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Chapter 2: Opinions - The Fuel That Drives Corporations
Overview
This is a chapter about opinions: how they are shaped, and how they could be shaped.
Opinions play an all-important role in our personal and professional lives. When you think about it, we rarely make a significant move without soliciting other people's opinions. At the same time, when we want help in making important decisions, most of us are pretty selective about the people we're going to listen to.
When organizations need to make important decisions, most hire experts to become familiar with their situation and make recommendations. A case can be made that CEOs receive huge compensation packages because of their ability to evaluate situations and formulate opinions - informed guesses that ultimately shape the strategic direction of their company.
Not everyone's opinion is valued equally, of course. As we proceed down an organization chart, the power of individual opinions to shape company policy decisions drops off sharply. In fact, most organizations have structures in place to ensure that decisions will be made based only on opinions that have been arrived at (or least blessed) by higher-level people. In a manufacturing company, for example, employees on the shop floor execute procedures - act on opinions - that have been developed by others. Few, if any, policy decisions are made on the shop floor.
But there is a major exception to this rule: the sales function. Yes, in most cases a business plan is finalized, and specific marketing plans are put into place to execute it. And yes, for most companies with a sales organization, the revenue plan is broken down into revenue objectives (quotas) for each territory. And yet, while salespeople may be given very specific targets to achieve, they are also given enormous latitude in arriving at opinions, and making decisions, that not only affect the organization's performance, but also ultimately shape the customer's experience. In how many organizations are salespeople given the latitude to decide
How to position their offerings to buyers?
Which accounts and titles to call on?
Which accounts to include in their pipelines?
Which accounts to close and when?
How to interpret lost opportunities?
Which changes in offerings are needed to improve competitive positioning?
Without necessarily understanding that they're doing so, companies rely on the opinions of traditional salespeople to build a pipeline, create a forecast, and deliver top-line revenue. Depending on the specific circumstances, this may be exactly the right thing to do - or it may be an out-and-out disaster. The most common reason that new companies fail is that Sales does not deliver according to plan (although, of course, the reasons for that failure to deliver may be complex). So let's peel the onion and take a closer look at how salespeople form opinions, and how those opinions come to bear on their company's success or failure.
Who's Responsible for What?
When we ask CEOs a critical question - "Who positions your company's offerings?" - we often hear the same response: "Marketing." This is true whether they are using a direct or an indirect sales organization. In our experience, though, this is a gross oversimplification - to the extent of not being a response at all. So what we tend to do next is ask the CEO to consider the following scenario:
Your company makes a major new product or service announcement and trains the entire sales organization on the offering in regional meetings for 2 days. The following week, your salespeople begin calling on buyers and customers. Let's assume that calls are made by three different salespeople attempting to sell the new offering to the same title and vertical industry, and let's assume that these calls are videotaped. Would someone reviewing those tapes be able to determine if
The same offering was being sold?
The salespeople worked for the same company?
At this point, most executives - especially those who have come up through the sales ranks - face a sobering reality that they don't like to dwell on: The burden of positioning offerings falls, by default, on the shoulders of individual salespeople. This is true no matter how many hours the Human Resources (HR) department has devoted to carefully creating job descriptions and detailing responsibilities across the entire Marketing apparatus. In the final analysis, many CEOs simply abdicate responsibility for their customers' experience - as well as the attainment of top-line revenue targets - to individual salespeople.
A CEO can safely assume that Tactical Marketing has responsibility and exerts control over literature, brochures, advertising, web site content, trade shows, seminars, and so on. But marketing support and the control of the selling process are far more tenuous. At the end of the day, the positioning of offerings boils down to the words and phrases salespeople use when they communicate with potential buyers. So how consistent is the message that is being delivered? Most CEOs, when answering truthfully, have to say, "Not very consistent."
Who's to blame? We now hear from many senior sales executives that Marketing has become irrelevant in terms of supporting their selling efforts. According to the American Marketing Association's Customer Message Management Forums held in 2012, between 50 and 90 percent of the material created by Marketing to support Sales is never used by salespeople. Of course, Marketing should not shoulder all the blame for this situation. Part of the problem results from the fact that in many cases, no effective interface between Marketing and Sales has been defined. In addition, it is virtually impossible to provide effective support if an effective sales process has not been established.
