Three Misunderstood Consequences of a Fake Pipeline (and how to fix it)

Salespeople are incentivised to hold on to deals with little chance of closing to pad their pipeline for the monthly sales report. Why they do it is clear, however, revenue isn't the only casualty of this behaviour. The real toll of a full, fake pipeline is greater than the individuals' revenue contribution, for the following three reasons:

1. Bandwidth

Time and energy are spent contriving excuses and gaming the internal system. This distracts from the vital function of finding new customers. Rather than tackle the problem, the salesperson convinces themselves that low probability deals are going to close. The result is a lack urgency to replenish their pipeline with genuine opportunities. Attention shifts from solving customer problems, to justifying their position within the company. It's a self-perpetuating downward spiral in which the salesperson deceives themself, their colleagues and the company, creating an unhealthy and stressful situation.

2. Damages credibility

Behind the scenes, management label the salesperson as untrustworthy. Top Salespeople (who are notoriously unforgiving) brand the rep as "average" and unreliable. Once labelled as someone who won't face a situation and fight their way out, there is little chance of promotion, or being chosen for new business opportunities. It gets worse. Some managers encourage reporting the low probability deals because a full, fake pipeline looks better in their monthly report than a less well-populated, genuine pipeline. The bad news is that the salesperson is responsible for the inaccuracy, and must bear the consequences alone. Feeling victimised, they blame everyone but themselves. For example, "Leadership haven't supplied adequate coaching" or, "Other colleagues have better territories" or, "The product isn't good enough." What a mess.

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3. Business fallout

The business impact becomes clear if 50% of the sales team are relying on low probability opportunities. The clusterfuck percolates across the entire organisation; group targets are missed, and the board of directors face the wrath of shareholders, who want answers. The Grim Reaper is sent in (aka the CFO) to look at facts not excuses; to cut the deadwood and streamline the business. Guess who's first on the chopping block? You could argue the situation has been perpetuated by poor management, but in the fight for survival, guess who management are going to blame?

This could all have been avoided with a genuine, full pipeline.

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My Strategy for a Healthy Pipeline

It is a good assumption that 25% of the opportunities in a sales pipeline won't close for reasons outside the sales professional's control. So, if only 75% are genuine opportunities, you need a pipeline of 133.33% (133.33 x 0.75 = 100%) to hit target. This assumes a 100% closing rate by the salesperson, which isn't realistic.

In my mind, a healthy, on-target pipeline is 50% larger (133.33 x 1.5 = 200%) to guarantee success and increase the probability of overachieving. This logic is one way I assess new territories; i.e., if I can't identify at least 200% of my target in potential revenue, either the target is wrong, or I need to look harder.

These three things keep the pipeline clean and healthy:

1. If you are going to lose, then lose early.

Gain commitment to proceed at every point in the sales process. A good way to do this is have the potential customer repeat their understanding of the value of the offering at each point in the sales process. If they can't, the opportunity remains a low probability outcome.

 

"Top Salespeople understand the detrimental impact of a fake pipeline and reject low probability deals." Tweet...

 

2. Get a second opinion from the top salesperson.

Are the top salespeople in your organisation stressing over an empty pipeline? No, because they understand that time and energy are better spent building a genuine pipeline. They are not focused on surviving, but dominating. Ask them to scrutinise your opportunities with the same ruthless intent.

 

"The ability to accurately assess deals by probability of closing is a basic and fundamental behaviour of top salespeople." Tweet...

 

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3. Dedicate the necessary proportion of your time to maintain 200% pipeline over target.

Ensure the majority of your time and energy (80%) is focused externally on revenue generating activities, and not internally on box ticking exercises (20%).

 

"Top salespeople balance the ratio of customer focus with that of internal processes. It never falls below 80:20."Tweet...

 

Allowing imposters into your pipeline to compensate for a lack of opportunities creates a downward spiral. There is no silver bullet or easy way out. The answer is ownership. Nothing can go wrong if you work to the strategy above, and stay one step ahead at all times. It's much easier to put in the extra effort to find new opportunities than to deal with the consequences.

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