By Rick McPartlin
Business 101: Every gap gets filled with something!
The part of business that is supposed to produce profitable revenue has two huge gaps that, in 99 percent of companies, are filled with chaos.
The only significant part of business that is not intentionally organized around strategy, supported by structure and then delivered through aligned execution is the production of revenue.
Today, the production of revenue is primarily about execution, and the two gaps (strategy and structure) are filled with chaos. This chaos produces little or no profitable revenue (it actually reduces it), while also creating a large amount of unnecessary cost. Why? Nobody owns the end-to-end responsibility for producing profitable revenue.
The most senior person in the company dealing with revenue already has a full-time tactical job as a VP of sales or marketing (or both). Since these leaders are measured on short-term results and removed if their short-term tactics fall short of expectations, all of their effort is tactically focused. And when they do give strategic or structural advice to senior leadership, they’re often seen as self-serving or making excuses.
The result is no focused leadership for revenue strategy or structure. Other parts of the organization do not have these gaps. On the financial side, the CFO is accountable for the financial strategy that supports the corporate strategy. The controller is responsible for the structure to make the financial strategy happen, and then the accounting team executes.
The CIO is responsible for the IT strategy that supports the corporate strategy, and the IT structure is developed by application and/or technical leadership that support the execution by programmers and engineers.
The same logic applies to all parts of the business – except the production of revenue. To get the same level of predictable results from revenue, we need to apply the same approaches to the production of revenue.
This approach requires a new leadership role. That role is a CRO (Chief Revenue Officer), and the CRO has only ONE job: managing ALL the resources invested in the production of revenue, and the CRO will be held accountable for the amount of profitable revenue generated compared to the resources invested.
The CRO will have the resources and the responsibility for the “revenue strategy,” and that supports the corporate strategy. The CRO develops the ideal structure to support the actual execution of the revenue plan. The structure will be led by a position like CMO (Chief Marketing Officer), with a role like the CSO (Chief Sales Officer) being accountable for execution.
What is important in the revenue structure and execution areas are that the functions of producing revenue need to be planned, supported, executed and measured. In the past, all those functions were considered to be human beings in the roles of marketing and sales. Today, the functions can include the Internet, cell phones talking to computers, and iPads talking to anything with few if any humans in the function. The CRO’s role is to manage the right resources to create the right result (the most profitable revenue possible for the available resources).
The CRO is responsible for the continual transitions of the revenue strategy, structure and execution brought about by constant changes. Buyers, competitors, technology and financial conditions will change daily, and the CRO must follow the lead of the Navy Seals and “Adapt, Improvise and Overcome,” starting with required changes in the revenue strategy to maintain continuous alignment with the corporate missions and goals.
When the CRO fills the strategic gap in the production of revenue and assumes the responsibility to design and lead the filling of the structure gap, the execution will improve markedly. The cost for these new positions, programs and resources will be paid from the reduction in chaos for producing revenue with lots of leftover fall to EBITDA.
Making this happen is simple but not easy. Get outside help from an experienced CRO firm that will help you create a “revenue strategy” (a very specific form of strategy), then scope out the CRO role for your organization. After the “revenue strategy” is developed, the role of CRO will be easy to scope out with both financial and operational metrics, making it easier to recruit the right person and hold him or her accountable.
When you bring the CRO on board, the rest of the leadership team will need to be coached on how to support and coordinate with this new strategic role. Since the “Revenue Generation” function is organization-wide and the resources that the CRO is responsible for are often in another leader’s budget, this coordination is as critical to success (as are the metrics that reflect this coordination).
Every company needs CRO thinking to manage its revenue resources and revenue results. It can come from a full-time member of the leadership team (if the company is large enough to afford this role full time) – or, if a company is smaller than $100,000,000.00, a part-time or outsource CRO works very well.
Regardless, the important thing is to fill the gaps by applying CRO thinking and to implement revenue structure, measure the results, and continuously improve the execution of profitable revenue.
Rick McPartlin is the CEO of The Revenue Game and is a revenue generation consultant and Vistage speaker. McPartlin was a Vistage member development chair from 2002 to 2009.
Originally published: Jan 10, 2012