We have already discussed how most PowerPoint presentations and glossy brochures are of minimal help to salespeople in structuring conversations with buyers, or in closing business. Much of today's marketing collateral simply is not designed to be used by salespeople while making calls.
Similarly, much of the training provided to salespeople also misses the mark. It is, for the most part, product-focused, not customer-focused. We've already seen how traditional salespeople tend to launch almost immediately into a product pitch, without regard for what the buyer may either want or need. Well, cramming a newly hired salesperson's head full of product information points that salesperson down this same exact path - the wrong path if the salesperson is expected to engage in a customer-focused conversation with a buyer. Yes, there is a need for product training, but we believe it should be distinguished from sales training.
Companies that are unable to bridge the gap between Tactical Marketing and Sales have no alternative but to rely on - and be at the mercy of - the opinions of their salespeople. Is that such a bad thing? Well, salespeople are just like doctors, lawyers, electricians, or the members of any other profession in that
10 percent are exceptional
70 percent are average
20 percent are marginal
The small percentage who are naturally customer-focused are capable of overcoming the lack of marketing support. They are able to resist the temptation to recite verbatim what they have learned in product training. On a sales call, they can listen, and respond, and ask smart questions to properly position offerings during conversations with their buyers. The question or challenge then becomes, "What production can be gotten from traditional salespeople?"
Hiring and Training: Where Selling Begins
Let's examine the hiring and training of new salespeople, explore how offerings get positioned, and see how a series of opinions ultimately rolls up into the CEO's revenue forecast.
Some large organizations have established hiring profiles designed to help them to select candidates who possess what they believe are the requisite education, intelligence, and personal characteristics to become successful revenue-producing salespeople. Other large organizations prefer to start with a blank canvas, in the sense that they favor hiring recent college graduates, with the intent of teaching them everything they need to know about the company's offerings, about vertical markets, and about how to sell.
After an orientation period in the branch office where they will be working, these new hires are often sent to a central location for indoctrination. The duration of these indoctrination sessions can range from a few days to several months, depending on the complexity and number of product offerings. Classroom sessions often run all day, with evening assignments or after-hours case-study work also being fairly common. In addition to product training and immersion in their company's sales culture, sales trainees are introduced to corporate policies and procedures, headquarters staff, administrative reporting, and so on.
The primary objective of these sessions, however, is to teach new hires about the company's product and service offerings. Frequently, these corporate training sessions are designed and delivered by Product Marketing staff who have limited direct experience with, or even exposure to, customers and salespeople in the field. The focus is more inward ("These are our offerings") than outward ("Here are some ways your customers and prospects could use our offerings to achieve their goals, solve their problems, or satisfy their needs"). Attendees are asked to memorize specifications of different offerings. They learn to deliver canned presentations, perform demonstrations, handle objections, and recite competitors' strengths and weaknesses.
As suggested above, most such training presents the company's offerings as nouns, with a relentless focus on what it is and what it will do. This rarely works. A few years ago, we ran into a salesperson working for a company that sold adhesives. Asking him about his offerings prompted an astounding "core dump" about viscosity, drying properties, resiliency, and so on.
Within the first few seconds of this onslaught, the salesperson had lost our interest. He didn't seem to be aware of that. He droned on for many more minutes, telling us far more than we ever wanted to know. Finally, he paused to take a breath. Leaping through this narrow window of opportunity, we commented that he had described his products as if they were nouns. We then suggested that he try to discuss his adhesives as if they were verbs.
Give him credit: He gave it a shot. He stepped away from his normal presentation mode (inward focus) and came up with applications of his products (outward focus). He described how some of his customers were using his company's adhesives, which was far more interesting and easier to understand than listening to him drone his way through a laundry list of properties, attributes, and features. And something else interesting happened, too: We had a conversation. No, that conversation could not have been described as scintillating, but as a sales approach, it represented an enormous improvement over his feature-dump approach.
Perhaps because they are aware of (and maybe even feel a little guilty about) the intensely inward focus of their new-hire training, some companies attempt to provide their new salespeople with industry knowledge. These studies of industry segments typically represent a small percentage of the total class time. They often appear to be an afterthought, or filler - a kind of cultural time-out.
