How accurate is your corporate pipeline?… here are six reasons why your pipeline may not reflect the true position of your potential sales… and at the end of this post… the consequences for the corporation for it not being accurate.
1. Targets get Set Against Size of Pipeline
It is in the sales reps interest to have targets as low as possible and never more so if accelerators are paid after targets have been achieved. Many sales reps have a genuine fear, backed by evidence, that if the company sees large pipelines they set targets accordingly, therefore restricting the potential earnings. Solution – don’t put all deals in pipeline and then only put them in the pipeline when they are about to close. Even then some deals are not put in the pipeline and they just appear as sold deals – commonly known as ‘bluebirds’!
2. Too Few Deals will get me Fired
Many sales organisations believe there are only 3 things that sales reps need to do to make their number… activity, activity and activity! Therefore, if the individual is having a difficult time filling the pipeline they will leave dead deals in to show evidence of activity. These deals will be added to the factored forecast and the numbers rolled up. As long as there are deals in the pipeline the sales rep believes he wont get fired and has a chance to recover… buys him time to find deals or buys time to find another job.
3. Reputation for Losing Large Deals
If the sales rep puts all his large deals in the pipeline as soon as he gets wind of them and they don’t progress then he believes he will get a reputation of losing large deals. Therefore, these large deals get put in a slate as possible and if they go away then they don’t count against his stats.
4. Being Asked too Many Questions
Another reason for not putting large deals in the pipeline is that they attract too much attention. The corporate officers get seduced by the ‘dark side’ and start to speculate the positive impact the large deal will have on the business and the deal becomes the focal point… it must be closed! Therefore this deal is top priority and so the boss starts asking questions. His boss then also gets in on the act and phones directly for updates… and then his boss also calls… and soon every top officer in the company is on the case…. It’s all unwanted attention, unwanted pressure and unwanted expectations.
5. Forecasting too Large a Number
Most corporate pipelines have percentage probability of closing against each stage in the pipeline. The pipeline stages reflect the sales process and as the deal progresses it attracts a higher percentage and this percentage is multiplied against the order value to produce a factored forecast. Do this for all deals in the pipeline and then you have the sales forecast. However, large deals in the pipeline provide skewed forecasts which appear too high and will provide the wrong expectations. With factored forecasts you are not committing close any deal, just report where they are in the sales process and the factoring does the rest. The sales reps resolution to this problem is move the deal back in the pipeline to a smaller percentage or another way is to reduce the real value of the deal so again reducing the factored value.
6. Losing Control
Sales reps often look at their customers as personal customers. They have developed the relationships, they have their reputation on the line and they make sure they deliver value. If they build these relationships then they will keep selling to the same customer irrespective of the organisation for whom the sale rep is with. If they move on then the rep takes the personal relationship with them. Therefore, if a rep is thinking this way then they will not share all their long term deals… just in case something happens and they need to move on… the deals will go with them.
Corporate Consequences
For most of the above the consequences of not seeing the deals mean the real size and complexity of pipeline is not known… resource planning will be more difficult to do… true position of potential sales not known… and ultimately the corporate decision making capability is compromised.
In the case where rogue deals are left in the pipeline then … management time will be taken on reviewing deals that are not real – sales rep will be vague in answers… big hole coming in corporate number towards end of quarter as these deals will either die at the end or be shown to slip – they won’t close… and it will be too late to take corrective action.
Where deals are being manipulated to show the right forecast number then these compound the problem of not being in control… their real value and real position are not known… and again the corporate decision making capability is compromised.
Another consequence of the corporate pipeline not being used is that there will be many individual pipelines developed for personal use and the corporation in reality is run on many different types of pipeline most of which is for private use only. Standards and accuracy will be different per individual pipeline… and most if not all will be based on Excel. The corporation only wants one pipeline, but because they only want one pipeline they will have as many as the number of sales reps they employ… complete opposite and no control!
Finally, because the corporate pipeline is not accurate and because of the way it is manipulated the reps development needs are not highlighted. Losing big deals early is an indication of poor qualification or lack of account penetration. Afraid to answer questions may mean the rep does not know and therefore not in control. They need help with managing deals… but if you can’t see it you can’t help. All reps need to be able to fill, manage and close their pipeline… and you should be able to see from their pipeline where they need to focus their time… but you wont get this help from the corporate pipeline… however, I do have the answer… but more on that later!
- Colin Wilson, FirstBorder.com