TELECONFERENCE COMPANION                                          AUGUST 2005

SALES EXECUTIVE COUNCIL                                                                                                   ...
SALES EXECUTIVE COUNCIL                                                                                                   ...
SALES EXECUTIVE COUNCIL                                                                                                   ...
SALES EXECUTIVE COUNCIL                                                                                                  P...
SALES EXECUTIVE COUNCIL                                                                                                   ...
SALES EXECUTIVE COUNCIL                                                                                                   ...
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Peter Longo Scorecard Article


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Peter Longo Scorecard Article

  1. 1. TELECONFERENCE COMPANION AUGUST 2005 MCKESSON ’S DYNAMIC OPPORTUNITY SCORECARD This report summarizes questions answered during the Sales Executive Council’s February 2004 teleconference on McKesson’s Dynamic Opportunity Scorecard, as TABLE OF CONTENTS featured in the Council’s strategic research initiative, Shifting the I. Background: Understanding the Issue (page 1) Performance Curve. The architect of the Dynamic Opportunity II. Key Themes of the Teleconference Question and Answer Discussion Scorecard, Peter Longo, Vice President of Sales, participated in a Theme # 1: Developing and Introducing Dynamic Opportunity Scorecards question-and-answer session (page 2) regarding the scorecard’s creation, implementation, and utilization. Theme #2: Reinforcing Usage and Preventing Manipulation This document summarizes the (page 3) Q&A discussion. Theme #3: Leveraging Scorecards to Achieve Account Planning and Replay Instructions Forecasting Benefits Members may listen to a digital (page 4) replay of this call in its entirety Theme #4: Supporting Sales Manager Responsibilities by dialing +1.888-843-8996 (page 5) toll-free within the United States or +1.630-652-3044 for international calls. When III. Additional Questions Answered during the Teleconference (page 6) prompted, please enter passcode 8459378#. During the IV. Additional Resources (page 6) teleconference, listeners may follow the instructions outlined below. ü To pause the call—Press 3 ü To rewind the call—Press 1 ü To fast-forward the call—Press 2 For more information about this replay and all other archived teleconferences, please visit and point your browser to the Upcoming and Archived Teleconferences section of the Web site under the Member Events heading. © 2005 Corporate Executive Board SEC13DEROP
  2. 2. SALES EXECUTIVE COUNCIL PAGE 1 MCKESSON’S DYNAMIC OPPORTUNITY SCORECARD : TELECONFERENCE COMPANION This document serves as a companion to the Sales Executive Council’s February 2004 teleconference on McKesson Corporation’s dynamic opportunity scorecard. Themes summarized below and on the following pages represent listeners’ questions and responses from Peter Longo, McKesson’s Vice President of Sales and creator of the dynamic opportunity scorecard. To learn more about McKesson’s dynamic opportunity scorecard, please dial in to the teleconference replay or refer to the 2004 Council research Shifting the Performance Curve. BACKGROUND: UNDERSTANDING THE ISSUE Key Findings: As sales organizations migrate to solutions -oriented sales strategies, rep skill gaps often widen as core performers increasingly encounter difficulties achieving performance standards . In pursuit of complex In solutions-oriented business sales , reps may confront the following two significant challenges: sales environments, Ÿ Allocating time and resources to only the most profitable sales opportunities, rather than all sales core sales reps often opportunities struggle to identify highest potential Ÿ Securing critical customer information essential to closing sales deals opportunities and Indeed, research indicates that high-performing reps in s olutions -selling environments may produce as allocate time and much as five times more revenue than reps lacking the ability to prioritize and execute high-value sales resources accordingly. activities.i This skill gap necessitates that companies systematize their sales processes in accordance Moreover, reps’ with known success factors demonstrated by high-performing sales reps and create decision-making inability to secure structures enabling core-performing reps to target the most valuable customer opportunities . essential customer information may Through the course of the Council’s principal research initiative, Shifting the Performance Curve, Council decrease their staff identified one company in particular that created a sales process which exports high-performance probability of closing activities to