management
Success is a Mental Game
This assertion is as true in business as in sports, individually and in teams. So, let’s break it down.
When I watch my local football team, I occasionally see a shift in facial expressions from excitement to frustration – often right before the end of the first half. Sometimes, they recover during halftime and come out renewed and ready to win, but the “gloom and doom” expressions usually translate into suboptimal performance and mistakes. It is frustrating because you know they have the talent to win.
The same thing happens in business – especially in Sales. Sometimes it occurs in the middle of a sales cycle, similar to the example above. Unfortunately, too many people allow a couple of data points to determine their future trajectory. Why is that?
Whether you own a company or manage a group of people, good leaders aim to optimize their workforce by finding the balance of factors that result in happy and loyal employees who are doing their best for themselves, their customers, and their company. There are a ton of motivational theories out there, such as Expectancy Theory, Reinforcement Theory, the Role of Instrumentality, Intrinsic vs. Extrinsic Motivation, and more. Since one size rarely fits all, the challenge becomes an effort of reward-focused personalization, which can be a lot of work.
People will often win or lose before they even start. Their negativity, self-doubt, and anticipation of failure become a self-fulfilling prophecy. This post focuses on self-motivation, attitude, mindset, and creating the habits that lead to better success.
Below are four simple questions that someone should ask themselves when they question their ability to succeed in a position, company, or industry. There are always many ways to point the finger of blame elsewhere, but the first step should be to look in the mirror.
- Do you believe that you can win where you are today? If not, why are you still there? Customers and prospects can sense insincerity, so if you don’t believe in yourself, you shouldn’t expect them to believe in you. Maybe the company is terrible, and everyone is failing. If that is true, then it is probably time to look elsewhere.
- What have you learned from past successes and failures, and how have you adapted based on those lessons learned?
- What are some early indicators of success or failure that you have identified? Are you adapting to the situation if you run into those indicators now? It could be that the best approach is to cut your losses on this attempt and move to the next sooner rather than later (i.e., qualify out quickly).
- What are you doing to improve your skills? It is funny how small, continuous improvement efforts lead to a greater sense of confidence. Greater confidence often translates to increased success.
I have found that consistently doing the right things is the best way to maximize my success. Start developing habits and routines that have led to winning in the past, but don’t expect them to work forever. Everything changes, and you should change too. Look for things that are working for others, try them out, and if they work, incorporate them into your routines.
Success truly is a mental game, and everyone can win. The person who continues to win over time is the person that does not get stuck in time. Be curious, get excited, and adapt. And once you get there, start helping others. It is nice having mentors, but also great to become one.
As the saying goes, The rising tide lifts all boats. Winning can be a team sport, but it begins with individual contributors having winning attitudes. Unfortunately, the same can be said for losing, so decide now what you want and go forward with energy and confidence.
Shouldn’t Sales Forecasting be Easy? What about Accuracy?
I’m sure that everyone has read articles that state some “facts” for managing your “sales pipeline” or “sales funnel.” Things like needing 10x-30x of your goal at the start of the process, down to needing 2x-3x coverage at the start of a quarter to help increase your odds of achieving your goal. Now, if it was only that easy…
First, what are you measuring? The answer to this question is something that anyone with a sales quota should be able to succinctly answer. For example, are you measuring?
- Bookings – Finalized Sales Orders
- What happens when Sales Operations, Finance or Legal pushback on a deal? You have a PO, but has the deal really been closed?
- Billings – Invoicing Completed
- This includes dependencies that have the potential to introduce delays that may be unexpected and/or outside of your control.
- Revenue – In-depth understanding of Revenue Recognition rules is key.
- How much revenue is recognized and when it is recognized varies based on a variety of factors, such as:
- Is revenue Accrued or Deferred? This is especially key for multi-year prepaid deals.
- Is revenue recognized all at once – such as for the sale of Perpetual Software Licenses? (even this is not always black and white)
- Is revenue recognized over time – such as with annual subscriptions that are ratable on a monthly basis?
