A small dose of arrogance may indeed be desirable in the quota-carriers we employ. However, this confidence gene can negatively impact enterprise performance if it is allowed to inform formal sales forecasting and corporate planning.
A quick query on LinkedIn shows that there are approximately 4,500 chief revenue officers within the online community -- 78% of them in the US. This title was virtually nonexistent a few years ago, so where did it come from?
We know from new Aberdeen Group research published in "No Longer Sitting at the Kids' Table: Sales Management Finally Grows Up" that B2B sales leaders are more and more making their management decisions based on big-picture thinking and corporate responsibility compared with just a few years ago. Much as the CMO role (43,000 LinkedIn members) earlier evolved from mere VP into a C-suite executive position charged with Return on Marketing Investment (ROMI), so too are SVPs and EVPs of Sales increasingly becoming identified with the ability to run a business within the business.
And what does business success hinge on? Accurate forecasting.
You Can Only Sell Your Way So Far Up the Ladder
This is an understandable, if not overdue, phenomenon. Most enterprise sales leaders have earned their stripes in the field, demonstrating an ability to consistently meet and beat individual quota, and then scaling their success as they move up the ranks to regional, divisional, and executive management positions. Considering the traditional alpha behavior that drives B2B selling and its practitioners, it's safe to assume that heavy doses of confidence, ambition, and drive apply not only toward beating sales goals and promoting products, but also to the career arcs of sales leaders themselves. Hence, any opportunity to inch closer toward the “big chair” of the CEO role is hard to resist, and the new CRO position provides just the right steppingstone for any sales executive hoping to move up the food chain.
A C-suite title, however, is not bestowed lightly. For years now, CMOs have earned their moniker by transitioning their performance metrics from activities to results. With more measurable value-add to the enterprise as a whole, business-minded marketing, and now sales leaders, have as much opportunity to aspire to the top corporate rung as their counterparts in finance, operations, and supply chain.
Figure 1: Tidal Changes in Modern Selling
In Figure 1, we see a dramatic illustration of this new phenomenon in sales management. Only now is the concept of margin-centric sales management beginning to emerge in Aberdeen’s Sales Effectiveness market research. Just a year ago, in fact, sales leaders were still predominantly held accountable for simply selling more product, and focusing only on the top line number (just hit quota, and worry about profits later on).
Suddenly, however, we see sales leadership abandoning top-down management style in favor of bottom-up, performance-sensitive business approaches. Furthermore, the research reveals that Best-in-Class companies report a 74% rate of profit-oriented sales management, compared with 53% among All Other firms. If the most successful organizations are now considering the sales function as an additional P&L business unit, it follows that their best practices are worth adopting by all practitioners seeking that coveted C-level sales management title.
Enterprise Sales Forecasts Are More Crucial than Ever
Understanding that sales leaders need to run a more business-centric team, it follows that they need to adopt more of the data-driven practices and systems of their line-of-business peers at the executive table. Perhaps the most crucial communication that sales provides to the rest of the enterprise is that of the forecasted revenue to be brought in by inside, field, and channel representatives during any particular selling window in the calendar. And yet, in many organizations even today, the internally published sales forecast is considered a joke by the rest of the company’s line-of-business leaders; too often, it represents emotionally-driven aspirations rather than logically predicted sales outcomes. In other words, the overflow of confidence that informs a typical sales professional’s everyday demeanor does not translate effectively into the hard facts required for companies to plan.
Figure 2: Why Can't We Forecast Accurately?
Why are accurate sales forecasts so difficult to create, anyway? When survey respondents were asked to identify the top barriers to forecasting accurately, the results in Figure 2 reveal a clear theme. The human factor, so important in accomplishing the business of B2B sales, actually gets in the way of leaders understanding their own short- and long-term activities with precision.
Let's face it: Unless there is a specific carrot or stick involved, sales reps have little motivation to spend time accurately predicting their future. Neither do their managers, who are just as focused on meeting quota, attaining President's Club status, or simply keeping their jobs.
All of this changes, however, when we introduce the concept of profit-oriented sales management trends from Figure 1 above. If ambitious sales leaders seek to prove their worth beyond just hitting a gross revenue number, they need to do a better job in holistically managing their portion of the company's business. That requires controlling the cost-of-sale, and growing the bottom line at a slower rate than that of the top line.
I Need a More Confident Forecast. What Should I Do?
More accurate, tighter sales forecasts are directly associated with stronger performance. In Figure 3 below, we see that at every stage of a typical B2B sales cycle, Best-in-Class companies report stronger results around the accuracy of their forecasting data.
Sales operations practitioners need reliable and credible forecasts early enough in sales cycles to make the right management decisions. These judgment calls can include adding extra resources to certain deals, such as advanced product demos, executive involvement, or customer references. They can also involve holding firm on discounting or bundling for those opportunities proven, by the predictive data found in B2B forecasting software solutions, or even linking compensation to sales forecasting accuracy.
Figure 3: Better Forecasts = Better Business Results
It should not go without mention that even at 11:59 PM on the last day of the month or quarter, Best-in-Class companies report only an 89% forecast accuracy result. Is driving that visibility number to 100% valid or worth the effort? Maybe. But it’s certainly less important than correcting the average 22% delta in sales forecast accuracy between top performers and all other firms. And tackling this latter issue is critical for sales leaders seeking that coveted CRO title.
To learn specifically how Best-in-Class companies reduce the impact of gut feelings and emotional judgment when creating more confidence in their forecast and managing better team-wide performance, read our full report here.
Originally published Oct 14, 2015 7:30:00 AM, updated August 13 2018