Originally published in Forbes
By Randy Illig
Over the last 20 years, the pressure for sales leaders to hit quarterly numbers has increased exponentially. And that focus often leads to an erosion of long-term value.
Too much focus on short-term results can be devastating. Just take a look at the S&P 500: a recent study found that “the 33-year average tenure of companies … narrowed to 24 years by 2016 and is forecast to shrink to just 12 years by 2027. A gale force warning to leaders: at the current churn rate, about half of S&P 500 companies will be replaced over the next ten years.”
To make their quarters, public companies often sacrifice profitability in the next one. They make “sweetheart deals” that were going to close in a future fiscal period, so the company can report to their shareholders that they technically hit their numbers. But what if these companies also had to report how much they devalued the future by doing so?
Public companies that focus on hitting the quarter make all kinds of tradeoffs in the process. The whole organization is focused on the short-term, and of course, the sales organization often bears the brunt of it.
Impatient executives often say, “I’m not happy with my leaders or sales team. So I’m going to hire new ones.” That in and of itself is fundamentally flawed. As reported in The 4 Disciplines of Execution, “Edwards Deming taught that anytime the majority of people behave a particular way the majority of the time, your problem is not the people. The problem is in the system. And the leader has to own that.” You can’t hire your way to success. You need to grow your way there.
It’s not uncommon for sales leaders and salespeople to hear, “If you don’t accomplish your quota by the end of the quarter, you’re outta here.” That pressure creates dysfunctional behaviors. It rolls down into how we develop our people, how we interface with our customers, the messaging we send the marketplace, the buyers’ experiences we create. This misguided focus doesn’t create value; it erodes it.
Wouldn’t it be interesting if someone had the courage to stand up to that? To say to their shareholders and their marketplace: “We’re going to build this business for long-term value. We’re not going to make decisions to hit short-term targets that impact our future profitability, that undermine the value of what we could be providing to and earning from clients. We’re not going to try to hire our way to success. We’re going to create lasting, supporting infrastructures that are more fiscally efficient and responsible. We’re going to deliver value now and in future years and decades.”
This problem of short-term focus didn’t develop overnight, and it won’t go away overnight, either. If you want to make progress, here’s where to start:
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- Brainstorm the short-term behaviors in your organization that are harming long-term value. What behaviors are driven by your compensation plan? Do you have strategic goals for your sales organization, not just tactical? If your strategy is to move to higher margins by adding service offerings to your existing product offerings, do the goals you’re giving your sales force support or conflict with that transition?
- Prioritize your list. After you’ve listed these counterproductive short-term behaviors, rank them through two lenses: what’s most impactful and what how difficult would it be to affect the change?
- Take one small step. What small action could you take that would allow you to move forward? What’s a low risk? Could you ask your sales teams to create multi-year plans? How about development plans? In many organizations, not a single person—from salespeople, to sales leaders, to sales executives—has a personal development plan. Let’s get them in place. Let’s start making longer-term bets.
If this problem resonates with you and you want to start making longer-term moves, don’t try ten things at once. Try just one. And if that works, make another. What we’re looking for is an “and” not an “or” approach to balancing short- and long-term success.
Randy Illig is global leader of FranklinCovey’s Sales Performance Practice.