Article 2/2
Leadership and Sales: Bridging Strategy and Execution
Building on the discussion of sales team hiring and building a high-performing sales team in Article 1, this second article delves into the Leadership Role in Sales and Sales in a Changing Environment, with an emphasis on how AI and technology are transforming sales functions. The discussion will conclude with Professor Cespedes’s practical advice for SMB business leaders looking to improve their sales performance.
About Professor Frank Cespedes
Frank Cespedes teaches at Harvard Business School and for 12 years was Managing Partner at a professional services firm. He has worked with companies on go-to-market and strategy issues, and has been a Board member at consumer goods, industrial products, services, PE and VC firms. He has published articles in Harvard Business Review, European Business Review, Organization Science, and The Wall Street Journal, among others, and is the author of six books including Aligning Strategy and Sales which was cited as “the best sales book of the year” (Strategy & Business), “a must read” (Gartner), and “perhaps the best sales book ever” (Forbes). His newest book is Sales Management That Works: How to Sell in a World That Never Stops Changing (Harvard Business Review Press).
Harvard Business School
(Photo: Professor Frank Cespedes)
Leadership’s Role in Sales Success
Leaders establish the foundational conditions for success or failure within companies, and as the esteemed scholar James March once observed, “Leadership involves plumbing as well as poetry.” His point highlights that, beyond their words or actions, effective leaders assist individuals within their organizations in addressing practical challenges, thereby enhancing contributions and productivity. However, many senior leaders remain disconnected from their organizations’ sales models and performance management practices.
Changing Composition of Leadership Teams
The composition of senior leadership groups in companies globally has changed. The number of executives reporting to the CEO has, on average, doubled in large companies over the past three decades. However, this increase has primarily consisted of managers responsible for specific activities (e.g., CIO, CMO, Legal, Regulatory Affairs, head of AI or Data Analytics, and so on), rather than general managers (GMs) responsible for overseeing business across functions.
The Growing Complexity of Business
Business is becoming more complex, with data increasing exponentially, which in turn raises the demand for more specialized knowledge. Consequently, specialists are required to stay up-to-date with this growing knowledge base. Managing IT, Marketing, or Supply Chain is now a full-time job that demands focused attention to stay abreast of best practices, making it increasingly difficult to span multiple functional domains.
The Impact on C-Suite Composition
While the causes of this shift are understandable, the result is that the C-Suite in many companies consists primarily of specialists. Additionally, more executives than ever are reaching top positions without prolonged customer-contact experience throughout their careers.
These changes impact a core task of executives: formulating and implementing a market-relevant strategy. To remain competitive, every business must focus on customer value and efficiently tailor sales and other activities to serve target customers better or differently than competitors. However, surveys reveal that in most firms, fewer than 50% of employees report understanding their company’s strategy. Moreover, this percentage declines as you move closer to customer-facing roles, such as sales and service employees.
Closing the Gap Between Leadership and Field Sales Requirements
According to Professor Cespedes, bridging the disconnect between company leaders and front-line sales begins with complementing vision or purpose statements with effective organizational processes. This involves clear communication of priorities and the establishment of a two-way feedback mechanism between the C-Suite and sales leaders.
Priorities: Executives often hesitate to make strategic priorities explicit due to concerns about competitors gaining access to the information. However, the strategies of successful firms are typically well-documented in articles, case studies, and often shared by the firms themselves. Leaders should be more concerned about their own employees being unaware of these priorities than about competitors discovering them.
Without clarity regarding priorities, employees—particularly salespeople with quotas—tend to rely on random cues about strategy, leading to inconsistent alignment. Discussions often revolve around vague abstractions like “innovate,” while the organization gradually transforms into a “global mediocrity,” excelling at many things but not particularly strong in any one area. The essence of competitive advantage lies in excelling at what target customers value most and what competitors struggle to replicate.
Process. Alignment is an ongoing process, not merely a motivational teamwork speech during a meeting. It necessitates continuous customer insights for strategy development and the implementation of relevant sales management practices during execution.
Consider pricing, a factor that can build or destroy value more rapidly than almost any other business action. Actual price realization involves linking price, value, and selling behaviors. Does the sales compensation plan incentivize the desired behaviors? Is the necessary information available to connect pricing with customer value? How frequently do senior leaders test pricing strategies and analyze the results to understand their implications for framing and delivering value?
Aligning Strategy with Execution
Professor Cespedes observed that leadership teams frequently focus on closely tracking quarterly financial results. However, the information required to enhance a key driver of bottom-line outcomes—how the sales team frames and delivers the value proposition, including pricing—is often insufficient. Worse still, sales incentives sometimes prioritize volume, even when senior executives define their strategy around premium value within a specific segment. When leadership teams fail to establish critical connections between strategy and sales, they may push for improved execution when what is truly needed is a more market-relevant strategy, or they might shift strategic direction when the focus should instead be on fundamental sales practices.
