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1 Introduction

The fundamental core of this paper emphasizes the importance of the marketing and sales functions to firm success. Whereas many firm functions provide significant value, marketing and sales differ qualitatively from most others. Specifically, the purpose of marketing and sales is to attract, retain, and grow customers. If these functions fail, the firm does not make profits, the organization does not survive, and shareholder value atrophies. And from the perspective of employees, no one gets a paycheck!

These assertions are not particularly revolutionary. After all, a half century ago, Peter Drucker stated, “If we want to know what a business is, we have to start with its purpose. There is only one valid definition of business purpose—to create a customer.” As just noted, that is the job of the marketing and sales functions. Indeed, Drucker continued, “Because it is [the purpose of a business] to create a customer, [the] business enterprise has two—and only these two—basic functions: marketing and innovation.” (Drucker 1954).

In recent years, two factors have highlighted the prescient nature of Drucker’s observations. First is the evolution from considering customers as important firm assets in general, to placing a specific monetary value on individual customers. Indeed, during the past decade, both academics and practicing managers alike have become enamored of the customer lifetime value (CLV) concept. CLV can be complicated mathematically, but essentially equates to the anticipated stream of future profits a customer delivers to the firm, factored by the probability of retaining that customer year-to-year, and the firm’s discount rate (Gupta and Lehmann 2004). Hence, management can calculate the value (individually) of current and potential customers, and make more informed resource allocation decisions about customer retention and acquisition.

The second factor is application of Pareto’s law to the firm’s customer base. Many firms have realized that a disproportionately small number of customers is responsible for a large portion of the firm’s sales revenues. Indeed, the 80:20 rule states that 80% of firm revenues derive from 20% of firm customers. Of course, this ratio is not exactly 80:20; it may be 70:30, 90:10, or even more skewed. The basic point is that all customers are not equal; rather, some customers are more equal than others. Hence, a relatively small number of customers is disproportionately important to firm health.

As a direct result of this realization, during the past quarter century, many firms have developed strategic/key account programs. In these programs, the firm pays special attention to a relatively small number of its most important customers. These programs come in several shapes and sizes, but are typically staffed by specially trained strategic/key account managers (SAMs/KAMs), frequently backed up by a program office, and employing formal systems and processes like annual planning and periodic supplier/customer reviews. More recently, globalization has led firms to initiate global account programs staffed by even more highly trained global account managers (GAMs), to address customers with operations in many countries/continents around the world.

The foregoing places the following question squarely on the table. Given the critical importance for the firm of attracting, retaining, and growing customers; given the firm’s new ability to calculate the economic value of individual customers; and given the large investment many firms have made in strategic/key/global account management programs to optimize relationships with their most important customers; what is top-management’s responsibility to become involved in this endeavor?

In most corporations, the CEO and executive team are busy people. Executive team members direct and manage areas of functional expertise like accounting, finance, human resources, operations, marketing, R&D, sales. The CEO leads and directs the executive team and guides the firm to achieve its objectives in the face of increasingly difficult environmental challenges, and demanding stakeholders. And from time-to-time, top-management intervenes at the frontline in attempting to secure major deals. Consider for example the case of Accenture, IBM, and Merck: A few years ago, along with many other large corporations, pharmaceutical giant Merck decided to outsource its data-processing system. Middle managers developed an RFP and evaluated submissions from several potential suppliers. The consensus decision: Accenture had earned the contract. Then IBM CEO Sam Palmisano came calling on Merck’s CEO: IBM won the contract!

A major reason for this success was IBM’s strongly developed focus on Integrated Accounts. High-caliber strategic account managers (Account Managing Directors) are responsible for securing revenue—and—profit growth from IBM’s most important customers. Supported by global team resources and a systematic executive sponsorship program, IBM implemented an Embedded-type of customer management (Capon and Senn 2010). This program allowed IBM to take action at a critical time when strategic customer Merck was about to award its contract to IBM’s competitor.

Perceptive senior executives understand that customers are crucial to organizational survival and growth, and that success with strategic customers can have a significant impact on revenues, profits, and shareholder value. Many firms have initiated programs similar to IBM to supplement ongoing sales efforts. But while some research and received industry wisdom suggests that greater top-management involvement tends to be positively related to revenue generation and profitability (Homburg et al. 2002; Workman et al. 2003), we suggest three important caveats:

  • Using the CEO as a persuader of last resort is not sustainable. Even rock-star CEOs will not be able to turn around customers’ closed (and almost closed) deals with competitors on a regular basis.

