The Tech Company Equivalent of the Canary in the Mineshaft

For those puzzled by the title above, long ago, canaries were used in the mining industry as leading indicators of a looming catastrophe underground. When the canary was overcome by/died from dangerous levels of gas in the mine, things were about to get very bad. And it was time to get out. So what’s the comparable situation in a software or hardware company? Why, it’s the imminent firing of the VP-Sales, of course!

A frequent occurrence

Let’s face it: the VP of sales gets fired frequently in tech companies. So I’m not implying that every time one gets fired, it means a company is about to go down the tubes. A VP of Sales gets fired for myriad reasons: they’re not all that competent, they’re lazy, there is a sales force revolt, they fight with the VP Marketing, CEO, or other senior executive, etc., etc.

However, they get fired most frequently for not meeting the expected top-line numbers, regardless of any other circumstances. There’s a quicker trigger for the sales department than any other functional area in a company. In many companies, it doesn’t matter whether you’re talking about a bag-carrying rep or a VP-Sales managing a staff of 500. Don’t make your number for the year (or maybe two years in a row in “enlightened” cultures) and you’re history. There are no ifs, ands, or buts.

This is an accepted method for dealing with the sales function in many, if not most, tech businesses. It’s usually not even questioned, just like paying reps with commissions. Sales is a competitive, performance-oriented function, that’s what you’ll hear. Yet I’ve always found this approach curious, and I’ll tell you why.

Sales performance matters, but a reality check is needed

While I believe sales rep skills and work ethic are important to a company’s success, let’s be real here. The sales function is just one link of the value-creation chain. The sales department is the most visible link because it’s at the very end of the chain.  By the time the ball gets into the hands of the sales function, the great majority of the value that will enable a sale to happen has already been created. Or NOT, even more crucially.

If the value chain has worked well upstream of sales, the job can be relatively easy, and salespeople make LOTS of money. If the value chain is broken upstream, the salesperson’s job can become nearly impossible. Ironically, it’s often in this latter situation that a VP-Sales will lose his or her job most quickly. In many organizations, there is a great deal of resentment or jealousy toward highly compensated sales personnel. So maybe it’s because the sales function’s compensation is so high when things are good, that they are let go first when things don’t go well. In any event, I don’t think it makes a lot of sense.

People will argue with me on the paragraph above. But in my mind, it’s very true. Because of my view, I’ve always found it absurd that the sales folks are the first fired when expectations aren’t met. And also that in most cases, their compensation is SO heavily dependent upon the end sale. I realize that many will consider this view to be blasphemy. It’s been done this way so long and so broadly that my contrarian opinion certainly goes against the grain of common business practices. Assuming you think I’m not completely crazy, here are a few things to consider when this situation applies to your company:

A few warning signs might indicate it’s not really (or just) a sales issue

1. You’ve fired several VPs of Sales in quick succession.
2. You’re losing good salespeople that you don’t want to lose. Exit interview feedback indicates that your competitive position in the market is declining.
3. The developers and marketing/product management functions are fighting (even more than usual). Often this indicates that the right products won’t be released in the right time frame.
4. 3rd party analyst rankings of your product’s position in the market are declining.
5. Hiring the talent you need in key departments, or even across the entire company, is becoming more difficult.
6. The scuttlebutt from water cooler conversations is that overall company morale is low.
7. The percentage of current customers renewing is decreasing, not just a decrease in the number of NEW customers. This can indicate something fundamental is going wrong with the product or the customer service/tech support function.

Steps to take before you fire your 3rd VP of Sales in 5 years

1. Take a step back and make sure you’re getting true information about the overall state of your company. Especially in larger companies, but even in some smaller ones, the CEO and other very senior staff aren’t always totally informed of the actual state of affairs.
2. Complete a review of your product development and marketing/product management /planning functions. Are the right products, fulfilling key market needs, being developed in the appropriate time frames?
3. Review the outbound marketing/demand creation and customer/technical support functions. Ensure that adequate numbers of high-quality leads are generated to support the sales department in growing the business. Also, check that customer service/technical support interact respectfully with customers, and do everything possible to respond to their needs. Bad customer service is the quickest way to turn customers and prospects from advocates to naysayers. The Internet and social media dominate today. Word of bad service travels faster than ever and can quickly drive your business into the ground.

So next time you’re ONCE AGAIN ready to fire the VP-Sales or even a large part of the sales team, take your finger off the trigger. Step back and look closely at the company’s entire value chain. Make an objective assessment of the functioning of every key link. If just one of those links is broken, the potential for a sale at the end of the chain is greatly compromised.

What do you think–am I wrong about the firing of a VP-Sales often being a leading indicator of deeper issues?  Post a comment below with your own opinion on this common scenario.

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