Cross Selling or Cross Purposes?

Harvard Business Review Article,07/01/2004 by Ford Harding

In the aftermath of a major
acquisition, everyone at
TopTek has been looking
forward to a festival of
synergistic selling. So
why isn't it happening?
Cross Selling orCross Purposes?

HOW WAS YOUR WEEKEND?" John
asked. "just fine. We got away to the lake." "Hey, that's right-you have a place up
there. How long have you had it now?"
This was John's standard way of getting to what was on his mind. Anna decided to cut directly to the heart ofthe matter. "About three years. So what's up, John?"
Anna Tucker was officially the vice president for human resources at Top-Tek, maker of software for middle-market companies, but no more than half her time was devoted to HR. The rest, the fun part, was spent as CEO John Vaunt's troubleshooter. He gave her all of the problems that didn't fit neatly
HBR's cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.
TOP-LINE GROWTH (ULY-AUGUST 2004
HBR CASE STUDY • Cross Selling or Cross Purposes?
anywhere else and those he didn't want messed up.
"We had dinner with Ric Gudalskis and his wife on Saturday," John began. "Do you know Ric? He's CIO at DigiDeal Stores, which has been a good account. He said he thought 1 shouid know something: Since the acquisition, we've been driving him nuts. Our people are in there frying to sell additional projects left and right. Ric feels we're churning the pot, trying to stimulate demand for a pace of change that the company can't handle, and taking up too much of management's time while we're at it. I called Peter Lee on Sunday to ask him about it, and he gave me an earful. 1 don't want to bias you -you should hear it from Peter yourself- but I think our sales compensation structure may be broken."
"That could be part ofthe problem," Anna offered cautiously.
"Whatever it is, would you look into it? With the saie of product flattening out, we need to sell more services; that's where the growth is. But we can't abuse our customers in the process."
Sins of Commission
Nine months earlier, TopTek had acquired the systems-integration and consulting firm Rossberg Lee, which had been one of TopTek's alliance partners. Both parties had stood to gain from the marriage. TopTek hoped to snag more ofthe software saies that were a natural by-product of a Rossberg Lee consulting engagement. And Peter Lee, the former head of Rossberg Lee and now executive vice president ofthe Solutions division at TopTek, was excited about TopTek's foot in the door at a much broader range of companies. The newly merged organization had spent a lot of time developing "solutions"- standard bundles of products and services to take to market. More customized and expensive offerings were also available.
But in many ways the two organizations had worked better as partners
Ford Harding is the founder ofMaplewood,
than as parts of the same company. Anna knew that John Vaunt's concern about the consultants was only the latest sign of friction. So when she met with Peter later that day, she wasn't surprised to get an earful herself.
Peter paced the floor of his office while they talked. It was clear that he had been stung by John's query. "Gudalskis isn't really concerned about all
to push product. Selling a solution designed to meet a client need takes a consultant's perspective."
"OK," Anna said, sighing,"but we can't just leave it at that. Otherwise, what was the point of our combining forces?" She took a breath and forged ahead. "Peter, you just made a remark about a commission. Is there something out of whack about our incentives?"
'Frankly, the sales force only knows how to push product. Selling a solution designed to meet a client need takes a consultant's perspective."
those calls to his people," he said defensively."He just doesn't like the fact that I play golf with his boss. CIOs don't like it when consultants have better access than they do." Anna couldn't help glancing toward the corner of Peter's office, where a display case housed several ornate golf trophies. "John should recognize that it's my relationship with Gudalskis's boss that got us that new work last month. I'm talking about the HR package they signed up for. The account manager had nothing to do with it - though, of course, that won't stop him from collecting his commission."
"So we don't need a sales force?" Anna asked, knowing Peter could take a gentle jabbing.