  • CEOs and executive team members face ongoing time constraints. They must carefully balance time they allocate to their day-by-day responsibilities with time they direct to addressing customer issues (Lafley 2009). Spending large amounts of time with customers on a regular basis is not sustainable (Quelch 2008).

  • Many executive–customer interactions focus overly on securing immediate sales revenues, rather than discuss how the firm and its customer may shape the future together (Senn 2006).

2 About the Research

A half century of research on management time has identified a broad range of general insights and specific recommendations/guidelines on how best to allocate this scarce resource (Drucker 1966; Mintzberg 1973; Kotter 1999). But findings on top-management relationships with customers remain mostly anecdotal (Guesalaga and Johnston 2010; Shi et al. 2005; Bossidy and Charan 2002). Nor do these studies offer practical advice for senior executives who care seriously about customer–supplier relationships (Kohli and Jaworski 1990; Jaworski and Kohli 1993; Narver and Slater 1995; Homburg et al. 2000; Day 2006). Regardless, recent research confirms increasing supplier appetites for top-level customer relationships, leading to deeper strategic dialogues and greater influence on customer decisions (IBM Corporation 2013; Senn et al. 2013).

In our research, we set out to answer three related questions:

1. How, if at all, do senior executives relate to customers?

2. What are the impacts of various relationship types?

3. How may firms leverage these relationships in the best way?

The taxonomy we develop results from a multi-year study embracing 30 personal interviews with top managers, and 15 workshops with more than 300 participants. The main preliminary findings are:

Interviews: CEOs and top managers with sales backgrounds interface with customers more broadly, deeply, and frequently than their peers. They also view spending time with customers as a strategic necessity, rather than as an agenda-filler.

Workshops: Four direct and one indirect role capture the ways in which senior executives interface with customers; each role offers rewards and risks. For strategically important customers, the Growth Champion role provides the most benefits.

Loose cannon

Senior executives make visits to customers without decent prior and/or post meeting interaction with account managers. Often leads to bad impression and/or unrealistic promises

Social visitor

Senior executive meet with customers, but interactions focus on relationship building. Firm–customer interactions do not involve substantive business issues, but create a certain level of trust

Deal maker

Senior executives (including the CEO) get involved in significant revenue opportunities when the customer is about to make (or has just taken) the supplier decision. Strong signal of commitment

Growth champion

The firm builds senior executive involvement into relationships with strategic customers via regular meetings and/or an executive sponsor program

3 Top-Management Customer-Focused Roles

Our research identified five relationship roles that CEOs and top managers actually play in addressing customers. To be more precise—four customer-focused roles plus an absence of customer interaction. We start with absence and label this role—not my problem.

3.1 Not My Problem

The CEO of a large manufacturing firm addressed one of the authors: “I typically do not see customers. That’s why we have a sales force. Our products and solutions are world-class and we have one of the strongest R&D groups in the industry. If only our account managers would do a better job in selling our value to customers!” A competitor has since acquired this firm and the former CEO is no longer with the organization.

It is not uncommon for senior managers to adopt this perspective. Indeed, the motto, Let the sales force do its job, sounds eminently sensible. After all, as noted above, each top manager has his/her own set of responsibilities; competitive pressures continue to increase and most executives have to do more with less. The perspective underlying this role is quite straightforward: The human resource function should do its job—hire the best talent to direct and manage the selling effort. In turn, senior sales executives should use the tools at their disposal to effectively populate the sales force and ensure salespeople reach their goals. If sales force results do not meet firm objectives, then required actions are quite straightforward: Make the appropriate personnel changes. The common mindset is simply stated: We don’t expect top marketing and operations managers to get involved in finance; why should any functional leader, or the CEO, get involved with sales?

The underlying assumption of not my problem is that, at a high level, all functions are equally important. Of course, most functional areas are critical to firm success, but as our observations of companies around the world show, and noted above, sales (and marketing) is perhaps a little more equal than others. More than any other function, sales is a boundary role—the critical interface between the firm and its customers. If sales underperform, revenues do not reach expectations, and everyone’s budget suffers. If top managers can assist sales in doing its job, then all functions benefit.

