the ceo procrastination sales trap

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The CEO Procrastination

Sales Trap

Research paper

© 2015 Copyright Sales Focus International

New Zealand • United States of America • Australia


This report offers chief executive officers (CEOs) valuable insight to assist them in their sales organisations’ preparedness and ability to deliver.

The focus of the research and studies is a combination of both the CEOs’ perspective of the sales organisation and the sales leaders’ perspective of their own organisational performance.

This research and study have also provided valuable insight into the effect sales leaders have on the company within both the sales organisation and the broader audience across the company.

In terms of the past four years, the research demonstrated that 88% of CEOs have had to take action to manage costs and efficiencies within the actual sales organisation. Within that group, 71% reported that they had to take more than one action in response to the changing economies and markets.

CEOs reported they had given directives to sales leaders to reduce costs in the following areas:

• Compensation plans 64%• Hiring 76%• Travel/entertainment 54%• Head count 41%• Goals and quotas 26%• Sales operating expenses 37%• Sales cost 29%• Training and development 12%

These cuts were made deep into the sales organisation and how it operated, tending to downsize the sales business overall. The noticeable trend was that the cuts were in hiring and compensation plans, being the first primary cost point. Interestingly, only a small number of respondents reported reductions in training and development and this was driven by the fact there was no expense budget in place from the outset.

Research overview

This report offers chief executive officers (CEOs) valuable insight to assist them in

their sales organisation’ preparedness and ability to deliver.

Hiring

Travel/Entertainment

Head Count

Goals & Quotas

Sales costTraining & development


Research overview CEOs were pleased to report that these overall reductions had immediate cash-flow benefits and profitability benefits. Their primary concern, and an over-riding issue, was that most respondents reported they experienced challenges in delivery of sales goals and quota (budget), even after reducing them.

In identifying the instigator of the changes, over 95% were driven by the financial manager in response to CEO directives to cut costs. The financial managers established new revenue and expense budgets within each criterion based on the revised sales goals.

Despite making these cost reductions combined with reductions in sales goals and quotas, over 67% of companies reported that they failed to achieve sales goals in 2011.

Participants reported their delivery against sales goals over the past four years as follows:

• 2010 94%• 2011 67%• 2012 77%• 2013 79%

From a low in 2011, there was a significant improvement by 2013. Reports are that sales leaders are forecasting that for 2014 they will realise an average 84% delivery against sales goals/ quota.

Whilst these trends are certainly pointing in the right direction for many companies, the result still falls 16% short of sales goals on what for many companies is an already reduced level. Some CEOs are reporting that their sales results are now only equal to where they were operating four years ago, whilst others remain at lower levels.

“The problem remains that the result still falls 16% short of sales goals on what

for many companies are already reduced levels.”

2010

2011

2012

2013

94%

67%

77%

79%

Achievement of sales goals


Although companies in some industries are experiencing a recovery in the market place, others are reporting stagnation and declines. With the emphasis on cost control at an all-time high, questions are now being asked by boards and CEOs about the actions sales leaders have taken in response to the experience of a downturn or changing markets and how they are planning to manage their sales organisation in the future.

Unfortunately 84% of CEO respondents reported dissatisfaction with the action taken by their sales leaders outside of directed cost reductions. They felt that sales leaders viewed these changes as sufficient, with little consideration of any other improvements that could be delivered.

Within that 84% group, 92% reported concern over not only the time taken to make non-directed changes but also the lag between initial identification of a problem and actual acceptance that the problem required action.

As a measure of those times between identification and starting to make the required changes, we reported according to quarterly action time lines. The results were:

• 19% started directed changes in the first 3 months

• 27% started directed changes in the 3–6 months timeline

• 38% started directed changes in the 6–12 months timeline

• 16% started directed changes after 12 months.

The CEOs in the 38% and 16% groups – six-plus months– felt that, on reflection, their companies had lost considerable momentum through the slower response times or inaction and this directly affected market share and/or profitability.

A further fallout from the slower response times was that some companies missed their sales goals, believing the delay in acting had taken a deeper than necessary toll on the morale of the business.

Initiating Change

Many CEOs report they have now given strong directives of change being

required. Their reported tolerance of results being delivered is under twelve

months in 2013 and the year ahead.

100%

0%

3 months 3 - 6 months 6 - 12 months 12+ months


Who is Initiating Change? Many companies reported that, since late 2012 to early 2013, they have changed their focus from survival in the market back to growth.

