, and providing
Article at a glance: Most large companies have some form of customer-relationship-management (CRM)
software, but more than half of them are disappointed with it. Critics blame the software, but the real problem
could be a failure to address the organizational challenges posed by any new initiative. Top management often
assigns executives with other primary responsibilities to take charge of the CRM effort on a temporary basis,
and they may resort to heavy-handed mandates to get frontline staff to use the new tools. Instead, CRM
should be treated as a product or service targeted at internal customers.
The take-away: CRM initiatives have a better chance of succeeding when accountability is clear and front-
line users get adequate training and incentives.
Organizing for CRM ���
Anupam Agarwal, David P Harding,
and Jeffrey R. Schumacher
What’s left to say about customer-relationship- �������������������������� ��
management (CRM) solutions?1 Business commentators
have spilled oceans of ink describing the gut-wrenching ������������������������������ ��
rise and fall of these programs’ reputations. Most large
companies have implemented some form of CRM, and ������������������������������� ��
many have followed their early disappointments with full-
scale CRM remediation efforts.2 ����������������������� ��
Indeed, more than half of all companies investing in ������������������������������� ���������������������������
CRM consider it a disappointment, according to several
recent surveys. What’s wrong? It’s not that companies
are spending wildly; many of them build robust business ��������������������������������������������������
cases before making their investments, which at this point
are likely to be incremental. Nor does the fault lie with
the technology itself—most systems provide the required
features. Companies have lavished attention on business of the money invested and the opportunity costs of failure.
and technology issues because both were glaring early Instead, companies should view CRM as a product or
impediments to CRM’s effectiveness. service targeted at internal customers. Like any product
or service, it must be infused with clearly defined value,
The core of the problem now is that too few companies priced appropriately, advertised, and provided with after-
are paying enough attention to the organizational sales support.
challenges inherent in any CRM initiative, whether it
involves delivering a new solution, fixing a foundering In our experience, no temporary centralized team,
application, or tweaking a functioning CRM capability. however competent and well-intentioned, gets everything
These challenges stem from the wide variety of people— right. What is needed to achieve long-term business
frontline sales and service providers, business analysts, results is an infrastructure grounded in accountability, as
IT professionals, and a broad array of managers, to well as supporting initiatives to motivate, train, and track
name just a few—who must collaborate to ensure that the many employees in diverse positions throughout
a CRM program is defined, delivered, and deployed. This the organization who make or break the CRM program.
diversity creates accountability issues and complicates Attention to these perennial organizational challenges,
the challenge of persuading employees—particularly the which are easy to overlook in the rush to fix the technology
sales force—to embrace CRM. and business-alignment issues, correlates strongly with
success in CRM (Exhibit 1).3 Finally, CRM’s impact on
Solving these organizational problems requires a company frontline employees is so significant and potentially jarring
to go beyond the vigorous exhortations and heavy-handed that clear, forceful messages from senior executives are
rollouts that many have relied on—understandably, in view critical to enforcing accountability and motivating change.
CRM helps companies to plan and analyze their marketing campaigns, to identify sales leads, and to manage their customer contacts and
Turning around a CRM program (or, for the lucky few, getting it right the first time) typically involves focusing on a few clear business objectives,
building or reconstructing the technology to meet them, and realigning the organization to help it embrace new tools and processes. See
Manuel Ebner, Arthur Hu, Daniel Levitt, and Jim McCrory, “How to rescue CRM, The McKinsey Quarterly, 2002 special edition: Technology
after the bubble, pp. 48–57 (www.mckinseyquarterly.com/links/13061).
The authors heard this message, loud and clear, from executives and middle managers in the insurance industry, whom we recently
interviewed and surveyed about the factors influencing the successes and failures of their CRM programs. Similarly, a recent Forrester Research
study found that resistance to process change was the leading obstacle to CRM’s success at 111 large North American companies.
Organizing for CRM
The organizational challenge Excessive reliance on technology specialists helped sink
Building, modifying, or running a CRM solution involves a some early CRM initiatives. In the past few years, some
large cast of characters. It can include systems experts; organizations have overcompensated—so much so that
business analysts; backroom operations specialists; many capabilities are now defined by the business side,
managers who use customized reports to fine-tune without enough participation from IT. Too often, the
sales, marketing, and customer service strategies; and results resemble those experienced by one large media
frontline sales and service people, who are responsible company that developed a strong business case with
for inputting much of the data the CRM initiative limited participation by its IT organization, took several
needs to yield rich insights and for acting on them. The months to realize that achieving its goals with the chosen
breadth and scope of these constituencies create two technology would take more than a year, and ultimately
organizational problems: identifying who is accountable abandoned its original plans and began redefining the
for which results and truly achieving the broad behavioral program.
change that success requires (Exhibit 2).