3.2 Four Direct Customer-Focused Roles

Not my problem assumes that senior managers cannot add value to the firm’s selling effort. This judgment is typically erroneous. Indeed, each executive team member has significant ability to improve firm–customer relationships, but there are pitfalls. Some approaches can be positively damaging to customer relationships. In our interviews and workshops, we found evidence for four separate roles. We organize these roles along two dimensions—revenue seeking and relationship building. Each dimension has two levels—low and high (Exhibit 17.1).

Exhibit 17.1
figure 1

Top-management–customer relationship roles

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Loose Cannon

The loose - cannon role can be positively damaging for the firm. Top managers must clearly understand the potential negative consequences from loose - cannon behavior, and implement eradication processes.

A U.S.-based account manager for an Indian technology outsourcing firm complained to one of the authors during an executive education program: “I had been working my account for two years, gaining trust and making steady progress, and then it all fell apart. A senior Hyderabad-based executive made an appointment with my customer’s top-management without letting me know, and without any briefing or debriefing. He had no idea what was going on with the customer, and we just could not honor he promises he made. The meeting was a disaster and set us back at least one year.” It was later revealed that the Indian executive’s daughter was at college in the U.S., and the customer visits were an excuse to charge the trip to his company expense account.

A top-level executive at a European chemical firm met with a major customer. The executive was unfamiliar with both customer challenges and his firm’s initiatives—he left a negative impression. This executive also made unrealistic promises the firm could not fulfill; he did not tell the account manager about the meeting nor about the promises. The result: A badly damaged relationship that remains unrepaired despite heroic efforts by the account manager and her team.

The critical question is straightforward: Are the CEO and/or senior executives acting as loose cannons? L oose - cannon behavior typically occurs when a senior executive meets with a major customer but has no (or minimal) prior interaction with the account manager. Sometimes the account manager only finds out long afterwards—often from customer executives! Not only was the senior executive not (or improperly) briefed, the executive commits the firm to actions without full awareness of intricacies in the firm–customer relationship. And the senior executive may fail to advise the account manager of these agreements.

Loose - cannon interactions with customers are typically short-lived and not particularly focused on revenue generation, at least not in the short term. But they seem to be ubiquitous. We have met few account managers who could not identify loose - cannon behavior and its negative consequences from one or more of their senior executives.

Account managers have another name for loose cannons—seagulls. The seagull flies in, leaves a deposit, and flies off, rarely returning to the same spot! Regrettably, many readers probably have seagulls in their firms. Consider what the senior sales executive at a major Canadian financial institution told us when we discussed our evolving framework with him: “We don’t have isolated senior executives acting as seagulls; we have a whole flock of them!”

If such interactions are so damaging, why do they occur? Our research revealed that, in many cases, senior executives thought they were being helpful. They saw their organizational positions as door openers to customer executive suites. Typically, they were not mistaken. But lack of preparation and failure to develop the appropriate working relationships with relevant account managers led to disaster.

Fortunately, most sample firms had sufficiently strong processes to avoid loose - cannon behavior most of the time. They employed some form of strategic account management and executive sponsor program to interface with major customers. These firms clearly defined roles and responsibilities as a central program element.

Social Visitor

Social - visitors also have a low revenue focus, but a long-term relationship focus. The role’s purpose is to demonstrate supplier commitment, and to create trust through long-term personal relationships. Though less negative than loose cannons, the social visitor has its own set of risks and rewards.

The CEO of a European-based engineering firm frequently met with customer CEOs at social events and trade shows. Attempting to take these conversations to a more business-oriented level, the CEO accepted an invitation to visit a major customer’s U.S.-headquarters. The CEO advised the account manager of the visit but decided to go alone. The customer CEO, used to high-level visits from high-performing suppliers, awaited the supplier CEO with a senior executive entourage. After a moment’s surprise at seeing the supplier CEO alone, the customer CEO asked: “Good to see you, but where on earth is your account manager and his team?” The supplier CEO responded: “Well, I thought we were going to discuss confidential issues.” “Sure,” was the response, “but who’s going to take the notes?”

