Leadership vs Management

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Management vs. Leadership – Setting the Foundation

Establishing the importance of leadership and management in building a high performance culture

“Management is about persuading people to do things they do not want to do while leadership is about inspiring people to do things they never thought they could do.” Steve Jobs

The ability to survive and thrive as a true market leader in today’s mature market and tough economy is achieved by leaders’ abilities to create and sustain an entrepreneurial culture of empowerment, discipline and personal accountability.  Focused leadership with a defined plan and disciplined actions is essential to creating winning teams and performance acceleration through effective coaching, mentoring and performance measurement.

Every aspect of the business – hiring and onboarding new associates, acquiring, growing or renewing revenue and solutions within an existing customer – is positively or negatively affected by leadership quality.

The need for leadership involvement, guidance and feedback is critical to ensure that best efforts and results are executed in every interaction with the customer. Individual and team coaching is critical to overall success.  I will discuss in detail the criticality of being and effective leader to accelerate growth and a world class performance culture.  Let’s start with the fundamentals.

Leadership vs. Management

Managers and leaders are two very different types of individuals. Manager’s goals arise out of necessities rather than desires; they excel at diffusing conflicts between individuals and departments, placating all sides while ensuring the day to day business gets done.

Leaders, on the other hand, adopt personal, active attitudes towards goals. They look for the potential opportunities and rewards that lie around the corner, inspiring subordinates and firing up the creative process with their own energy. Their relationships with employees and coworkers are intense, and the working environment is often, consequently chaotic.

We need both managers and leaders to survive and succeed. We must find ways to train good management skills and develop leaders at the same time. Without a solid organizational framework, even leaders with the most brilliant ideas may spin their wheels. But without an entrepreneurial culture that develops when a leader is at the helm, we will stagnate and rapidly lose competitive power.

We need both good management and leadership skills to survive and succeed. Without a solid organizational framework, even leaders with the most brilliant ideas may spin their wheels, frustrating coworkers and accomplishing little. But without an entrepreneurial culture, our business will stagnate and rapidly lose our unique competitive position.

Today’s Take Charge Leader-Manager

Take Charge Management is the integration of principles of great leadership combined with management fundamentals in a new pragmatism is critical for success in today’s market. I am by no means debating that some of the new ideas hyped to today’s leader/managers are without merit or that managers should go back to the bureaucratic practices of the past. Instead, I am saying that the time has come to reconsider the relative balance between innovation and fundamentals.

Today’s take charge leader-manager must excel at three critical areas:

  • Direction setting
  • Aligning people
  • Planning and budgeting.

Today’s take charge Manager’s ideas should be:

  • Adopted only after careful consideration and judged by their practical consequences
  • Purged of unnecessary buzzwords and clichés, tied to the here and now and rooted in genuine problems
  • Adapted to particular people and circumstances and adaptable to changing circumstances
  • Tested and refined and discarded when they are no longer useful.
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Rick Nichols is Managing Partner of TechCXO’s Sales & Marketing Practice and a member of the Executive Committee. He can be reached at rick.nichols@techcxo.com or view his full bio.

Sales Planning Guide

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Sales Planning Guide

This time of the year is critical to Chief Sales and Revenue Officers. So many things to do, so little time to do them:

  • Close Q4 business
  • Design sales model changes
  • Review individual and team performance
  • Top-grade talent
  • Assign accounts and territories
  • Review and refine sales compensation

This is a multi-part discussion on how to organize and motivate your sales team for success in the coming year.

Creating a great sales compensation plan is critical to focusing and motivating the sales team for success. It’s both a science and an art and – as they say in the movies – it’s complicated. Designing sales compensation plans are a delicate balancing act that should both motivate the team to maximize results while constructed in to allow the business to easily scale without breaking the bank.

Considering the following factors in sales planning and plan design will ensure a much higher probability of success:

Model revenue, performance and quota assignment

Corporate Revenue Goal Alignment

One very significant exercise involving sales, finance and HR is, before designing the upcoming plan, to agree on expected revenue objectives. Sales and finance should have equally weighed inputs and perspectives. Tension may occur when, totally apart from sales, finance creates a revenue and sales model that, while aligning with Board/Investor/CEO level growth models, isn’t aligned with market conditions and reality.

Team Performance and Quota Assignment

This exercise should be followed by analysis of current team performance. Systematic issues to consider in forming and finalizing both team and individual plans are current year performance, team turnover, onboarding time to full productivity for new hires and quota over-subscription.

Blaming underperformance solely on sales execution is common. Many factors contribute to underperformance including pricing and commercial terms, product quality, market climate and competitive threats.

Team turnover, time to hire and onboarding time to full productivity should be factored and balanced against quota assignment. The most current industry reports related to sales team performance state that current team performance is that roughly 60% of team members achieve or exceed quota expectations.

Factor in expected turnover and time to full value for new hires in modeling quota assignment. The “I hire industry thoroughbreds with great networks that can have instant success” and “let’s just increase our current reps’ quota” mantras and mentality simply doesn’t work.

Significant quota over-assignment should be factored – in the range or 30% – 50% to ensure a high confidence in sales revenue objective achievement.

