How to Shrink the Gap between Sales and Strategy—An Interview with Frank Cespedes

For a business to grow, it must have a strategy and that strategy must be aligned with sales. The problem is often companies don’t have a strategy, or if they do, there’s a gap between that strategy and what their sales teams are doing.

“Research shows relatively few companies successfully execute their strategies. And on average companies deliver only about 50% of the financial performance that their strategies and sales forecasts promise,” says Frank Cespedes, author of Aligning Strategy and Sales. “Now that’s a lot of wasted money and effort. … Companies regularly overpromise and under-deliver when it comes to sales and profitable growth.”

The problem stems partly from impractical strategy planning processes, he says. A firm might take five months doing planning. In the meantime, the market continues to move and sales must respond issue by issue and account by account. That means the eventual strategy is irrelevant to sales executives.

Read the full article and listen to the interview on

Book Review: Getting Beyond Yes

Harvard Business School

Every company needs a strategy—a forward-looking plan for the future—and every company needs to keep that bottom line growing through sales. But all too often, the folks devising the grand plan and the folks sealing the deals are not on the same page.

In his new book, Aligning Strategy and Sales: The Choices, Systems, and Behaviors that Drive Effective Selling, Frank V. Cespedes laments the fact that sales and strategy rarely make a joint and complementary appearance in MBA classrooms or academic journals. Professors stick safely to the realm of publishable strategy theories; the sales side is left in the hands of consultants and trainers. This, he says, is just the start of a larger problem: the inability of businesses to tie their sales practices to their overall strategy.

Read the full review in the HBS Alumni Bulletin.

You Can’t Do Strategy Without Input from Sales

Aligning Strategy and Sales

One of the best books ever written about selling is David Dorsey’s The Force. Dorsey turns a year in a Xerox sales district in Cleveland into a riveting drama about people, accounts, the operatic highs and lows of the sales cycle, and the triumph of making quota. Dorsey focuses on Fred Thomas and his sales team and the sometimes strange but effective motivational techniques of his district manager, Frank Pacetta. It’s a great ethnographic study of B2B selling for capital goods.

But even as Thomas and Pacetta make their sales, Xerox is missing the larger strategic point, although the facts are staring at them in every office where Thomas and his team make sales calls: more and more copies are being handled by printers linked to personal computers, not by copiers. Thomas is doing his best to maintain Xerox’s share in copiers. But the disconnect between sales and strategy (in this case, a lack of strategy to deal with a technology that is redefining the market and customer behavior) is the hidden subtext of the book.

Even Dorsey, as great an observer as he is, misses it. Instead, he explains that by the mid-1990s Xerox competed with Canon, Kodak, Minolta, Ricoh, Savin, and other copier manufacturers, without mentioning HP, Brother, and other makers of computer printers that were eating Xerox’s lunch. It makes Dorsey’s summation of his story a non sequitur: “A once-thriving American business loses share to the Pacific Rim, gets scared, adopts TQM practices, raises productivity, and begins to win back business. The way the Cleveland district sells copiers illustrates . . . this comeback.” No. How could it be when selling, however clever and creative, is divorced from the main strategic reality facing the firm?

Read the article on Harvard Business Review.

Sales Still Matters More than Social Media

Long Live Sales

It’s become commonplace for observers to tout the transformative potential of digital technologies and bemoan the allegedly slow pace at which companies support these initiatives. Two recent blogs published by are representative and, I believe, wrong.

Walter Frick, an HBR editor, contrasts the enthusiasm of executives for spending money on digital initiatives versus their relatively unsupportive boards. “Digital growth is appropriately a priority for a diverse swath of organizations, and boards need to get with the program,” he writes. Didier Bonnet of Capgemini agrees, and is refreshingly direct in suggesting the cause: the average age of independent directors in S&P 500 companies is almost 63, they did not grow up with online technology, and many should be replaced for their lack of “digital awareness.”

Read the full article on Harvard Business Review.

A Lesson in Execution: Why Your Strategy is Failing

Strategy Execution

Teamwork. Whether in meetings or retreats, there’s no doubt you’ve heard these words repeatedly preached by senior executives. However, few firms actually focus on alignment where it counts most: linking big-picture strategy with the nitty-gritty of customer acquisition and retention in sales efforts.

Poor alignment of sales and strategy incurs both direct and opportunity costs, putting your company at a severe disadvantage. As proven by income statements, selling is by far the most expensive part of implementation for firms. Companies in the United States invest in their sales forces three times more than consumer advertising, 20 times more than online media, and 100 times more than social media. Despite this spending on sales, 56 percent of senior executives agree their biggest challenge is ensuring that day-to-day decisions are in line with strategy and allocating resources in a way that supports strategy.

Read the full article on Business 2 Community.

800-CEO-READ Books to Watch: August 2014

Aligning Strategy and Sales

With so many books focused on the elevator pitch, closing the sale, or other minute sales techniques, Aligning Strategy and Sales is a refreshing change of pace. Frank Cespedes digs deeper into improving a company’s sales and performance by looking at creating stronger connections between a company’s broader mission and strategy and the sales force on the ground. The book stresses better communication between management and sales, strategic hiring, and effective delegation of responsibility that allows staff to both manage and sell.