Whereas loose cannons are positively destructive for the firm–customer relationship, the social visitor’s impact ranges from mildly positive to mildly negative. The social visitor specializes in relationship building via meeting and greeting. Typically, the firm arranges meetings for senior customer executives—educational events on company premises, cocktail parties at trade shows, and/or hosting trips to sporting events. The social visitor works the crowd, engages in conversation about industry issues, and builds personal relationships with individual customer executives.

These interactions rarely involve deep discussion of business issues; indeed, spouses may attend these events. Relationships are often long-term in nature and occur at regular intervals—the annual duck hunt, U.S. Open Tennis Championships, U.S. Golf Masters, or Formula 1 Grand Prix races in Europe or Asia. Customer executives often look forward to these events.

There is nothing particularly undesirable with social interactions between senior firm and customer executives—everyone has a good time, and leaves with pleasant feelings; these meetings enhance personal relationships. Rarely do such social interactions cause positive harm. But customer executives may wonder why these interactions are all they see of senior supplier executives. Indeed, they may feel mildly negative about lack of relationship depth, and be frustrated about missed opportunities for meaningful discussion. Negative feelings maybe especially strong if other suppliers make concerted efforts to engage in deeper business relationships.

Customer expectations can be easily misconstrued. The lonely CEO and his firm described in the opening vignette learned a big lesson, and learned it quickly. Today, the firm prohibits executives from visiting customers alone, except under special circumstances, and only with proper briefing and debriefing. A centrally managed tracking system ensures no top-management visit occurs without evaluating potential alternatives. Results from recent meetings are built into briefing packages for upcoming customer discussions.

Deal Maker

Deal Makers have high revenue focus but low relationship focus. The purpose of this role is to stabilize shaky relationships or secure deals. Sam Palmisano’s actions as described earlier exemplify a senior executive fulfilling the deal - maker role.

A mid-sized coating systems manufacturer was trying to supply eco-friendly, cost-saving production technology to a leading German automotive firm. Contrary to the experiences during lab- and field-tests, a stable operational solution at the customer’s main production line could not be reached within the contractually agreed timeframe. The supplier CEO personally intervened. The purchase-decision delay he secured enabled the firm to demonstrate technical ability to solve customer problems in a full-scale production environment.

Senior executives can have a major positive impact as deal makers. Sophisticated suppliers with good sales pipeline systems know what deals customers are deciding on a week-by-week basis. For many opportunities, the critical deciding issue is not so much the value propositions that supplier account managers offer, but customer beliefs that the supplier will/or will not live up to its commitments. Account manager promises go so far, but only a senior executive, often the CEO, can fully commit firm resources. The deal maker is very revenue focused.

In many customer organizations, middle managers negotiate deals and make purchase recommendations, but senior managers have the final word. As our opening vignette showed, Merck’s CEO overruled internal advice to outsource its data-processing system to Accenture when IBM’s CEO came calling. Indeed, we have observed several cases where top-management intervened in the buying process reversed previously made purchase decisions. On some occasions, customers even assumed penalties to void signed contracts.

Senior executives, especially CEOs, are uniquely placed to fulfill the deal - maker role. Only senior executives can truly commit the firm to allocate necessary resources to serve a customer. But there are dangers: Too many deals escalated to the executive suite create a culture of upward delegation. The senior executive team can certainly help the sales force close deals, but too frequent rush meetings on customer schedules may be unsustainable. And although customers may be happy to see senior supplier executives engaged in real business issues (versus meet-and-greet social visitors), they may also wonder where senior executives are the rest of the time. Could they not have been involved earlier in the process?

Notwithstanding potential success, deal makers are no panacea. Consider what one account manager told us: “The division president decided to accompany me to my customer to close an important deal. Shortly after the meeting started, the customer pushed for significant additional price concessions. The division president was so focused on winning the deal, he was about to agree on a massive discount that would have cost us more than $2 million. I didn’t know how to stop him, so I faked a heart attack. The meeting ended and the negotiations were put on hold. A few weeks later I negotiated the deal at a much better price!”

Growth Champion

Growth champions have a strong revenue focus and a long-term relationship focus. Unlocking new growth opportunities and serving as a role model to inspire others are the main purposes of this role. Thus, growth champions represent the most positive customer-facing behavior for senior executives.

