When Revenues Are Down, Do You Increase Pressure On Sales?
When revenues are slowing or dropping, what do we typically do? Most managers put more pressure on sales while reducing sales expenses and at the same time reducing operational expenses where the losses are occurring. Is this the right thing to do? Not necessarily.
Let’s look at it another way. As a consumer and a family patriarch, when gas prices are climbing and climbing, do you let the air out of your family’s tires forcing their vehicles to drive at a slower pace so they don’t use as much gas, while delaying on maintenance costs of the vehicles to save money? If you did that, would your family still get to the same destination safely and on time at a reduced expense? No, they would have to drive slower with more risk while they would be putting more wear on the tires and deal with mechanical problems on the road while having to spend more time traveling. You’ll be buying tires sooner, fixing higher cost problems in an emergency situation while dealing with late arrival issues or complaints due to longer times to drive. You’ll be spending more money than what you’re saving on gas while alienating your family against you! Not many of us would take this route.
So why would many of us do this for our business? From a business management point of view: just putting more pressure on sales while cutting expenses to make up reduced revenues due to lost revenue while reducing operational expenses where the losses occur is basically the same thing. It will erode your past investments on sales through attrition or worse, it will reduce motivation and efficiency of those that stick around and in the end will reduce sales productivity and capabilities on building new business. You are still at risk to meet your goals because of reduced revenue and lesser efficiencies for new business growth that have not been realized.
Let’s go back to the car analogy. If we need to cut costs on driving expenses when operating expenses are on the rise, wouldn’t the best tact be to ensure your cars are driving at their best and that each trip taken is for a cause to the end goal? An alternative course of action is that we can cut out any non-productive trips, ensure our destinations are made in the shortest possible routes, make sure the cars are running at top efficiency and eliminate any wasted weight in the trunks that don’t contribute to your goals (yes, get those golf clubs out in the winter). In doing this, we’re getting the best performance of our vehicles while ensuring we’re not wasting any expense on non essential items.
So returning to business, if we pressure the sales team to instantly gain the loss we’re seeing in revenue while we’re cutting back on operational expenses and capabilities, this will cost us in sales ability and deliverable abilities now and in the future. It will jeopardize our sales training investments we made in the past and efficiencies we already gained both in sales and operations. Or we can come up with another solution much like we did with the car analogy.
If we focused our sales teams to run at top efficiency by trimming out waste with better qualifying up front with less expense (maybe more phone and e-mail vs. trips and utilize better qualifying techniques) and reduce the part of the sales team that couldn’t deliver well in the best of times (the golf clubs) we can then further our sales efforts more efficiently. Same goes with operations. Instead of just cutting resources because of sudden loss of revenue in a specific program or product line, if we trimmed out any waste on all programs or products, focused on more efficient processes, shifted proven resources in losing areas to more solid areas and reduced costs of operations by operating better (running at top efficiency), wouldn’t that be best over just reducing costs where we see loss?
As business managers, this may seem like business 101, but in practically, many managers in a sudden change are apt to react differently. The point is, change is in order when revenue drops quickly. However, how you change or are pressured to change can be managed carefully and can produce a much easier transition and add more control and less loss until the economy returns to normal, when that happens.
None of us know how long the recovery to this economic downturn will take; we only know that it is affecting most of us now. So the way we respond can be reactionary or we can be proactive in our plans for the future, when it does recover.
Let’s look at it another way. As a consumer and a family patriarch, when gas prices are climbing and climbing, do you let the air out of your family’s tires forcing their vehicles to drive at a slower pace so they don’t use as much gas, while delaying on maintenance costs of the vehicles to save money? If you did that, would your family still get to the same destination safely and on time at a reduced expense? No, they would have to drive slower with more risk while they would be putting more wear on the tires and deal with mechanical problems on the road while having to spend more time traveling. You’ll be buying tires sooner, fixing higher cost problems in an emergency situation while dealing with late arrival issues or complaints due to longer times to drive. You’ll be spending more money than what you’re saving on gas while alienating your family against you! Not many of us would take this route.
So why would many of us do this for our business? From a business management point of view: just putting more pressure on sales while cutting expenses to make up reduced revenues due to lost revenue while reducing operational expenses where the losses occur is basically the same thing. It will erode your past investments on sales through attrition or worse, it will reduce motivation and efficiency of those that stick around and in the end will reduce sales productivity and capabilities on building new business. You are still at risk to meet your goals because of reduced revenue and lesser efficiencies for new business growth that have not been realized.
Let’s go back to the car analogy. If we need to cut costs on driving expenses when operating expenses are on the rise, wouldn’t the best tact be to ensure your cars are driving at their best and that each trip taken is for a cause to the end goal? An alternative course of action is that we can cut out any non-productive trips, ensure our destinations are made in the shortest possible routes, make sure the cars are running at top efficiency and eliminate any wasted weight in the trunks that don’t contribute to your goals (yes, get those golf clubs out in the winter). In doing this, we’re getting the best performance of our vehicles while ensuring we’re not wasting any expense on non essential items.
So returning to business, if we pressure the sales team to instantly gain the loss we’re seeing in revenue while we’re cutting back on operational expenses and capabilities, this will cost us in sales ability and deliverable abilities now and in the future. It will jeopardize our sales training investments we made in the past and efficiencies we already gained both in sales and operations. Or we can come up with another solution much like we did with the car analogy.
If we focused our sales teams to run at top efficiency by trimming out waste with better qualifying up front with less expense (maybe more phone and e-mail vs. trips and utilize better qualifying techniques) and reduce the part of the sales team that couldn’t deliver well in the best of times (the golf clubs) we can then further our sales efforts more efficiently. Same goes with operations. Instead of just cutting resources because of sudden loss of revenue in a specific program or product line, if we trimmed out any waste on all programs or products, focused on more efficient processes, shifted proven resources in losing areas to more solid areas and reduced costs of operations by operating better (running at top efficiency), wouldn’t that be best over just reducing costs where we see loss?
As business managers, this may seem like business 101, but in practically, many managers in a sudden change are apt to react differently. The point is, change is in order when revenue drops quickly. However, how you change or are pressured to change can be managed carefully and can produce a much easier transition and add more control and less loss until the economy returns to normal, when that happens.
None of us know how long the recovery to this economic downturn will take; we only know that it is affecting most of us now. So the way we respond can be reactionary or we can be proactive in our plans for the future, when it does recover.
posted by Tom Topolinski at
12:14 PM 
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1 Comments
