That's Why Many Salespeople Feel They're Fighting a No Win Battle!
The mechanics of sales development for technology and professional service companies is currently stuck in a cyclic format that is over twenty years old. We still have annual sales projections that are based on backroom conversations with unsubstantiated forecast logic or rolled forward from last year's commitment to investors, compensation plans that haven't changed in years and sales support departments who are not assigned a sales quota. While entire IT and professional service industries continue to evolve around the Internet and the digital economy, the revenue methodology model for technology salespeople is supported by business departments using antiquated concepts leftover from the organizational structures of Fortune 500 org charts.
So, as digital firms move forward to create new technology and distribution channels, they continue to fall backwards as they attempt to sell these new IT programs with outdated business revenue models.
In This Paradox, We Have:
• VP's of Sales who are held accountable for annual sales forecasts that were created twelve months prior based on commitments to Wall Street.
• VP's of Marketing who are not paid on revenue, but are provided bonuses based on marketing and communications (MARCOM) objectives.
• Managers of Strategy who make recommendations on new markets for the sales department to sell to, but are not paid on their recommendation's successes.
• VP of Operations making sales proposal decisions not based on what the client wants to buy from the account manager but instead on what their current bench utilization statistics are for that month for a specific technology practice.
No Wonder it Salespeople Are Frustrated.
So Whose Fault Is This?
Well it's not the fault of the VP of Sales, or the VP of Marketing, or the VP of Operations. Like all of us have been from time to time, they are stuck in a traditional technology organizational structure that propitiates silo decision-making and reduces the corporate potential for integrated business development opportunities. Like their predecessors before them, they are just emulating the "standard" IT business model to generate revenue.
So whose fault is it?
It's The System Of How Technology Companies Are Managed!
When we look at VC-funded start-ups, mature family IT businesses or Fortune 1000 players, you consistently see the same IT organizational structure and reoccurring compensation plans.
Yes, during the wild dot com craze, there were executives running around with titles like Chief People Officer or Customer Care Manager, but the basic process of managing a technology firm's sales model has not changed in twenty years.
We have VP's of Sales, VP's of Marketing, VP's of Strategy and VP's of Alliances all of whom are paid on the same basic structure that their predecessors before them were paid.
Once a week (hopefully), they have an executive meeting with their direct reports and then they sit in an executive meeting with the CEO, COO or President discussing the issues of the day.
This process goes on throughout the entire world in big companies and small, startups and mature players.
So, where did this sales revenue model come from?
The current technology sales model is based on the bureaucracy of a Fortune 500 organization structure DESIGNED TO CREATE ORDER, NOT REVENUE.
Yet, we are all willing participants without knowing it.
When a VC company recommends to a start-up founder to hire an experienced president to run the day-to-day, whom do they recommend and approve? Most often, they select an executive from a Fortune 1000 company.
When a $10 million CEO wants to hire a VP of Sales to double his company's revenue, whom do they hire? Usually, a Regional VP of Sales from a $ 1 Billion powerhouse is hired.
When a Fortune 50 company is seeking a new Divisional Senior Vice President, whom do they employ? They either promote a VP from within their own organization rank and file or bring in a VP from a direct Fortune 50 competitor. You see, it is all the same, so were all to blame!
We are all just cogs in the machine that is laid out before us. We just keep recycling the Fortune 500 structure from IT firm to IT firm. Each new executive brings in their "established" way of business operations and continues the cycle. Or a startup founder reads in the business publications the "way" it is suppose to be and then emulates those corporate mentors they aspire to be like.
So, why is the Fortune 500 organizational structure bad for revenue generation for a technology company?
Because it is based on non-shifting industries and rigid markets and years of established business units structure needed to manage preprogrammed budgets and operating markets. We have job descriptions, budgets, staff positions, line positions, sales forecasts, pay plans, and weekly executive meetings all based on big companies' business needs to manage by department. However, this management structure creates automatic department friction between all of the divisional heads that directly influence revenue generation in a technology company.
Instead of building a team environment, it builds permanent silos. These structured operating business models create large, minimally maneuverable aircraft carriers in a world where we need sales speedboats. It is not that the managers are actually trying not to be team players, but instead each manager responds to his daily responsibilities based on the job description they were hired with and HOW THEY ARE PAID.
Case History Example
Once, in a previous life, I held a position as a National Major Account Manager selling multimillion-dollar hardware, software and services to Fortune 1000 firms in North America. I closed a big deal with a major player and they placed a condition in their contract, which required our company's development department to provide their firm a detailed deployment schedule with software modification schedules by a specific date after contract signing. After being continually informed by the VP of Operations that they were all on schedule, we missed this critical delivery date. Since we were the highest priced vendor when I won the deal, the client was so upset that they exercised their back-out clause in our agreement and went with the numbed two, less expense vendor.
When I called the CEO (a former Fortune 500 C-level executive) to complain that I had just LOST over $100,000 worth of commissions and to ask what was he going to do to the VP of Operations for his major mishap? His answer was "When I evaluate him (the VP of Operations) in six months at his annual review, I will be will be very critical of his performance and only give him a 3% raise!"
This response is very common. Why? Because salespeople are held accountable for revenue, when it is a company's responsibility. In this example, our firm lost over $10,000,000 of revenue over several years. I lost over $100,000 in commissions and the VP of Operations got a 3% raise.
Why did this happen? Because in technology firms, multiple departments' goals are not aligned and the market still relies on old methods for business development.
You see, I am not a new wave executive who believes in Chaos Theory, but I do believe that we can reorganize our revenue generating departments "with structure" that will enhance a team environment to generate more revenue. Because there is a better model to help sell technology!
Continue reading "Is Your Technology and Service Sales Model Ancient?" ... Read the full article
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