Company strategies now incorporate new products, innovation of existing products and opening of new sales channels to take their products to market.

59% of respondents reported changes in their product mix offered to the market. Within that group, 27% have begun taking to market new products that compliment their existing offerings or replace redundant product offerings. The balance have plans to release new products and offerings in the coming 12–24 months.

Interestingly, for many companies all of these actions were reported to be driven predominantly by business areas outside of the sales organisation. Cost reductions emanated from finance departments and innovation of products emanated from marketing and research and development.

Based on the research, it would appear that sales leaders have benefited from the decisions made in other areas of the business – changes that removed them from direct scrutiny as those changes were being implemented.

With most CEOs believing sufficient changes have been made in operations and finance, the focus now sits squarely on the sales leader to deliver results.

For CEOs the focus now sits squarely on the sales leader and how they will deliver

the results in the years ahead.

59% of respondents reported changes in their product mix

27% have begun taking to market new

products


Many CEOs have experienced firsthand the difference between the focus and priorities they have for the company and those that their sales leaders have. That gap, no matter what size, can have a direct impact on the company’s financial performance, by which the CEO is ultimately measured.

As part of the study, Sales Focus International canvassed the sales leader’s perspective in an attempt to provide CEOs with an understanding of the chasms that can develop within their own companies in this respect. The sales leader’s actions and priorities will certainly provide foundations for a sales strategy and its execution.

The respondents reported that they believed their key pressures for 2012, 2013 and beyond are:

• Sustaining or increasing revenue• Re-alignment of sales activities to overall business

objectives• Longer buying cycles by customers• Customers’ increased scrutiny of offers• Decreasing customer loyalty• Decreased sales talent loyalty• Poor hiring talent pool• Increased competitor activity in traditional

markets

None of these key pressures is surprising given the current market. The question will be “How are they going to be addressed in the sales strategy and what disciplines and standards will be applied to strategy execution?”

From a CEO’s perspective, all these pressures have a significant impact on the overall profitability and sustainability of the company. They have a considerable flow-on through operations and into the company’s ability to plan and deliver its products and services in a timely and cost-effective manner.

The key pressures identified by sales leaders demonstrate that there may be fewer opportunities in the market and these will have longer lead times for those companies focused on existing customer bases. The diminishing loyalty of customer base can indicate greater customer transience in the future.

For sales organisations that are correctly aligned to strategy, this will bring opportunities as transient customers seek alternative offers from the market. The selling capability of the sales organisation will be under pressure – but more over their new business strategy and how that it will be executed to support sales personnel.

Sales Focus International advises that sales strategies must be reviewed, and risk management strategies incorporated, to minimise the impact of all of these key pressures. A strategy to offset the challenges must be in place for each pressure point. To overcome these potential challenges, the strategy must be deep enough to have a positive impact on the business.

Sales leaders must develop sales strategies that minimise the risk of each key pressure and ensure it has sufficient depth that it has a positive impact on revenue and profits.

The Challenges Ahead

The key pressures identified by sales leaders demonstrate that there may be

fewer opportunities in the market and these will have longer lead times for those companies focused on existing

customer bases.


The Sales Leaders Response Sales leaders will see their role within a company defined by the actions they take to address the key pressures and the timing of those actions, with the directive from CEOs that over-sales-goal results must be delivered in the coming twelve months. The time for error or slow implementation has past.

Some sales leaders had already begun the development of three-year plans focusing on immediate sales performance improvement and results, with a wellplanned and measured approach to the years that follow, but they represented just 12% of respondents. A slightly higher 34% had developed sales strategies for the coming twelve months, but the strategies addressed the immediate concerns of the business while lacking foresight as to the future. A disturbing 54% were continuing the sales strategies they had previously developed, even though these were not delivering the results. Those strategies contained minimal measurement and lacked flexibility to adjust to market changes.

The sales leaders who did have strategies in place reported the following actions:

Restart hiring 24%Change hiring criteria 6%Restart training and development 14%Revise metrics 5% Perform ongoing costs analysis 4%Re-align sales structures 8%Revise compensation plans 26%Adjust sales goals / quota 29%Install technology 8%Restore travel and expenses 27%

The study shows that the primary focus remains on sales goals, compensation plans, travel expenses and hiring. The other strategies or actions have a much lower ranking in their priorities.

