How to Ruin a Perfectly Good Channel Sales Program – Top Five Mistakes Made By Corporate Leadership When Trying To Scale a Channel Program

Over the course of my sales career I have had the opportunity to work alongside and within high-performance channel programs, as well as underperforming and inefficient channel programs. The following are some of my observations made while I was in the trenches at the tip of the channel sales sword.

  1. Treating your partners like they work for you, not with you

Grab a dictionary. “Partnership” is defined as two or more individuals or corporations sharing money, skills, and other resources to achieve a common goal, and that common goal includes sharing in the profit as well as the risk associated with obtaining the common goal. I cannot tell you how many times I have seen companies treat their partners as if they were a burden and not value. This one mistake can, single-handedly, set the stage for the ultimate failure of a channel program. What makes this one mistake even more frustrating is that it can be very easily avoided. In my opinion this mistake is nothing more than bad behavior that can be easily avoided by good leadership. If a company wants a successful and scalable channel program then leadership must not only understand the fundamentals of what motivates their partners to become partners, but must also support the steps needed to ensure their partners success and communicate it down the chain of command. If corporate leadership has a philosophy of “ it’s all about my company” instead of “ it’s about our partnership” then the channel program is doomed to failure. I was once at a corporate sponsored dinner event for prospects and customers. Our CEO was in attendance and I had brought along one of our partners to act as a SME guest speaker for the event. When I introduced my CEO to the partner my CEO smiled, looked the partner in his eyes and asked “How many customers did you bring to the event ?” As you can imagine, I was mortified. Not a “thank you for attending and for offering to add some content to tonight’s event, or “ how’s our partnership working for you ? ” Instead it was obvious to myself and the partner that all my CEO cared about was his company. Shortly thereafter my partner started working with our competition. Surprise, surprise, and completely avoidable… This philosophy trickled down the chain to VP’s, Directors, and direct sales reps and then the partner program began to unwind. Again, completely avoidable

  1. Trying to avoid paying your partner the fair margin they earned.

The common phrase “Penny wise and pound foolish” applies in this scenario. Time and time and time again I witnessed sales reps and corporate leadership attempt to de-value the efforts and results that the partner delivered when attempting to help close the deal that they were involved in. Part of this was due to ego and part of this was due to ignorance. Now don’t get me wrong, I believe every partner that wants margin should have to earn it. However, in my role as channel sales manager I often had to defend the partner from having their margin decreased. I found this not only frustrating because of the extensive notes kept in our CRM system that justified the margin in the first place, but also because, once again, the underlying philosophy within the organization was that “the partner worked for us.” This ignorant and shortsighted philosophy helped erode the trust that I had worked so hard to build with the partner. This erosion of trust also led to, you guessed it, an erosion of partner generated pipeline. All because of a flawed, short-sighted philosophy and… completely avoidable.

  1. Reducing or limiting the number of partners you choose to work with.

I realize that most channel organizations get 80% of their business from 20% of their partners. I also understand that there is a cost associated with on-boarding and supporting a large number of partners. However, simply making a decision at the executive level to “reduce the number of partners we work with” without fully understanding the value that many small and boutique partners can bring to the table is shortsighted and dangerous. I recall once when such a mandate was announced by the CEO and sent down the chain of command to local VPs to execute. Corporate politics being what it is, this quickly became a competition between VPs to see which VP could eliminate the most partners. As a middle manager within the channel organization, I chuckled because it was obvious to me that these efforts would not help create incremental, net-new channel revenue, and certainly would not help me hit my quota. My view from the front lines was crystal clear. Instead of spending my time helping the partners I had responsibility for succeed in their efforts, I was pulled away from that focus and instead directed to create a list of partners to terminate and then deliver the news. Even though I was a mid-level person within the channel organization, I did possess a significant amount of common sense. I could have easily used that common sense to manage costs associated with maintaining a large number of partners. Yet, instead of being asked by senior management what I would do to manage the situation, I was simply told what to do, and told to do it quickly. As a retired military man, I saluted and carried out my orders. The small and boutique partners that I was routinely generating revenue with went away, my pipeline dwindled, and I was stuck working with the large multinational partners that most people in the trenches know, are very difficult, if not impossible, to get attention from, let alone influence and control. I had been told to essentially put all my eggs in one very, very large basket where I now had to compete with hundreds of other companies to get the attention and mind share of the largest channel partners. The VPs and senior management were thrilled that they reduce the size of our channel ecosystem. Since I was not paid or measured on reducing the size of our channel partners, I did not share their happiness. So, the moral of the story is instead of making a decision in a vacuum, executives might consider chatting with the folks on the very front lines to get a real-world assessment on the causes and effects of the decision being contemplated.

