The Risks of Hiring the Wrong CRO
The Risks of Hiring the Wrong CRO: Why You Should Consider a Dedicated Fractional CRO First
The average tenure of a Chief Revenue Officer (CRO) at a small to mid-sized company varies depending on various factors such as the industry, company size, and market conditions. However, it is widely known that the average tenure of a CRO is significantly shorter than other C-level executives such as the CEO, CTO, or CFO.According to the Sales Management Association Report, , the average tenure of a CRO is 18 months, while the average tenure of a CMO is around 26 months in small to mid-sized companies. When you examine early stage companies as their own population this tenure is squeezed even further.
There are several reasons cited for why CROs may leave their positions, including:
- Performance Issues: If a CRO is not able to meet the company's revenue targets or achieve the desired growth rate, they may be asked to leave or may choose to resign if they feel they’ve been given an impossible task.
- Cultural Fit: If a CRO is not a good cultural fit for the organization or does not share the company's values or vision, they may leave the position. Culture can shift rapidly where once unified visions can fracture and crumble as demands escalate.
- Lack of Resources: If a CRO does not have the necessary resources, budget, or support from other departments, they may be unable to achieve their targets, which can lead to frustration and resignation - especially when corporate targets are not adjusted as investment areas of focus shift.
- Better Opportunities: If a CRO is offered a better opportunity with another company or receives a more attractive compensation package, they may choose to leave their current position.
- Burnout: The role of a CRO can be high-stress and very demanding, with long hours and frequent travel. If a CRO experiences burnout, they may choose to leave their position to focus on their well-being.
It is important for small to mid-sized companies to prioritize finding the right fit & timing for their CRO role and providing the necessary support and resources to ensure their success. A dedicated fractional CRO can help provide the necessary expertise and flexibility to support a company's revenue goals & GTM planning and execution, as well as help ensure the future success of their revenue leadership team.
In today's highly competitive business landscape, the role of the Chief Revenue Officer (CRO) has become increasingly important. A CRO is responsible for driving revenue growth and ensuring the financial success of the organization, building a culture of accountability and a business that is predictable and repeatable. However, finding the right fit for the CRO role can be a challenging task, and making the wrong hire can have significant consequences. In this blog post, we will discuss the risks of hiring the wrong CRO and why companies should consider investing in expert sales consulting services and/or hiring a dedicated fractional CRO first. We will also explore the differences between business leaders that have an affinity for building vs those who are better at operating an already working system.
The Risks of Hiring the Wrong CRO
Making the wrong hire for the CRO role can have debilitating consequences for a company. Hiring the wrong CRO can result in missed revenue targets, decreased profitability, corporate culture chaos and even the failure of the company. According to a study by Harvard Business Review, the cost of a bad hire can range from one to five times the executive's annual salary. This includes direct costs such as severance pay, recruiting fees, and training costs, as well as indirect costs such as lost productivity and negative impact on employee morale.
Additionally, a bad hire can also result in a waste of arguably the most precious resources for early stage companies - TIME. A CRO plays a critical role in setting the company's revenue strategy and direction, building the team and culture to execute that strategy, and a wrong hire can lead to significant delays, setbacks and even catastrophic failure. The time and effort spent on recruiting, onboarding, and training the executive and their team can all be lost with a bad hire.
To be clear, many of the CRO’s that fall in this “wrong hire” category are not bad CRO’s, over 50% of the time the reason they do not work out is because of “timing”. And most of the time that’s because the CRO was hired too early. CRO’s are not cheap and often the simple act of hiring one can change the entire complexion of a company with expectations ratcheting up and pressure becoming too great too soon.
Why employ expert Sales Consulting or Hire a Dedicated Fractional CRO First
A proven senior sales consultant or hiring a dedicated fractional CRO can help companies mitigate the risks of a wrong hire by providing proven, cost-effective, flexible, and adaptable revenue expertise. These senior consultants and fractional CROs are experienced and proven executives who have “sat in the seat” before and now work on a fractional basis, providing specialized expertise to companies that may be too early in their journey and may not have the resources to hire a full-time CRO but cannot afford to wait to begin building their robust GTM plan for future, repeatable, predictable growth.
“There are huge benefits to having a proven sales leader who is independent from your company, deliver unvarnished insights into the state and direction of your business and to build out a detailed and thorough GTM strategy and plan that is inextricably linked to the goals and directives of the CEO/Founder and Board of Directors. Having this plan uncoupled from a new sales leader supports its long term relevance, especially in light of the dynamic and transient nature of the CRO’s role in general.”
Fractional CROs can provide a range of services, including developing and implementing robust GTM plans and revenue strategies, optimizing sales processes, and coaching sales teams. They can also provide valuable insights into market trends, customer behavior, and competitive landscape, helping companies stay ahead of the curve and empowering early stage founders and CEO’s to continue successfully leading their companies through the difficult early chapters of company building.
By hiring a senior sales consulting asset or fractional CRO first, companies can assess their revenue needs and determine if and when a full-time CRO is necessary. This approach allows companies to test the waters and determine if a CRO is the right fit for their organization before making a long-term and often economically traumatic commitment.
Building vs. Operating
When considering the CRO role, it's important to understand the differences between business leaders who have an affinity for building vs those who are better at operating an already working system.
Builders are skilled at creating new revenue streams and developing innovative GTM approaches and teams. They excel at identifying new market opportunities and creating strategies to capitalize on them and they are also governed by data, “In God we trust…everyone else - bring data.”. These leaders thrive in dynamic and fast-paced environments and are comfortable with ambiguity and risk.
On the other hand, operators excel at optimizing existing revenue streams and improving efficiency. They are skilled at streamlining processes, reducing costs, and maximizing profitability. These leaders thrive in stable and predictable environments and are comfortable with structure and routine.
When hiring a CRO, it's critical to understand which type of CRO you need before conducting your direct CRO search…builder or operator.
What’s the upshot? The role of the CRO is critical to the financial success of an organization, and finding the right fit for the role is essential. Making the wrong hire can have significant consequences for the company, both in terms of financial resources and time. By hiring a dedicated sales consultant or fractional CRO first, companies can mitigate the risks of a bad hire and assess their revenue needs before committing to a full-time hire.
Sources:
Sales Management Association. (2017). Sales Force Turnover and Tenure Benchmark Report.
Gartner. "The Role of the Chief Revenue Officer." Gartner, 2020.
Harvard Business Review. "The High Cost of a Bad Hire." Harvard Business Review, 2017.
Bly, Robert W. "Why Hire a Fractional CRO?" Forbes,
Morris, Richard. "The Difference Between a Builder and an Operator CEO." Forbes, 2016.
PwC. "The Chief Revenue Officer: Powering Growth through Sales and Marketing Alignment." PwC, 2020.