the core sales force. Specifically, McKesson Corporation designed a results -oriented tool enabling core sales reps to improve opportunity management decisions , as detailed below. sales deals. CASE SNAPSHOT: MC KESSON’S DYNAMIC OPPORTUNITY SCORECARD McKesson’s dynamic opportunity scorecard consists of customer attributes that correlate to sales deals likely to yield successful outcomes. The scorecard requires reps to score each deal in progress and update the score as they collect more information, rewarding reps for achieving goals rather than completing activities . Based on the collected data, the scorecard helps McKesson’s dynamic reps and managers systematically determine whether to continue pursuit of opportunity scorecard or walk away from an opportunity. Perhaps most importantly, the scorecard helps reps improve facilitates manager coaching around clear action-steps necessary for win rates and boost advancing sales opportunities. efficiency by providing reps and managers with clear indications Given overwhelming member interest in this case study and the significant number of members of which customer implementing their own scorecards based on McKesson’s model, the Council arranged this opportunities to teleconference to discuss the practice in greater depth as well as to allow members to pose questions pursue and which to directly to the creator of the Dynamic Opportunity Scorecard, McKesson’s Vice President of Sales, Peter Longo. avoid. While the Council’s research Shifting the Performance Curve details the scorecard’s key features and role in supporting manager coaching, the following themes provide a snapshot of new discussion points that emerged during the question-and-answer portion of the teleconference; the pages that follow provide additional insights into the below concepts: • Developing and introducing dynamic opportunity scorecards • Reinforcing usage and preventing manipulation • Leveraging scorecards to achieve account planning and forecasting benefits • Supporting sales manager responsibilities i Sales Executive Council. “Shifting the Performance Curve: Exporting High-Performance Sales Disciplines to the Core.” The Corporate Executive Board (2004). © 2005 Corporate Executive Board
  3. 3. SALES EXECUTIVE COUNCIL PAGE 2 McKesson’s Dynamic Opportunity Scorecard: Teleconference Companion K EY THEMES OF THE TELECONFERENCE Q UESTION-AND-ANSWER S ESSION THEME #1: DEVELOPING AND INTRODUCING DYNAMIC OPPORTUNITY SCORECARDS McKesson initially developed its dynamic opportunity scorecard to improve the visibility and accuracy of internal data and revenue forecasting mechanisms. In rolling out the scorecard, the company stressed the simplicity of the tool and positioned it as a guide to practices already in place, rather than a tool creating new work for managers and reps. While the company originally piloted the scorecard in one division, executives revisited the creation and rollout process a year later to refine scorecard usage for a second division. The process below outlines the steps McKesson’s Vice President of Sales Peter Longo orchestrated to create the original scorecard, as well as key procedural changes he enacted during development of the second scorecard to improve implementation and sales force buy-in. S TEP D ESCRIPTION KEY PROCEDURAL CHANGES McKesson executives selected a total of 15 employees to participate Change : Identify influential in the initial scorecard-creation process. Executives identified these During the second round of employees within employees by conducting an internal search for sales reps and development, McKesson sales division managers exhibiting above-average performance competencies and instructed each region to demonstrating insightful knowledge of their cus tomer bases and sales designate a sales rep as its processes. regional representative at the scorecard creation McKesson invited the above mentioned sales staff to a two-day, off-site sessions. strategic brainstorming session in Las Vegas . In addition, McKesson Select off-site employed the services of a third-party sales consultant to mediate In addition, the Vice location and discussions and ensure time discipline for the group. President of Sales invited meeting facilitator leaders of internal corporate functions, such as Day 1: Brainstorming—With the consultant recording the session, the Marketing, to ensure Vice President of Sales asked the assembled group to list all potential companywide input and factors that prove critical to successful deal closures. support. Determine Day 2: Ranking—The group ranked and weighted the elements specific factors discussed during the previous day to identify the 20 most critical factors Benefit: essential to deal affecting deal success. The consultant specifically proved helpful in By facilitating regional success forcing the group to conclude its deliberations by the end of the ownership of the nomination allocated time