Even after the Federal Reserve poured billions into Banks under the TARP scheme, banks did not resume lending. To those of us who study management, this was not a surprise at all – why would any bank in its senses lend to anyone in such an era of uncertainty? To economists, however, it was astonishing: there is supposed to be a Multiplier..banks are supposed to lend some multiple of their reserves, which in turn.. and so on..but they didn’t! The multiplier was actually below 1.0 (as the Australian economist Keen correctly notes in his excellent book ‘Debunking Economics’).
I remember posting comments on various blogs around the world at the time, essentially saying that if the Fed wants lending to increase, they would have to do it themselves – banks were not going to. I didn’t expect, of course, that top managers of banks would be so downright shameless as to pay it out to themselves as bonuses, but that is another story.
More than anything else, it seems to me to highlight the difference between Economics as a discipline and the field of Management. Economists try to understand, and model, very large systems – like the economy itself. To keep their models manageable, they have to simplify them, to the point where, sometimes, what really matters in a given situation is assumed away. Like banks. How do banks behave? To an economist, banks are simply a black box, a conduit for the transmission of the money supply.
To someone concerned with the field of management, the really interesting question is: how are banks managed? How do they respond to external challenges? What drives them? The mechanism of the black box, in other words. I had created just such a course at IIM Ahmedabad during the ten years I taught there .. unfortunately, nobody seems to have kept it alive after I left, and we are back to ‘Bank as a black box’ level of understanding.
At times like these, it turns out, understanding the internal mechanics is crucial. No wonder TARP failed – almost a trillion dollars wasted, all for lack of understanding of how the black box works.
Friday, December 30, 2011
Friday, December 9, 2011
Account Management: the new role in Indian IT companies
In the good old days of software services outsourcing, there was really no need for anything like account management – what you were selling was cost savings, whether real or not, and the customer (mainly a large US company) was buying it.. it was a supply-constrained world where anyone who could offer good quality, and reliable service, could succeed. It was essentially an ‘all you can eat’ buffet….
Well, the inevitable graying and maturing of the market has now happened. Clients are no longer naïve about what to expect, the offshore delivery model is well-established and pretty standard across Indian companies, at least the reputable twenty or so of them. Now the client has become unreasonable! He keeps asking ’what value have you added to me?’ while remaining clueless, or at least, silent, about that the aforesaid ‘value’ is. Selling to new prospects is getting competitive, and existing clients are asking uncomfortable questions.
Enter the ‘account manager’.
Initially, most Indian companies got sales people in the field to play this role – after all, they already have relationships with the client, they are already in the US, or whatever, and so on. Unfortunately, it soon became clear that, once the business relationship is well under way, the customer doesn’t enjoy meeting salespeople any more – strangely enough, he thinks they are trying to sell him something!
The next iteration that was tried was a ‘two in a box’ model, where a salesperson in the field and a delivery person back in India played a jugalbandhi. If the two were very tuned to each other, and respected each other a lot, this arrangement worked well enough – but mutual liking is hardly a process solution. And now there was a new problem – when the delivery person tried to talk about new opportunities, the client took the opportunity to beat him on the head over some delivery issues, and the conversation usually took a different turn.
But the business challenge did not go away – how to grow existing accounts. New sales had slowed for most medium-sized companies, and it was becoming clear to top management in these companies that most of the growth would have to come from selling more services to the same set of customers they already had.
A new breed
Clearly, we need a new solution – a new breed of account managers who are neither salespeople nor delivery managers, either something in between or something else altogether.
My own theory is that account management as a discipline, or challenge, or role, is more akin to marketing than anything else – the account manager should understand the customer so well that she can create solutions the salesperson can go and effortlessly sell. This is what marketing is supposed to do for sales, at the level of the overall company, isn’t it? If the account manager is responsible for delivery, she will get sucked into conversations about delivery – if she is responsible for sales, the client will run a mile when he sees her. So the account manager should be responsible for neither – only for the growth of the account, and the overall relationship.
Position, KRAs and Training
Should delivery report to the account manager? Should sales? With most Indian companies, since sales is in the field, and delivery managers are back home with the account manager, the first is an option, the second is not. On the other hand, the account manager does need to influence both sales and delivery – if he cannot influence sales, the account will not grow – if he cannot influence delivery, the client will ignore him. On the whole, it may be best to have delivery report to the account manager provided the delivery manager is strong enough to manage day to day issues on his own. Sales is usually a different organization, so influence will have to be indirect, and worked through joint KRAs (and joint reviews by senior management are often more useful than joint KRAs.. you do what your boss reviews you against, whether KRA or not, I have found in practice.)
KRAs of the account manager should be: growth of the account, relationship health, our positioning in the customer’s eyes, and depth of relationship (how many different organizational units the account has penetrated, how many different projects, etc.). Accounts should have 1 year plans, 3 year mission statements, and should be reviewed quarterly against the account plan.
Selection and development
The ideal profile is an experienced delivery manager who wants to become a business manager, for there is no better preparation for a potential BU head than being an account management first, preferably of a large and visible account.
Indeed, account management should be a compulsory step on the path to heading a business division.
