When Growth Cools, CROs Feel the Heat
For whom the board tolls? It tolls for thee.
Our friends and partners at SBI published some fascinating research on CRO turnover in HBR. The news for CROs is… decidedly mixed.
Quick takeaways
First off, growth has been hard to come by recently. Only 2.8% of 496 companies saw an increase in growth each of the last 3 years.
If you’re the CRO at one of the other 97.2%, the board’s most likely giving you the side-eye. You may be shocked to learn that when growth slows, the CRO often takes the blame.
A few key points:
The average CRO tenure is 25 months (shorter than other CXO tenures of 30 months)
70% of CROs that left their role were “asked” (nicely, I’m sure) to leave
Only 41% of surveyed CEOs are confident that their current CRO can drive success
So if you’re like most CROs, you’re in a tight spot, but you may have more leverage than you think.
Firing the CRO isn’t a silver bullet
SBI finds that swapping out the CRO isn’t a magic switch that turns growth back on. In fact, it often does the opposite.
The HBR article makes it clear that changing CROs is a risky move:
Our analysis paints a stark picture. A staggering 62% of companies see their revenue growth rate decline or remain flat in the fiscal year following a CRO change. The median rate of decline is nearly four percentage points, from an average 15.5% growth rate the year before the CRO switches out, to an average 11.7% growth rate the first full fiscal year after the CRO switches out.
The slide below lays this out visually. You can also see that 56% of companies saw growth rates decline—not just stay flat—after changing the CRO.
In a separate analysis, SBI found that 33% of companies with voluntary CRO turnover exceeded expectations while only 7% of companies with involuntary turnover did. The sample size on the voluntary turnover is pretty low (n=6), but the large difference in performance levels between voluntary and involuntary turnover makes it seem that there’s signal there.
Of course, correlation is not causation. It’s likely a company that takes a drastic step like firing the CRO is struggling in other areas as well and will require a more thorough turnaround.
Here’s where it gets a little surprising. SBI finds that hiring an experienced outsider tends to make things significantly worse.
Based on this, they recommend promoting an insider to CRO. From HBR:
While logic may suggest that internal promotions limit the pool of talent under consideration and could perpetuate existing problems, this view underestimates the value of institutional knowledge and the ability of internal candidates to drive change when given new authority and perspective.
That’s the CEO perspective. Let’s explore this from two other perspectives:
The CRO in the hot seat
The leader waiting in wings
What’s a CRO to do?
Let’s be clear. If you find yourself in a situation where growth has slowed, you’re under scrutiny from the CEO, from the board, and from your own team. You’re not alone, of course—remember that 97.2% of companies have seen growth slow at least once over the last 3 years.
Start by asking yourself if this really is the right situation for you. Maybe your heart’s just not in the fight anymore. If that’s the case, you can hang on and hope for severance, or you can seize the reins and make yourself one of the 30% of CROs who left voluntarily.
If you think you’re in the right situation and you want to rekindle things, SBI has a very clear recommendation: uplevel your strategy and analytics support. In HBR, they note that “CEOs are quick to lament their CRO isn’t ‘a data-driven leader’ or lacks analytical chops.” They also suggest doing the following before moving on from the current CRO:
Consider surrounding your CRO with analytical horsepower through an upgraded revenue operations (rev ops) department. If your current rev ops team isn’t delivering robust insights on commercial performance, making a change in this department is far less disruptive than jettisoning a CRO.
While they go on to specifically call out the sorry state of the “fact base” at many organizations, I would argue that the problem isn’t limited to data. It’s often poorly designed and executed processes. You’d be surprised how often the strategy you think you’re following isn’t actually being executed on the ground.
Once upon a time, I took over a pretty large RevOps organization for a public company that was struggling with growth. It made a difference. RevOps sometimes has an inflated sense of self worth, but I will say this: a strong RevOps org is necessary (but not sufficient) for growth.
If you find yourself in this growth bind, proactively upgrade your RevOps organization. If you don’t own it (e.g. it’s under the CFO or COO), you’ll need to do some political maneuvering to make this happen.
This is also not the time to make incremental change. If slowing growth has become entrenched, you’re going to need to shake things up. That likely means a big swing. You’ll need to take a hard look at your leadership, your culture, and your processes. Get rid of that toxic sales manager who’s been there forever, shake up that territory model you’ve had for 3 years. Do whatever it takes.
What if you’re the insider who wants to be CRO?
I’m not going to give you advice on playing politics other than to say you shouldn’t stab anyone in the back. Life’s way too short and the world’s too small to do things like that.
First, if you do find yourself in a place where the CRO may be out the door, do your job really freaking well and don’t complain about anyone else. Make sure your team knows the product and market better than anyone else in the GTM org.
If your CEO promotes you, they’re going to have to go to the board and explain why you’re ready. If you’ve never been a CRO before, they’ll have to convince the board to “underwrite” that risk.
The board will be much more willing to do that if the CEO can say, “Yes, she hasn’t been CRO before but her team is doing great. If we go with Maria we won’t miss a beat on product and market knowledge. Nobody knows it better than her.”
Second, do your best to speak about your area of the business with the language that boards care about. Know your unit economics (e.g. CAC payback, churn, win rates) and how to use those unit economics to tell a larger story about the business. Be prepared to speak both quantitatively and qualitatively at whatever level is necessary. After all, good leaders can dive deep.
If you’re not sure how to speak to a board, get a coach or a mentor1. Find someone who’s done it before who can help you position your team and your performance the right way.
Finally, bring a plan. Your job is to bring new ideas and energy, not to say that everything your predecessor did was wrong. Take a long, hard, rational look at what you know about the business today. Identify new ideas to start executing on, find some areas where you may want to stop today’s approach and be clear about what you’re going to continue doing.
Change or be changed—your choice
When things aren’t going well, change is inevitable. You’ve got a choice: either let it happen to you or drive the change yourself. You most likely didn’t get here by sitting back and being passive. Don’t start now. That seat you’re sitting in is heating up.
If you’ll be in Chicago on December 6th, join us for the first Uncharted Coffee. Wake up, network and talk shop with other revenue leaders. Space is very limited, so register now.
Amy Volas of Avenue Talent Partners even recommends that you negotiate an executive coach as part of the role. Thanks, Amy, for reading a draft of this.