  1. Spending more time and money on your largest partners.

Just because a partner is a large multinational organization does not mean they will be of value to your company. The largest partners are also the most difficult to gain attention from or control over and may be less profitable versus smaller partners where the lines of communication are much easier and faster to navigate. Additionally, your largest partners today may have lower growth upside because they have already tapped into much of their cross-sell potential versus other smaller and more nimble partners that are hungry and are on a growth trajectory. I absolutely agree that working with a few select large anchor partners is a smart move. However, I caution that if you rely solely on this tactic you may find your channel sales cycle to be a very, very, slow and painful burn. I managed my channel program using the philosophy of “risk management”. Yes, I would speak to the big players (when I could get their attention), but I had far more control and predictability with the medium and smaller boutique partners. This gave me a diversification in my pipeline by having a few larger opportunities being pursued by larger partners, and many smaller and medium-size opportunities being generated and closed by smaller and medium-size partners. Regarding how much and with who to allocate channel marketing dollars, I would once again caution against simply choosing the largest partners in the ecosphere to spend the money on. Why ? Let’s apply some logic here. If one of your partners is a large multinational multi-million-dollar player, and you offer to spend $5000 to host an event with them, that $5000 often equates to pennies from the viewpoint of the large partner. In other words, it does not really get their attention, and as such might not drive as much excitement, effort, and ultimately results that you wish to achieve from your investment. Conversely, should you choose to invest $5000 with a small to medium-size partner, if qualified and managed correctly, that $5000 channel marketing investment will probably be viewed by the small to medium-size partner as a significant and generous contribution by you to your existing partnership. It will also probably get the attention of the leadership at the small to medium size partner, that may create real excitement from the top down, drive more effort, and underscore that the results of the event will be closely monitored and measured from the top on down. The moral of the story is bigger is not always better. In some situations, big is good, but don’t always assume that from the outset. Don’t immediately go to the old playbook because it’s safe. Executives should enter into a dialogue with their channel managers who have boots on the ground. They are intimate and very knowledgeable about which partners will provide the biggest bang for your time and money. Remember, channel managers are usually senior, seasoned executives that work day to day, hour to hour with your partners. Not considering their opinions is not only a waste of their IQ points but a waste of the investment you have made by making them part of your team.