- Is revenue based on work completed / percentage of completion? This is more common with Services and Construction. Combining contracts, such as selling custom consulting services with a new product license, can complicate this.
- Are there clauses in a non-standard agreement that will negatively affect revenue recognition? This is an area where your Legal team becomes an invaluable contributor to your success.
- Cash Flow – Is this really Sales forecasting?
- The answer is ‘no’ in terms of Accounting rules and guidance.
- But, if you have a start-up or small business this can be key to “keeping the lights on,” in which case the types of deals and their structure will be biased towards cash flow enhancement and/or goals.
- How much revenue is recognized and when it is recognized varies based on a variety of factors, such as:
My advice is to work closely with your CFO, Finance Team, Sales Operations Team, and Legal team to understand the goals and guidelines, and then take that one step further to create policies that are approved by those stakeholders and are then shared with the Sales team to avoid any ambiguity around process and expectations.
So, now the hard part is over, right?
It could be that easy if you only have one product that is well established, has a stable install base, has no real competitive threats, where the rate of growth or decline is on a steady and predictable path, and where pricing and average deal size is consistent. I have not seen a business like that yet but would have to believe that at least a few of them exist.
Next, what are you building into your model to maximize accuracy? Every product or service offered may be driven by independent factors, so a flat model that evenly distributes sales over time (monthly or quarterly) is just begging to be inaccurate. For example:
- One product line that sells perpetual licenses may be dependent on release cycles ever 18-36 months.
- A second product line may be driven mainly by renewals and expansion on fairly stable timelines and billings.
- A third product line may be new with no track record and in a competitive space – meaning that even the best projections will be speculative.
- And finally, there could be Services associated with each of those product lines and driven by an even greater number of dependent and independent factors (new implementations, upgrades, implementing new features, platform changes and modernization, routine engagements, training, etc.)
Historical trends are one important factor to consider, especially because they tend to be the thing that you have the greatest control over. This starts with high-level sales conversion rates and goes down to average sales cycle, seasonal trends, organic growth rates, churn rates, and more. Having accurate data over time that can be accurately correlated is extremely helpful. But, factors such as Product SKU changes, licensing model changes, new product bundles, etc. increase the complexity of that effort and potentially decrease the accuracy of your results.
Correlating those trends to external factors, such as overall growth of the market, relative growth of competitors, economic indicators, corporate indicators (profits, earns per share, distributions, various ratios, ratings, etc.), commodity and futures prices (especially if you install base tends to skew towards something like the Petroleum Industry), specific events, and so forth can be a great sanity check.
The best case is that those correlations increase your forecasting accuracy for the entire year. In all likelihood what they really do is provide valuable inputs that allow you to dynamically adjust sales plans as needed to ensure overall success. But, making those changes should not be done in a vacuum, and communicating the potential need for changes like that should be done at the earliest point where you have a fair degree of confidence that change is needed.
There will always be unexpected events that negatively impact your plans. Changes to staffing or the competitive landscape, reputational changes, economic changes, etc. can all occur quickly and with “little notice.” That is especially true if you are not actively looking for those subtle indicators (leading and trailing) and nuances that place a spotlight potential problems and give you time to do as much as possible to proactively address them. Be prepared and have a contingency plan!
Forecasting accuracy drives confidence, and that confidence leads to having the ability to do things like getting funding for new campaigns or initiatives. Surprises, even positive ones, are generally disliked simply because the results were different than the expectations and that begins to fuel other doubts and concerns.
Confidence comes from understanding, good planning, helping everyone with a quota and the teams supporting them to do what is needed when it is needed to optimize the process, and then to have an effective approach to determine whether deals really are on-track or not so that you can provide guidance and assistance before it is too late.
It may not be easy, but it is the thing that helps drive companies to that next level on a sustainable growth trajectory. In the end, that is what matters the most to the stakeholders of any business.
As an aside, there are myriad of rules, regulations, and guidance statements provided by a variety of sources that apply to each business scenario. I am neither an Accountant nor an Attorney, so be sure to consult with the appropriate people within your organization or industry as part of your routine due diligence.