Create an Aggressive but Balanced Plan

A sales-minded CEO that I worked for early in my career stated very simply, “You can’t have a healthy bottom line without a growing top line.” Many companies whose culture is dominated with a finance and/or engineering mindset and mentality consider sales a necessary evil. The facts are simple, pay too little and you won’t attract top performers, pay too much, it’s not sustainable for the long term.

Many of today’s successful sales compensation plans are modeled on a 40%/60% or 50%/%50% mix of base salary vs. on target earnings. Depending on situation, one may work better than the other. The premise with this is to have a balanced risk/reward between the company and the individual.

Keep it simple

Very simply, human nature and psychology says that people are motivated by what they’re rewarded to do. I get migraine headaches when I read compensation plans that are over a dozen pages in length, have very broad objectives and definitions of products, solutions and require a degree in calculus to calculate commission payments.

Plan objectives should be aligned with corporate objectives, clearly defined, standards for performance, aggressive but realistic, directly related to what they’re being paid to sell and how and when they’re getting paid.

Role-Based Compensation

Compensation plans should be very specifically aligned with the team’s and individual’s role within the company. Lead/demand generation, inside sales, outside direct sales and channels all have unique and different objectives, behaviors and revenue producing goals.

The quickest way to destroy sales focus and performance is to create a generic but overly complex plan that both confuses and frustrates individuals from their primary role of revenue generation.

Reward Over Goal Performance, Revenue Type and Quality

Rewarding revenue type, quality, timing are significant factors in motivating the team for success while accomplishing corporate revenue objectives.

Revenue Type

Revenue type is important, particularly in balancing new customer acquisition, growth and retention. Many plans make the mistake of paying one rate, regardless of which of the three revenue types are involved.

New business acquisition and significant customer expansion (new major solution sales, major customer expansion, e.g., additional divisions, distribution centers, and so forth) are very important to long term growth and scale. Additional seats, servers, devices, services and other incidental and ancillary services in most cases are handled by and paid to either account management or client success roles.

Revenue Quality

Profitability of revenue is important as, with significant discounting, individuals both give away revenue and set a precedence for the longer-term relationship with customers and longer term corporate health. Significant attention should be paid to addressing both revenue profitability and discounting policies within the sales compensation plan.

Revenue Timing

Revenue timing is important for several reasons, the most important being overall corporate financial health, as well as staffing and utilization/realization of services and support resources.

Rewarding the sales team’s and individual’s ability to accurately forecast revenue, especially coinciding with month, quarter and year end should be rewarded over and above normal commission percentages. Bonuses, SPIFs and other time-based rewards are very simple, straightforward ways to reward behavior and achievement.

Over Goal Compensation

The target of any well-constructed plan should be to reward over-goal performance and motivate the highest population to be rewarded for exceptional achievement. Many plans are modeled with significant commission accelerators as well as other non-cash incentives such as equity and stock or club trip performance. Many companies incorporate a quota club reward as well as Chairman’s or President’s Council for the top 10% of the team. Stringent definition and levels of performance for these rewards should be outlined in the plan.

Regardless of how you structure your sales team’s commission plan, never — under any circumstances — place a cap on earnings and variable compensation. Doing so will remove individuals’ and teams’ incentives to “do whatever it takes” as well as create an under-performing sales culture and kill team morale.

In closing, sales compensation plans, in combination with a well thought through sales model, should be designed to attract and retain top tier talent, lower the cost of fixed cost investment in salaries, and accelerate healthy and profitable growth.

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Rick Nichols is Managing Partner for TechCXO’s Revenue Growth Practice. See his full bio here.

High Cost of Sales Attrition and What to do About it

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Sales force attrition ranks among the top concerns for Chief Sales Officers because of the two-headed monster it quickly becomes, particularly for how attrition insidiously affects annual sales plans and the make-up of your team. Here are some key numbers:


Attrition – Sales force attrition has a near 50/50 split between voluntary departures – those sales reps you don’t want to lose – and involuntary dismissals, typically underperformers who are not working out. According the CSO Insights, the premier sales survey firm that surveys 4,000 CSOs each year, attrition is averaging 25.8% (see Figure1).

annual-rep-turnover

Cost per Rep – The cost of sales force attrition may be more than you think. Companies that closely follow their attrition rates determine a cost per departed sales rep to be from $500k to over a $1M. If that sounds high, think about what happens when you lose a star sales rep, particularly to the competition.

  • They take the clients with them
  • They were trusted yet they left- big morale question for the remaining
  • Their departure implies a problem

Recruiting/On-Boarding – On-boarding new reps cost you development time and money. The ramp time for seasoned reps is still at least six months. As a sales leader if you are reacting to the loss, you are in recruiting mode instead of selling and lost revenue potential is assigned to others further burden on their plan.

Less than “Full Employment” –  Most sales plans fail to properly account for attrition because they assume “full employment” against their plan (see Figure 2). It’s easy to figure out if you lose your stars to voluntary attrition and you keep your laggards who should be involuntarily let go. This creates a real problem because you are attacking the sales plan with a less than 100% team. You keep your laggards hoping for a miracle to make plan. In essence you are putting the destiny of success in the hands of the “60 percenters” to perform at 135% of plan.