In this small percentage of the overall sessions, attendees are exposed to the functions and responsibilities associated with the various job titles within vertical markets. They may be introduced to industry buzzwords and potential buyer hot buttons, both of which they are encouraged to work into their sales calls. Hope springs eternal. The hope is that by using these terms, salespeople will appear to possess industry knowledge - perhaps even expertise - which of course should prove useful when the salesperson attempts to relate to the person on the other side of a desk or on the other end of a phone line.
In our experience, it's a forlorn hope. The new salespeople rarely gain expertise through these truncated, but often intense, industry segments. For them, it's information overload - the equivalent of trying to drink from a fire hose. And even if they're successful at ingesting and regurgitating buzzwords, the potential buyer is rarely impressed. The seller may just be one question away from exposing an underlying lack of understanding of the buyer's business environment. The buyer lives this industry every day. When a salesperson misses by an inch, he or she misses by a mile.
Another difficulty with this overall sales-training approach is that it is not integrated. It presents product, sales, and industry information separately, and leaves all three in separate "silos" of information. Salespeople are thus required to do the integration themselves, and to create a coherent message that they can deliver during sales calls. This is a huge challenge. Even customer-focused salespeople can require months in the field to accomplish this integration and convert product knowledge into product-usage knowledge. Think about how wasteful it is for salespeople to learn to achieve this integration and conversion individually. And how unreasonable it is to expect traditional sellers to ever get there.
Positioning: The Next Challenge
How the product is described to potential buyers is its position in the market. Positioning is all-important in the sales process. Although many people harbor a negative stereotype of salespeople, that may be in part because they don't fully appreciate the skill needed to successfully position a product in the mind of the buyer - or the training that lies behind that success.
In the mid-1970s, one of us - fresh out of college - was hired by IBM's General Systems Division. The assignment: to sell first-time computer users on the benefits of migrating from their manual accounting systems to a computerized setup. Most of us trainees fell into the trap of believing that we were selling hardware and software. It took us a frustrating couple of months to make the leap - to understand that the decision makers we were pitching to had little or no interest in learning about computer hardware and software. In fact, the product approach actually frightened some of them. It reinforced all their worst notions about the complexity and general scariness of computers.
On the other hand, if the business owner could be shown reports generated by our systems, and if these reports could be shown to be useful tools for making real-life business decisions, we were home free. For example, seeing an inventory report with items sorted by date of last usage would enable buyers to visualize reducing inventory. Who cared about CPU processing speeds, disk capacities, and the like? The hardware and software needed to be described only as the means to a desired end. Remember that this was IBM, which at that time was considered to be the gold standard in most aspects of business, the company that all the others were imitating. IBM, with all of its vaunted staff, expertise, and experience, was leading its new hires down the wrong path. It was teaching them to position products as nouns, rather than verbs.
And the positioning problem is not limited to new hires. For companies with multiple offerings selling into multiple vertical industries, the challenge of positioning offerings becomes formidable, even for the most talented and experienced salespeople.
For example, think about the wide range of people with different job functions a salesperson must communicate with in order to get an enterprise productivity-improvement offering sold, funded, and implemented. In the case of some enterprise sales, this cast of characters can range from technical staff within the information technology (IT) department, through middle management and line vice presidents, and all the way up to the chief financial officer and the CEO. Think how different each of these calls should be. Consider, too, how the length of the sell cycle can vary, depending on whether the salesperson's point of entry into the buyer's organization is low, middle, or high.
Let's go back to the less experienced salesperson. Imagine that a new hire has completed his or her company's 6-month training program, and that you have the distinction of being the first buyer (victim?) that he or she is calling on. Picture where this call is likely to head, right after the introductions. Unless the salesperson has rare innate customer-focused sales talent, he or she is likely to jump right into the pitch, regardless of the interests of the buyer sitting across the desk. Most likely, the salesperson is thinking, "Hey - if my company thought it was so important for me to understand our offerings, then it must be important for the buyer to understand them as well."
When was the last time a salesperson called on you and took too long before discussing the offerings? Prior to the salesperson's getting into the sales pitch, did you indicate any need for the offerings or any reason that you would be a potential buyer? When the salesperson was reciting features of the offerings, what percentage of them were you actually interested in, or felt could be useful to you?
