PIPping in the Red Zone

PIPping in the "Red Zone"

If you are going to have a norm of 1:1 for PIPs closed to PIPs proposed, you must get into the customer managers' "red zone," where they are compelled to take action on each PIP you present. It is not enough to say that your proposal "certainly made them sit up and take notice" or that the outcome of your presentation was that you made them think. A thinking manager is not a closing manager. Your outcome must be to get a close. What will get you into the red zone where you can score?

Customer managers' red zones are where their key performance indicators (KPIs) are located. Each PIP must fit one of them in order to link it to the manager's contribution to business strategy. This is called a PIP's business fit. A statement of business fit sounds like this:

This proposal contributes to realizing your business objectives to:

1. Increase your sales volume by $4.5 million (42.4 percent) over the next three years.

2. Increase your market share by 4.1 points (10 percent).

3. Increase your net operating profits before tax (NOPBT) by $2.3 million (9 percent).

In the course of your partnering, you will learn each customer's business objectives. Your PIPs must tie their contributions to these objectives by quantifying how much of each objective you can help realize: for example, contributing $864,000 (4 percent) toward the customer's sales volume objective of $4.5 million and increasing NOPBT by $69,000 per year to contribute 30 percent of the operating profit objective.

KPIs compose a customer manager's "plan." The manager's current performance is called "actual." If plan exceeds actual, the manager is "off plan" and at risk of becoming competitively disadvantaged. Disadvantages can become your leads if your norms represent an improvement over a customer's actual performance when it is below a KPI.

The performance indicators that you choose to improve for your customers provide them with their definition of your business. The KPIs you decide to "own" position you with customer managers in terms of exactly where in their operations you can partner with them and why, because of your norms, they are compelled to partner with you. The "where" is your entry point.

If you want to make yourself compelling to IT managers, for example, nothing will do it faster or on a more businesslike basis than to issue norm challenges like these:

• Do your operating costs exceed our norm of 1 percent of the dollar value of all the purchases you make? If so, what if we can work together to bring you closer to our norm?

• Does your staff exceed our norm of 2.2 per each $100 million to $150 million worth of purchases?

• Does your number of instances of delayed shipments exceed our norm of four to six total yearly deliveries from each supplier?

If you want to compel hospital managers to do business with you, challenge them with your norms for their KPIs for capacity utilization expressed in terms of patient occupancy rate and average length of stay for patients in each disease category. You can also challenge other KPIs for the percent of outpatient revenues to total revenues, gross revenues per discharged patient, cash flow per bed, and the percent of salary and benefits expenses of hospital employees to the hospital's total expenses. Comparing labor costs to total costs shows how well a hospital is controlling its workforce content. Cash flow per bed shows how aggressively the hospital is recruiting patients, and their average length of stay shows how well the hospital is managing its turnover. If your norm for labor costs is 51 percent of total costs while hospital managers can do no better than 56.6 percent, you have a lead for a PIP to improve their performance.

If you sell IV systems for intravenous drug delivery to health care organizations as IFLOW does, you may need to know the key performance indicators of more than one class of customer manager. In IFLOW's case, critical care and neonatal unit heads are major users, as are general service IV team leaders. Pharmacy managers are involved as well, in addition to hospital administrators and their chief financial officers. In IFLOW's initial incarnation as a vendor, the critical success factors influencing sales were competitive price and performance, salesperson skills, timing, and supplier reputation. After reincarnation as a consultative seller, the chief factor critical to IFLOW's sales success has become the contribution that it can make to key users' KPIs.

At the Box One HMO and hospital administrator level and at the Box Two midlevels, there are several performance indicators to choose for improvement:

• Capacity utilization, such as the number of beds in service, occupancy rate, and average length of stay, all of which IFLOW can affect

• Revenues and expenses, such as cash flow per bed, total profit margin, and return on assets

• Productivity and efficiency, such as the ratio of personnel per patient and total assets turnover, as well as outcomes in terms of patient discharges in compliance with disease-category standards for length of stay