AMERICAN EXPRESS TAKES LONG, SLOW, AND SUCCESSFUL ROAD TO THE VIRTUAL OFFICE, TELECOMMUTING REVIEW, October 1994 SUMMARY: Companies looking to find quick success and instant real-estate cost savings with virtual office projects would do well to learn from American Express. A two-year project to improve sales force productivity ended with what looks like a virtual office model, but only after a complex series of steps that originally had nothing to do with real estate or facilities issues. This case proves that effective telecommuting and remote-work projects are rarely only concerned with where people work - there is as much emphasis on how they work and what they do. Every time you use your American Express card at a store or restaurant, you probably don't realize what's involved in supporting that merchant (or "establishment" as American Express calls them) and even signing them up so they accept the Amex card. I didn't realize this either until I heard a presentation by Richard Tiani, Director of Service Establishment Best Practices for American Express. It's a story that clearly illustrates how to implement a remote-work project correctly - and it also shows how short-sighted some of the current virtual-office office space reduction projects really are. THE PROJECT HISTORY American Express Travel Related Services (TRS) sells the opportunity for establishments to accept the American Express card, and then services those accounts and attempts to help them generate more American Express card volume. In early 1992, TRS noticed that the productivity of its field sales force was declining, as measured by the number of sales calls made each day and the number of new establishments signed up to accept their cards. [Ed. note: In addition, TRS was coping with the effects of some resistance from some of their establishments about the discount rate charged by American Express. This is the fee paid by the establishment as a percentage of each charge; at that time, American Express charged a discount rate of 2.5% to 3.2% (which has since been lowered), while bank cards charged 1.5% to 2.5%. In a follow-up interview with Tiani after his presentation, he told me the company has consistently been able to show establishments that customers using his company's cards were worth more - they represented incremental sales to the establishments. But this concern made it even more important for the sales force to be making the expected number of calls each day on existing accounts and to continue signing up new establishments.] With some help from an outside consultant, a TRS task force began to study the entire field sales process and organization. It was the proverbial opportunity to "wipe the slate clean" and determine the best way to do the job, instead of just patching up the existing methods. "We spent day after day in the field with the sales reps," said Tiani, "because we wanted to understand their jobs and we wanted their input into the change process." This resulted in a comprehensive, difficult overhaul of almost everything they did, with most of the emphasis on the processes at all stages in the sales and establishment service process. Here are three representative examples of changes that were made: 1. ACCOUNT ANALYSIS: TRS had one million accounts that were, for the most part, assigned solely on a geographic basis to the sales reps; each rep was responsible for more than 3,000 accounts each. Reps were supposed to do everything from sign up new accounts and service existing ones, to resolve problems and deliver supplies such as charge slips. The accounts were sorted into categories according to their current charge volume and the quality of the relationship with TRS, and an indirect sales channel was set up to handle the 700,000 accounts with less than $100,000 in charge volume annually. The existing field organization was now set to concentrate on the 100,000 accounts that submit more than $100,000 charge volume annually. 2. SALES ADMINISTRATION: Every field sales organization creates tons of paperwork - forms, reports, budgets, and so on - and TRS was no exception. The study team reviewed everything and streamlined a lot of it, as well as brought in new technology in the form of Apple PowerBook laptops with specially-designed "TeamMate" software that handles much of the administrative work. The voice mail system was expanded and improved, reps got car phones, a centralized voice mail and order processing center was set up in Phoenix to serve the whole country, and the sales reps were trained to plan their time and scheduling more efficiently. 3. SALES MANAGEMENT: TRS realized that the sales managers had a critical role in the effectiveness and productivity of the sales reps; this may seem painfully obvious, but it's amazing how many companies don't make this connection. Therefore, the company made a number of changes in the managers' duties and the technology available to support their jobs, and raised the expectations about the amount of time the managers would spend in the field working with reps and customers - which previously averaged less than two days a week. That list of three items doesn't do justice to the extensive changes TRS made. These were implemented over a one-year period, including several trials and refinements, and at each step the field sales reps and managers - and senior TRS management - were all involved in the changes. Tiani's presentation included a graphic that depicted the sequence and nature of changes; while technology played an important role, the consistent driver was work process change from start to finish. PROCESS CHANGES FIRST - FACILITIES SECOND After - and only after - these changes were made, the TRS team started to look at the facilities issues. "When we started this process in 1992, we didn't have any idea what a "virtual office" was," Tiani told me. "Our entire focus was on field sales productivity. We didn't start looking at the virtual office concept until the middle of 1993." TRS maintained a network of fifty satellite offices around the country, and it was apparent that these satellites may have become obsolete. TRS didn't jump to this conclusion, and instead did a careful analysis of exactly what the sales reps did when they came to the satellite. Most of the work was to get access to remote computer systems, reference materials, and office equipment (fax machines, copiers, and printers), as well as providing some social contact and interaction with peers. "We realized that almost everything the reps had been doing in the satellite office could now be done through their PowerBooks, voice mail, and electronic mail," explained Tiani. As he noted in his presentation, the satellites were very time-consuming for the reps to use, and most of the resources needed by