The answer in most cases, of course, is "a very low percentage." So why do traditional salespeople go this route? Talking about their offerings represents their comfort zone, partly because it was what their company trained them to do. It allows them to feel like experts, and to control the meeting. But leading with features is, in most cases, like driving a car off a cliff. Sure, you're in charge. But do you really want to be in charge of a car crash, or a failed sales effort? Wouldn't it be better to succeed?
Why Not Lead with Features?
The irony is that leading with features - operating in the comfort zone, as described above - can also cause a salesperson to lose control.
How? Once a specific offering (it) is mentioned, many buyers ask a very logical question: "How much does it cost?" But this is often too early in the conversation to discuss pricing, because no goals, problems, potential usage, or value have been established in the buyer's mind. A stick of gum costs too much, no matter what it costs, if you haven't decided that you want or need a stick of gum.
The traditional sales technique at this point - when price comes up too early - is to attempt to provide waffling kinds of responses ("Your mileage may vary") in an attempt to dodge the question. This can create a negative impression, and sometimes causes the seller to conform to the pervasive, unflattering stereotype of a "slippery salesperson." But there's an even worse scenario: Particularly among traditional sellers, there is also a powerful desire to hang onto this buyer at all costs, which can prompt the salesperson to quote unrealistically low numbers. If the sale progresses, the buyer will remember the unrealistically low figure quoted in the initial meeting. Eventually, it can become a barrier to moving toward a buying decision.
Yes, price is a qualifier, and it should be shared with buyers relatively early in the sales cycle. But until the buyer begins to understand the potential usefulness of the product, his or her reaction is very likely to be, "Hey, that seems expensive." And once that conclusion is drawn, the seller faces an uphill battle to regain mind share. And while there is no easy way to prevent buyers from requesting pricing information earlier than the salesperson would like to divulge it, discussing the potential usage of the product can defer these discussions until later in the sales cycle. The more valuable the usages that are discussed before cost is shared, the more reasonable that price is likely to sound when it finally is disclosed.
So again, this makes a case for discussing uses rather than features. But that's rarely what gets discussed in traditional sales calls. Given their training, their enthusiasm, and their formidable quotas, traditional salespeople feel compelled to present each buyer with every possible feature.
Assume a buyer is exposed to twenty-five product features, but needs only five of them. The buyer is very likely to draw the conclusion that the product must be too complicated and too expensive. In other words, it looks like overkill for the buyer's requirements. Buyers will object to having to pay for features that they believe they won't ever use. (No matter that they may be wrong in this; it's what they believe that counts.) Some traditional salespeople have been trained to believe that selling begins after the buyer says no, but the fact is, it's extremely difficult to turn someone around after he or she has voiced an objection about a feature. The traditional school of selling holds that an objection is a selling opportunity. We strongly disagree. Once a buyer has voiced an objection, the salesperson has to get the buyer to change his or her mind, and this is something that most people are reluctant to do.
The fact is, although traditional salespeople lead with their product to head off potential objections, they are far more likely to generate these kinds of objections when they take this approach. Part of the problem is a control issue. Who is controlling the conversation during a "spray and pray" session? The salesperson? He or she is doing all the talking, and the buyer is in the unenviable position of passively listening. Most human beings like to be in control, and buyers are no exception. In fact, they may be fully accustomed to being in control of most of the conversations they have in the workplace. So they may feel a strong need to seize control of this conversation - and the easiest way to do so is by offering objections. This job is made far easier if a seller generates a tidal wave of features. All the buyer has to do is wait for a bad feature, and then pounce.
Opinions: Right and Wrong
Let's go back to the scenario introduced earlier in this chapter: Let's assume that a new offering is announced, and that traditional salespeople from New York, Chicago, and Los Angeles who have been with the company for an average of 5 years attend 2 days of training. Their first posttraining calls are scheduled for Monday. Each will be calling on the CFO of a manufacturing company.
If these calls were videotaped, would an outside observer realize that all three were selling the same product? Would the observer conclude that the salespeople worked for the same company? What might be the range of expectations in the minds of the three CFOs? Which of these three accounts should become part of the company's pipeline? In whose opinion?
Does it look as though all three are selling the same product? In most cases, as noted, the answer is no. Most likely, the presentation of the company's offerings and the shaping of the discussion with the buyer have been left to the salesperson to figure out. The result is a wide variety of sales approaches (although most will tend to be in the traditional vein).