Cisco’s former long-time CEO John Chambers fit the profile of a truly customer-centric top manager. Chambers accompanied strategic account managers on business trips and demanded feedback on how to improve his participation. And Chambers regularly interacted with customer CEOs by leveraging Cisco’s tele-presence technology. eBay’s CEO John Donahoe also plays a major role in developing and sustaining retailer partnerships that drive substantial revenue growth for eBay.

Senior executives acting as growth champions play a critical role in driving revenue and profit growth. Our research suggests that well-planned, well-organized, and well-executed executive involvement at customers can pay huge dividends. Findings from our preliminary research indicates that executives who combine revenue seeking and relationship building create significantly more favorable conditions for customer-centricity than other approaches.

Two items merit further consideration: First, some of the most successful executives we identified commenced their customer-facing behavior as social visitors or deal makers; later, they evolved into growth champions. Second, senior executives should take customer behavior into account when planning customer relationship efforts. When customers behave in a transactional manner, growth - champion behavior is often a waste of resources. Conversely, if customers desire long-term collaborative relationships, behaving as a deal maker or social visitor delivers sub-optimal results.

Perhaps the most significant corporate initiative that firms take to implement growth - champion behavior is installing an executive sponsor program.

Executive Sponsor Programs. Over and above periodic and episodic interactions between top supplier and customer executives, many suppliers are appointing executive sponsors for important customers (Capon and Wallner 2012). Executive sponsors are senior managers who work with individual strategic account managers at specific customers. The executive sponsor is a permanent senior executive who interacts with senior customer executives. Executive sponsors can add significant value to the supplier–customer relationship.

Suppliers with these programs typically draw executive sponsors from the C-suite. These firms work through a serious matching process to ensure positive chemistry between and among the strategic account manager, senior customer executives, and the executive sponsor. Strategic account managers know that some senior firm executives make good executive sponsors—others do not; sometimes divorce is necessary. DHL gives strategic account managers the right to suggest changing executive sponsors without penalty, provided they back up proposals with solid evidence. The strategic account manager–executive sponsor relationship is particularly tricky because, at some level, the executive sponsor works for the account manager. Frequently, the CEO is executive sponsor for the firm’s most important customers: J.W. (Bill) Marriott Jr. was executive sponsor for major Marriott customer Accenture; Oracle’s executive sponsor at GE is Larry Ellison. At Siemens, the entire Executive Board participates in the executive sponsor program—members, including the CEO, average seven customer sponsorships.

Most firms introduce executive sponsor programs for customer-facing reasons. But executive sponsors may offer significant benefits within the firm. It is one thing for the account manager to discover customer needs and propose value propositions; it is quite another for the firm to actually deliver promised value. Powerful executive sponsors can cut through supplier bureaucracies when account managers face internal roadblocks. Some executive sponsors offer direct support to account managers:

In a significant downsizing, IBM released an engineer with considerable expertise in transaction processing. IBM’s strategic account manager at Merrill Lynch realized IBM’s position would be severely weakened by this loss; he contacted his executive sponsor. The sponsor said he could not reverse the layoff, but authorized hiring the engineer on a consulting contract and agreeing to pay on his budget. The engineer remained as a consultant for the next dozen years, helping IBM to secure business with a strategic customer during economically difficult times.

Senior executives acting as growth champions play a critical role in driving revenue and profit growth. Our research suggests that well-planned, well-organized, and well-executed executive involvement at customers can pay huge dividends. Findings from our preliminary research indicate that executives who combine revenue seeking and relationship building create significantly more favorable conditions for customer-centricity than other approaches.

4 Conclusion

Leveraging top-management–customer interactions requires a clear view of the firm’s strategic direction. Greater customer focus by top-management and appropriate executive relationships with customers are key differentiators for many firms. Senior executives have critical functional roles, but they may also play an important additional role in helping the firm reach sales and profit objectives. Forming meaningful relationships and becoming more engaged in customer affairs allows senior executives to provide higher degrees of customer-centric behavior, and hence greater value for both the supplier and its customers. Peter Drucker was very clear about the purpose of a business. Active and well-managed participation in fulfilling that purpose should become an increasingly important role for senior managers, led by the CEO.