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Pipeline = Lifeline
November 27, 2007
Why does such a critical business tool get so little TLC at some companies?
By Maureen Hrehocik
Even though a company's sales pipeline is its profit lifeline, many firms lack a formal mechanism for tracking leads through it, proper management of it or appropriate talent working it, according to David Stein, CEO of ESResearch Group in West Tisbury, Mass.
"Pipeline management is a critical issue," Stein says. "Few companies have it figured out." For those that do, they will reap a myriad of benefits, including better forecasting the length of the sales cycle.
Mary P. Donato, president of Applied Principles, LLC, agrees. "You need a customer relationship management system," she says, "some way to measure content, even if it's just an Excel spreadsheet."
Equally important is to have rigorous decision criteria for what goes into the pipeline. "It is amazing how little the pipeline is appreciated, when it is so important," says Steve McNally, managing partner of marketing and distribution for the TAS Group in Kirkland, Wash. "A company's pipeline is the leading indicator of how it will perform. A forecast is a lagging indicator in which you deal with an outcome. With an effective pipeline, you tactically affect outcomes."
McNally says that to create an effective pipeline, everyone in the organization (including sales, marketing and operations) must have an awareness and understanding of the company's sales process. "Something like 'verbal order' has to mean the same to everyone in the organization," he says.
By having everyone understand the sales process, McNally says a company can avoid finger-pointing if a lead falls through. "If there is a commonly understood sales process, everyone can talk about new leads in the context of that sales process," McNally tells Sales & Marketing Management. "It makes looking into the future significantly clearer. It also tells the marketing department precisely where they need to focus."
The second major component of a successful pipeline is having a chief revenue officer (or equivalent individual) understand the sales cycle for products and services in a time sense, and be able to "overlay" quotas against time. "Everything done should be quantifiable," McNally says. "The CRO can see issues before they manifest themselves. A good pipeline means no surprises. A good pipeline allows you to create correct expectations. Another benefit is, over time, you will see trend lines developing."
McNally emphasizes that the "swing piece" in a good pipeline is clarity of data. "The vice president or sales manager must understand what the salespeople are telling them. It's important to listen and to granularize the information as much as possible." A good pipeline allows the organization to make good decisions around it, such as whom to hire and what products to carry.
McNally underscores that setting up a productive pipeline is a science. As such, it needs a formatted structure, such as software, to totally embrace the methodology. "Everything should be quantifiable, including time," he says. "We are big advocates of using automation, software, customized programs, visual interactive materials, planning approaches and visual reinforcements."
McNally adds that managing the pipeline well is a long-term investment that requires reinforcement of the proper sales behaviors. "It needs to become a way of life," he affirms, but even with a well-structured pipeline, McNally warns of a huge pitfall: focusing on short-term revenue goals and not adding to the pipeline constantly to ensure sales into the future. "A little bit of activity to feed the pipeline constantly goes a long way," he says.
McNally likens the pipeline to a container holding rocks. If you stack only large rocks, there are spaces in between that need to be filled with smaller rocks. The smaller rocks will stay in place even if one of the large rocks falls. It is the same with accounts, he says.
Dustin Manocha, director of business development for BroadReach Partners in Stamford, Conn., says the core role of a pipeline developer (whether it's the company or third-party vendor) is to "uncover sales opportunities," then let the salesperson close the deal. "We believe we're in the best position and have the ability to talk to decision-makers at the executive level in companies," he says. "Once that rapport is built, and there is an opportunity, we bring in the company salesperson."
His colleague, Michele Belperron, also a director of business development, agrees. "You need to have the right talent for getting to the decision-makers," she says. "Some companies have great salespeople, but they may have difficulty building a relationship at a high level."
Manocha says one of the biggest mistakes in pipeline development is mismatching talent to the company's sales objectives. "Many companies hire low-level, tactical, scripted telemarketers and expect meaningful results," Manocha says. "It doesn't work because senior executives do not respond well to that approach."
Another pitfall in managing the sales pipeline is the competitive, compensation-driven nature of sales. This can lead salespeople to gravitate toward the late-stage deals, rather than shepherding possible deals all the way through the pipeline. "You can have the best opportunities enter the pipeline," Manocha says, "but if the salesperson isn't working them, some very promising deals fall through due to lack of attention."
"It is absolutely imperative that even early-stage deals are tracked," Belperron adds. "A collaborative approach is necessary to track leads at all stages through the pipeline so no deal goes south." She also says there needs to be integration between sales, marketing and management for data tracking, recording, promotion efforts and validation. "Everyone needs to have a clear picture of what is happening," Belperron says.
In the end, the extra effort will pay off. Manocha says companies he's worked with who have taken a strategic view of their pipeline have seen up to a 20-fold return on their investment.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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