After training, in many cases misdirected and all too brief, newly hired salespeople are asked to begin volunteering opinions. First, they must condense their understanding of the company's offerings into some format with which they can communicate a coherent message to buyers. This is an opinion. Once that task is completed, they have to analyze their territory - to decide what their target markets are and what titles to call on - and then to start filling their pipelines. Again, these steps begin with opinions.
Meanwhile, new hires understand that their honeymoon period is likely to last about 60 days, after which their pipelines must grow. Again, opinions come into play as the salesperson decides what approach to employ: go for quantity of buyers or quality of buyers? (Traditional salespeople think quantity; customer-focused salespeople think quality.) Even if they try to focus on what they feel are qualified opportunities, their judgment may be clouded, and their opinions shaped, by the pressure to show activity.
Within a few more months, they will be required to provide their opinion as to which opportunities in the forecast will close, why they will close, and when. Opinion, opinion, opinion. Is it any wonder that many customer relationship management (CRM) systems are flawed, at best? Many companies gather the input for their CRM system by asking their salespeople to interpret the outcome of their calls. But in many cases, the weakest link in the chain is a salesperson's opinion of what constitutes a qualified opportunity.
Salespeople are also asked to give reasons - opinions - when fading prospects finally must be removed from their pipelines. The most common reasons given are product and price. In most cases, we believe, neither is valid. If "product" is cited as a reason for the loss after a 6-month selling effort - for example, "we can't run under UNIX" - we believe that questions such as the following should be asked of the salesperson: "How long did it take you to discover that the buyer needed UNIX support? How long did it take you to realize that we don't provide that support?" The hard fact remains that if the product is not a "fit," the opportunity was never properly qualified, and those 6 months of activity were wasted.
And yes, unless you are selling a commodity like pork bellies, wheat, or gold, price is likely to be a factor in your success (or lack thereof). But we believe it's not always - or even often - the determining factor. Buyers tend to use price as an excuse when delivering bad news to salespeople. Think about it: Very often, when a salesperson learns that a sale has been lost on the basis of price, he or she asks, "Where do we have to be?" In most cases, the buyer declines to give an answer. Sometimes, this is because the buyer has psychologically closed the door and doesn't want to reopen it. But many times, as noted, price is used as an excuse. It was only one of many factors that went into the purchasing decision.
Stated conversely, if price were the be-all and end-all, vendors could post their prices on the internet and do away with salespeople. Purchasers could make all their buying decisions based solely on price. But they don't - so clearly, other factors are involved.
After a salesperson has competed for months and then lost, the buyer tends to let him or her down easily. One of the easiest ways out is to blame price or product, and most traditional salespeople are happy to take these reasons back to their managers. How many professions have situations in which there is one winner and a four-way tie for the silver medal? The real reason most opportunities are lost, however, is that the losing salesperson got outsold.
The odds are high that "I got outsold" will never appear on a loss report (that is, the write-up of a lost prospect). And this, in turn, is one of the reasons most loss reports are exercises in futility. Companies that attempt to direct product development based on loss reports, therefore, are doing the equivalent of driving down the highway by looking through rearview mirrors distorted by the opinions of salespeople.
A while back, we worked with a company that sold software to help manufacturers schedule preventive maintenance on their production equipment. They were one of three or four major players in this particular niche. About a year before we began working with them, they offered only a Disk Operating System (DOS) version of their product, while two of their competitors had developed Windows support. Predictably, the most common reason cited by the salespeople to explain losses was the lack of a Windows version of the product. In fact, the salespeople complained to the point where corporate made the investment, developed the new offering, and withdrew support for the DOS version.
What happened next? The next round of loss reports highlighted the fact that many buyers were still running DOS, and couldn't use the new Windows product!
We undertook a pipeline analysis and found two major problems. First, reps were filling their funnels with unqualified opportunities. Second, their opinions about which transactions were winnable, and how they could be won, were simply wrong. The company's strategic direction - to develop a Windows product and to stop supporting the DOS version - was misled by the opinions (excuses?) of their salespeople.
Turning Opinions into a Forecast
As you may have surmised by now, opinions permeate most sales organizations. Their importance is magnified when people are asked to predict the future. This barbaric ritual is euphemistically referred to as forecasting.