period. process and including cross-functional executives, Following the completion of the two-day session, assembled McKesson helped gain key participants returned to their respective regional sales groups and stakeholder buy-in of the Utilize assembled shared the list of 20 factors with local reps and managers . McKesson final scorecard composition participants to requested that participants solicit feedback on the ranked factors and and improve the scorecard’s solicit their importance to deal success. ability to enable division-wide cross-functional coordination input on high-potential deals. Two weeks following the off-site session, participating reps and Submit input and managers submitted collected regional feedback to a central changes to a point-of-contact within McKesson’s sales group responsible for implementing final changes and assembling a pilot scorecard. Change : central source McKesson adjusted its rollout process by introducing the scorecard to Before formally launching the scorecard, the Vice President of Sales managers before reps. Pilot scorecard conducted three weeks of scorecard training with a select group of reps ; training included classroom instruction and on-the-job, role-playing prior to Benefit: scenarios. distribution Managers’ advance knowledge of scorecard Following final adjustments, McKesson introduced the scorecard at a mechanics and operating three-day national sales meeting and positioned it as a tool primarily procedures ensured Introduce designed to help the organization improve data accuracy and sales managers could support scorecard for forecasting. During rollout, managers and reps received joint training reps’ questions and drive divisional use on the elements and mechanics of the scorecard. Both sales reps utilization. and managers proved eager to utilize the scorecard; the first year adoption rate exceeded 80%. © 2005 Corporate Executive Board
  4. 4. SALES EXECUTIVE COUNCIL PAGE 3 McKesson’s Dynamic Opportunity Scorecard: Teleconference Companion THEME #2: REINFORCING USAGE AND PREVENTING M ANIPULATION To reinforce the scorecard’s importance and ensure proper utilization, each of McKesson’s sales regions host day-long review sessions once a month; during these sessions sales reps, managers, and executives diagnose deals in progress, discuss process mechanics, and share tactics for maximizing the scorecard as a sales tool. Titled “Ripping Sessions ,” these reviews require sales reps to present and discuss their scorecards for deals in their pipelines; because of the intensity of presentations and discussions, regions only complete four to five of these 30- or 50-minute sessions per day. Teleconference participants noted particular interest in learning more about the following structure and benefits of Ripping Sessions: RIPPING S ESSION AGENDA AND B ENEFITS Sample Agenda for Scorecard Presentation 5 minutes: Sales rep introduces deal by providing background information on completed steps and known variables 5 minutes: Team questions rep regarding scorecard variables and deal status 5 minutes: Sales rep objectively lists deal strengths 5 minutes: Sales rep objectively lists deal weaknesses 10 minutes: Based on ripping discussion, participants provide the presenting sales rep action steps to collect any unknown data and specific timeframes to complete those action steps RIPPING S ESSION BENEFITS BENEFIT DESCRIPTION Senior executive attendance at sessions and question-and-answer opportunities encourage Reinforce personal mastery of the scorecard and strongly signal its importance to company executives Scorecard Utilization and the workflow of the sales organization. Ripping Sessions ensure accuracy of forecasting data by facilitating scrutiny of deal Ensure Scoring progression factors; any manipulation or gaming of the system quickly becomes apparent Accuracy under questioning. Although all new sales hires receive separate training on scorecard elements and strategies for uncovering critical information, the Ripping Sessions provide ongoing, practical training Provide based on real sales situations. In addition, Ripping Sessions inform more tenured reps Ongoing Training about new product specifications and best practices for collecting deal information and closing deals. Opportunity scorecards help establish a common sales language across all divisions by Standardize Processes creating a standard sales process; as such, managers and executives across divisions may Across Divisions participate in shared Ripping Sessions. Facilitate Ripping Sessions promote a cross-functional culture by providing opportunities for non-sales Cross-Functional employees in such functions as Finance and Operations to learn about sales processes and Collaboration partner with sales reps to help collect information and close deals. In addition to Ripping Sessions, McKesson employs the following mechanisms to reinforce adoption and utilization of scorecards