People tell me that over time, civilizations become smarter. But I’m not so sure. Back in 1998—almost 15 years ago—courtroom testimony about the Prudential Insurance sales scam included “Your judgment gets clouded out in the field when you are pressured to sell, sell, sell.”
But just two weeks ago, Jason Gay wrote in The Wall Street Journal, (Cash a Large Check, Repent, Refocus, Cash a Larger Check, July 24, 2012) “A big-time football program can generate tens of millions per season, and though profits are hardly guaranteed—a stunning proportion of athletic departments run at a deficit—this pursuit can be used to justify a program’s excessive power on campus.”
Clouded judgment, redux. In 1998, Penn State’s administration might have benefited from studying the Prudential case. Another learning opportunity, squandered.
Revenue uber alles! If the Prudential and Penn State stories don’t give executives pause to consider the risks, nothing will. Even with the NCAA’s harsh sanctions against Penn State, governance problems won’t evaporate—from college football or from anywhere else. The more zeroes in potential revenue, the more people drawn to the bacchanalian orgy—except they’re getting drunk on dollars.
Few organizations are immune. Ask a CXO what Sales must provide for his or her organization and the response comes searing back with the emphatic velocity of a Roger Federer forehand: “Revenue!” Yet, while most executives readily acknowledge that high revenue won’t overcome bad strategy or out-of-control spending, they don’t recognize the myriad risks that accompany tasking the sales team with the singular mission of generating it.
Asking whether unprofitable revenue is valuable brings a similarly quick response, equally emphatic: “No!” But that answer cracks open the door just enough to expose the truth that sales teams are often tacitly urged to deliver more than revenue. Profit matters. “And are profitable customers valuable if they didn’t enjoy buying from you, and aren’t likely to buy from you again?” “No, that’s not valuable, either,” I frequently hear. “What about customer satisfaction, Positive Experience, and customer loyalty?” “Yep, Sales must deliver those, too.”
And because we’ve all heard customers lament too many times “. . . after we bought, we never heard from our sales rep again,” Sales must also create—and keep—raving fans. Add to these deliverables the need to bring competitive knowledge and customer insight into the organization, and executives now have a more complete, better-balanced picture of how Sales fits into the overall mission of an enterprise. Delivering on the monthly revenue commitment comprises an important part of the picture—but not the only part. Far from it.
Confusion lingers over just what companies want from Sales. A large global strategy consulting organization I worked for wanted to grow revenue and to reduce the business development workload for their senior partners. They envisioned a new sales entity within the company, and staffed it with experienced professionals. When they hired me to join the team, they told me a detailed compensation plan would be prepared and ready when I started two weeks later. Two weeks went to four, then six, then beyond. “We’re still trying to figure it out,” the lead partner eventually told me with a sigh. Finally, when the plan was presented, a sizable chunk included discretionary compensation, to be awarded “if I like the job you’re doing,” he said.
Comp plan six weeks overdue, discretionary compensation . . . Hmmmm . . . A pattern began to emerge. When another partner asked me to hand-deliver a small proposal he had prepared for a government client in downtown Washington, I said “the in-house courier company does that.” “But that’s what Sales is supposed to do,” he insisted. In hindsight, all of this was emblematic of an organization that had, at best, a blurry picture of what Sales does—if it had any picture at all. There’s more, but I’ll skip to the end: the company dissolved its entire sales team within twenty-four months.
Most companies don’t suffer such extreme outcomes, but many stumble along, under-performing, and wondering year after year why sales skewed off the rails. Lack of clarity about the value Sales must return to the enterprise often bubbles up as a root cause.
Sales organizations provide the greatest value when they consistently deliver on:
1. Growing revenue. No surprises—it’s on everyone’s list.
2. Maximizing profitability. Often overlooked, but equally important.
3. Attracting and maintaining customers. Encompasses the R in Customer Relationship Management.
4. Managing governance, risk, and compliance. Removed from the domain of the sales organization for too long. But today, how revenue is generated matters as much as whether it’s generated.
5. Improving effectiveness and organizational learning. In today’s hyper-competitive global market, complacency and hubris bring great risk of failure.
6. Ensuring agility and competitiveness. “Sales must change!” We hear it all the time. But few companies make changing part of the job description.
These six constitute a shaky equilibrium. That’s OK–I’ll take that over lopsided, anytime! Amazing to think that if Penn State and Prudential were measured on revenue achievement alone, they would be considered wildly successful. And for a time, that was exactly how they were regarded, until the whistles began sounding. To prevent that from happening, sales operations must become more balanced, and the measurements of sales achievement more nuanced than championing revenue over everything else.
Analysts cheer when publicly-traded companies achieve financial targets. But for many organizations, getting there meant Sales contributed more than just revenue. Organizational leaders must develop a clear understanding of what those contributions are, and they must identify the strategic value Sales must offer every day to accomplish a company’s overall mission.
