Here’s Why Sales Always Fights With Operations

...the daily battle continues

When I previously posted this article on one of the hospitality websites last year I got a lot of grief from those in the “sales” side of the business.  They thought I was being too harsh and putting the blame on them for all the ills of bad service.  Now it’s your time to judge for yourself.

sales versus operations

In the world of business there are many components that make up a successful venture. All must work as a team with one vision in mind, the health and prosperity of the company. But business is also a daily battle.

The procurement/purchasing department is responsible for getting the necessary goods in house that are needed to manufacture a product or support a service. But they are bound with the task of not getting more than is needed or risk having too much available capital tied up in inventory. That makes sense.

But what if they are tightening their belt a little too much and under-order based on business needs? This will negatively affect the customer in some way.

The marketing department is responsible for spreading the word about the product(s) or service a business offers. Regardless of their methods; through print, television or internet advertisements, through social media and direct mailings, they are the driving force that keeps the company’s name/product on the public’s lips.

Much is dependent on their successful marketing efforts. If they fail, any potential new customers, as well as existing customers, will not learn of the benefits of the business.

Let’s now focus on the two departments that are the front-line of the most businesses; Sales and Operations. This is where the predictable differences (battles) lay when it comes to which is more important.

No industry is better represented with this challenge than that of my industry – “hospitality“, hotels in fact.

There is friction between those who “bring the business in vs those that make it happen”.

Each has a distinct, and conflicting, view on how it should be done.

Sales

Most hotel sales people are broken down into two categories; room sales and meeting space. Room sales will focus on “getting heads-in-beds” and booking as many rooms as possible, whether through individual guest bookings or group business.

Those in charge of booking meeting space are further segmented into corporate business, social bookings (birthday parties, anniversary parties, etc.), weddings and maybe even golf events if applicable. There is even a SMERF category, which stands for Sports, Military, Entertainment, Religious and Fraternal.

The sales staff all have one thing in mind, to book as much business as possible. And why not, their compensation is based on a percentage of revenue generated from the events booked. If they don’t book, the hotel will not have any business and the sales person will not get paid. Seems cut and dry to most.

The restaurant manager usually doesn’t need to worry if sales are down because their job performance is not based on that. The housekeepers hourly rate is not affected when sales are down, though yes, their overall hours may be lowered.  The front desk agent still gets paid even with a poor performing sales staff. Or do they?

When hotel sales are down this puts enormous pressure on all departments to cut hours and do more with less. If it gets too bad staff will be cut or laid–off based on the lack of business. Also, the sales staff themselves may be let go if they can’t produce. Sales personnel are under constant demands to produce revenue. This revenue is not only actual but projected.  They have a tough job.

Projected revenue is used to make budgets, to plan the next marketing campaign and for the large investment of capital improvements in the coming year. This gives the sales staff power, power to chart a course for the future of the company. But many times it gives them the power to sell events with no consideration of the cost of doing business. This is where the problems start.  Now on to:

Operations

This is the backbone of any hotel. No matter what is booked, and at what price, the operational departments are responsible for making the guest’s experience as special as they hope for, and even to go above and beyond their expectations. But this comes at a cost, the highest in the business; labor.

Labor costs, or “payroll” is usually the largest of the “non-fixed” costs of a hotel. When an event is booked at a low rate it still must be serviced, and done so within the hotel standards and the same business costs, regardless of the revenue generated from that event.

For this example I will focus on the areas of the Food and Beverage Departments and how they respond to the demands of a corporate meeting event.

This department is divided into two sides; the “front-of-the-house” and the “back-of-the-house”. The Culinary Department and all their support staff are the back of the house. They usually do not have any direct interaction with the guests, hence the term back of the house. The Banquet Department consists of the wait staff, bartenders, housemen (who setup the rooms) as well as the managers, and is called the front of the house since they are in direct contact with the guest.

When a sales manager sells or ‘books” an event they are not responsible for what it takes to make the event happen. Whether it is a small event of 10 people or a large multiple day event, their primary focus is to book the event and get the information needed for the operational departments to make it happen.

But is that really their only responsibility?  Here is where I get into trouble…

What good is booking a small event when the cost of servicing the event is more than the revenue generated from it?

Yes, this small group can be the start of a long-term relationship with the customer and may lead to multiple future events as well, but what if it doesn’t?