If a salesperson is under the gun - in other words, if he or she is busy and hasn't made much progress with the pipeline - then forecasting is likely to mean spending a few minutes massaging dates, amounts, and percentages from the previous month's report, most likely late in the afternoon on the day the report is due. The poorer a person's year-to-date position against quota, the greater the temptation to inflate the forecast. In such cases, the report should carry a disclaimer patterned after the one on side-view mirrors: "Warning! Objects in forecast may be further away and smaller than they appear."
Salespeople quickly learn that monthly review meetings with their managers go much better when they have lots of accounts listed in their pipelines. Because there is no standard way to position offerings, it is up to each salesperson to list the accounts he or she feels are viable. First they persuade themselves of that viability, and then they persuade their managers. By the time they get to this second round of persuasion, they may be quite eloquent in arguing for an opportunity's viability. In fact, if these salespeople could sell to buyers and customers as well as they do to their managers, they would be 200 percent of quota every year!
Sales managers are required to give their opinions of their salespeople's opinions. They are measured in the short term by the aggregate of the pipelines of the salespeople reporting to them. Inevitably, their opinions are influenced by what they want to believe. They want to believe that the opportunities in the pipeline are winnable, and that all the salespeople will make their numbers.
The job of sales manager is a very difficult one, and most are subjected to a great deal of pressure to deliver revenue objectives. Salespeople's lives are better if they can either (1) show a strong pipeline or (2) defend a weak pipeline. First-level managers have exactly the same challenge when doing a pipeline review with their managers. For this reason, first-line managers want to believe the yarns being spun by their salespeople.
There's another reason not to stir the pot. If the sales manager is able to poke holes in a rep's funnel for several months in a row, his or her "reward" is to put the salesperson on a performance improvement plan, which in many cases must be overseen by the HR department. Writing and monitoring this plan requires a huge commitment of time and serves as a distraction from the task of achieving branch or district quotas. It is also an unpleasant task to finally realize that a potential hiring error was made.
Ultimately, moreover, if the salesperson is unable to achieve the established objectives, he or she will be terminated. Now the manager is faced with the task of recruiting, hiring, and training a new salesperson. Does all of this influence how hard a manager drills down into a given rep's pipeline? We think so. All things considered, it is far easier for managers to believe their salesperson's overoptimistic assessment of the opportunities that are out there, soon to be closed.
The barbaric ritual continues all the way up the chain - from district, to region, to the vice president (VP) of Sales. Each level puts its happy spin on the figures and then passes them along. The accuracy of the forecast usually improves over this long journey; the major reason it does so, though, is that the statistical base behind the forecast is getting larger, and this generally leads to a more reliable final result. This forecasting activity happens either weekly (weakly?) or monthly, and culminates with the forecast from the senior sales executive that arrives on the desk of the CFO, who must project earnings for the quarter.
Virtually all companies have become skilled at controlling their expenses, so the largest variable in projecting profitability is top-line revenue. But CFOs have learned from experience not to take revenue projections from Sales at face value. In fact, not believing the projected total for a moment, CFOs tend to multiply the gross forecast by a heuristic factor - always less than 1, often written on a scrap of paper and then stuck in their top right-hand drawer - to take some of the sunshine out of the forecast. After making this adjustment, they tell the CEO what the results for the quarter will be, so that he or she can set earnings expectations for analysts and investors.
So, as we've seen, senior executives have good reason to doubt the accuracy of their forecast. On the occasions where it is accurate, that may be due to offsetting errors. For example, the ABC Company (95 percent probability) did not close, but the DEF Company placed a huge order for add-on business that was never factored into the forecast. The most important revenue number at so many companies turns out to be little more than a piling up of opinions, many of them extracted from people under pressure to protect their jobs. Unless and until organizations take responsibility for forecasting out of the reps' hands, this key number will continue to be unreliable.
In reality, monthly forecasts tend to be most useful as potential wake-up calls, alerting salespeople that their pipelines are thin and warning them that they've got to ramp up their business-development activities. When the revenue forecast starts looking overoptimistic and it appears that there could be a shortfall late in a quarter, the pressure (internal and external) intensifies. Salespeople are encouraged to close business, often by offering "Hail Mary" discounts. Even if the current quarter is salvaged, though, this too often becomes a vicious cycle, with the pipeline being flushed at every quarter end, and then having to be filled from scratch.
