A sales-driven CEO is a CEO whose strategy is based on having the best sales force in the industry. He, or she, has determined to win by outselling the competition. For this type of CEO, sales strategy trumps product differentiation, customer service excellence, and price leadership.
You should care because this breed of CEO creates more shareholder wealth than any other type of CEO.
They do this by consistently growing revenue faster than their competitors and their industry. As organic revenue growth leads to an increase in free cash flow, and multiple expansion, a sales-driven CEO at the helm is tightly correlated to exceptional shareholder wealth creation.
Here we explore what traits sales-driven CEOs have in common, how they behave differently than other CEOs, and how you may put this information to use.
People have long studied CEOs because they want to be one, be like one, or need to hire one. Yet, very little research has been done specific to sales-driven CEOs. This is because there are so few of them. Our research team has studied sales-driven CEOs exhaustively, perhaps more than anyone. This article will share some of the research highlights. If you would like to explore this topic in more depth, I encourage you to visit with my team of experts at The Studio, our executive briefing center in Dallas, Texas.
Are sales-driven CEOs born?
It does not appear so. For instance, there is no data to support that sales-driven CEOs are male or female, of a certain ethnicity, tall or short, fat or skinny, or blond or brunette for that matter. Furthermore, the evidence does not support that sales-driven CEOs come from a certain age group, education level, academic institution, income bracket, marital status, or religion.
Are sales-driven CEOs made?
It appears they are. For instance, sales-driven CEOs come from certain industries. When doing the research for SBI’s annual report, How to Make Your Number in 2017, SBI’s research staff analyzed 103 industries to understand the external environment in which executives operate. They found that industries with little product differentiation produced three times as many sales-driven CEOs as industries where product differentiation was prevalent. Why is this? When a company cannot rely on a superior product to win, it must rely on the ability to outsell the competition. This environment breeds sales-driven CEOs.
Sales-driven CEOs tend to “get made” in certain markets. For example, this same research project included over 700 DILOs whereby SBI sales consultants spent time in the field with sales reps across the globe via a “day-in-the-life-of” study. These direct observations revealed that sales-driven CEOs tend to be found in markets that are rapidly expanding. In a rapidly expanding market, the key task is to get in front of as many potential customers as possible for many are actively in the market looking to buy. This need to hustle produced CEOs who rose up from the sales ranks understanding the cliché “make hay when the sun shines.”
Certain cultures tend to produce more sales-driven CEOs than others. Customer-centric company cultures tend to produce sales-driven CEOs. These companies prioritize delivering an exceptional customer experience. To do this, they must have a deep understanding of the customer’s journey and each touch point along the way. Mapping this customer journey is a difficult, yet mission-critical task, that when done correctly, results in exceptional revenue growth. The sales team is best positioned to help a company map the customer journey, and as a result, this tends to put sales leadership at the center of strategic planning. This board-level exposure has led to many boards promoting a sales leader to the role of CEO.
How do sales-driven CEOs behave differently than other types of CEOs?
The primary behavioral difference of sales-driven CEOs is that they hit their revenue targets every year. They are remarkably consistent, and predictable.
The success of sales-driven CEOs is not based on landing in the right place at the right time. These leaders don’t rely on luck and timing. They exceed their revenue targets regardless of the circumstances. The distinguishing characteristic of sales-driven CEOs is mastery of sales strategy and execution. As market conditions change, the sales-driven CEO can pivot quickly, putting some tools away and deploying others. The sales function is inherently more adaptable than other functions. The ability to respond quickly is a powerful advantage.
In contrast, product-driven CEOs tend to make their revenue targets inconsistently, and their performance is less predictable. Their revenue growth is often tied to the product life cycle. As the product moves from launch to growth, product-driven CEOs exceed the revenue growth objectives. However, as the product moves toward maturity, and decline, product-driven CEOs often miss their revenue objectives. Brilliant engineers who make it to the corner office tend to have blind spots in sales. When the product-driven CEO needs to win when he does not have a product advantage, he usually does not know how. It is during these market cycles when mastery of sales strategy is required to meet the revenue objectives. And mastery of sales strategy is lacking in product-driven CEOs.
Boards have long recognized this blind spot in product-driven CEOs. To address it, they hire a strong sales leader to work for the product-driven CEO. Unfortunately, this often does not work. SBI recently interviewed and surveyed 1,200 CEOs and sales leaders in support of our annual research report. We found that strong sales leaders do not want to work for product-driven CEOs. They want to work for sales-driven CEOs. The hiring failure rate, in this situation, is an astounding 61 percent. In plain speak, this means that when a product-driven CEO hires a strong sales leader, the sales leader quits inside of the first year 6 out of 10 times. Boards should rethink this approach. Operations-driven CEOs also tend to make their revenue targets inconsistently. As cost-minded operators, their profit performance tends to be superior to their revenue performance.
Operations-driven CEOs are process-driven executors. They are excellent at generating efficiencies, but can struggle when asked to deliver an increase in effectiveness. Revenue growth is dependent on an improvement in effectiveness, not on an improvement in efficiency. For example, sales effectiveness is defined as driving up revenue per salesperson. Sales efficiency is defined as driving down expense per salesperson. This is an important point to remember because, as discussed earlier, the most reliable way to create shareholder wealth is to grow organic revenue. Organic revenue growth depends on an increase in sales effectiveness, not sales efficiency. This is not the core competency of operations-driven CEOs. The core competency of these CEOs is driving cost out of the operation through process-driven efficiency.