The Value Created by a Strong Team
One of the best team-building exercises that I have participated in was as a Board Member for the Children’s Hospital Foundation of Wisconsin. We were going down a path that led to a decision on whether or not to invest $150M in a new addition. The CEO at the time, Jon Vice, wisely determined that strong teams were needed for each committee in order to thoroughly vet the idea from every possible perspective.
The process started by being given a book to read (“Now, Discover Your Strengths” by Marcus Buckingham & Donald O. Clifton, Ph.D.), and then completing the “Strengthsfinder” assessment using a code provided in the book. The goal was to understand gaps in perception (how you view yourself vs. how others view you) so that you could truly understand your own strengths and weaknesses. Then, teams were created with people having complementary skills to help eliminate weaknesses from the overall team perspective. The results were impressive.
Over my career, I have been involved in many team-building exercises and events – some of which provide useful insights, but most failed to pull the findings together in a way that was concrete, had context, and offered actionable recommendations. Key areas that consistently omitted were around Organizational Culture, Organizational Politics, and Leadership. Those three areas have a significant impact on value creation vis-à-vis team effectiveness and commitment.
When I had my consulting company we had a small core team of business and technology consultants and would leverage subcontractors and an outsourcing company to allow us to take on more concurrent projects as well as larger, more complex projects. This approach worked for three reasons:
- We had developed a High-Performance Culture that was based on:
- Purpose: A common vision of success, and understanding of why that mattered, and an understanding of specifically how that was defined and measured.
- Ownership: Taking responsibility for something and being accountable for the outcome. This included responsibility for the extended team of contractors. Standardized procedures helped ensure consistency and make it easier for each person to accept responsibility for “their team.”
- Trust: Everyone understood that they not only needed to trust and support each other but in order to be effective and responsive the others would need to trust their judgment. If there was a concern we would focus on the context and process improvements to understand what happened and implement changes based on lessons learned. Personal attacks were avoided for the good of the entire team.
- Empowerment: Everyone understood that there was risk associated with decision making, while at the same time realizing that delaying an important decision could be costly and create more risk. Therefore, it was incumbent upon each member to make good decisions as needed and then communicate changes to the rest of the team.
- Clear and Open Communication: People on the team were very transparent and honest. When there was an issue they would attempt to resolve it first with that person, and then escalating if the two people could not reach an agreement and decided to seek the consensus of the team. Everything was out in the open and done in the spirit of being constructive and collaborating. Divisiveness is the antithesis of this tenet.
People who were not a good fit would quickly wash out, so our core team consisted of trusted experts. There was a friendly competition that helped raise the bar for the entire team, but when needed the other team members became a safety net for each other.
We were all focused on the same goal, and everyone realized that the only way to be successful was to work together for the success of the team. Win or lose, we did it together. The strength of our team created tremendous value – internally and for our customers that we sustained for several years. That value included innovation, higher levels of productivity and profitability, and an extremely high success rate.
This approach can work at a Business Unit or Department level but is most effective when it starts at the top. When employees see the leaders of their company behaving in this manner it provides the model and sets expectations for everyone under them. If there is dysfunction within an organization it often starts at the top – by promoting or accepting behaviors that do not benefit the whole of the organization. But, with a strong and positive organizational culture, the value of strong teams is multiplied and becomes an incredible competitive advantage.
Creating Customers for Life (4 minute read)
This should be the goal for any business, regardless of the products you sell or the services you provide. The idea is to create a mutually beneficial relationship that motivates people to want to continue working with you, despite the availability of competitive products and/or the possible concerns or objections of others (e.g., those pushing for a “Corporate Standard” involving another product.)
The best part is that this concept applies to all companies and all Product Life Cycle stages. Whether your company is on a rapid growth trajectory towards ‘Unicorn status,’ your offerings are mature and may be viewed as ‘less exciting,’ or your products are on the decline and you are seeking the ‘longest tail’ possible – this will help. At each phase, there are credible threats from competitors that seek to grow through the erosion of your business.
