On enterprise sales and performance: applying Total Quality Management concepts to the world of B2B SaaS

A reflection about the sales ladder and what each of the main levels entails.

What can Total Quality Control teach software sales leaders? What parts from a management philosophy perfected by manufacturing organizations can be applied to software sales, of all areas?

In this article I'd like to discuss some concepts from Total Quality Control (or TQC or Total Quality Management or TQM) that I think are very well applicable to the world of b2b software sales. Some of these concepts are in fact applicable to all areas of management, but in this article I'll focus on sales, a great interest of mine since I've founded and became the self-appointed CEO of Qulture.Rocks almost 9 years ago.

The collision of two seemingly very different worlds

Total Quality Control is a management philosophy that blossomed in Japan in the wake of WWII. American management experts such as W. Edwards Deming were sent there by the US Government in an effort to help the Japanese rebuild after the war (here, here).

The Japanese learned and perfected what the yankees had to teach, so much so that Japanese firms began beating their American competitors on their own turf, the U.S. market. One of the most notable markets where this beating took place was semiconductors, the then-nascent industry based out of the San Francisco Bay area. Intel and other American memory makers had a hard time keeping up with their eastern counterparts like Hitachi, Fujitsu and Nippon Electric. (Another famous market was automobiles, with the rise of Toyota and later other makes.)

As a response to that threat, many American firms adopted TQC.

Intel itself became a major TQC case. It implemented it among myriad other initiatives including abandoning the production and sale of memory chips in favor of that of microprocessors. TQC became the company's backbone. Other key TQC practices adopted by Intel were quality circles and TQC's goal management framework, Hoshin Kanri, named internally "iMBO," or Intel Management by Objectives (more about the origins of Hoshin Kanri, MBO, OKRs and the sort here).

TQC in a nutshell

TQC is based on a holistic view of the firm. Quality means addressing the needs of "customers," and total quality means addressing the needs of all of the firm's stakeholders: customers, of course, but also employees, shareholders, and society at large.

Controlling quality starts with the definition of lagging quality indicators and leading quality indicators. Controlling means keeping such indicators within acceptable ranges or, when needed, scientifically working to improve them, in an ongoing cycle called PDCA, or Plan, Do, Check, Act.

This logic doesn't stop at the company's top-level, foremost stakeholder quality indicators (be them shareholder-centered (EVA, share price performance, EBITDA, net income, etc.), customer-centered (NPS, churn, retention, avg. ticket, etc.), employee-centered (turnover, eNPS, etc.) or society-centered (ESG stuff mainly)); top-level indicators must be unfolded throughout the organization, so that every important indicator is controlled, and so that every person within the company works towards maintaining or improving a subset of them.

The logic of how these indicators (you can call them metrics, KPIs, whatever) are unfolded is the logic of the business and the metrics themselves. For example, the board may decide that the main shareholder-centered indicator is going to be net income. Net income is composed of sales, costs, expenses and taxes, as well as other non-operating revenues or expenditures. In b2b SaaS, sales can be further broken down into sales from existing customers and sales from new customers. Sales from new customers can then be further broken down into number of deals closed, average ticket per deal, and date of closing. These numbers can be also broken down by customer segment, territory and by the organizational structure of the team (VP A, VP B, VP C, and then further down until you reach the reps themselves). This is of course not an exhaustive unfolding of sales, but it should give you a good idea of what we're talking about.

Anyway, since this is not supposed to be a treatise about TQC, I'll stop the intro here and dive into the concepts.

The importance of standardization

A core tenet of TQC is standardizing how things are done in the company. Standardization has two aspects: on the one hand, it means executing the latest version of a process in the same (best) way every time. On the other hand, getting consistent results out of the process.

For example, if an AE follows the sales process correctly and consistently, she should hit quota (say, plus or minus 10%). Also, all AEs that a) are equally skilled/experienced, b) sell the same products and c) to the same customers should follow the same process and get very similar results.

Why, you ask, is standardization important? The answer is simple: if the latest (and best) process isn't being followed, we can't make tweaks to said process in an organized manner so as to get better results in a predictable, consistent way.

We'll be throwing darts blindfolded.

