CRO Alignment, the Revenue Engine, and Downstream Impacts of Getting it Wrong.

According to a Salesforce.com article, “A Chief Revenue Officer (CRO) is responsible for every process that generates revenue in an organization” (Gustovson, 2023, para. 1). Think about it, the Chief Revenue Officer’s role is to generate and retain revenue. The CRO must also meet EBIDTA, profit, growth, and other critical targets the organization has set forth.

The CRO is integral in pleasing investors and the board and is also expected to be the head of sales. According to the Harvard Business Review, the average tenure of a CRO is 25 months, which in many companies is only two selling cycles (Toman et al.) 2024. According to the same study, the CROs are often asked to leave their role, not vice versa.

So what’s happening here? Is the CRO becoming the scapegoat? Is the selection and vetting process just poor? Or was the CRO structure set up for failure? There are no clear answers here; there are just more questions.

Why is it that CROs are often the defacto sales leader? Is it because they were previously head of sales and promoted to a CRO role? Similar to how salespeople get into sales leadership roles? More often than not, CROs have had a successful sales career, before taking on the role of CRO (Gustavson, 2023). My experience has taught me that salespeople don’t always make the best sales leaders. So why do companies think sales leaders or a previous VP of sales will make a great CRO? 

The role of CRO varies from organization to organization, I have yet to see a company structure the CRO team identically. Companies with a Chief Marketing Officer (CMO) role clearly won’t have “marketing” rolling up to the CRO, so does that mean the CRO just has responsibility for sales and customer success? I’ve talked to CROs who also lead product, which may be acceptable in a company where product-led growth (PLG) is the strategy, but does this make sense? Maybe in certain scenarios it does. How can the CRO effectively bifurcate their time, focus, expertise, etc.? 

The CRO owns the Revenue Engine.

A CRO is expected to build the “revenue engine,” which supports the complete customer buying journey. Think of it as customer and prospect engagement from website views to leads, new business, renewal and even churn. To level set, revenue engine, according to Forrester Research, is defined as “ The combination of people, processes, and systems that drives the conversion of prospects to customers and maximizes customer lifetime value” (Cross, 2022, para. 4). What does that CRO job description say? Does it include Marketing, Sales, and Customer Success? Does it align with the definition of “Revenue Engine”? 

Let’s not forget about Revenue Operations (RevOps), a critical role and extension of the CRO; RevOps falls in line with the CRO structure. Without a comprehensive CRO structure in place, RevOps is better served reporting up to Finance, COO, or directly to the CEO. How can a company correctly set up a revenue engine for scalable growth if its CRO organization is not aligned correctly to support it? 

While having or finding a CRO sounds excellent to a board and investors, how should the role be set up? What should that look like in organizations? There is never a single correct answer, but companies should think about downstream impacts. Organizations have to ask themselves, what problem are they trying to solve?

When is the right time?

When does a company seek to hire a CRO? The answer is sooner versus later, and McKinsey & Company validates that startups in the US are hiring CROs earlier than ever before (Berger-de León et al., 2023). Imagine a startup, and the problem the company is trying to solve is generating new business. In that case, the “CRO” candidate must have a strong marketing, sales, and executive leadership background.

Conversely, suppose the organization is more mature and has a large customer base. In that case, the CRO candidate must have experience with growing revenue, and this is where account growth, customer success, and a focus on metrics like NRR and GRR will be at the forefront. In that scenario, bringing in a CRO with a background primarily in sales may pose a higher risk, and that company may prefer to seek out a candidate with more expertise in account growth, customer success, and operations. 

The point is, it’s complicated, and if companies are stuck, confused, or unsure of what to do, going fractional is an excellent option to gain clarity, create the strategy, and execute. There are many great fractional CRO leaders who can help assess and structure the role of the CRO and RevOps and set the strategy for building the revenue engine. 

Silos are killers.

Getting it wrong is costly. From my experience, inefficient CRO structures cause friction between the silos in the organization. Suppose the CRO doesn’t have a FULL span of control over marketing, sales, and customer success. In that case, it is challenging to have a clear picture of the COMPLETE revenue engine, which, in my mind, are the people, processes, and systems that support the entire customer buying journey (lifecycle). In an article by McKinsey and Company, Berger-de León et al. (2023) points out that, “CROs understand all aspects of customer success and lead initiatives that align people, processes, and technology across the entire revenue cycle” (para 3). Berger-de León (2023) goes on to remind us that the CRO should bring customer success, marketing, and technology together, and that successful B2B companies do that by creating a singular revenue engine, orchestrated by the CRO.

Ultimately, if the CRO does NOT have full control over marketing, sales, and customer success and cannot lead those three functions; alignment in the organization is a pipe dream. Unfortunately, in many organizations, VPs of departments have their own goals, jobs, and issues to worry about, and the “greater good” of collaborating for the sake of the company and customer isn’t a “thing” if their jobs are on the line. Silos in organization are killers of speed and scalability and in my experience the more silos in an organization, the more friction there is between departments. 

Let’s take a CMO for example. Expecting a CMO with their own budget inside the organization and their own tools or processes to play nice with a CRO who may own the CRM and have a RevOps leader reporting to them is far-fetched. Yes, it can work, but in the event they don’t agree on things like “let’s use Pardot” no “let’s use HubSpot” for marketing automation when the Sales team (under the CRO) is using Salesforce for the CRM, well, you can see where this is going. In-fighting, disparate tools, and disjoined processes result in downstream impacts that ultimately cause friction for the customer. In this example, it would make sense to centralize RevOps under finance or directly to the CRO to combat the issues between departments, transfer the ownership of the “tools,” and create some objectivity when building the revenue engine. 

Getting the CRO structure right is critical.

At the end of the day, these distractions can lead to delayed revenue, missed targets, or a decline in business. Sixty-two percent of companies that churn their CRO see an immediate decline in revenue the following year (Toman et al., 2024). Companies also see a higher growth rate of “home-grown” CROs versus hiring external hires, likely due to the depth of internal knowledge and relationships within the customer base and organization (Toman et al., 2024). Getting the structure right, properly aligning the revenue functions from the top of the organization down, and setting the CRO up for success is critical to the organization’s success. 

References:

Berger-de León, M., Königsfeld, J., Riebel, M., & Vollhhardt, K., (2023, July 21). A bigger, bolder vision: How CROs are propelling growth from the C-suite. McKinsey & Company. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/a-bigger-bolder-vision-how-cros-are-propelling-growth-from-the-c-suite

Cross, L. (2022, November 21). B2B Revenue Engine Alignment: A Cultural Transformation That Begins With Customer Obsession. https://www.forrester.com/blogs/b2b-revenue-engine-alignment-a-cultural-transformation-that-begins-with-customer-obsession/

Gustavson, J. (2023, September 19). 5 Traits of Game Changing Chief Revenue Officers.  Salesforce.com. https://www.salesforce.com/blog/chief-revenue-officer/#:~:text=A%20chief%20revenue%20officer%20

Toman, N., Kurey, B., & Lingebach, D. (2024, October 10). The High Costs of Chief Revenue Officer Turnover. Harvard Business Review. https://hbr.org/2024/10/the-high-costs-of-chief-revenue-officer-turnover