Several years ago I was responsible for two product lines in two major geographic regions (Americas and APAC/Japan). Our attrition rate (“churn”) had traditionally been slightly below the industry average. We began seeing an increase in churn and a corresponding slight decrease in organic growth. Both were indicators that something needed to change.
After discussions about tactical approaches to address this, our small leadership team agreed that this was a strategic issue that we needed to address. The result was an understanding that we needed to create ‘Customers for Life.’ Everyone agreed with the concept, but due to a variety of differences (culture, who our customer was – end customer vs. channel partner, buying patterns, etc.), we agreed to try what was best for our own businesses and share the results and lessons learned.
My approach was to focus on developing strong relationships that fostered collaboration and ultimately led to growth and success for both parties. The basic premise was simple:
- People tend to buy from people they like, respect, and trust. Become one of those people for your customers.
- Helping companies achieve better outcomes leads to greater success for both our customers and us.
How did we do it? It was a systematic process that included the following:
- Develop simple profiles for each customer (e.g., products used, date of first purchase, size of footprint, usage and payment trends, industry).
- A minimum size – based on either the size of the product footprint, annual amount spent with us, or size of the company, was used to prioritize companies and organizations having the greatest potential impact.
- Make contact multiple times each year, and not just when you wanted money.
- These “out of cycle” contacts turned became very important.
- Ask questions about key initiatives, milestones, and concerns.
- The responses were documented, and that helped seed following conversations and demonstrate an interest in what they were doing.
- Follow-up!
- Request meetings to understand how they are using our products and get a brief update on what our company has been doing.
- Meeting people face-to-face is always good.
- Learning more about their business, systems, goals and challenges created opportunities to really add value.
- Look at what they were doing with our products and offer suggestions to do more, do something better or more efficiently, call out potential problems and offer suggestions and discuss best practices. Often, I would have a technical expert follow-up and provide an hour or two of free assistance relating to those findings.
- Look for opportunities to congratulate them.
- It demonstrates that they are important enough that you are paying attention.
- Google Alerts made this easy.
- Regularly ask our customers if there is anything that we could do to help them.
- They would often reciprocate, which led to an increase in references and referrals.
- Continuous Improvement – Analyze the results and refine the process as needed.
As I met with our Customers and Channel Partners I would explain what ‘Customer for Life’ meant to us, and the potential benefits to them. Prior to the meeting, I would check to see if we had (or they wanted) an NDA in-place so that they could speak freely without having concern that this information would be shared with potential competitors. It was a good step towards developing trust and helping them feel comfortable in disclosing information that would help us understand their situation.
Prior to the meeting, I would spend an hour or two researching the company, their history, major events for that company and within their industry, and identify their top 2-3 competitors. This is where my consulting background really came in handy. Showing interest and understanding created credibility and ask relevant questions, which allowed conversations to progress to substantive issues in much less time. From there I could focus on specific points that would add the most value to that specific customer.
Over the course of two years, my team and I helped our customers innovate by providing different perspectives and ideas, modernize (e.g., move to spatial analytics to get a more granular understanding of their own business, or cloud-enable their systems to increase responsiveness to their business and control costs), improve their systems and grow their businesses. We also received feedback that helped us improve our products and a variety of processes – something that benefits all customers. Collaboration and success created strong relationships with many of those customers.
From a business perspective our customer churn decreased by 50% over the same period, and organic growth increased slightly more than 20%. We had achieved our objectives and improved our bottom line. The concepts behind Strategic Account Management, Voice of Customer, Customer Loyalty and Customer Success had blended into a practical approach that was not burdensome and provided a great ROI.
One of my biggest lessons learned was that adopting this mindset and creating a repeatable process is something that can be done anytime, and really should be done sooner than later.
Every day that you are not creating your own ‘Customers for life’ there is a good chance that your competition is.
Edit: Added category and tags
It’s not Rocket Science – What you Measure Defines how People Behave
A while back I wrote a post titled, “To Measure is to Know.”
The other side of the coin is that what you measure defines how people behave. This is an often forgotten aspect of Business Intelligence, Compensation Plans, Performance reviews, and other key areas in business. While many people view this topic as “common sense,” based on the numerous incentive plans that you run across as a consultant, as well as compensation plans that you submit as a Manager, that is not the case.
