How CEOs Can Reduce Sales Revenue Failure: Understand What is Causing It.

By January 3, 2019 Sales Management
Businessman looking at screen with sales revenue falling

CEOs have for many years focused on functional improvements in areas such as operations, logistics, and finance where there are a set of repeatable processes that result in predictable outputs. Sales, on the other hand, are like a moving target that they grapple with week in week out, month in month out to deliver sales revenue results. With only some 17% of CEOs coming from a sales background, it’s a function in the business that has thwarted many strategic plans and revenue results.

Many CEOs feel there is something innately uncontrollable about sales—it has a mystic about it that cannot be pinned down, and CEOs feel they need to keep the magician on-side who seems to know how to make it work at some level. Rightly or wrongly, they are in a stalemate, and often the longevity of the sales leader and lack of upskilling can indicate the degree of stagnation that exists.

Companies will make ongoing, piecemeal repairs as long as they can, in a vain attempt to keep revenue flowing. They will tolerate behaviour in the performance of sales and marketing that would not be accepted in other areas of the business. Some CEOs share that often knowing less about the sales function, oddly brings less stress.

But for CEOs, there comes the point where changes or improvement must be made if growth is to continue. The world is not static, and sales and marketing organisations cannot be allowed to stagnate and to operate using now primitive thinking. Sales functions can and should be optimised to achieve similar levels of efficiency, transparency, and measurement that would be expected from other functions of the company. It is when those business fundamentals are missing you are handcuffed by the mystic and your magician.

To start unraveling the sales function mystic, the challenge for a CEO is understanding where the business is genuinely operating and what changes need to be made. This can be confronting when you slowly lift the lid on this functional group and take a look inside. It is more complex than most people often think; if you want a high-performance sales function. It is not a function that you go ‘full steam ahead’ toward. You need to take considered steps and set out a plan. As CEO, you need to be educating yourself to validate and organise the responses that often come from the magicians and their team.

For many years, selling was viewed as an “art” in which success is a matter of intuition, relationships, and influence. With a limited pool of people capable of working in that mode, the magician became the deal maker and growth was inhibited by lack of ability to scale the business. Relationships are still meaningful, but successful selling is now including tools such as technology and data as critical drivers of success. Tools that were not available in years gone by. This shift presents an opportunity to operationalise the sales function using a robust and rigorous approach that is used to drive improvements in another functional unit.

Understanding which level of maturity your selling function has achieved is essential as it will also inform you of the level of sales leader you have driving your team.

There are four distinct generations in the development of the sales functional area. These generations come with the maturity of skill of the sales manager hired but are never installed by the sales manager. They occur when the initiative is driven by the CEO. The generations see the rise of more formalised processes, metrics, accountability, and management, progressively leading to a more flexible and scalable organisation capable of driving growth.

The starting point for the improvement of the sales function, just as it would be for any improvement initiative, is to understand your present situation. As a first look reference guide, this will provide initial insights into your companies sales function.

Generation 1: Magicians and Motivators

The sales business is conducted on trust and verbal communication. The sales managers business process is focused on motivation, reward programmes, and interaction between one individual and another. They are active promoters of relationships and the importance of the connection between customer and salesperson rather than customer and organisation.

No business process is applied to the identification of human capital requirements, and often it comes down to connections and likability. Individuals are prized for their product knowledge or industry experience and therefore attract high levels of compensation for bringing that knowledge to the company. They make small changes that have interim or no effect on the overall sales capability of the organisation.

They surround themselves with experienced individuals who require a lower level of management and input into their performance, each person applying their own unique set of selling practices and behaviours resulting in revenue spikes and falls. The hiring of new salespeople into this environment typically leads to poor results and high turnover as they struggle to find their own way to meet targets. Growth is generally organic, and actions are focused on matching competitors.

Primary Traits:

  • Customer targeting
  • Sales meetings or gatherings on an ad hoc basis
  • Individual or team budgets
  • Basic compensation plans
  • Promotes autonomy
  • Typically, product sellers with little consultative selling capability.
  • Team reporting verbal
  • Measure performance on the basis of historical figures
  • Team autonomy

Stage 2: Change Resistant and Slow Uptake.

Frustrated with the lack lustre results, these managers have taken a step forward from generation one in their pursuit of management of individuals within the team. Typically, a person promoted from within that has delivered good sales results for the company. However, the established culture often limits their ability to progress as sales team members are resistant to change and leadership. There will be sporadic use of processes, but with a lack of consistent focus, the results delivered are reflected by the wavering focus. The sales manager is unable to break free and influence the change required in the business. They focus on easy tasks in an attempt to bring about change.

Typically, the sales manager will be drawn to focusing on the top 10 / 20 / 30 customers or customers with significant value to the company. There will be little development of new business as the focus remains on nurturing existing customers.