If the process is being followed, we can make experimental changes to parts of it and check if they improved results or not. If not, we can go back to the original process, or try something else, knowing that going back to the standard process takes results back to where they were originally expected to be.

Standardization is a core principle of TQC because TQC is all about creating a predictable, consistent system for improving results. And the only way to predictably and consistently improve results is to do it in an organized, "scientific", if you will, way.

Two important consequences follow from these two two aspects: the first is that if the AE doesn't follow the process, that's her fault and she should be held accountable. The second is that if the AE does follow the process (again, correctly and consistently), bad results are not her fault, and she should not be accountable for them.

If the AE doesn't follow the process, that's her fault and she should be held accountable. If the AE does follow the process (again, correctly and consistently), bad results are not her fault, and she should not be accountable for them.

These two consequences take us to our next concept, which is the relationship between authority and accountability.

Authority and accountability

This concept is pretty simple: Employees should only be held accountable for results if they have authority over the processes that generate said results. It follows, logically, that employees should not be held accountable for results if they aren't allowed to create and change the processes that generate said results (nor be expected to create and change processes if they don't have the experience and skills to do so effectively).

This is critical.

We've said before that if an AE follows the sales process correctly and consistently, she should hit quota (say, plus or minus 10%). If she does follow the process and doesn't get the expected results, she shouldn't be held accountable. The actual person who has authority over the process should be held accountable.

Salespeople should not be held accountable for results if they aren't allowed to create and change the processes that generate said results (nor be expected to create and change processes if they don't have the experience and skills to do so effectively).

In the next topic, "the general job ladder", will tie this principle to how organizations are structured.

The general job ladder

TQC experts (e.g., Nemoto, 1987; Falconi Campos, XXXX) have created an amazing framework that divides work at a company in a vertical progression with four buckets of jobs with decreasingly complex functions as they relate to TQC. The four buckets are:

• Executive jobs,

• Middle-management jobs,

• Supervisory jobs, and

• Operational jobs.

The four buckets can be illustratively superposed over an "org chart" pyramid, as show in the following drawing.

Important: Some professionals at smaller orgs might accumulate supervisory, middle-management and even executive functions

Executive jobs

At the top of the org, we have the executive jobs.

Executive jobs are in great part composed of translation functions: getting a high-level strategy from the board (where the CEO also usually sits) and translating, with the CEO, that high-level strategy into top-level organizational goals. Then, translating top-level organizational goals into more cross-functional goals (think NPS) and more functional goals (think "1 month retention for product A" or "% avg. quota attainment"). (I already outlined how goals unfold or cascade throughout the top of the org in the TQC in a nutshell section.)

Middle-management jobs

Next come middle-management jobs.

Middle managers (directors, managers) own the processes that are executed by supervisors and AEs/SDRs/BDRs. Since they have direct authority over these processes, they also have responsibility over the results these processes produce.

Contrary to popular lore, it's where very interesting work - arguably the most interesting work from a TQC standpoint - happens.

Middle managers own the processes that are executed by supervisory and operational functions. Since they have direct authority over the creation and change of these processes, they also have responsibility over the results these processes produce. They receive ambitious goals from the executive functions and are accountable to tweak processes (or even create new ones) so as to achieve them.

Supervisory jobs

Next, come supervisory functions, who are very close to who's actually executing most processes within an organization.

There are two key supervisory functions: the first is training the people who execute the processes. The second is regularly auditing how correctly and consistently the processes are being executed (ironically, both training and auditing are processes themselves). In doing so, supervisors might get external help from sales enablement and/or sales ops if they need and depending on the completeness of the sales organization.

Supervisors don't own - and shouldn't own - processes. Supervisors should be promoted into their functions after a) having been performed well in operational jobs and b) having a nack for leadership and people management. They don't have the necessary experience to have authority over processes, and therefore should have limited responsibility/accountability over results. They must be held accountable for process execution, and only that.

Supervisors should also gather suggestions made by those holding operational jobs and take them to middle managers, so they might be incorporated into processes.

Now, of course, if someone performing a middle-management function is redesigning a process in hopes of improving its results, they will confer with those in charge of supervisory functions who are close to the action and can provide valuable input and feedback. There is no point in a middle-manager trying out a change in the sales script if AEs for some reason can't follow the changes.

