Rebooting leadership selection in software sales

Rebooting leadership selection in software sales

by Gren Millard, David Beuerlein, Patrick Delhougne, and David Knapp

May 2011 Software companies should fundamentally alter how they select sales executives. Analysis of Korn/Ferry executive assessments shows that the required leadership skills shift significantly with each promotion. The upshot?

Top sales managers are not naturally good sales leaders.

Software companies would be wise to use a more rigorous, assessment-based approach to recruiting, development, and promotion.

The head of global sales at one of the world’s largest enterprise software companies recently outlined everything he was looking for in a sales executive—a position he’d been struggling to fill. He sighed in frustration and then acknowledged, “I guess we’re looking for a purple squirrel.”

His colorful metaphor drives home the current difficulty of recruiting and hiring effective software sales executives. Similar frustration crops up in almost every discussion we hold with CEOs and senior vice presidents regarding the executive talent needed to lead software sales. Getting over this hurdle requires:

> a clear understanding of the sector’s new demands on sales leaders;

> a candid assessment of the flaws inherent in current recruiting and development practices; and

> knowledge of the skills, behaviors, and leadership characteristics that define success at each successive level of the evolutionary path from sales representative to global sales leader.

Research into how social and cognitive psychology intersect with leadership talent sheds light on why software organizations are facing this dilemma, and provides insight into how to handle hiring and promotion in the sector.

Our analysis of the leadership profiles within Korn/Ferry International’s substantial database of executive assessments indicates that sales executives must change their leadership style significantly to thrive as they move up the ranks.

“Purple squirrels” exist. But they’re not born that way. They evolve.

Software sector after hard times The business software sector is in the throes of a structural break, a term economists use to denote an unexpected macroeconomic shift that generates confusion and uncertainty. This stems from a number of interrelated drivers and conditions, including but not limited to the impact of the global economic crisis of 2008 and 2009. Now, as was the case in the wake of the dot-com bubble, customers demand rapid and clearly defined returns on their investment. After both those recessions, consultative selling—better understanding customers and the exact nature of their problems—re-emerged as a preferred approach. Although many of those demands may feel familiar, it is prudent to recognize that today’s sector changes are less cyclical and more fundamental.

Consider the mushrooming growth of cloud computing and the software as a service (SaaS) model. These developments may be responsible for the largest transformative impact in a generation. The business model of nearly every large technology company has changed in response.

Consider the rising demand for massive “meta platforms” that help customers wrap many core applications together to solve complex business problems. These solutions require sales teams to develop intimate knowledge of each individual customer’s unique tangle of technology.

A similar demand for an intense customer-knowledge requirement accompanies the emergence of business intelligence and analytics applications that enterprise resource planning (ERP) companies like Oracle and SAP have acquired in recent years. Such applications, when combined with the enterprise software firms’ massive databases, enable customers to convert under-utilized data into valuable and actionable information.

These forces have fundamentally changed the execution and management of sales forces. It is no longer sufficient for a sales team to address a single business issue. Instead, the sales team must deliver a solution, one that can be woven into the overall business and IT strategy—and satisfy specific financial metrics. Additionally, the most effective selling approach in this new world is not entirely consultative, but consultative and transactional.

The need to close deals has only intensified.

Finally, it is important to understand that others are well aware of these trends. In response, large services firms that perform system implementations are moving away from a “custom shop” mentality and instead developing their own “solution suites” from a large menu of software products. In short, professional services “partners” that previously provided enormous revenue streams (and required dedicated sales practices) to software companies are morphing into competitors—and competing for the same sales leadership talent.

2

Magic Johnson and the Einstellung Effect Finding the rare leadership talent who can lead sales through this landscape—the purple squirrels—requires two things: overcoming the Einstellung Effect and dealing with the Magic Johnson problem.

The Einstellung Effect refers to a tendency to try to solve a problem with methods that worked in the past—even though there are better ways of solving the current problem (Brooks 2011). For example, software companies traditionally promote from the sales supervisor ranks to the managerial and executive level. Those who become sales supervisors, however, tend to be “Magic Johnsons,” that is, top sales “athletes” who have been promoted into that first rung of management based solely on the strength of all-star sales rep careers.

Magic Johnson’s all-around play helped the Los Angeles Lakers win five National Basketball Association (NBA) championships. After retiring, he entered the NBA Hall of Fame and is widely considered the greatest point guard of all time. Based on the strength of his on-the-court performance, Magic was named coach of the Lakers in 1993. His record? Five wins, 11 losses and a very un-Hall-of-Fame-esque winning percentage of 31 percent.

Too often, software companies commit a similar foul by promoting their Magics, and, worse, by overlooking their Phil Jacksons. Jackson was just a scrappy sixth man during his playing days. But his comprehensive knowledge of the game, players, and inspirational techniques helped him become a coach who has won a record 11 NBA championships.

Likewise, the skills, behaviors, and leadership characteristics that define a successful salesperson, or even a sales manager responsible for five or six sales representatives, differ dramatically from the qualities of a leader who oversees numerous sales executives and their teams (see “The evolution of the sales leader”).