Sales Focus International was surprised at the low ranking given to metrics and costs, when these are critical to strategy execution. The other stark finding was how little change was made to both sales structures and hiring criteria. In other words, these sales leaders would be taking the same team to the field, with similar skills, to address the new economy.

The approach was in contrast to the market they had been experiencing and the change in customer loyalty. Another notable finding was the low emphasis on training and development, even though the hiring pool had lower skills and existing hires required education in the new markets.

It was concluded that the actions many sales leaders are taking will fall short of addressing the potential issues ahead. Many sales leaders will continue to rely on applying past practices to new and future markets. The degree of change being brought about will be less than half of that being experienced in the market.

This is most concerning for CEOs as their overall strategies and operations are reliant on sales goals being delivered. With the cost cutting in recent years, companies are thin to the market and need reliable delivery of sales goals to remain profitable.

CEOs must consider intervention in sales strategies before further profits and

market share are lost through lack of competitiveness and timely action for

strategy execution.


A critical function of the sales leader’s role will be their ability to identify not only the right changes to make but also the degree of change that is required to be effective. Any changes made that are not correctly analysed or identified or are not sufficiently deep to address the core problems will put greater pressure on the business. With many companies experiencing pressure with regard to cash flow and profitability, poor strategy and execution will be extremely costly to the business.

The skill that will be required above most others will be the ability of the sales leader to identify and deliver those changes in the right sequence and in a timely and effective manner through the sales organisation. Strategy execution has never been as heavily weighted in sales leaders’ skill sets as it is in this era.

Of the sales leader respondents, just under 32% reported they had experience in delivering change projects through their sales organisation, and only 4% in complex change projects. Each respondent

was enthused by the opportunity to be involved in a change management project and they all said they would take the lead role. This lack of experience being applied to such a vital area of the business is a further concern for CEOs.

To gain more understanding of the depth of change they had been involved in, respondents were asked to describe their activity in relation to delivering changes over the last twenty four months and the core changes they were focused on. The 32% of respondents in this category reported the following as their experience in delivering change:

• Implementation of CRM• Increased use of CRM• More frequent sales meetings• Revised call plans within territories• Focus on top customers• Changes to territories• Increased product segment focus• Increased sales call numbers.

Sales Leaders Driving Change

A critical function of the sales leader’s role will be their ability to identify not

only the right changes to make but also the degree of change that is required to

be effective.Sales leaders experience with change projects

32% experience with change projects

64% no experience with change projects

4% experience with complex change projects


Sales Leaders Driving Change The changes were delivered over a twelve-month period. Sales Focus International, with its experience in change management over the past two decades, would rank these changes as soft changes, typical of normal sales function activity in the current market, and not change projects.

A degree of complexity would only be reached if all were implemented at the same time by a very entrenched sales force with a long-standing history in the business – especially considering the extended delivery time line.

In reviewing the results of those change initiatives, the sales leaders reported the following outcomes in the seven change areas identified:

Number of changes planned 4 Number of changes commenced 3Number of changes achieved 2Number of changes measured 1Number of changes delivered on time 0

Clearly these outcomes are not sufficient for most companies to remain competitive in the market. They highlight the need for CEOs to be diligent in how change initiatives are identified, delivered and measured.

The sales leaders citing 10–20 categories included subject matter related to hiring, sales tools and measurement, and actions related to strategy execution.

The sales leaders citing 20–30 categories included all of the above and also had a strong focus on business, profit and risk management. Their commercial skills were mature and they held a broader skill set than their counterparts.

The respondents were then asked to identify the number of contribution points that support all their categories and would be actionable points for change and sales improvement to contribute to overall sales force effectiveness. The results were:

0–30 points 24%30–45 points 37%45–70 points 18%70–100 points 9%100–150 points 7%150–200 points 5%

“Do the sales leaders have the access to the knowledge and resources that

is needed to fully understand sales force effectiveness and how to apply it to their sales organisation and have a

competitive advantage?”


Without correct analysis, these companies can expend considerable

revenues in the wrong areas of their sales organisation, with direct impact on top-

line and bottom-line performances.

These results were reflective of the categories. Primarily sales leaders rely on just 45 action points to run their sales organisation and provide it with analysis for decision-making. This would be considered insufficient to run a highly competitive sales organisation.

