Managing Organizational Change
Cincom and Accountability of Sales Representative for Results
Cincom is a 43-year-old developer of enterprise software applications and by virtue of the designed-in nature of their applications, has been able to literally coast on a comfortable wave of recurring revenue for a decade. This recurring revenue stream is comprised of license payments, maintenance fees, and the continual need for updates to mission-critical systems the company sold, in some cases, decades ago. With the majority of revenue being generated through a recurring revenue stream, the urgency and intensity to sell which is often found in smaller, younger, and more cash-starved businesses is not as prevalent inside Cincom. The framework for change model provides an invaluable construct in which to analyze the complacency of Cincom, what contributed to that false sense of security, and the path back to being a competitor in their core markets (Kotter, 2008).
Analysis of Sales Representative Roles and Accountability
It was common before the change in sales accountability, organizational structure and quota re-alignment to have Cincom sales representatives who had not sold anything in two years or more. Having created an organizational culture that was more attuned to maintaining accounts and ensuring customers were satisfied enough to renew their maintenance and software licensing contracts, Cincom sought out sales people who were excellent at maintaining accounts. These sales teams were not however adept at prospecting, working on new opportunities and closing new business. As a result, the culture began to became more focused on relationships as tantamount in selling and less on results. The factors that also contributed to this culture was the rapid build-out of enterprise software globally, the increasingly balkanized markets of software where Cincom’s deep expertise was well-recognized and respected, and the CEO’s ability to sell. In essence, the CEO was carrying the company’s largest sales cycles to keep the company earning new revenue. During strong economic cycles, having relationship-oriented sales people could close new business in existing accounts and still earn their commissions. Given the global economic collapse and as many analysts call the last three years The Great Recession, the lack of accountability and results is starting to erode the company’s financial base. At one point in 2009 it appeared that Cincom would need to sell off a division or two to keep financially viability. It was during this time that the CEO saw that the culture had become excellent for attracting and motivating relationship-driven sales people, yet had not been very strong at producing results-driven selling.
The overall structural approach companies were taking to buying software had also changed. There was much greater focus on how to minimize or even eliminate purchasing based on capital expenditures (CAPEX) and instead the focus was on expensing software in the period in which it was used. This approach to paying for software is called (OPEX) for operating expense-based budgeting. Cincom had structured its sales teams and strategies with CAPEX in mind. Sales cycles around CAPEX were very long by today’s standards, well over 6 months, and would often involve multiple presentations to a company’s board of directors and much effort to persuade up to a dozen different people to make a decision for a product. This longer sales cycles were also affordable by the customers as the cost of capital was low, and they knew if they dragged out the sales cycle they could get major concessions on service and support. This strategy worked well in the late 1990s and early 21st century when enterprise software companies including Cincom had the revenue base to wine and dine customers, create relationships with them, and work to create value over the very long-term.
A Global Economic Storm Changes Enterprise Software Selling Forever
The Great Recession, bank meltdowns, a contracting economy globally, and inflation beginning to increase all forced companies buying enterprise software to drastically reduce spending. When they did spend for software, it was purely of the Software-as-a-Service (SaaS) variety that is a business model built entirely on the OPEX model.
This was exactly the opposite of the Cincom business model, which was based on selling a very expensive enterprise system (in some cases well over $1M for software alone) and relying on CAPEX spending to fund it. The culture within Cincom however had been frozen in time. To change a culture, the rewards and financial incentive need to change to support the necessary new direction of the organization (Phelan, 2005). This is exactly what Cincom did. The organizational structure was completely redefined to be more directly accountable for every sales call, every campaign and every program. All this accountability soon created an exceptional level of competitiveness throughout many of the organizations. It also alienated the sales people who had come to Cincom looking for a relationship-based selling job, one that didn’t offer exceptional financial rewards but didn’t require exceptional responsibility either. That was the mindset of nearly all the salespeople before the global economic storm hit.
To survive, Cincom had to immediately push for greater accountability of sales efforts and results. The CEO, who is brilliant at strategy, devised an entirely new approach to selling based on value-based metrics. He also concentrated on redefining sales roles so there would be accountability designed in to each strategy, program and initiative. By doing this, the CEO was in fact implementing one of the most successful change management strategies of all, and that is having a senior executive actively and completely endorse the cultural change (Mento, Jones, Dirndorfer, 2002). This underscores the essential elements of the Kotter framework for change model as it directly communicates urgency and credibility of the change as well (Kotter, Schlesinger, 2008).
As with any change of this magnitude, there was negativity associated with it, mostly from the sales reps who did not want to work in a company with such a high level of accountability. They had chosen to work at Cincom because it was more of a relationship-based business and not one driven to quotas. The result of the CEO bringing out an entirely new plan based on results and underscoring it by changing his own approach to selling galvanized the company going forward. The economic storm had in fact created the necessary energy and focus to change a culture that should have been modified a decade ago. The Kotter framework for change model specifically shows how these factors combined led to the company successfully changing and staying relevant to its customer base while attracting new ones.
Kotter, J.. (2008, December). Transformation. Leadership Excellence, 25(12), 20.
John P. Kotter & Leonard A Schlesinger. (2008, July). Choosing Strategies for Change. Harvard Business Review, 86(7,8), 130-139.
Anthony J. Mento, Raymond M. Jones, & Walter Dirndorfer. (2002). A change management process: Grounded in both theory and practice. Journal of Change Management, 3(1), 45-59.
Michael W. Phelan. (2005). Cultural Revitalization Movements in Organization Change Management. Journal of Change Management, 5(1), 47-56.
Ian Smith. (2011). Organisational quality and organisational change: Interconnecting paths to effectiveness. Library Management, 32(1/2), 111-128.
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