among sales reps: Ÿ CRM system linkage—McKesson’s CRM system tracks deal stage progression for all active opportunities, and if a rep fails to update any given opportunity for three months, the CRM system automatically e-mails the respective manager an inactivity notice. Ÿ RFP requirements—McKesson’s RFP department requires that completed scorecards accompany all requests for RFPs. Moreover, by specifically requiring certain threshold scores before reps may request proposals , the company reduces costly RFP expenses and improves proposal win rates. Ÿ First-line manager reviews—McKesson’s first-line managers utilize scorecards to review their direct reports’ pending deals . In particular, scorecards help managers develop formal platforms for rep coaching discussions . (Please refer to page 4 for additional information on this topic). © 2005 Corporate Executive Board
  5. 5. SALES EXECUTIVE COUNCIL PAGE 4 McKesson’s Dynamic Opportunity Scorecard: Teleconference Companion THEME #3: LEVERAGING SCORECARDS TO ACHIEVE ACCOUNT PLANNING AND FORECASTING B ENEFITS In addition to creating manager coaching opportunities , scorecards support account planning, customer data accuracy and analysis, and sales forecasting responsibilities, as highlighted below. ACCOUNT PLANNING All scorecards contain an account planning section that requires reps to complete information on customer backgrounds, actions completed by sales reps, and planned future activities. Sales reps continually update the account planning section of scorecards as they obtain new information. Furthermore, scorecards help facilitate the following sales activities: • Executive sponsorship support—To optimize executive sponsorship impact, executives receive working scorecards prior to meetings with clients. In addition to providing essential customer information, scorecards help executives and reps coordinate meeting objectives. • Pipeline progress reminders—McKesson’s CRM system tracks stage progression on all pending scorecards and emails managers if reps fail to update any particular scorecard for three months . DATA ACCURACY Scorecard usage helps McKesson achieve the following data accuracy goals: • Ensure consistency across segments and regions—Composition of scorecards does not vary by region or segment, allowing executives to view consistent and uniform data across geographies and product lines. • Provide data accuracy assurances—To guarantee manager verification of reps’ scorecard accuracy, McKesson includes forecasting accuracy as a performance objective for first-line managers. Moreover, managers also receive incentive compensation based on the accuracy of their forecasts relative to actual revenue numbers. Ideal forecasts fall within 10% plus or minus the actual revenue number. • Enable lost deals information capture—In addition to utilizing dynamic opportunity scorecards to track pending deals, McKesson also requires that reps capture information on deals that ultimately do not close. Before managers may remove opportunities from reps’ pipelines, reps must complete a 10-question, lost deal form that secures key information regarding each lost opportunity. By recording this information, McKesson enables future, educated sales conversations. SALES FORECASTING Scorecards allow McKesson to improve sales forecasting by automating managers’ forecasting responsibilities and providing executives with detailed estimates of expected future revenues , as detailed below. • Quarterly forecast automation—Sales managers populate an Excel spreadsheet with scorecard data, such as company names, deals’ projected revenue, products, and customer opportunity parameter (COP) scores. Through the use of macros (user-defined software commands), all data within the spreadsheet automatically aggregates, organizes, and funnels upward to appropriate divisional executives. • Revenue forecasting clarity—Each month, reps complete reports listing their total number of pending deals in each of the scorecards’ five stages of deal progression. Once aggregated, sales managers specifically review the number of deals within stages 2 and 3 in order to forecast the potential amount of incoming revenue for the next quarters. At the senior most level, sales executives specifically examine the number of deals within stages 4 and 5 to forecast the potential amount of revenue in the coming month. © 2005 Corporate Executive Board