"The sales force is great at getting us into new accounts. But once a company has signed up for the basic financial package, they don't have the technical knowledge or the day-to-day contact that will lead fo add-on business. Ed Forsythe practically camped out at DigiDeal forthe final month ofthe rollout of the basic package," Peter said, referring to the principal consultant on the engagement. "I was there a lot myself. That's how you get the ties that bind. And it's how your consultants get to really understand a client's business. Frankly, the sales force only knows how
New Jersey-based Harding & Company
"Well, think about it," Peter said with a scowl. "The current compensation structure rewards the sales force for all the work sold into an account forever, regardless of whether they contributed to the sale. Our people-the consultants in Solutions - have to sell to keep billable, but fhe commissions go to the salespeople who won the accounts, even if it was years ago. Does a structure like that make any sense?"
"The salespeople's contributions are important, though," Anna said.
"Of course they are. Sometimes. But there are big holes." Peter glanced toward the door, where his assistant was mouthing a name and indicating a telephone with her thumb and pinky. "Fxcuse me," he said, striding toward his desk. "That's a call from a client that I just have to take. But I'll tell you who you should talk to: Leiia Chase. She's a Solutions person who calls into accounts directly-just what Gudalskis was complaining about."
Sins of Omission
LeIia was in charge of the consulting practice that implemented the facilities package of TopTek's major product suite. Anna welcomed the chance to talk with her. Lelia was professional and coolheaded; she could be counted on to be objective. Still, it was a strange recommendation. Implementations of this
(http://www.hardingco.com/), which consults to professional firms on sales. He is the author assemblage of software and services for of three books, including Cross-Selling Success (Adams Media, 2002). customers'facilities management func46 HARVARD BUSINESS REVIEW
Cross Selling or Cross Purposes? • HBR CASE STUDY tions accounted for a small fraction of the company's revenue. Few customers signed up for it. The two arranged to meet in the company cafeteria, which had been upgraded since the merger and now served gourmet meals that were worth staying on campus for. Leila picked at herCaesarsalad."So,you've been asked to look at the way work is sold and rewards are given out My condolences" she said. "You're a sucker for all the choice assignments, aren't you?" This was Leiia's way of acknowledging Anna's role as troubleshooter. Anna found it flattering. "Why do you think Peter asked me to talk with you?" Anna asked. "Because if I waited for the sales force to sell work for us, our practice would starve." Anna, in the middle of a bite, could only register a surprised expression. Lelia elaborated. "The price of a facilities implementation is about a quarter of the price of any other package. Our projects are tiny. But it's going to take the account rep just as much time to sell work for us as it would to sell any other package. He has to build relationships with people in the client's facilities department people he has no other reason to get to know. He'd much rather be selling a juicy financial, HR, or sales package instead." "So you have to sell it." "Right. I don't blame them for being uninterested. But I can't wait around. I won't be able to hang on to the team I've built up over the past five years if 1 can't keep them busy. None of us will get our bonuses if we don't reach our utilization targets. So I sell." "I sense you'd rather not." Lelia shrugged."I don't mind. Besides, I have some advantages over the account reps. I deal with facilities people every day and understand their problems. I belong to the right associations. The account reps don't really understand what we do. There are several small units in Rossberg Lee-excuse me, I mean in Solutions-that suffer from this problem. I've asked if the company is really interested in our practice areas TOP-LINE GROWTH JULY-AUGUST 2004 47
HBR CASE STUDY • Cross Selling or Cross Purposes?
and I'm told that it is, that we are needed so the firm can offer a competitive array of products and services."
Anna brought up the question of commissions, asking if it bothered Lelia that account reps got a cut of the work she sold.
There was a long pause. "I don't understand it," Lelia said. "But I figure the higher-ups have their reasons."
She doesn't want to alienate the account reps, Anna thought, but the system seems crazy to her.
Lelia continued: "In this market, facilities software isn't all that popular
and, as you're aware, I pushed the acquisition of his firm. But he doesn't understand sales"
"I think Peter's a pretty good salesman, based on his record," Anna said.