In fact, in Sales Force International’s model of sales force effectiveness, 24 primary areas and 150–200+ individual points are identified as contributing to the effective conduct of a highly competitive sales force delivering predictable performance and achieving sales goals. The number of points varies according to sales channels and industries, but a minimum of 150 stands for most sales organisations in the review and study demographics.

There was a clear difference in the ranking and, as established in the reference book, many companies and their sales leaders apply a moderate interpretation of a process rather than full analysis of its correct application. This is predominantly driven by sales leaders’ lack of education and limited access to knowledge.

These results have a serious impact on the performance of the sales organisation as they have a direct effect on:

• Identification of improvement areas • Ranking of improvement areas • Change strategies • Competitive capability • Revenue achievement • Cost management • Strategy execution

A number of CEOs were contacted for their opinion of the overall results and their response was that they believed sales leaders would have gained the knowledge of their own volition and without formal directive from the company. Clearly this is not the case. CEOs must take action to ensure that sales leaders are suitably trained to deliver the results in today’s economies.

Sales Leaders Driving Change


The results are consistent with SFI’s previous findings that the overall level of talent in sales leaders is not increasing with the demands of the market. But now, we believe that not addressing the issues could have significant impacts on the business, in the form of lost profits in direct or indirect behaviors of the sales organisation and/or lost market share.

CEOs must minimise the risks and act in order to take maximum advantage of the new economy. This can be accomplished in the following ways.

1. As in other areas of the company, more scrutiny and improved practices to increase profitability must be implemented in the sales organisation – through either lean manufacturing or other operational and financial best practices. The sales organisation is now under similar scrutiny and needs to be considered along with business practices and step away from the common exclusions applied to this significant profit regulator of the company. Their failed performance can have a catastrophic impact across the company.

2. Board members, directors and CEOs need to minimise the risk in their companies by seeking third party best practice scrutiny of the sales organisation. They must seek hard evidence and facts rather than the traditional rhetoric applied to this critical area of the company. CEOs must have not only sales leaders who embrace change but people who can deliver change and install best practice standards across the sales organisation.

3. CEOs must question the basis on which sales leaders are making their decisions in relation to sales strategy and execution. Strategy and execution practices must be reviewed to ensure their alignment to the company’s overall objectives in both the immediate and distant future. The execution plan must be reviewed for its application of business skills in establishment, milestones and measurements.

4. As the sales leader can become a lynch pin to success for some companies, they need to ask “Is the sales leader him/herself willing to learn, change and adopt new practices to minimise the risk for the company in unnecessary loss of profits and market share? Is there hard evidence of them taking those steps?”

5. Is the sales leader suitably qualified and experienced to identify and deliver the necessary improvements in the business. Do they require mentoring, skills education or replacement?

This research report will provide CEOs with some initial insight into their sales organisation and potential risks, as well as an understanding of the quality of sales leaders available in the market and their ability to deliver. It will provide CEOs with an understanding of the next step they must take to minimise risk and maximize profitability.

Those CEOs demanding more will be best positioned to take market share and increase profitability and shareholder value.

How to be ready

As CEOs are responsible for the strategic direction and profitability of the

company, this research and study support the view that more scrutiny is required of this critical area of the business and how

it is managed.


Research and study demographics

Total Participants: 480 companies

Industry: construction, importers, industrial, manufacturing and wholesalers

Sales channels: wholesale, direct, distributor, other

Geographic Revenue Sales Employees:

Australia 79% $ 10 - $25 million 12% Less than 10 2%

New Zealand 12% $ 25 - $45 million 23% 10-20 2%

Asia 4% $ 45 - $60 million 43% 20-30 2%

North America 4% $100 - $150 million 3% 40-50 2%

$ 10 - $25 million 3% 50 plus 2%


where companies turn for revenue improvement

Sales Focus International is one of the leading dedicated sales and marketing consulting firms in the region. We work with companies to assist them in delivering sustainable revenue improvement. We are renowned for delivering results in shorter time frames. We transform

company cultures to embrace contemporary practices creating a competitive advantage.

Since 1990, we have been passionate about achieving better results for our clients.

© 2015 Copyright Sales Focus International

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the ceo procrastination sales trap

Sales

sales business

delivery of sales goals

sales goals quota

short of sales goals

revised sales goals

sales leaders perspective

actual sales organisation

effect sales leaders