  6. 6. SALES EXECUTIVE COUNCIL PAGE 5 McKesson’s Dynamic Opportunity Scorecard: Teleconference Companion THEME #4: SUPPORTING S ALES M ANAGER RESPONSIBILITIES In addition to simplifying account planning and boosting data accuracy, McKesson’s scorecards also serve as a mechanism to improve managers’ overall performance. While the Council’s best-practice book Shifting the Performance Curve illustrates the scorecard’s impact on manager-rep coaching discussions, teleconference participants noted particular interest in the following process for involving managers in the rollout process and reinforcing their scorecard usage: M ANAGER ROLE IN TOOL ROLLOUT AND UTILIZATION By linking the tool to McKesson’s corporate goal of data accuracy, executives dispelled fears among Link tool to managers that scorecard use would evolve into an administrative respons ibility. Executives further corporate goals and position as gained manager support by demonstrating that scorecards help managers complete their existing manager support coaching and forecasting responsibilities more efficiently. resource To improve rollout within its sales organization, McKesson completed scorecard training for managers before introducing the tool to reps . Within these sessions , McKesson provides examples of actual rep Train managers deals and requires managers to complete practice scorecards. In addition, McKesson conducts role- on specifics of playing scenarios to teach managers optimal tactics for obtaining customer and deal information. scorecard use To reinforce the importance of scorecard utilization, McKesson includes forecasting accuracy in Reinforce managers’ performance evaluation criteria and provides ongoing incentives. through compensation As previously noted, the McKesson tactic outlined in Shifting the Performance Curve discusses the role of dynamic opportunity scorecards in allowing managers to intervene in specific rep deals ; teleconference participants also discussed the dynamic opportunity scorecards’ roles in joint executive and rep customer-facing calls. Whereas, prior to the introduction of scorecards, pre-call planning sessions typically occurred in an ad hoc manner and failed to generate specific goals for customer interactions, managers and reps now review scorecards’ collected customer information prior to conducting joint calls. © 2005 Corporate Executive Board
  7. 7. SALES EXECUTIVE COUNCIL PAGE 6 McKesson’s Dynamic Opportunity Scorecard: Teleconference Companion ADDITIONAL Q UESTIONS ANSWERED D URING THE TELECONFERENCE The table below contains a snapshot of additional questions answered during the teleconference. Please dial into the teleconference replay for further information on these topic areas. ADDITIONAL M CKESSON TELECONFERENCE TOPICS AND QUESTIONS Topic Questions Answered Use of dynamic ü How does McKesson leverage dynamic opportunity scorecards to provide other corporate opportunity scorecards functions supporting roles in closing sales deals? across corporate functions Scorecards’ role in creating ü How does McKesson utilize scorecards to create a common sales language among a common sales language multiple segments and product lines? Application of dynamic opportunity ü How does McKesson adapt scorecards for smaller deal opportunities? scorecards to multiple deal types ü Does McKesson utilize scorecards for deals with sales cycles longer than one year? Dynamic opportunity scorecards as ü What roles do scorecards play as customer-facing tools? customer-facing tools Implementation advice from ü What advice would McKesson provide for anyone seeking to develop and implement the dynamic opportunity scorecards? scorecard’s creator ü What lesson proved most important to the success of the scorecards at McKesson? Rep management of ongoing tools ü How many deals and scorecards do McKesson reps manage at once? ADDITIONAL R ESOURCES The following list features additional resources from the Sales Executive Council’s archive related to issues discussed in this teleconference companion. To access these resources, please visit the Council Web site at . Shifting the Performance Curve: J.D. Edwards’ Manager Coaching Roadmap Codified coaching guidelines improve quality of sales managers’ interactions with their staff, and sales managers in turn receive accountability for deeper territory knowledge. Deepening Customer Relationships: Opportunity Fit Matrix (Square D) Quantitative and qualitative criteria regarding customers’ future value and strategic fit enable robust assessment of market segment and individual account potential. Deepening Customer Relationships: Stage-Gated Selling Methodology (IBM) Standardized, multi-step sales approach provides salespeople with tools to identify and serve new customer needs at each stage of the customer purchase cycle. The Sales Executive Council has worked to ensure the accuracy of the information it provides to its members. This project relies upon data obtained from many sources, however, and the Sales Executive Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Sales Executive Council is not engaged in rendering legal, accounting, or other professional services. Its projects should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither Corporate Executive Board nor its programs are responsible for any claims or losses that may arise from any errors or omissions in their reports, whether caused by Corporate Executive Board or its sources. © 2005 Corporate Executive Board