As usual, mentoring and coaching is the best way to grow account managers – but the first step should be to make sure the person really wants to do the role – being delivery manager, having clear KRAs, going deep into technical issues, managing hordes of people – if these are the things that thrill a person, he may not even want to be an account manager. The necessary qualities are: a passion for growth, excitement with solving problems for the customer, and a head for business..
Having selected the right set of people, it would be useful to create a community or cadre of account managers, who meet informally to exchange notes. One good way to get them to network among themselves is to put them through a common training program.
The ‘Building Account Managers’ program I have run for several clients, is usually spread out over 6 months, while they transition from a delivery role. It takes time for people to adjust to a new mindset, a new set of expectations, so it is not useful to put them through a crash course over a weekend and expect them to learn this slippery new role. Topics include: how to understand the customer’s business, customer’s organization, politics in organizations, selling skills, negotiation skills, service quality concepts, and, of course, how to create and monitor account plans. An important module is teaching them tools by which they can estimate value delivered by their services, to the customer – in the customer’s language.
So, a toast to the brave new world of account management…! May their tribe grow, and their accounts too!
Well, the inevitable graying and maturing of the market has now happened. Clients are no longer naïve about what to expect, the offshore delivery model is well-established and pretty standard across Indian companies, at least the reputable twenty or so of them. Now the client has become unreasonable! He keeps asking ’what value have you added to me?’ while remaining clueless, or at least, silent, about that the aforesaid ‘value’ is. Selling to new prospects is getting competitive, and existing clients are asking uncomfortable questions.
Enter the ‘account manager’.
Initially, most Indian companies got sales people in the field to play this role – after all, they already have relationships with the client, they are already in the US, or whatever, and so on. Unfortunately, it soon became clear that, once the business relationship is well under way, the customer doesn’t enjoy meeting salespeople any more – strangely enough, he thinks they are trying to sell him something!
The next iteration that was tried was a ‘two in a box’ model, where a salesperson in the field and a delivery person back in India played a jugalbandhi. If the two were very tuned to each other, and respected each other a lot, this arrangement worked well enough – but mutual liking is hardly a process solution. And now there was a new problem – when the delivery person tried to talk about new opportunities, the client took the opportunity to beat him on the head over some delivery issues, and the conversation usually took a different turn.
But the business challenge did not go away – how to grow existing accounts. New sales had slowed for most medium-sized companies, and it was becoming clear to top management in these companies that most of the growth would have to come from selling more services to the same set of customers they already had.
A new breed
Clearly, we need a new solution – a new breed of account managers who are neither salespeople nor delivery managers, either something in between or something else altogether.
My own theory is that account management as a discipline, or challenge, or role, is more akin to marketing than anything else – the account manager should understand the customer so well that she can create solutions the salesperson can go and effortlessly sell. This is what marketing is supposed to do for sales, at the level of the overall company, isn’t it? If the account manager is responsible for delivery, she will get sucked into conversations about delivery – if she is responsible for sales, the client will run a mile when he sees her. So the account manager should be responsible for neither – only for the growth of the account, and the overall relationship.
Position, KRAs and Training
Should delivery report to the account manager? Should sales? With most Indian companies, since sales is in the field, and delivery managers are back home with the account manager, the first is an option, the second is not. On the other hand, the account manager does need to influence both sales and delivery – if he cannot influence sales, the account will not grow – if he cannot influence delivery, the client will ignore him. On the whole, it may be best to have delivery report to the account manager provided the delivery manager is strong enough to manage day to day issues on his own. Sales is usually a different organization, so influence will have to be indirect, and worked through joint KRAs (and joint reviews by senior management are often more useful than joint KRAs.. you do what your boss reviews you against, whether KRA or not, I have found in practice.)
KRAs of the account manager should be: growth of the account, relationship health, our positioning in the customer’s eyes, and depth of relationship (how many different organizational units the account has penetrated, how many different projects, etc.). Accounts should have 1 year plans, 3 year mission statements, and should be reviewed quarterly against the account plan.
Selection and development
The ideal profile is an experienced delivery manager who wants to become a business manager, for there is no better preparation for a potential BU head than being an account management first, preferably of a large and visible account.
Indeed, account management should be a compulsory step on the path to heading a business division.
As usual, mentoring and coaching is the best way to grow account managers – but the first step should be to make sure the person really wants to do the role – being delivery manager, having clear KRAs, going deep into technical issues, managing hordes of people – if these are the things that thrill a person, he may not even want to be an account manager. The necessary qualities are: a passion for growth, excitement with solving problems for the customer, and a head for business..
Having selected the right set of people, it would be useful to create a community or cadre of account managers, who meet informally to exchange notes. One good way to get them to network among themselves is to put them through a common training program.
The ‘Building Account Managers’ program I have run for several clients, is usually spread out over 6 months, while they transition from a delivery role. It takes time for people to adjust to a new mindset, a new set of expectations, so it is not useful to put them through a crash course over a weekend and expect them to learn this slippery new role. Topics include: how to understand the customer’s business, customer’s organization, politics in organizations, selling skills, negotiation skills, service quality concepts, and, of course, how to create and monitor account plans. An important module is teaching them tools by which they can estimate value delivered by their services, to the customer – in the customer’s language.
So, a toast to the brave new world of account management…! May their tribe grow, and their accounts too!
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