One of the most difficult aspects of forecasting is projecting when opportunities will close. If a salesperson forecasts the Acme Company to close in September, then in October, and then in November, and it finally closes in December, the forecasting accuracy is 25 percent, even though they got the business.
Too often, close dates have nothing to do with the buyer's agenda, but correspond to seller's agendas. Under the best of circumstances, closing before buyers are ready requires significant discounting. In the worst case, pressuring buyers prematurely can cause the seller's organization to either (1) lose the sale or (2) compromise pricing. In the latter case, if the order doesn't close, the seller can anticipate either having to honor the discount at a later time or having to talk their way around it.
Organizations spend a significant amount of time forecasting. Much time and effort are expended to create the forecast, and - in months where there is a shortfall - more time and energy may be expended defending the bad numbers and explaining how they were generated in the first place. (These resources should, of course, be devoted to selling, rather than finger pointing.) And in many cases, after the last dust settles, things return to normal, dates are shifted back, and the process is repeated. The quality of the pipeline remains fairly consistent, still reflecting the (optimistic, undisciplined) opinion of each salesperson.
Many libraries offer amnesty programs to their borrowers, whereby fines on overdue books are forgiven. The books come back, their borrowers are reinstated, and everyone starts with a clean slate. Sales organizations would benefit from the equivalent. They would benefit from getting rid of all the dead wood contained in the pipeline and starting from scratch, without unduly penalizing those who come clean.
One extreme example of dead wood in a funnel emerged in a consulting engagement when we asked what was the longest sales cycle that the company ever encountered. Without hesitation, the VP of Sales said, "Seven years." Knowing that their average sale was about $100K, this seemed to be impossible, so we asked a number of follow-up questions. As it turned out, the company had, indeed, competed for a particular account for 7 years. During that period, they actually wrote four separate proposals.
The business initially was awarded to one of their competitors by a decision maker who was comfortable doing business with their major competitor. After 7 years, that decision maker left to join another company. At that point, in response to a fifth proposal, the buyer switched vendors.
Amazingly enough, during the entire 84 months, this "opportunity" appeared in the pipeline. We've already suggested the reasons for this: Salespeople take comfort in having a long list of buyers as they set out to convince their manager that things are going to be great. Removing a dead opportunity would create more problems than it would solve. A new prospect would have to be found to replace it. Embarrassing questions would have to be answered. Better to sell your manager on being unrealistically optimistic.
Aiming for Best Practices
As long as there is a system, there will be people who abuse it. This is as true in sales as in any other walk of life. In this resource, we would like to propose ways to make the scenarios described above the exception, rather than the normal course of business.
The concept of "best practices" has been associated with virtually all aspects of business. Sales has been, and remains, the most notable exception. Most senior executives and investment analysts believe sales to be much more art than science, and therefore not amenable to a best-practices approach.
We believe this view can be changed - but only after companies provide direction to all their salespeople about how to have conversations with buyers about how to use offerings to achieve a goal, solve a problem, or satisfy a need. Unless and until this happens, companies will continue to be dependent on the opinions of their salespeople in the following areas:
How their offerings are positioned to buyers
What accounts and titles to call on once given a territory
What accounts should be included in their pipelines
What accounts will close, and why, and when
What the reasons are for losses
What enhancements to offerings are necessary to improve win rates
One thing we have learned from our years in the systems business is that reports are only as good as the quality of the input that goes into them. Consider again the disappointing results that most sales force automation (SFA) and customer relationship management (CRM) systems have delivered with respect to pipeline management. Why? Because the input to these systems consists largely of salespersons' opinions of the outcomes of sales calls they have made. When you add in the fact that product positioning is left up to individual salespeople, and that they often are under enormous pressure to justify their positions, you can see how problems get built into the system.
Automation without improved process only makes a bad system faster. In the following chapters, we will focus on the kinds of improvements that are necessary to make the sales process better.
In closing, consider what a misnomer the term forecasting is. If that were the objective, CFOs would just take the number they receive from their VP of Sales and run with it. Our view is that senior executives crave control. Doing this exercise weekly or monthly is a flawed attempt to give them an illusion of control. In point of fact, allowing salespeople to forecast abdicates control to people whose mission is to justify their jobs, not to predict what will actually close. Without process, opinions rule.
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