Boards of directors understand this, and as with product-driven CEOs, they address this issue by hiring a strong sales leader to work for the operations-driven CEO. Unfortunately, this rarely works. The same research mentioned earlier revealed that strong sales leaders do not want to work for operations-driven CEOs. They want to work for sales-driven CEOs. The hiring failure rate, in this situation, is 57 percent. In other words, this means that when an operations-driven CEO hires a strong sales leader, the sales leader quits inside of the first year 5.7 out of 10 times. Boards should refrain from taking this approach. To add some context, the three most commonly cited reasons why sales leaders do not want to work for operations-driven CEOs are their reluctance to invest in growth, their micromanagement style of leadership, and their tendency to apply process engineering to the sales function, which they perceive as a mistake.
How can you put this information to use?
I offer three actions you can take to put this information to use.
First, boards should consider hiring a sales-driven CEO. By doing so, they will increase the likelihood that their company will accelerate revenue growth, and free cash flow. This will lead to a multiple premium and ultimately, more enterprise value.
Hiring a sales-driven CEO is hard to do. There are few of them, and in most cases, boards will be doing so for the first time. There are a few steps boards can take to make this easier.
Develop a sales-driven CEO position profile. This should reflect the competencies most often found in successful sales-driven CEOs. A position profile for a sales-driven CEO is significantly different than a position profile for a traditional CEO. For example, a sales-driven CEO possesses as a core competency a deep understanding of how to determine which products to sell to which customers through which sales channels.
Concentrate your search inside industries that have little product differentiation. Leaders who can grow their companies inside these industries have to do so without the momentum of a superior product. Often, these industries are breeding grounds for sales-driven CEOs.
Contract with a niche executive search firm that specializes in this area. The large brand-name executive search firms have large CEO practices, and do an excellent job. However, they tend to be generalists and in this instance, you need specialists to locate a sales-driven CEO.
In addition, this is a good time to consider hiring a current sales leader as a first-time CEO. A current sales leader will have the competencies you are looking for in a sales-driven CEO. You can overcome what the new CEO lacks by surrounding him or her with a great team. This has a high probability of success. Our research revealed a willingness, and in some cases a preference for working for a sales-driven CEO by product, operations, technology, and finance leaders. Why do these executives want to work for a sales-driven CEO? They recognize that fast-growing companies present more interesting opportunities for executives and fast-growing companies tend to attract top talent. In addition, many mentioned revenue growth tends to equate to job security, and job satisfaction is higher in a growth environment. As sales-driven CEOs get their companies growing, and executives want to work for growth companies, this drives a preference to work for a sales-driven CEO.
Second, boards should invest in getting the product-driven and/or operations-driven CEO some help to address their blind spots in sales. There are many high-quality consulting firms that specialize in providing sales advice to CEOs. My firm, SBI, is one of these firms, but we are not the only ones. If you would like to explore how we may help your CEO, I suggest you come see me and my team at our executive briefing center. This will give you access to me and my team of experts, all under one roof, and help you accelerate your understanding of our approach and methodologies.
In my experience, I have found product-driven CEOs, and operations-driven CEOs, to be highly intelligent and eager to receive the help. In a recent workshop at our executive briefing center, with a private equity investor and the CEO of one of his portfolio companies, the CEO stated that he uses advisors often and using an advisor in sales made sense. He referenced relying on external legal counsel for some legal matters, a large accounting firm for taxes, and an investment banker when making acquisitions and concluded working with us was the same.
Augmenting your CEO’s talents with the skills of a sales consultancy might get you the result you need. Hiring a sales-driven CEO is preferable, but this can be very disruptive, especially if this is a replacement hire. Customers, and investors, do not like it when a CEO change is made. This suggests the business is in trouble and creates a feeling of uncertainty. By supporting the CEO with a sales-consulting partner, the need for a CEO change might go away.
Also, boards should consider adding a member to the board with deep sales expertise. This could be a current, or former, sales-driven CEO. It could be a highly respected sales consultant. Or, it could be a current or former sales leader with a proven track record of working with CEOs to grow revenues quickly. The CEO depends on his or her board to provide counsel and if your CEO specifically needs sales guidance, make sure your board has on it someone who has mastery of sales strategy.
What is the specific anatomy of a sales-driven CEO?
Lastly, I thought it might be helpful to conclude with some commentary on the specific anatomy of a sales-driven CEO. What are the pieces and parts of a sales-driven CEO? What are some of the organs of a sales-driven CEO? Think of these as competencies. A top 10 list of the things a sales-driven CEO can do. If you are a CEO, use these as a way to assess yourself with regard to your sales ability.
If you are a board member, use this as a checklist to evaluate your CEOs against. If you are a sales leader, and want to be a CEO, use this as a guide. The 10 things a sales-driven CEO can do:
- Understand the cost to acquire each customer.
- Understand the free cash flow generated from each customer over its life span.
- Convert the capital efficiency of the sales team into an increase in shareholder wealth.
- Generate the right type of revenue growth, i.e., that which generates a high return on capital.
- Match the sales strategy to the life cycle stage of the industry, company, and product portfolio.
- Define which markets to compete in, and which ones to avoid.
- Define whom you compete with, and how to win.
- Develop a go-to-market strategy that sufficiently covers the market and optimizes sales channels.
- Price and package products and solutions correctly.
- Hire a best-in-class sales leader, who will put the best sales team on the field and compete hard.
So there you have it: a summary of what we know about the anatomy of a sales-driven CEO. Sales-driven CEOs create more shareholder wealth than any other type of CEO. The anatomy of a sales-driven CEO is constantly evolving. We will continue to stay on the forefront of these trends and keep you updated on our app, website, magazine, TV show, and podcast.
If you would like to spend some time with me on this subject, come see me in Dallas at The Studio, our new executive briefing center. You can arrange a visit here.