The evolution of the sales leader First-level sales supervisor Highly specialized sales executive with > strong result orientation. Perceived as a doer. Typically highly identifies with the task at hand. >

>

Employs a “lone-cowboy” sales model to “get things done on my own.”

Command-and-control approach to management with a tendency to close large sales deals for sales representatives on his/her team.

Top-level sales executive A generalist team leader with a strong > ability to set the agenda for the entire sales organization.

An “Orchestra Chief par excellence,” he/she > gets things done through others and

understands how his/her decisions and actions affect the organization as a whole.

A network-builder with an innate ability to > achieve consensus while developing a

common denominator in a team.

Great individual sales contributors get promoted to a supervisory (or first-level) position based on an ability to identify and close new business.

But that’s when they also tend to fall prey to the Einstellung Effect: They rely on their old selling instincts while nudging their representatives aside to show them how it’s done—sometimes even closing deals in their place.

Despite the long-term limitations of this approach, these top athletes tend to succeed, but only when they are leading teams small enough (five or six sales representatives) to produce winning results.

This success earns them another promotion, typically to a middle-level sales management or director position that presents the added responsibility and complexity of leading a larger team of sales managers. This is where

3

serious signs of trouble begin to materialize. The habits, behaviors, and management style—often a “command and control” approach—top athletes cultivated during their sales and supervisory tenures begin to backfire.

The responsibilities at this level—developing sound go-to-market strategies, hiring talent, developing talent, empowering their direct reports, and working closely with colleagues in other functional areas—require subtler, more collaborative forms of influence.

The impact of a low winning percentage, or outright failure, at this middle level can be extreme from an organizational perspective. The combined effects of two or more ineffective sales managers and executives can:

> drive top sales talent out the door;

> weaken the bench strength of the sales team;

> hurt short-term sales; and

> compromise long-term succession planning efforts.

To avoid these threats, software company CEOs and top-level sales leaders should focus their recruiting efforts on distinguishing between Magic Johnsons and Phil Jacksons.

Introducing science to sales leader selection Rather than reflexively promoting or recruiting top sales reps to management and executive positions, software company leadership teams should bring greater behavioral and cognitive assessment to bear on the process. In doing so, software companies would be in good company; leading organizations in most The question is whether top sellers are suited for sectors are rethinking many traditional approaches to talent sales leadership positions, or should remain management. Google, for example, individual contributors. recently completed a year-long effort to analyze the qualities that determined its most successful managers. The results proved surprising: technical and analytical expertise, such as the ability to code, ranked “dead last” while softer skills, such as making time for person-to-person meetings with direct reports, topped the list (Bryant 2011).

To be sure, this reframing should not devalue top athletes. High-performing sales representatives may be more valuable than they have ever been, given the uncertain and rapidly changing nature of the business software market. The questions to ask, rather, are whether top sellers are already suited for different levels of sales leadership positions, whether they require more development before being promoted, or whether they would best remain individual contributors. The answers should come from

4

individual assessments based on validated systems and best-in-class models.

As a recent Harvard Business Review article on how companies leverage talent data to strengthen competitive advantage puts it, “If you want better performance from your top employees … you’ll do well to favor analytics over your gut instincts” (Davenport, Harris, and Shapiro 2010).

Promoting (or recruiting) best-in-class senior sales leadership starts with identifying the key competencies required for success, and then identifying those who have them and have a demonstrated potential to learn and adapt to perform at the next level (See “Be agile and adapt”). To do so, it is important to understand the different leadership styles successful sales leaders use at each stage of their career. Likewise, sales management talent might internalize the changing-competency message this way: What got us here won’t get us where we need to go.

First-level sales supervisors: Front-line sales supervisors learn to influence primarily by being directive and with an emphasis on explaining how and why. They are primarily influencing “downward,” driving the performance of their direct reports. Korn/Ferry research shows that best-in-class sales supervisors are inclined to use Task Focused and Intellectual leadership styles (see Figure 1), an overall approach characterized as being directive, decisive, and driven to produce results.

Figure 1

Leadership style of sales supervisors This model is an amalgam of first-level sales supervisors who are considered best-in-class. The one to seven scale measures how much they emphasize that style in their leadership.

7.00

First-level sales supervisor

6.00 5.00

A

C

4.00

D

3.00

B

2.00 1.00

Task focused

Social

Intellectual Participative

Be agile and adapt Korn/Ferry research indicates that highpotential sales leaders approach their positions differently from those who will struggle after promotion. The difference is learning agility, the ability to pick up things quickly and immediately extrapolate from those lessons in brand new situations.

High potential: Like successful rising executives in all functional areas, highpotential sales leaders learn how to adapt the way they influence, solve problems, and navigate the emotionally laden aspects of management. Specifically, they adapt their approach to establish credibility, engage others, drive performance through others, and navigate complex relationships inside and outside their organizations.

Low potential: These individuals tend to stick with what they have always done, over-relying on their natural capabilities of persuasion, motivation, negotiation, and selling. Although these capabilities are valuable within sales representatives, they rarely enable an individual to make the transition from a sales manager role to an executive role, leading a sales organization.