First-line managers (e.g., supervisors) shouldn't own processes. They don't have the necessary experience to have authority over them, and therefore should have limited responsibility/accountability over the results they produce. Frontline managers must be held accountable for correct and consistent process execution, and that's basically it.

Operational jobs

Last, but not least, come operational functions. Operational functions are those comprised of executing established processes, period. They are what is usually equated to "actually doing the work". People holding operational jobs should also be asked to contribute ideas to improve their work. These are not big process changes, but small tweaks. For example, an AE may suggest a new way to close calls that produces clearer next steps, or that others read this or that article. In traditional TQC, operational people participate in Quality Circles, or QCs.

Every corporate career starts in performing operational functions. Nonetheless, operational work is not the same thing as blue-collar work. This is a common misconception. At the base of the office pyramid, white-collar workers also start performing operational functions.

As AEs do their jobs well - following processes perfectly - they might get promoted from junior to senior. That should bring about increasing productivity (e.g., more MRR per quarter). They can then go tackle more complex sales processes (e.g., from mid-market to enterprise) or tackle a supervisory job (e.g., managing other AEs).

Jobs at different org. maturities

Mature sales orgs should have roughly four hierarchical levels: salespeople (e.g. AEs, SDRs, BDRs, or even support analysts in enablement and ops), sales supervisors (who oversee a number of salespeople), sales managers (who oversee a number of supervisors) and sales executives, who oversee a small number of managers. Some of the actual job titles - the names - may vary from org to org: supervisors might be called managers; managers might be called managers or directors (or even VPs at very large orgs); executives might be called VPs or chief officers.

Some professionals at smaller orgs might accumulate supervisory, middle-management and even executive functions: a nascent sales org at a pre-series A startup might be composed of AEs and a VP Sales, with the VP sales doing all the non-operational work. Between such small nascent orgs and mature orgs are a large number of different setups.

Putting TQC and sales together: implications

You might have intuited a few consequences of these concepts as they apply to b2b software sales organizations. If not, I'll help you out, for it's really useful to look at a sales org through the lens of TQC, standardization, authority x responsibility and the general job progression.

• Again, for the sake of repetition: AEs should be accountable for following the process correctly and consistently; Supervisors should be accountable for training AEs on following the process (correctly) and audit process adherence (consistency); management should be accountable for results; executives should be accountable for the impact results have on strategy and company success.

• If an AE follows the sales process correctly and consistently, she should hit her quota (say, plus or minus 10%). Also, all AEs that a) are equally skilled/experienced, b) sell the same products and c) to the same customers should follow the same process and get the same results.

• Since AEs have no authority over the sales process they follow, it should be obvious that we should be very careful in measuring AE performance by the results they achieve: the core performance management metric for AEs should be their individual adherence to the sales process. AEs should follow the processes established by middle-managers, and get the predicted results out of them, i.e., AEs that follow the process perfectly should hit their quotas consistently over time, and all AEs should be generally hitting their quotas.

• Conversely, if an AE is following the process (as measured by her supervisor and/or enablement) but not getting results, managers - not supervisors - should be held accountable, because it's their process. (Exceptions should be due to bad hires (which shouldn't happen if recruiters and intverviewers are following their processes properly) or localized anomalies, such as territories being affected by some external, unpredictable factor.)

• As we saw, the core function of supervisors or frontline managers is to a) train AEs on their jobs (i.e., to train them so they are able to follow the processes perfectly) and audit AE adherence to said processes. In doing so, supervisors might get external help from enablement if they don't have the time necessary to perform all their functions.

• The core performance management metric for a supervisor should be the aggregate adherence of their direct reports - AEs - to the sales process. They should at the one hand, at a high level, monitor activity KPIs that indicate adherence to the process, such as the number of calls, demos, meetings made, proposals sent, etc., and on the other hand, at a lower level, listen in on a sample of calls, demos and meetings and read a sample of emails, proposals etc. to ensure adherence.

An important final observation (not wanting to get recursive, but getting a bit recursive nonetheless): supervisors should follow established processes in doing their work. There should be a standard way to sample work, to set shadowing frequencies, and so on.