The salespeople resist change and take a stance on relationships and connections. There may be some attempts to have visibility into the pipeline, but the information is unreliable, highly speculative or guarded, due to the lack of consistent sales process definitions. Sales productivity is variable and often under required levels. The sales team have their own way of selling so coaching is difficult and rarely impacts the individual.

Primary Traits:

  • Immature territory management strategies
  • Immature account management strategies
  • Performance reviews – annually
  • Individual budgets with under-budget performance acceptance
  • Sales training – irregular timing
  • Individual coaching ad hoc
  • CRM system – low take-up within team
  • Typically product sellers with some consultative approach

Generation 1 and 2 are the most populated area of sales functions, with 78% of sales managers reporting their companies being in these generations. Problematic for CEOs is 34% reported that they would not adopt any changes to their practices.

Generation 3: Platform for Growth

The sales manager in this generation is often found in an organisation that has achieved some degree of size and maturity in the market and achieved functional improvements in areas such as operations, logistics, and finance where there are a set of repeatable processes that result in predictable outputs. The company will have grown to the point where it has put the structure around the sales manager rather than them seeking to create one themselves. The company can invest in the sales division and some standardised processes exist as they link into other functional areas of the company. They co-exist within the overall structure but have not formalised sales function specific procedures, policies, and processes to drive growth. The sales manager is often resistant to change more than the sales team. The organisation will have developed stronger human resource management skills, which the sales division gains benefit from.

There will be an emerging focus on sales team activities, but there will be inconsistent follow-through in initiatives and implementation of new processes. Salespeople will be following a more standardised method of selling and coaching is provided on an ad hoc basis. The sales function performance is visible, monitored daily leading to more consistent delivery of reliable numbers. The metrics in the sales function providing a robust platform for making informed business decisions. The company will be starting to control its growth.

Primary Traits:

• HR systems – organization-wide, not specific to sales divisions

• Early stage activity-based management

• Commencement of simple knowledge management/sharing

• Distribution engagement strategies

• CRM System – low to medium uptake with some team members not engaging at all

• Maturing account management strategies

• Maturing territory management strategies

Generation 4: Driving Growth. This generation should be the minimum operating system for sales functions in today’s market. Driving growth occurs with robust sales operational performance and performance metrics being used as management tools. The sales function is standardised, systematic with unobstructed views of the pipeline, metrics, well-designed compensation and exit of non-performers. They are in a continuous improvement momentum avoiding complacency in the team.

Often at this stage, the sales division will be well populated in headcount, and a national manager is in place, with regional manager reporting lines. They are well educated and experienced across the broader business demands, therefore understanding the impact of decisions made in the sales functional area across the organisation.

They have a strong focus on market intelligence and understand the impact of cross-functional systems and policy, minimising the effects of the sales division on other areas of the business. They make most of the hard decisions in a timely way. There is evidence of early stages of workflow control to increase productivity within the sales function area.

The achievement is the sales function area is repeatable and scalable, and capable of achieving growth objectives, reducing the company’s risk profile.

Primary Traits:

  • Sales planning
  • Human Capital planning
  • Cost control of sales headcount
  • Knowledge management
  • Sales cost control
  • Risk management – human capital
  • Risk management – financial
  • CRM system – high uptake implementation
  • Sales compensation and rewards aligned with corporate goals
  • Cross-organizational efficiency
  • Performance reviews quarterly
  • Brand management – human capital
  • Analytical and strong follow-through on tasks
  • Quarterly performance reviews
  • Leadership based on set goals and requirements within the team
  • Role clarity
  • Strong induction and educators
  • No individual greater than the business in knowledge
  • Lead tracking systems
  • Defined selling practices

Taking a Deeper View of your Current State

Most companies’ sales functions get stalled in Generation 1 or 2 because they don’t realise the improvement opportunity available to them. The sales manager is concerned about the magnitude of the changes ahead and often unwittingly stifles growth.

For CEOs, they are not sure of the critical steps needed to move forward. Ultimately, the goal is to establish Generation 4. As a CEO, you now need to understand in an objective way, where your company is positioned today and at deeper level by using this complimentary CEO Analysis Tool.

This tool has been established to provide you with real insights into your sales function. It asks you the questions that open conversations around your business and provides you with feedback on improvements that most likely need to be undertaken — a more granular understanding enabling early-stage conversations about the sales function area.

As CEO you will have the comfort of knowing if the conversations are following a pathway that is going to take you where you need to take your company with the sales manager. You will be able to gauge the potential responses to change and time that may be required to achieve the outcomes.

After reviewing, you are now set up to move forward in an orderly, process-driven way toward operationalising the sales function. By taking the right approach, your sales function will operate with the transparency and predictability required to drive growth.

Successful improvement of sales function performance is an initiative driven by CEOs.

If you would like to discuss your specific situation and establish a improvement plan, please reach out to Adele Crane.

© 2019 Adele Crane. All Rights Reserved.

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