The responsibility begins at the top. Chief Financial Officers (CFOs) and Chief Information Officers (CIOs), for example, are not required to have expertise in managing a sales force. However, they should be familiar with the critical sales tasks integral to their company’s strategy so they can ask relevant sales-related questions during planning, budgeting, and operational reviews. Conversely, sales leaders must be prepared to answer questions regarding how their resource allocation aligns with the organization’s strategic and financial objectives.
When both leadership groups engage in effective communication, the outcomes of selling and strategy development significantly improve.
Sales in a Changing Environment
Sales is experiencing a sustained data revolution, with data analytics groups of various types often reporting through the Finance function within firms. Leveraging this data, finance executives pose questions about their companies’ significant investments in sales, and sales managers must provide answers that reflect an understanding of financial and enterprise value.
The Growing Importance of Financial Literacy in Sales Careers
Most sales managers primarily understand and focus on top-line sales volume, but this can be a misleading measure of value creation in many businesses. Top-line growth benefits firms with high returns on invested capital (ROIC), is neutral for firms with returns equal to their cost of capital and is bad for firms with returns below their cost of capital, because selling in negative ROIC scenarios only accelerates the destruction of value within the enterprise. One significant impact of the data revolution is the increasing need for financial literacy within the sales profession. For individuals under the age of 45 aspiring to build a career in sales, it is essential to have a solid understanding of the fundamentals of managerial finance. This knowledge is crucial, as it is the language used in capital budgeting and other processes that influence the allocation of sales resources and the evaluation of sales leaders.
Contextualizing Sales Performance
The good news is that more data provides more opportunities for improvement, and scrutiny from Finance creates more incentive to enhance sales practices. The bad news lies in how the tools are often used.
Tools are only as good as their makers and users. Technologies now enable companies to measure almost anything. The resulting proliferation of metrics produces immaterial KPIs that dilute the focus of employees, and salespeople get lost in the day-to-day noise. Perhaps worse is the belief that the algorithm is the answer. Data, even self-correcting data as found in some AI programs, is never the same as the answer to a management issue. Data is powerful, but it’s mute: it must be interpreted.
Professor Cespedes said, “My point here is not that ‘everything is relative’ or that data and outcomes don’t matter. The point is that other factors besides the salesperson affect sales outcomes: market conditions, the economy, product quality, competitors, pricing, and so on. To diagnose and improve performance, one must place the outcome data in context to understand how much is attributable to the salesperson, the market, incentive systems, or other factors that can be controlled, changed, or mitigated. Then, this diagnosis must be linked to behaviors relevant to the salesperson, which is what good sales coaching does.”
The Impact of E-commerce on Sales
When asked how the rise of e-commerce and digital platforms has affected sales, Professor Cespedes’s view is that there is a common misconception that e-commerce is a dominant mode of buying and that the pandemic made this a “new normal.” However, this is not supported by the data. In the U.S., for example, e-commerce as a percentage of total retail sales was about 11% in 2019, just before the pandemic. At the height of shutdown conditions in mid-2020, it rose to about 16.5%, but it has trended down since then, settling at 15-16%. The percentage is lower in Europe, where shopping patterns are different, and higher in China and some other Asian countries, where retail infrastructure is still being developed in many cities.
It is not a digital-eats-physical world, but it is an omni-channel buying world. Customers in most consumer and B2B categories engage both online and offline multiple times during their buying journeys. They gather information about products, pricing, and other purchase factors from various sources besides salespeople, including blogs, websites, influencers, and online buyer forums.
This affects sales tasks. Understanding where customers are in their buying journey, how they navigate between sources of information, and when to engage with them is now central to effective selling.
Among other things, this is putting pressure on companies to rethink their sales models and the relationship between Marketing and Sales – two functions that, while more interdependent, have different procedures and perspectives. Omni-channel buying means that customers interact with your brand and company at many different touchpoints (online, offline in sales conversations, via marketing collateral, and so on), increasing the need for interactions between sales and marketing data and initiatives.
Omni-channel buying also means that, for more firms, selling involves working with channel partners who are influential during and after the sale. In addition to maintaining and upgrading selling skills, sales effectiveness increasingly requires success with channel partners throughout the buying journey.
Leveraging Technology in Multi-Channel Selling
Here, technology can be your friend. The means for establishing, maintaining, and utilizing partner sites that provide white papers, case studies, online demos, deal registration data, and other relevant sales tools are decreasing in cost and increasing in scope. Channel marketing software enables partners to leverage your content, messaging, and demand-generation knowledge in their selling efforts for your products.
Multi-channel selling is complicated but necessary. Attempting to do it without the smart use of these tools makes it unnecessarily complicated and burdensome.
How is AI affecting Sales?
Artificial Intelligence (AI) is now a loose term covering many different technologies. However, the core promise of AI is that these tools can perform tasks as well as, or better than, humans, thereby freeing up time for people to focus on what they do best. In sales, freeing up time is a significant advantage. Here are two areas where Professor Cespedes is already seeing AI make an impact in boosting sales productivity and effectiveness:
Customer Contact Time: Estimates suggest that most salespeople spend only 30-35% of their time in customer contact, which includes emails, phone calls, webinars, and both virtual and in-person meetings. Consider the impact of increasing the time spent on prospecting or selling/servicing current customers by 10-20%. In most firms, this represents a significant productivity boost and, especially for SME firms, it also increases the addressable market, as economically infeasible segments become feasible with better go-to-market utilization.