Resistance to change
Fuzzy accountability The large number of stakeholders involved with CRM
When the responsibility for different aspects of the doesn’t just complicate accountability; it also magnifies
solution rests in different places, it’s often hard to muster the difficulty of effecting behavioral change, particularly
the organizational resolve to bring in the right people, in salespeople but also among managers and business
unclog bottlenecks, and make effective decisions. At analysts—all groups whose recalcitrance can cripple an
worst, companies wind up with the kinds of problems initiative. Consider the problem of managing the sales
that plagued Soviet-style planned economies: a lack of pipeline. CRM helps managers to see quickly when
ownership, a CRM to choose the right features, and an
failure salespeople are not hitting their targets and remedial
Exhibit 2 of 4
inability to meet performance goals. action is necessary. But management can act only when
Location of primary organizational obstacles associated with CRM activities1
CEO COO CIO CMO2 Head of sales
Region C Worldwide/corporate operations Business unit 3
Region B IT Operations Business unit 2
Region A Business unit 1
Frontline users Operations Frontline users
Sales Sales Architecture Marketing Sales
Marketing Marketing Infrastructure Service Marketing
Service Service Quality Service
Organizational obstacles to implementing CRM
Lack of commitment, Confusion about Lack of motivation,
communication roles, responsibilities, participation
1 Actual functions and organization vary by individual company.
2 Head of CRM program often reports to chief marketing officer.
Organizing for CRM
salespeople input timely, accurate data and analysts Sending and receiving
generate the right reports. If management doesn’t Instead of holding businesspeople accountable for
augment the underlying performance metrics, frontline determining the requirements of a CRM solution and IT
employees are likely to go on behaving in the old way. personnel for developing it, companies should make both
parties responsible for all of its aspects, from designing
Yet it’s easy to see why salespeople and managers might process shifts to managing change to implementing
drag their feet: technology. At the same time, companies must carefully
delineate the responsibility for sending and receiving the
• Salespeople are inherently skeptical because they solution as a whole (Exhibit 3).
think that information flows in one direction only
(which it often does) and is therefore unlikely to The sending team’s function is to define a solution that
benefit them, even if it helps the company. meets the objectives specified in the business case,
to estimate the level of effort required to implement
• Salespeople also fear that new systems and the solution, and then to deliver it. “Delivery” includes
bureaucracies will bog them down. establishing the architecture of the system, building and
testing it, and supporting its deployment, particularly the
• Managers, on the other hand, often recognize systems-training programs that help launch it in the field.
the potential long-term benefits of a successful When all the elements of this broad mandate show up in
CRM program but worry that they will be penalized a sending team’s cost assessments, executives get fewer
if short-term results suffer during implementation. surprises later on.
The predictable result is that CRM systems are used As for the receiving team, it provides the business case
little or not at all. In the insurance industry, for example, and the usability requirements. Then it leads the rollout
more than a third of the CRM modules developed by communicating to internal customers the goals and
during the past three years in areas such as marketing- likely implications of the program, assessing how the
campaign management, data analysis, and opportunity behavior of end users must change to take advantage
management lie dormant. Many companies have of the proposed solution (and therefore what behavioral
responded by punishing salespeople who don’t “get training is necessary), and implementing the sending
with the program. Heavy-handed approaches such as
” team’s systems-training plans. When an initiative involves
docking commissions or circulating internal blacklists placing new technology in the field, the receiving team
of nonadopters may bump up compliance, but only in a also ensures that the infrastructure is ready for use, that
grudging and mechanical way that isn’t likely to exploit support is available for customizing software to local
the initiative’s full potential. Training—another typical needs, and that data can be moved to the new system. All
response—often overwhelms users because it involves of these actions have a cost, and the receiving team, like
just a day or two of classroom immersion in the new the sending team, should estimate the effort required to
features. carry out its work before getting started.
Frontline solutions The sending-and-receiving infrastructure addresses
Overcoming organizational roadblocks requires a more accountability issues in two critical ways:
elegant approach than pressuring uncooperative business
and IT personnel into building a solution and then forcing • Each team’s cost estimates make clear to the
skeptical employees to use it. A better way is to establish sponsoring business executive what he or she
an organizational structure that mimics a market in which is signing up for while also clarifying the teams’
constituencies alternately take on the role of buyer and responsibilities. If the estimated benefits of the
seller or, in this case, “sender” (delivering the solution) business case appear too small or squishy to
and “receiver” (implementing it). This approach creates justify the cost, executives have a solid reason for
accountability and motivates employees to embrace backing off from weak initiatives.