Is it a bad thing to have people respond by focusing on specific aspects of their job that they are being measured on? That is a tough question. This simple answer is, “sometimes.” This is ultimately the desired outcome of implementing specific KPIs (key performance indicators) and MBOs (Management by Objectives), but it doesn’t always work. Let’s dig into this a bit deeper.
One prime example is something seemingly easy yet often anything but – Compensation Plans. When properly implemented these plans drive organic business growth through increased sales, revenue, and profits (three related items that should be measured). This can also drive steady cash flow by constantly closing within certain periods (usually months or quarters) and focusing on models that create the desired revenue stream (e.g., perpetual license sales versus subscription license sales). What could be better than that?
Successful salespeople focus on the areas of their comp plan where they have the greatest opportunity to make money. Presumably they are selling the products or services that you want them to based on that plan. MBO goals can be incorporated into plans as a way to drive towards positive outcomes that are important to the business, such as bringing-on new reference accounts. Those are forward looking goals that increase future (as opposed to immediate) revenue. In a perfect world, with perfect comp plans, all of these business goals are codified and supported by motivational financial incentives.
Some of the most successful salespeople are the ones that primarily care only about themselves. They are in the game for one reason – to make money. Give them a plan that is well constructed and allows them to win and they will do so in a predictable manner. Paying large commission checks should be a goal for every business because with properly constructed compensation plans that means their own business is prospering. It needs to be a win-win setup.
But, give a salesperson a plan that is poorly constructed and they will likely find the ways to personally win with deals that are inconsistent with company growth goals (e.g., paying commission based on deal size, but not factoring in profitability and discounts). Even worse, give them a plan that doesn’t provide a chance to win and the results will be uncertain at best.
Just as most tasks tend to expand to use all time available, salespeople tend to book most of their deals at the end of whatever period is being used. With quarterly cycles most of the business tends to book in the final week or two of the quarter – something that is not ideal from a cash flow perspective. Using shorter monthly periods may increase business overhead, but the potential to significantly increase business from salespeople working harder for that immediate benefit will likely be a very worthwhile tradeoff.
What about motiving Services teams? What I did with my company was to provide quarterly bonuses based on overall company profitability and each individual’s contribution to our success that quarter. Most of our projects used task oriented billing where we billed 50% up-front and 50% at the time of the final deliverables. You needed to both start and complete a task within a quarter to maximize your personal financial contribution, so there was plenty of incentive to deliver and quickly move to the next task. As long as quality remains high this is a good thing.
We also factored-in salary costs (i.e., if you make more than you should be bringing-in more value to the company), the cost of re-work, and non-financial items that were beneficial to the company. For example, writing a white paper, giving a presentation, helping others, or even providing formal documentation on lessons learned added business value and would be rewarded. Everyone was motivated to deliver quality work products in a timely manner, help each other, and do things that promoted growth of the company. The company prospered and my team made good money making that happen. Another win-win scenario.
This approach worked very well for me, and was continually validated over the course of several years. It also fostered innovation, because the team was always looking for ways to increase their value and earn more money. Many tools, processes and procedures came out of what would otherwise be routine engagements. Those tools and procedures increased efficiency, consistency, and quality. They also made it easier to on-board new employees and to incorporate an outsourced team for larger projects.
Mistakes with comp plans can be costly – due to excessive payouts and/or because they are not generating the expected results. Back testing is one form of validation as you build a plan. Short-term incentive programs are another. Remember, without some risk there is usually little reward, so accept the fact that some risk must be taken to find the point where the optimal behavior is fostered and then make plan adjustments accordingly.
It can be challenging and time consuming to identify the right things to measure, the proper number of things (measuring too many or too few will likely fall short of goals), and provide the incentives that will motivate people to do what you want or need. But, if you want your business to grow and be healthy it is something that needs to be done well.
This type of work isn’t rocket science, and therefore is well within everyone’s reach.
Where Ideas, Experiences, and Lessons Learned Intersect 