It gets worse at the beginning of the new year when you’ve been talked into a sales plan increase and then the departures begin. You never get ahead. In fact, you’re behind before you get started and oftentimes never catch-up.

Cost of Sales Attrition – Part 1

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The High Cost of Sales Force Attrition: And What to Do About It

Sales force attrition ranks among the top concerns for Chief Sales Officers because of the two-headed monster it quickly becomes, particularly for how attrition insidiously affects annual sales plans and the make-up of your team.

Here are some key numbers.

Attrition – Sales force attrition has a near 50/50 split between voluntary departures – those sales reps you don’t want to lose – and involuntary dismissals, typically underperformers who are not working out. According the CSO Insights, the premier sales survey firm that surveys 4,000 CSOs each year, attrition is averaging 25.8% (see Figure1).

Cost per Rep – The cost of sales force attrition may be more than you think. Companies that closely follow their attrition rates determine a cost per departed sales rep to be from $500k to over a $1M. If that sounds high, think about what happens when you lose a star sales rep, particularly to the competition.

They take the clients with them
They were trusted yet they left- big morale question for the remaining
Their departure implies a problem
Recruiting/On-Boarding – On-boarding new reps cost you development time and money. The ramp time for seasoned reps is still at least six months. As a sales leader if you are reacting to the loss, you are in recruiting mode instead of selling and lost revenue potential is assigned to others further burden on their plan.

Less than “Full Employment” – Most sales plans fail to properly account for attrition because they assume “full employment” against their plan (see Figure 2). It’s easy to figure out if you lose your stars to voluntary attrition and you keep your laggards who should be involuntarily let go. This creates a real problem because you are attacking the sales plan with a less than 100% team. You keep your laggards hoping for a miracle to make plan. In essence you are putting the destiny of success in the hands of the “60 percenters” to perform at 135% of plan.

It gets worse at the beginning of the new year when you’ve been talked into a sales plan increase then the departures begin. You never get ahead. In fact, you’re behind before you get started and oftentimes never catch-up.

In Part 2 of this series we’re going go give you a Four-Part Plan: Stop the Silent Profit Killer: How to Create a Retention & Redeployment Strategy.

5 Leadership and Management Styles

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How style may impact your team’s performance

The five leadership and management styles in today’s business are: The Boss, the Judge, the Missing, the Super Performer and the Coach. Understanding these five leadership and management styles is key to becoming a true take charge leader/manager. Four of the five sub-optimize the human interaction so critical in developing a world class performance culture. A true leader/manager leverages both the organization and individual capabilities to unlock efficiency, effectiveness and true corporate value.

The ‘Boss’ and ‘Judge’

These two styles are authoritarian leadership and management styles and likely to be evidenced by a rigid rules system and an expectation of obedience to authority. This is evidenced by a manager who takes absolute control of a workplace situation, without reference to their team’s views and input would be exhibiting an authoritarian management style which is directive in nature.

Where these authoritarian management style models are allowed to thrive unchallenged, either in the work-place or in society in general, is rigidity and inflexibility more likely to result in entrenched thinking and a lack of response to rapidly changing scenarios.

The ‘Missing’ and ’Super Contributor’

These two management styles are polar opposites of delegating styles. With the ‘Missing’ style, the leader-manager is too busy with their own job and takes a laissez faire attitude, dishing out tasks to employees and leaving the rest solely up to the employee including any decisions about problems that may arise. Their attitude is to think they hire very senior people who know what to do and don’t need supervision.

The ‘Super Contributor’ leader-manager is the polar opposite, working with their people at a very detailed level, often insisting on being involved in every significant interaction, interjecting themselves into every aspect of work activity. Both contribute significantly to team frustration and under-performance.

The Coach

Coaching is the most critical competitive skill that any organization can have. It is the most potent tool available for improving performance, maximizing productivity and achieving revenue growth. Effective coaching is an integral part of how any leader manages. The broader objective is to create a world class entrepreneurial culture in which collaboration and coaching are cornerstones of behavior.

Helping your colleagues and sub-ordinates take responsibility for their own development will build team cohesion and accelerated productivity.

The first step in leadership is about vision. The second step is empowerment. The third step is coaching. While all three are interrelated, coaching pervades all three and supports the others. The goal of effective leadership is to create independence. Effective coaches and leaders:

  • Act as role models, demonstrating in the first person the skills and behaviors which are critical to successful meetings and conversations
  • Collaborate and communicate frequently with their teams and individuals to share strategies and tactics, reviewing key account, opportunity and executive briefing plans to construct optimal outcomes
  • Add value and guidance by providing domain expertise and relevant knowledge and acting as sounding boards for ideas and suggestions
  • Support team and individual decisions and actions with customers, prospects and colleagues

 

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Rick Nichols is Managing Partner of TechCXO’s Sales & Marketing Practice and a member of the Executive Committee. He can be reached at rick.nichols@techcxo.com or view his full bio.