Organizing for CRM
Exhibit 3 of 4
Mixing business with technology
Sending Business-unit/regional operations
Key functions Key functions
• Define business needs, • Prepare infrastructure1
usability requirements • Ensure localization
Key functions Key functions • Document business support for software
• Define solutions • Create functional/
processes • Install software
• Consolidate requirements technical design • Conduct user-acceptance • Manage regional IT
• Verify/accept developed • Build solution
solution architecture • Develop communications • Ensure smooth migration
• Develop communi- • Develop system
and behavioral-training of data
cations and systems- • Test system
programs for users
training programs • Manage software
• Execute change-
• Manage organizational, versions
• Coordinate deployment
• Ensure readiness for
• Deploy system
launch in field
1 Includes determining hardware requirements and consolidation, if necessary.
• Since each team includes both IT and business- • Responsibility for systems training—which includes
people, it becomes harder for either side to developing training material, running the sessions,
define its scope of accountability too narrowly. and providing follow-up support—should be owned by
Finger-pointing by senders or receivers is of the sending team.
course possible, but when problems arise, execu-
tives should hold teams accountable by checking • Members of the receiving team should take the lead
whether the receivers were unprepared, the in behavioral training, which encompasses issues such
senders failed to deliver, or both. as changing job responsibilities, new incentive plans
and reporting relationships, and procedural changes,
When a large global technology company whose including new processes for signing off on decisions.
executives coined the sending-and-receiving terminology
adopted this structure in its CRM program, it overcame Behavioral training is the more difficult to accomplish—and
the weak accountability that had engendered budget deserves twice as much attention—because it addresses
overruns, slipping delivery dates, “scope creep, and,
” deeply ingrained habits affecting all aspects of a worker’s
ultimately, disappointment. Because accountability and job. A major pharmaceutical company’s training efforts
ownership were clear, often-overlooked issues such as illustrate effective behavioral training. The company asked
organizational implications and the communication of its sales reps to move from a uniform selling approach to
the program’s goals to internal customers stayed front one that was tailored to doctors’ attitudes. It chose three
and center. key areas for the pilot effort and sent teams of people
from headquarters to ride with the sales reps during the
The sending-and-receiving structure also helps bring first few days. In this way, it got the sales reps up to
order to CRM’s training challenges, which frequently speed quickly while allowing the management to see the
arise because most CRM solutions create a need for program in action and to make real-time adjustments.
both systems and behavioral training: Targeted follow-up visits tracked progress and provided
Organizing for CRM
remedial support. In many cases, the pilots yielded sales metrics such as revenue, lead-conversion rates, system
increases of more than 50 percent. usage, customer and user satisfaction, and margins.
Dashboard metrics that reflect the sources of value
Helping CRM sell itself propelling the initiative roll up into a high-level view for
The work of the sending and receiving teams should executives.4 Often, results vary by region (Exhibit 4).
go on enticing internal customers to buy into the CRM Comparisons promote the sharing of best practices
solution long after the teams have ceased to operate. and the fine-tuning of goals and rewards for specific
Research into organizational behavior suggests that regions and personnel. A retail bank seeking to expand
frontline employees will change only if they know why an its business in credit cards, for example, set and tracked
effort is important and what’s in it for them: ambitious weekly cross-selling targets down to the
individual branch and call-center employee and rewarded
• Show salespeople how a CRM initiative could those who met them. This highly focused effort yielded
reduce the number of processes they deal with a 15 percent sales jump for the targeted products in just
or of systems they use to enter data, improve eight weeks.
their collaboration with other sales reps, skim off
customer data that would help them develop Not every initiative yields immediate gratification. A
better leads, and reduce the time needed to company planning such a program should take into
generate quotations or obtain information about account the potential for productivity to drop during the
products and competitors. deployment period, which often lasts as long as three
months. Indeed, without some leeway, the motivation
• Target successful, influential salespeople as to give the new system a real shot at success may fall
early adopters. Their success gives the CRM effort because frontline employees feel that they can’t risk
the credibility that drives widespread adoption. becoming less productive. In extreme cases, when a
big productivity drop seems likely, it’s vital to involve
Consider the experience of a department store retailer the CEO and CFO early so that they can help manage
that identified “aspirational” shoppers—those who shop external expectations.
infrequently but aspire to do so more often when their
incomes grow—as key sources of revenue growth. This The senior executive’s role
retailer also observed that while loyalty programs and Although many organizational challenges impeding CRM
periodic promotions helped pull in such customers, they require solutions from the front lines, senior executives
reacted particularly well to personalized service. A CRM also have important responsibilities. For starters, only
initiative provided sales associates in stores with lists of the CEO and the business-unit heads (or their chief
target customers they could personally call and offer to lieutenants) have the authority to establish a sending-and-
assist with new merchandise, styles, colors, sizes, and receiving infrastructure that cuts across organizations.
the like. For sales associates, the message was, “We Moreover, like marathoners running a difficult course,
have given you tools that will help you follow the lead CRM teams require cheerleading for motivation, fuel
of your most successful colleagues and build long-term to keep going, and clear direction to stay on course.
relationships with customers who will earn you bigger Senior executives are uniquely positioned to provide this
commissions. The program yielded a 10 percent increase
” assistance by:
in revenue from these target customers.
• Articulating a specific business rationale—
Incentives provide important reinforcement, and we’ve improving customer satisfaction to boost retention
found that quite specific goals are the most likely to and keep competitors from stealing market
inspire the desired behavior. The best CRM initiatives share, for example, or improving cross-selling rates
thus employ detailed “dashboards” that track changes in to achieve annual revenue targets.
Of course, metrics are most helpful for companies that have already undertaken due diligence to determine which business levers are most
important to them and how much value each can create.