Read the full article on 800-CEO-READ.

Glean Insights Into “Aligning Strategies and Sales”

Small Business Trends

Aligning Strategies and Sales is a book that can help growing small businesses make enterprise level decisions and appreciate the potential results more clearly.

What does it take to be effective? Moreover what does it take to be effective at the right time? Given the speed of the Internet, success is becoming more dependent on being systematic where it counts. Such organization has potentially great value when strategy and sales are aligned.

To gain that alignment in a successful way, consider the book Aligning Strategies and Sales: The Choices Systems and Behaviors That Drive Effective Selling by Frank Cespedes. The author is a senior lecturer at Harvard Business School. I received an advanced copy through Harvard Business Review and was intrigued by the author’s earnest effort to make selling meaningful for those who struggle to organize sales.

Continue reading on Small Business Trends.

Breaking Through a Growth Stall

HBS Working Knowledge

This post originally appeared on HBS Working Knowledge.

Many companies get stuck on a plateau, unable to grow and burning through cash at a frightening rate. Frank V. Cespedes discusses how focusing on the right customers can generate growth again.

Starting a successful business is often considered the hardest thing entrepreneurs do—but growing an existing venture may be even more difficult. Many companies get stuck on a plateau that inhibits their ability to grow: a scale stopper.

Call this barrier the “Devil’s Triangle”: the place where a company seems weighted down by the bounds of its original start-up business model, a lack of experience by its founder(s), and an accelerating, expense-fueled burn rate through working capital and investor patience.

“Once a venture reaches a critical size, its complexity greatly increases,” write the authors of How to Identify the Best Customers for Your Business, published in the Winter 2013 issue of the MIT Sloan Management Review.

“Ineffective opportunity management eventually leads to loss of money, time, and positioning with customers.”

At this point, it’s time to identify your core customers and build a scalable platform for growth around them. That’s the message from Frank V. Cespedes, the MBA Class of 1973 Senior Lecturer of Business Administration at Harvard Business School; James P. Dougherty, cofounder of the health-care IT start-up Madaket; and Ben S. Skinner III, head of the Atlanta-based consultancy LCS Partners.

The article discusses the importance of understanding your ideal customers; the implications for selling, cost management, growth strategy, and organizational relationships; and a process for putting it all together.

We asked Cespedes to expand on how firms can break free from the grip of what he refers to as the Devil’s Triangle.

Read the full article.

How to Identify the Best Customers for Your Business

How to Identify the Best Customers for Your Business

This post originally appeared on the MIT Sloan Management Review.

Many companies pursue growth opportunities without adequately defining who their ideal customers are. That lack of clarity can hamper profitable growth.

It’s difficult to start a venture that gains traction with paying customers. In the first decade of the 21st century, fewer than half of all U.S. startups were able to survive beyond three years.1 But it’s even harder to grow a company beyond certain levels of sales. Of the nearly 44,000 companies founded in 2000 and listed in the Capital IQ database — which includes public and privately held companies — fewer than 6% achieved more than $10 million in revenues by 2010, and fewer than 2% grew to more than $50 million.2 Why?

Once a venture reaches a critical size, its complexity greatly increases. Not only are there more “moving parts,” but interdependencies are more difficult to manage. The original business model must deal with new products or markets, and the early leadership behaviors that worked in establishing the business are often inadequate to manage and grow it. Most visibly, SG&A (selling, general and administrative) costs often accelerate faster than revenues, and because resource-constrained ventures cannot afford to burn through working capital, promising ventures are forced either to go out of business or to operate in small niches because they are unable to scale their sales activities. Even large, established corporations can face a problem with SG&A expenses: Between 2000 and 2010, production efficiencies reduced the cost of goods sold at the average S&P 500 company by about 250 basis points, while SG&A as a percentage of revenue didn’t change.3

Consider the case of an entrepreneurial company we’ll call BusinessProcessingCo. BusinessProcessingCo. (a real company whose name we disguised for this article) was founded in 2000 to provide Web-based outsourced payroll services to small and medium-sized businesses. By 2004, it had about $40 million in sales and 75 sales representatives with annual quotas of $600,000 each and target compensation of about $60,000 per rep. In 2004, the founder raised nearly $30 million from investors to develop new products and expand the business.

Read the full article.

Is It Heresy to Make Salespeople Pay Their Expenses? An HBR Management Puzzle

Sales Expenses

This post originally appeared on Harvard Business Review.

It was just minutes after they greeted each other on the porch of the restored mansion that the sales manager and the VP of marketing of a heavy-machinery company found themselves embroiled in the real purpose of their lunch meeting: Hashing out the sales manager’s plan to make salespeople financially responsible for their travel, food, and entertainment expenses.

“You’re going to have a mutiny on your hands,” said Jo-Ann, the VP.

“I expect some resistance,” Peter replied. “But if I truly thought this was going to make the salespeople unhappy, I would not have proposed it. Once they see how it works, they’ll like it.”

“Wow. You are so out of touch,” Jo-Ann said.

