The economy may not be in a tailspin anymore, but it is hardly champagne-popping time either. Major corporations are sitting on mounds of cash, hiring has stalled, and many executives are stuck in perpetual wait-and-see mode. On top of all that, consumer confidence—and spending—continues to sag. It’s a time when we’re all struggling to figure out what we can reasonably expect from our people and our bottom line. Perhaps most difficult is the critical job of forecasting revenue.
In a more normalized environment, management generally does a better job of reading the proverbial crystal ball. We are also better at exercising patience. We can afford to wait for our business to gain momentum or make adjustments as we move along. In short, we are pretty good at being real. In less stable environments, however, we tend to panic too quickly, which often leads to someone getting fired, namely the person responsible for sales. As a serial CEO, investor and consultant, I have seen this happen time and time again—and it often turns out to be a fatal error. Let me share with you one example in my experience that drives the point home. It happened during another extraordinary economic period: The Internet Bubble.
At the height of the technology frenzy, I founded a new software company. Like so many others, my board of directors was fixated on getting my company public so investors could cash in on a ‘billion dollar opportunity’ (and maybe I was a bit as well). This meant impressing investment bankers with a big jump in revenue, both actual and projected. Despite skepticism from our VP of Sales, we put into place a plan that not only included aggressive sales targets, but also called for increased hiring, the opening of more offices, and a beefed up marketing budget. It all made sense then. After all, it was 1999 and the NASDAQ had increased 84 percent that year.
During the first two quarters of the year, we hit our numbers. The second two quarters were another matter. In fact, just as we were planning to file for an initial public offering (IPO), the VP of Sales turned in dismal results. The IPO was scrapped and calls for the sacking of the VP grew louder. Nonetheless, I did not fire him. Many factors had contributed to our ‘whiff,’ not the least of which was setting our business expectations unrealistically high due to a frothy atmosphere.
Whether it is the best of times or the worst of times, it is imperative to take a hard look at all the factors that contribute to a serious sales shortfall. It may very well be the disappointing performance of a single sales executive. More likely, however, the fault lies with a collection of decisions up and down the management food chain, including at the board level. My advice when assigning blame for disappointing results? Keep it real.