the reps could be duplicated in the home and used more efficiently. THE MOVE TO VIRTUAL OFFICES In the spring of 1994, TRS began the transition from the satellite offices to the virtual office. Tiani was careful to explain that it's not telecommuting, and it's not something to be used occasionally. "The virtual office is anywhere that the sales person can support accounts or prospect for new business using the available productivity tools," he said. In order for it to be successful, it would have to be at least as productive as satellite office work; this was to be measured by the number of sales calls made each day, the results of customer and sales rep satisfaction surveys, and the cost savings (measured by comparing virtual office start-up costs with ongoing satellite office rent and administrative expense). A lot of preparation was put into the virtual office introduction, including doing research about what other companies had done. TRS provided a comprehensive support package for the reps, including not only the PowerBook and software, but also a printer, fax machine, copier, two phone lines, a car phone, reimbursement for all normal business expenses, a one-time home-office set-up allowance of $1000, and more. This commitment was made even though TRS realized - and made clear to the reps - that 75-80% of the work week was to be spent with customers and prospects, and that less than 15% of the time was to be spent at home. The program was introduced to sales reps as a way to increase sales productivity, not as a cost-cutting tool. They were told about the extensive involvement of sales reps and managers in the planning, and about the expense and reimbursement provisions. Most important, according to Tiani, was the message that "this is our new way of doing business." The virtual office wasn't described as an option or a trial program; TRS management said it expected everyone to participate. Despite all the planning, Tiani admits the virtual office implementation wasn't perfect. "We had to make this work for everyone from a sale rep sharing a tiny studio apartment in Manhattan to someone in a four-bedroom house in the suburbs. We provided the training, worked with the reps and the managers, and did our best to meet everybody's needs." Tiani said that only two sales reps left during the process - one for performance problems and one because of a spouse's relocation. RESULTS AND LESSONS LEARNED Productivity measures to date show the project was a success. The number of calls made per day increased by more than 40%, there were 20,000 new establishments signed up, sales managers now spend four days a week in the field, and customer satisfaction ratings went up by 28% while rep satisfaction increased by 25%. These gains are a cumulative result of all the changes that were made - not just the move to the virtual offices. Tiani has a list of more than a dozen major points that were learned from this project; here are some of the most important ones: 1. HR ISSUES ARE SIGNIFICANT: The same issues that are vital for successful telecommuting were important in this project - selection, training, clarity about performance expectations, attention to team building and morale, and clear policies about home-office practices (e.g., no dependent care, suitable work area, TRS right to visit the home). 2. SENIOR MANAGEMENT MUST HAVE A ROLE: This project was "owned" by top management in TRS. Their frequent and visible support and involvement reinforced the message that this was a business initiative of utmost importance. 3. DO IT, DON'T JUST TRY IT: Tiani repeatedly noted that the virtual office was introduced as the new work environment, and not a test or experiment. He said this was important because it forced everyone to become committed to it and make it work. 4. BUILD THE RIGHT TECHNOLOGY PACKAGE: Except for the proprietary TeamMate sales management software, all other software, hardware and telecommunications services were "off-the-shelf" items that were carefully selected to form a package of related capabilities. "The virtual office isn't about giving sales reps laptops - it's about figuring out the full package you need and delivering it so everything works well together," said Tiani. 5. BE CAREFUL ABOUT PROVIDING TOO MUCH: Tiani explained that the sales force was given enough equipment and system support to become almost completely self-sufficient so they could do anything they needed without going into or calling on the district office. Even though it wasn't the intent to keep the reps away from the district offices, about 15% of them seem to have become too self-sufficient. "For example, our reps often use detailed reports about an establishment's account history during sales calls," Tiani said. "As part of this project we trained our reps to better plan their daily schedules, up to a week in advance, to make the best use of their time. If they do this planning, they can ask the district office to generate these reports and put them in attractive binders - that's one of the functions the district office is supposed to serve. However, some reps don't seem to be doing this planning and prefer to generate those same reports using their laptops, perhaps working on a Sunday evening at home before their sales calls Monday morning." Tiani feels this is a misuse of the technology and a sign of poor planning, as well as an underutilization of district office resources. "It seems to be a personal thing with these reps, and we don't know how to fix it." THE BOTTOM LINE: DO THE FIRST THINGS FIRST AND FIGURE OUT THE REAL ESTATE ISSUES LATER After I heard Dick's presentation I told him they probably don't realize how many things they did well, relative to other virtual office projects I've seen. He replied by saying that TRS never thought of this as a virtual office project - and that may be why they did so much so well. The fact that TRS did the process redesign and technology planning first - long before anyone asked the question about the need for satellite offices - is why the company got the results they reported. It wasn't perfect, and I bet that if the reps were polled about their experiences we'd hear a few more problems than appear in Tiani's presentation. But you can't argue with the results - the field sales job is one of the few with relatively objective, simple measures of productivity, and the TRS numbers are impressive. CONTACT: Richard Tiani (212) 640-3768, Fax (212) 619-9832 ________________________ Gil Gorden Associates 10 Donner Court Monmouth Junction, NJ 08852 (908) 329-2266 Fax: (908) 329-2703 Email: 74375.1667@compuserve.com David L. Peterson 235 West 56 Street, #11-F New York, NY 10019 (212) 586-5235 Fax: (212) 582-2038 Email: dlp@pipeline.com TELECOMMUTING REVIEW © Copyright. All Rights Reserved.