"Sure he is. One of the best. It's because of Peter and one or two others that we bought Rossberg Lee. 1 mean he doesn't understand what it takes to manage a sales force. For all Peter's posturing, Solutions sales are only 20% of the business. If we're going to make our numbers, we need hard-driving salespeople who are amply rewarded for their efforts. The Solutions camp can't
'At least the salespeople can sell product. Most of the consultants couldn't sell sunscreen at a
nudist colony."
with clients. But when companies are growing, there's a lot of interest. I have to keep us going until the market turns and interest heats up again. Then, I suspect, the sales force will notice us.
"The funny thing is that before the merger, I was always considered a hero for going out and selling my own work, Now it upsets people."
The Princes of Sales
Anna needed to hear the sales organization's point of view. Ron Murphy, vice president of sales and marketing, showed up for the meeting with a face almost as red as his tie.
"You'd think I'd have learned by my age," he said with a laugh. "But it was such a beautiful weekend, and one of our customers invited us out on his boat. I should have taken a hat." He laughed again. "So what's this about changing the compensation formula for sales?"
Anna knew better than to take Ron's easy manner at face value. TopTek owed a lot of its success to his relentless drive. She described what she had learned about the DigiDeal case.
"I've known Peter for ten years, and I'm a big supporter of his," Ron said. "He's one ofthe smartest guys I know.
deliver the goods. Aside from Peter and a few others, most of them feel selling is unprofessional. They don't want to dirty their hands.
"Albert Washington worked for three years to get us into DigiDeai. The basic financial package they bought was smaller than usual. So if Al had been compensated for that package and that package alone, he wouldn't have had much to show for his hard work, would he? And now, his account is generating all kinds of revenue for TopTek. Peter and his consultants wouldn't even know DigiDeal existed if it weren't for Al. 1 don't question the job that Peter Lee and Ed Forsythe did there, but you can't screw Al out of his commission on last month's HR implementation. He wouldn't stay if all he got was a commission on the initial package."
Anna could recall at least two other occasions when she had been threatened with the loss of Prince Albert. "Yes," she said, "but if he didn't really contribute to the sale-"
"You have to understand how sales works. Sometimes you work your butt off, do everything right, and you still don't win. Sometimes it comes too easy. It all nets out. Al spends his time where it's needed. He senses things are going
well at DigiDeal, so he devotes more time to Southland Baking, which, by the way, is about to sign up for an HR and a planning implementation this month. You want to penalize him for doing the right thing? Ed Forsythe is the project principal on that account, too. You think he worked hard on it? He was too busy at DigiDeal to be bothered with South-land. But Al knows you have to stay in front of your customers."
"Peter said Ed practically lived at DigiDeal for a month to help with that rollout."
"Look, the consultants get compensated, and well compensated, on utilization. They didn't do much to sell the extension work at Southland, but they'll still get rewarded for the work they do there. They want it both ways."
"How much of the first sale at Digi-Deal was product and how much was services?" Anna asked.
"I can tell you've been talking to Peter. He's always accusing our people of 'pushing products rather than crafting solutions'-nothing pejorative about that language, is there? But he's got a point. Ifyou want to do something helpn ful, find out how to train account reps to sell solutions. And while you're at it, train Peter's consultants to sell anything at all. At least my guys can sell product. Most ofthe consultants couldn't sell sunscreen at a nudist colony."
Anna laughed, in spite of herself. The idea of some of Rossberg Lee's more introverted techies in that kind of situation was amusing, she had to admit.
Searching for What Works
At the cabin by the lake that weekend, Anna found her thoughts turning continually to the conversations she'd been having. On Saturday evening, during a walk along the water's edge, her husband noticed she was preoccupied. "What's wrong?" he asked.
She tried to explain, though she knew he often found her business life mystifying."Maybethemergerjust isn't working," he ventured.