  1. Creating competitive situations between your partners and your direct sales team.

This topic is near and dear to my heart because I have experienced it firsthand and witnessed the enormous costs associated with managing it. “Cost” as defined in wasted time and unnecessary anxiety created for all concerned. Let’s look at a garden variety channel conflict situation. A partner registers an opportunity valued at $100,000. The partner agreement specifies that the partner will learn 20% of the sale based on their ”active and effective involvement”. Your sales reps’ compensation plan specifies that the rep will only earn commission and quota retirement based on the size of the deal closes less the 20% that is paid to the partner. In this case, the deal is for  $100,000 but your sales rep only earns commission and quota retirement on $80,000. Now most people would say, “ Geez, earning commission and quota retirement on $80,000 on a deal that was spawned and/or assisted by a partner is pretty good.” I generally agree with that statement. However having lived in the trenches, side-by-side with reps (and their managers)  I can say with almost complete certainty that most reps will say “ Great, I just lost $20,000 in commission credit and quota retirement, I could have done this deal by myself”. Of course, corporate politics being what it is, the rep will rarely say that out loud. However, they will often times do everything in their power to undervalue what the partner did to help close the deal in an attempt to reduce (or even eliminate) the 20% margin originally agreed to. And, if you don’t believe this, then you’ve spent WAY too much time in the boardroom and not enough time working side-by-side with your channel sales manager or sales reps. Aside from the financial element to the situation, we need to take into consideration the element of ego. Most reps do not want to admit needing or getting help from a partner (and in some cases, from anyone). I do not fault sales reps for feeling this way because I think it’s part of human nature and a sales reps DNA. However, really, really smart reps, sales managers, and sales VPs will realize the true value in working with, and not against their partners. A finely tuned channel program acts as a force multiplier taking one sales rep and making their presence look like 2,3,4 or how many people the partner can bring to bear on an opportunity and the market overall.  Managing and avoiding this conflict begins at the very top. The CEO must clearly and repeatedly communicate to everyone that the channel partners should be viewed as true partners and treated as such. Anything less will undermine the program and leave money on the table (or, in the pockets of your competition). The smart business leader will also realize there is a cost savings associated with evangelizing this philosophy. Time is money. The time spent bickering and arguing about who did what within a sales campaign adds up quickly and takes the focus off working on the next deal. If not corrected, this cycle will repeat itself over and over again, which eventually reduces everyone’s pipeline and quota achievement. One last thought about this topic. Aside from the CEO and sales leadership advocating the benefits of working with partners, the CEO and CFO can proactively avoid the situation altogether by installing what is known as a partner neutral compensation plan. For those of you who are unfamiliar with this terminology, partner neutral compensation means that sales reps are not financially punished because they worked closely with partners. Example: in the situation outlined above where a partner identified and/or helped close a $100,000 deal and received 20% margin for their efforts, in a partner neutral compensation model the sales rep would receive commission and quota retirement on the full $100,000. Yes, I realize this is more expensive for the company in the short term. However, if you look at the situation from a strategic level, and the channel program is managed correctly, companies will likely save money by eliminating the internal competition between direct sales and partners. Another obvious benefit to implementing partner neutral compensation is that it will help you attract the right type of partners to your company and even differentiate your company from your competition. This type of plan, if created and implemented correctly, could also set the table to make your partner program far more exclusive (and more valuable) to some of the larger partners that often times ignore you or care little about working alongside you. It takes guts to implement this sort of compensation plan, but it also takes real foresight and a long-term commitment to making a channel program successful. There is no perfect channel program, but avoiding some or all the mistakes I have listed above should help you be more successful with your channel program. Best of Luck !

John Ingemi is the Founder and CEO of Sell And Thrive, a sales consulting company located in New Hampshire. John frequently Blogs about how his experiences with sales processes and tactics from the lens of a consumer, and how they often time intersect with everyday life.

One thought on “How to Ruin a Perfectly Good Channel Sales Program – Top Five Mistakes Made By Corporate Leadership When Trying To Scale a Channel Program”

  1. From my experience, Channels or Partnerships to be successful, organizations need to consider and put in place the following:
    1. Have the right strategy for creating an partner echo system. Company’s need to decide, whether it is appropriate to have a single tier or a multi-tier partner echo system (Value added resellers/SI’s or Disti/resellers/VARS). Based on the product and solutions, organizations need to decide which is the right model for them. Often times I see that they are unclear as the person heading the channel organization, would decide based on his earlier experience which might not be correct.
    2. Identify the right resource for managing channel or partners. The resource managing the partner needs to be of high calibre and with extensive experience reaching out to the CEO or the board of the partner organization. I also see that most organizations, because of the cost, do not get the right resource and these resources cannot handle and connect the with partners and with-in their organisations. Most of them are used as Channel admin or Channel ops by both within their organizations and also by the Channel partners.
    3. Identify the right Channel partner. The partner resource need to take quite a bit of time in identifying the right partner.
    4. The channel resource often times need to step up and hold like a sales rep for the channel sales opportunity to a stage where the sales rep sees that this is a qualified lead and then only they start focusing. This is one of the big gaps which I see from my experience the channel organisation fails. I had worked in Sales leadership, Sales, Marketing and Channels and understand that this is one of the biggest gaps. Channel resource responsibility is to build the relationship and once he gets an opportunity which is being worked by the channel partner, he passes this to the sales rep who then needs to take this forward which in most cases does not work due to multiple issues, trust being one of the issue, other being their priorities etc.

    My 2 cents.

Comments are closed.