It’s normal for executives to experience anxiety about revenue and net income results — especially during a downturn and even more so in a crisis like the one we are all experiencing now. Rather than taking a fear-based approach, the author offers three principles to effectively lead your sales organization through troubled times: 1) Resist the urge to increase sales call activity. 2) Eliminate low-value reporting requirements. 3) Focus on the early stages of the pipeline rather than obsessing over late-stage negotiations.
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My first tour of duty as a VP of sales coincided with the onset of the 2001 recession. Often referred to as the bursting of the dot-com bubble, the recession worsened after the 9/11 attacks, and while the economy technically recovered in the fourth quarter of that year, unemployment continued to climb. My firm had recently been acquired by a holding company with high expectations for growth — growth that at that time seemed impossible. I was scared. Scared about the future. Scared of failing. Scared about losing my job.
The Covid-19 situation is creating an economic crisis, and many executives feel the same sense of fear and dread I experienced in 2001. Powerful emotions often lead to poor decisions and practices when it comes to leadership of the sales organization. What works in times of economic expansion isn’t what is needed in a challenging economic environment. And since somewhere between one-fourth and one-half of sales professionals in American companies have never had to sell during an economic downturn, few companies can lean on their sales team’s experience to get them through. It’s not about doing more — it’s about doing things differently.
Fortunately, the firm I worked for was founded by sales effectiveness guru Neil Rackham, who was still involved with the business. He shared a few principles from his research on economic downturns in the 1980s that helped our management team lead effectively through the 2001 crisis. Since then, I’ve applied these principles with my clients as they faced the challenge of driving growth in difficult circumstances:
Resist the urge to increase sales call activity.
When leaders are scared, they frequently turn up the volume on sales activity. The logic is that more calls with customers will equal more sales. In some cases, when you have an inexpensive product and sales cycles are quick, this can be true. But if you have a more sophisticated offering that needs to be sold as a solution or using a consultative approach, increasing calls may backfire. During the 2008 recession, I worked with a reseller of IT products and services that had implemented a major push to increase activity. The number of orders placed increased by over 11%, but their total revenue declined by 6%. As their sellers chased any business they could close, the average account potential shrunk, and order size declined.
Instead of pushing increased sales activity, rigorously drive your strategy through the sales organization. Make sure your sales team is going after your optimal target client, in terms of scope, budget, the value of your offerings, and other factors that define a successful client for your company. Channel all your efforts into a limited number of exceptional opportunities in the pipeline. A bad prospect never makes for a good client, and under pressure, sales professionals can be loath to let go of any opportunity that reflects even a little interest. Rather than chasing low-hanging fruit with minimal prospects, focus your sales team on filtering and actively pursuing only qualified opportunities at a scale that reflects high value solutions. Eliminate activity for the sake of busy-ness.
Eliminate low-value reporting requirements.
Fear also manifests itself in additional and sometimes excessive reporting requirements. When leaders constantly ask for more information about what is happening, what they really want is control often over a situation that feels frighteningly chaotic. When it comes to the sales organization, that control is illusory and often counterproductive. Instituting a new set of metrics to keep tabs on what’s happening or increasing the reporting cadence of the forecasting process often has the unintended side effect of grinding revenue-generating activity to a halt. Between gathering the data, plus multiple levels of review and revision, companies massively increase internally-focused time, leaving less time and energy for the work of selling and effective sales management. The focus shifts from improving sales effectiveness to inspecting sales effectiveness, which has low value for your bottom line.
Instead, maintain a strong dashboard of leading indicators that provide predictive measures of success at each stage of the sales process. A few leading indicators will go a long way, such as: new opportunities at each stage, the value of opportunities at each stage, and the volume of opportunities progressing from each stage to the next. Be honest with yourself about how often you need progress reports and don’t slow the journey down by stopping to check the fluid levels on the car every 20 miles. During my first stint as a sales VP, the new parent company insisted on copious sales reporting. We did grow during that time, but I know that unproductive reporting limited our effectiveness as we focused on moving numbers around on spreadsheets instead of executing on sales efforts that could have increased profits.
Focus on the early stages of the pipeline rather than obsessing over late-stage negotiations.
Leaders who are anxious about revenue naturally focus on late stages of the pipeline, or what many smaller firms call “close to cash.” After all, when you’re struggling to survive, it makes sense to do everything possible to get business in the door. Unfortunately, focusing on the late stages of the sales cycle, where a decision is already imminent, can have a double-whammy effect. First, it rarely has a significant impact on your bottom line since the deliverables, terms, and pricing are already on the table. An exception here or there may help get a deal finalized, but it’s often too late to make changes of real value. Leaders simply will not get a great return on time spent here. Further, your customer’s typically negative responses to extra pressure are heightened during challenging times.
Myopically focusing on late-stage revenue also results in missed opportunities during the early stages of the sales process. It’s here where you have the greatest potential for strengthening the business and minimizing the effects of a recession. During the early stages, additional needs are identified, and the scope of an opportunity can be expanded. Also, building conceptual understanding about your solutions with proper decision makers can accelerate the sales cycle. It’s the front end of the sales process that allows you to create value and ultimately set yourself apart from the competition which, in turn, will make negotiations easier when it’s time to explore varying terms, deliverables, or fees. Leaders must focus on the early-stage opportunities where they can make a difference in everything from account strategy, to resource allocation, and client relationships at the executive level.
It’s normal for executives to experience anxiety about revenue and net income results — especially during a downturn and even more so in a crisis like the one we are all experiencing now. Rather than taking a fear-based approach, apply these principles to effectively lead your sales organization through troubled times. As a company leader during both the ‘01 and ‘08 recessions, I applied the techniques described above to achieve double-digit growth, while most competitors’ profits declined significantly. These principles can help build a powerful sales engine for your business that will sustain your company through even the most difficult times.
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