A > Communicates goals clearly > Carefully monitors and manages execution B > Works to clearly establish roles > More focused on driving performance than on team building C > Conveys expectations of quality and performance > Holds self and others accountable D > Receptive to new ideas, but less likely to be concerned about reaching consensus

5

Middle-level sales managers: Once front-line supervisors are promoted to a middle-level sales management role, their scope of influence expands beyond direct reports. Adding a layer of complexity, they now have to deal with issues that require collaboration, negotiation and, at times, confrontation with peers and others outside of the sales team.

In this elevated role, it’s important to use new influencing strategies, such as collaboration, to focus on and develop key relationships. Learning to negotiate, gain trust, and earn respect of peers becomes a higher priority.

The manager needs to “unlearn” some of the command-and-control habits that previously sufficed.

Sizing up the situation and selecting the right strategy is key when transitioning into the more complex and diverse manager role. The best-inclass managers (see Figure 2) also demonstrate strong problem-solving skills and begin to develop the capabilities needed to deal with people challenges, such as the ability to assert oneself tactfully and the ability to negotiate “win-win” solutions.

Figure 2

Leadership style of sales managers The best-in-class model of middle-level managers is strikingly different, especially in the first two categories, which show a de-emphasis on individual tasks and greater emphasis on people skills, and thus leading a team to success.

7.00

Level two sales manager

6.00 5.00 C 4.00

A

B

D

3.00 2.00 1.00

Task focused

Social

A > Responsive and agile, stays focused on driving results B > Approachable > Works hard to strengthen key relationships C > Keeps the team aligned with the key goals > Reiterates the “how and the why” D > Collaborative > Strives to achieve win-win outcomes

Intellectual Participative

Top-level senior sales executive: Progressing to higher-level leadership roles presents a new set of challenges. At this point in their evolution, sales leaders gain exposure and access to other senior leaders inside and outside the organization. Establishing credibility, being able to think quickly on one’s feet, and displaying high levels of social and political intelligence

6 B > Works to clearly

emerge as key priorities—and important drivers of successful performance.

To maneuver this transition, sales leaders must have learning agility; that is, they learn from first-time experiences and adapt quickly.

This more perceptive, agile, and responsive style, coupled with the ability to make a strong impression and ultimately forge effective relationships, also represents key success factors (see Figure 3).

Figure 3

Leadership style of a top-level sales executive Individual tasks are further de-emphasized, and social and participative aspects of leadership climb.

Top-level sales executive

7.00 6.00

B

5.00 D 4.00 C 3.00 2.00 1.00

A

Task focused

Social

A > Delegates the “small stuff” > Retains close oversight of major initiatives B > Outgoing and engaging > “Open door” management style C > Conveys sense of knowing the answer without arrogance D > Reasonably open to listening and teaming

Intellectual Participative

Conclusion: adapt to win Korn/Ferry’s research indicates that the required evolution of leadership style from a front-line supervisor to a high-level sales executive is fairly predictable. This narrative illustrated in Figures 1 through 3 features a theme that business software companies will find quite familiar in their intensely competitive market: Adapt or else.

Doing so can be Bdifficult given > Works to clearlythe uncertain economic conditions and CD> >Conveys of establish rolesexpectations Receptive to new However, disruptive forces buffeting the sector. by understanding the quality and > More ideas, focused driving butonperformance less likely to leadership qualitiesperformance unique tothan each step of the sales leader’s evolutionary > Holds self and others on be concerned about accountable team building reaching consensus trajectory, CEOs and senior sales vice presidents will soon be able to select, recruit, and develop more purple squirrels.

References

Brooks, David. 2011. “Tools for Thinking.”

The New York Times, March 28.

Bryant, Adam. 2011. “The Quest to Build a Better Boss.” The New York Times, March 13.

Davenport, Thomas, Jeanne Harris, and Jeremy Shapiro. 2010. “Competing on Talent Analytics.” Harvard Business Review, October.

7

Gren Millard is a Senior Client Partner and the Global Sector Leader of Software within Korn/Ferry International’s Global Technology Market.

He is based in the firm’s Northern Virginia office.

David Beuerlein is a Senior Client Partner and the Global Sector Leader of Devices and Platforms for Korn/Ferry International’s Global Technology Market. He is based in the firm’s Dallas office.

Patrick Delhougne is a Senior Client Partner and leads Korn/Ferry International’s Global Technology Market in the New York office.

David R. Knapp is a Principal Consultant in Korn/Ferry International’s Leadership and Talent Consulting group, based in Chicago.

About The Korn/Ferry Institute The Korn/Ferry Institute generates forward-thinking research and viewpoints that illuminate how talent advances business strategy. Since its founding in 2008, the institute has published scores of articles, studies and books that explore global best practices in organizational leadership and human capital development.

About Korn/Ferry International Korn/Ferry International, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, deploy, develop and reward their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute com for thought leadership, intellectual property and research.

8

© 2011 The Korn/Ferry Institute