Strategic Modelling and Business Dynamics: A Feedback Systems Approach

7.4. Policy Structure and Formulations for Sales Growth

In the light of our discussion on decision making we now return to the market growth model to see how its various policies fit together. Figure 7.14 shows the policy structure behind the reinforcing sales growth loop that links sales force hiring, budgeting, customer ordering and order fulfilment. Before plunging into the detail of the formulations, first look at the broad pattern of connections between the grey areas that correspond to operating policies. Why should sales grow at all? Is the growth engine plausible? To investigate, we start with the sales force and trace anticlockwise. Crucially sales force hiring relies on a signal from budgeting (the authorised sales force) to guide adjustments to the sales force size. Hiring in this organisation is budget driven. Budgeting itself is quite myopic, a characteristic clearly shown in the single information link that feeds in from order fulfilment. Fundamentally, the budget is proportional to the order fill rate – it is not a complex trade-off between competing alternatives. Meanwhile, leaving aside capacity constraints, the principal pressure on order fulfilment comes from the backlog: the bigger the backlog, the greater the order fill rate. Looking down on this company from the perspective of the CEO, we can see there is a causal chain, weaving among the functions, that connects sales force hiring to the size of the order backlog. In addition, the backlog itself is an accumulation ...