Dear CEOs, if you want a rainmaker, invest in a sprinkler system not a CRO
Early stage CEOs make a strategic error when they hire a Chief Revenue Officer (CRO) too early. CRO's are a common executive function in today's B2B C-Suite. When I hear a CEO justify the hiring of their first CRO by saying "we needed a rainmaker", my follow up question is "how did that work out for you?"
The term "rainmaker" stems from Native American culture, which embraced the idea that an individual could bring rain through mysticism, religion or science. High performing CROs don't rely on mysticism or any religion (that I know of) to drive revenue.
Salesforce defines a CRO as the executive "responsible for every process that generates revenue in an organization. CROs work to connect different revenue-related functions, from marketing to sales, customer success, pricing, and revenue operations (RevOps). They focus on improving sales performance, creating great product and pricing strategy, and delivering customer satisfaction (which becomes especially important in recurring revenue models like subscriptions)."
The CRO is a strategist, not a quota carrying role. A rainmakers priority is prospecting, the chief revenue officer priority is guiding the company’s outlook. The CRO needs to be confident and aggressive on one hand, steady and predictable on the other. This involves more than just hitting the numbers. It’s storytelling with "here's our growth possibility......"
In one of our recent blogs "Should CEOs hire a Chief Revenue Officer who executes or builds?", we ask the hard question - what does an emerging growth firm get for their initial half a million dollar investment?
https://www.lucrumpartners.co/post/should-ceos-hire-a-chief-revenue-officer-who-executes-or-builds Due to the early stage firm's significant investment in the role, the newly minted CRO is too often seen as a miracle-worker, rainmaker, and a mover and shaker who will come to the rescue by taking the company to the next level of sales revenue growth. This gap in expectations is a big driver of the 18 month turnover rate for CROs.
In a recent conversation with a head of sales in the healthcare technology industry, he shared the common sales maturity gap in his sector. His perspective was CEOs are great at creating technology and bringing the tech to market, often selling initial deals to the CEO's network and friendly connections. He believes the CEOs emotional investment in the technology combined with the low barrier of entry for the CEO friend's circle of buyers, leads a CEO to believe "its easy to sell". He also commented on the CEO's expectation that a CRO carries clients and pipeline from the previous company. (I guess this CEO never read a non compete). As the gap in expectations was identified, this head of sales lasted less than 20 months in his previous CRO role.
Our team at LucrumPartners.co works with early stage CEOs to ensure the foundation for revenue scaling is in place before hiring a CRO. Two foundational blocks are a sales talent strategy and an established sales process. A firm doesn't need to invest in a CRO to ensure they have the right sales team skills to effectively engage with modern buyers and to establish a consistent method for recording and reporting new opportunity deal stages. The sales process, if designed correctly, is aligned to the differing buyer jobs by buying stage. CROs need these two building blocks in place to effectively focus on improving sales performance.
If you are a PE manager who has a portfolio company struggling, or you are a start up CEO trying to get their sales team's activities aligned to high performing selling motions, our team at Lucrum Partners can help. We review how to quickly assess key foundational requirements in our e-book "Red Flags in Revenue: A Guide for Private Equity". Download your copy at LucrumPartners.co