Maybe it's not, she thought as she watched the fireflies in the gathering darkness. But no, the logic behind it still
HARVARD BUSINESS REVIEW
held up. Sales and consulting each had its own inimitable way of getting businesses to open their wallets. And if they helped each other, the company would get a bigger share of wallet than it could hope to if they worked independently. It certainly seemed to be working that way at the Trigestis Pharmaceuticals account, the success story being touted by TopTek to the financial analysts. Maybe she could find the answers there.
A Productive Pairing
On Monday afternoon, she met with Tricia Boiling, a project partner from Solutions, and Charlie Hoaver, the account executive assigned to Trigestis. Anna explained her mission. "You two have succeeded wildly at Trigestis. Has the compensation system for rewarding sales helped or hurt?"
"1 try not to think about that," joked Tricia. "If I did, it might just break up our team."
Anna laughed. "Do you agree with that, Charlie?"
"Well, I never saw a sales compensation system that worked perfectly. This one's OK, 1 guess."
"So how do we create more successes like Trigestis?" "Hire more account execs like Charlie," said Tricia.
"Could you elaborate on that a little?"
"Yeah, I'd like to hear more about that, too," Charlie said.
"I can trust him," Tricia said. "Just after the merger, I took an account rep, who will remain nameless, to meet with the president of one of my old accounts. We were there to explain why the two firms had joined up and to reassure him that it would enhance the relationship we had with his company. The client was gracious, and the meeting went alongfine, until he indirectly mentioned a need he had. The account rep pounced on it, saying how much we would like to help him with it. He even brought out a brochure. It was totally inappropriate, and my client gave me a look I still remember. He hadn't agreed to a sales meeting, and we were out of there two minutes later. I had to call him up and apologize.
"Charlie would never make a mistake like that. He knows how to listen to accounts and when to come to me and my consultants and ask us to support him. Meanwhile, he's out there in the marketplace, which I don't have the time to be. We've sold more services and product at Trigestis than at any other account of its size as a result. Watch us do the same thing at the other companies we've targeted."
"Keep talking. I'm lovingthis,"Char!ie said. "Seriously, i could say the same thing about Tricia. I trust her. If I spend six months getting a customer to the point where he wants a meeting, I can trust her not to cancel on short notice because a current customer asked for the same time slot. When I introduce her to someone, she doesrj't go on about the latest technical fix till their eyes glaze over instead of listening to their problem. And she doesn't drop the ball."
Impressive, thought Anna as she left them, but how do we replicate that?
Overhaul or Tweak?
"Well, Anna, what have you found?" asked John.
"We're hung up on a number of dimensions," she responded. "Our sales force provides broad market coverage and our consultants provide content knowledge and deep working relationships. We need both, but we don't yet have a way to sort out the two of them."
"Compensation can clarify different people's priorities," John observed.
"Yes, but there are other issues as well. In many ways, the legacy TopTek and legacy Rossberg Lee people were better suited to their old organizations than to one that sells solutions. We are going to need to start recruiting to some new job profiles."
"I understand that, but even if I wanted to, I couldn't turn over a majority of the workforce in the next year without causing more problems than I solve. And I need results before then."
What will it take for cross selling to succeed at TopTek? • Four commentators offer expert advice beginning on page 52.
Practically applying leadina edae thinkin
Ashridge Is one ofthe world's leading business schools, ranked 24th in the world by the Financial Times for open and tailored executive education
Executive development
• open and tailored programmes
• MBA and other postgraduate degrees Consulting Research E-learning Psychometric services Conferences For more jnfomiation
c^ii +44 (0)1442 841026
or e-mail infohbr@ashridge.org.uk http://www.ashridge.com/
EQUIS
Ashndge, Berkhamslcd, Iknfordshife UPA INS. UK [(•^gislirrd js Ashridge (Bon.ir Uw Mrtniirijl) TruM Charity numbei 311096
ASHRIDGE
Do you want to go further?
(Rectangle comment Randy Sparks19/3/2550 20:31:19What will it take for cross sellingto succeed at TopTek? • Fourcommentators offer expert advicebeginning on page 52.)TOP-LINE GROWTH JULY-AUGUST 2004