(Editor’s note: This fictional Management Puzzle dramatizes a dilemma faced by leaders in real companies. Like HBR’s traditional case studies,’s Management Puzzles are based on academic research into business problems. This story was inspired by the Harvard Business School case study “Olympia Machine Company, Inc.,” by Frank V. Cespedes and Benson P. Shapiro. Please contribute by offering insights, solutions, and stories from your own experience.)

They were soon ushered into the restaurant’s private dining room. As she seated herself in the carved chair that the waiter had pulled out, Jo-Ann looked perfectly at ease — unlike Peter.

“Forgot my white gloves,” he joked. Although he had lived in Raleigh for two decades, he had never set foot in this place. He had agreed to meet Jo-Ann here only because she had been assured they could be alone to discuss his plan.

“You really don’t like all this, do you?” she asked, indicating the white linen and gilt mirrors. “Or is it only when the company’s paying?”

Especially when the company’s paying.”

“You were a salesman for years, though. Surely you took your customers out —”

“All the time. And I still do. But I know exactly how much money goes up in smoke in a place like this. I don’t think most of our salespeople have that kind of sense about costs. I’m trying to heighten their awareness.”

“But making them cover their own expenses?”

“We’ll give them a fixed amount, based on their territory and their past expenses, and we’ll let them keep what they don’t spend.”

“Give them less, you mean,” she said. “Less than they used to spend.”

“Correct. The assumption is that, under the current incentive system, they’re highly inefficient in their use of expense money, so we’ll give them less to work with than they’ve been getting reimbursed for.”

“I can’t believe the CEO actually likes this plan,” she said. “Our customer base is dispersed all over the place — that’s just how it is when you’re selling to specialty chemical manufacturers, as we are. Plus our sales cycles are long, and developing cross-functional relationships at customers is a key sales task. All this relationship building over vast territories takes a lot of traveling and a lot of wining and dining. Your plan could so easily make the salespeople penny-wise and pound-foolish.”

“The CEO doesn’t just like this plan, he loves it, Jo-Ann. Because it’s not just about pennies. In fact it’s not mainly about cost management at all — though that’s certainly important in these market conditions. My kind of expense approach can help the sales force develop their awareness and skills at P&L management, and that in turn might allow us in the future to peg incentives not only to volume but to profitability of sales. That’s something you know I’ve been arguing for, but we can’t just implement it overnight. We have to build toward it.”

“He told me yesterday he wants to implement your plan as soon as possible,” she said with a deep sigh. “There are rumors that something like this is being contemplated, and the salespeople are going nuts. He wants to put a stop to the rumor mill.”

“I agree with him: It should be implemented ASAP, and the rationale should be clearly and quickly communicated.”

“And what exactly would you communicate?”

“Jo-Ann, there are multiple issues with expenses under the current plan. First, there’s the squishiness factor. There’s no oversight — except me, of course, and I don’t want to have to confront every salesperson over every expense. Whenever I do their expense reports, I have to fight with my conscience the whole time, biting my lip about this expense and that expense. Tania Temple paid for the CEO of Shelston Chemicals and his whole entourage to spend the day at a NASCAR event. And Carmody pays top dollar for every hotel he stays in — you’d think he was the king of Persia. Stemberg’s bar tabs are out of sight.”

“I’ve heard you say yourself that salespeople should live in a style that reflects well upon them and the firm,” she said. “No one wants our salespeople to be seen driving beaters and staying in cheap motels.”

“That’s not the point. The point is that they see the expense account as an unlimited, no-cost resource for jacking up their sales numbers. If you gave me a big enough expense account, I could sell one of our pulverizing machines to the president of the United States. But I’d bankrupt the company.”

“Now why would the president of the United States need a pulverizing machine?”

“Oh, I could demonstrate plenty of uses. I could probably sell him two. But forget about that. Look at the cost situation. We pay straight salary plus expenses, so Tania gets $80,000 a year and puts in for $90,000 in expenses. True, she has global customers with plants all around the world, but still. That’s really high. And there’s no predictability. The year before, she put in for $50,000. Next year, it might be $100,000. How do we budget for that?”

“The need for expenses is highly variable,” Jo-Ann said. “Tania had to go all-out to get Shelston to buy those new grinding machines. Now that she’s made the sale, her territory is going to be a lot quieter. She’ll be spending most of the next year selling accessories and parts. Her expenses will be minimal.”

“We’ll take all that into account when we give them their expense budget each year.”

“Who’s ‘we’?”

“Me, mostly,” Peter admitted.

“We devote a huge amount of energy and a lot of money to keeping our sales force happy. As you well know, salespeople in our business are highly inclined to jump, because their relationships with customers are so portable. And it’s a cutthroat business environment out there.” Her voice took on an edge that sounded almost threatening. “I would not embark on this lightly if I were you.”

“I’ve heard that quite a few of the salespeople see the benefit in it.” He was aware that his voice lacked some of its earlier confidence.

“I don’t know who you’ve been listening to,” she said. “I think they’re all going to quit, Peter. All of them.”

What did Jo-Ann know that he didn’t?

Question: Should Peter go through with his plan to make the salespeople pay their own expenses?