AI tools can save considerable time in content marketing, personalizing emails, and assisting salespeople in finding information about the industry, company, and individuals they meet. Additionally, other AI tools from companies like RNMKRS can help reps practice relevant sales conversations when it is most beneficial.
Lead Generation and Qualification: In most firms, the sales cycle is the biggest determinant of time-to-cash, working capital, and funding needs. Higher interest rates result in higher capital costs, and longer sales cycles increase the costs associated with false positives in the pipeline. Especially in markets with lengthy sales cycles, the ability to qualify leads is crucial for allocating available sales resources wisely.
AI tools from firms like REV help marketers and salespeople understand the traits common to their current “best” customers, identify overlooked segments, and use that information to generate tailored content, posts, landing pages, and outreach questions through AI. This improves lead generation and qualification with less human effort and, over time, reduces the cost to serve.
Professor Cespedes warned of two important considerations regarding AI and sales productivity opportunities:
Garbage In, Garbage Out: AI tools depend on data inputs, which in sales, typically come from a CRM system. In many firms, this data is noisy and unreliable—not because of the software, but due to human input. Different salespeople interpret terms like “lead,” “qualified lead,” and “probability of purchase” differently, and the CRM system simply aggregates these diverse, subjective inputs. The biggest time and cost burden is not acquiring AI tools but cleaning up and maintaining relevant data. This is a management issue, not a technology issue. Good sales data requires good sales management.
Data Updating for AI Applications: Updating data for AI applications will become an increasing challenge. While deleting data from traditional storage systems is relatively straightforward, generative AI doesn’t simply store data in memory. It trains neural networks to recognize and reproduce relationships and patterns. As the machine learning algorithm reinforces patterns derived from existing data, those patterns can become outdated when market conditions and buyer behavior change.
Updating and retraining AI models is both time-consuming and expensive. As a result, many AI applications in sales deliver a one-time productivity boost followed by diminishing returns. Generating ROI from AI requires more than just a shiny new toolbox.
Insights for sales Excellence
Professor Cespedes’s advice for SMB business leaders looking to improve their sales:
In my experience with SMB companies, performance reviews are often an underutilized tool for influencing people’s behavior. Busy sales managers typically conduct cursory, surface-level reviews that focus more on compensation than on feedback and development. Sometimes, they believe “coaching” simply means sitting down with a rep to examine sales results and discuss pending deals. But that’s more of an audit than a skill-building interaction, and it often leads to a “you should sell more” sermon.
This approach is both costly and unnecessary. In many sales environments, crucial information about markets, customers, and current buying criteria is not captured in the CRM system; it’s stored in the minds of account managers. This valuable information only becomes visible and actionable during a productive performance review. Moreover, many SMB companies rely heavily on a limited number of large accounts for their sales volume. When sales managers conduct sloppy reviews, they not only foster a culture of underperformance but also hinder the flow of essential market information throughout the company.
Additionally, unlike many other things pundits say about leadership, conducting a good performance review is a skill that can be trained. In today’s rapidly changing environment, this skill has become more crucial than ever. As sales jobs—like many jobs in 21st-century organizations—become increasingly intertwined with other functions, immediate and natural sources of feedback about whether you are doing the right things as part of that interdependent chain of activities become less common. Sales outcomes are a lagging indicator, and you want your team focused on the leading indicators that drive those outcomes.
Furthermore, notice what happens in the absence of feedback: If managers are not clear about priorities, employees will create their own, often focusing on activities that have an ad hoc, hit-and-miss relationship with performance. If, like me, you believe that people seek recognition and meaning in their work as much as they seek financial compensation, then the absence of feedback also deprives them of that recognition.
Getting managers to take performance reviews seriously and equipping them with the skills in the art of performance reviews, is often the first critical step toward improving sales performance.
Professor Cespedes’s second piece of advice to leaders comes from a quote in a John le Carré novel: “A desk is a dangerous place from which to watch the world.” Many SMB leaders founded their companies or have spent much of their careers and “grown up” in their companies’ legacy processes. But leadership is about dealing with the market realities of today, not yesterday.
A desk is a dangerous place from which to watch the world.
Finally, “Always remember, as I said near the start of our interview, that value is created or destroyed “out there,” in the marketplace with customers. It’s not the responsibility of customers to understand and adapt to your strategy. It’s your responsibility to adapt to the market. If you’re a leader and you don’t meet with customers regularly, I guarantee that, in today’s changing world, you’re missing critical insights about your business.”
Stay ahead with exclusive insights! Sign up for our mailing list and never miss an article. Be the first to discover inspiring stories, valuable insights and expert tips – straight to your inbox!