The chef is still held accountable to the food cost and what it is as a percentage of revenue. He is tasked with keeping his labor costs down as well. But just because there may be a small event to service his quality, presentation and freshness of the food prepared must still be first-rate. Too many of these small-profit events do not allow the chef to efficiently run his department in the manner expected of him.

The banquet department then must get into the act. Setup staff as well as waiters/bartenders are next in line. Are we to think that the sales manager that booked this group realize that the waiter may be paid based on the revenue of the event? Low revenue = low pay.

Does the sales manager know that the revenue generated from the bar for ten people during dinner is not enough to cover the cost of the bartender’s hourly rate or the cost of setting up the bar?

Probably not.  So they don’t worry about it.

Then there are the situations where “sales” will discount the price of the event in order to make the sale. “If I didn’t discount the price they would have booked somewhere else” is a common phrase from the sales staff.  But “operations” can’t get a discount on the cost of food or lower the hourly rate of the staff needed to service the event. But we gave a discount to the event anyway.

When month’s end rolls around it is the chef and banquet manager that must sit in the boss’s office and justify why their costs are too high and not in line with budget. They are the ones that must explain to the customer why something was not done “as promised from the sales manager” when they may not have been provided with the information. And what if the compensation or yearly bonus for these positions is dependent upon them staying within their budget?

It is very easy for operations to downplay the value of these small groups because of the reasons already mentioned. “We’re not making any money on this group” someone may say, so their best staff is not scheduled to service it. “Just get the food out” is said in the kitchen, so the food presentation is not up to par. What is the ultimate outcome? A poor experience for the customer.  This can NEVER be acceptable!

I will not fault a customer for asking for, or receiving, a low price. But we still must treat this as one of the best customers we have in order to continue the relationships we value in the hopes of more business in the future.

This is where the battle begins…

It takes a concerted effort for “sales” to understand what it takes in order to produce the expected results, and top customer service, for the events they book. And the “operations” must realize that if no business is booked and revenue doesn’t walk in the door then positions may need to be eliminated and the business will suffer.

The challenge is for all parties involved to work as a team, understand the expectations and responsibilities of each, and find the best solutions for the health of the business. Until that happens, the battles will continue.

What “sales versus operations” stories can YOU share with me? 

➤Leave a comment below and add to the discussion, thanks.

Photo courtesy of "infoaliment.ro"

Copyright © 2017 Steve DiGioia

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10 thoughts on “Here’s Why Sales Always Fights With Operations

  1. When I was in Hotel Sales, I would ask advice and get suggestions from the operations staff depending on the business I was trying to book. Including the Banquet manager, the Chef, etc. Including them on the site inspection and including them and their input when building proposals and contracts helped to alleviate these issues. I also anticipated clients asking for discounts, working wiggle room into my proposals.

    Then if the discounts were not enough, I would offer a give and take, changing menus to less expensive items, using less meeting space, offering other room types etc. in exchange for lower rates.

    That being said, all salespeople should know how much they need to get to make sure the property is profitable. It is equally important for the operations staff to know how much is allocated to the meal, meeting room, or other service provided so they are not serving surf and turf and getting paid for eggplant parm.

    Communication is the key.

    • Kevin,

      Your approach is great and your methods are some that I would have been very happy to work with. Reasonable expectations from both sides equal happy customers…and team members.

      Thanks for your comment and welcome to my team!

  2. Perhaps a resolution to this problem is to allow the Sales team to know what the minimum is required in order for the Operations teams to meet their budget. When the Operations team can say with certainty that having an 60% filled hotel is the minimum or filling a conference space with at LEAST 50 people is the minimum recommended, then the Sales team will know who to target so that they are hitting their mark.

    Communication between the two teams on what the minimum requirements are are and overall picture of profitability seem to be the best solution for bridging the gaps.

    • Hi Bill,

      We tried this at one hotel I worked. We calculated the approx. total cost of each event, including labor, food, overhead, etc. per person and deducted this from the top line revenue of each event, and paid the sales people their commission on the new after cost value.

      Boy, there almost was a mutiny. It quickly went back to the way it was. What a shame. Thanks Bill.

  3. One way of getting both Sales and operations work together is by linking their KPIs to profit. Sales teams are judged on volume of business coming in without any consideration of profitability, where as operations are judged on profit. Unless this changes, there will be a constant bickering between the two.
    Sales teams tend to make promises to clients that the operations find challenging to deliver with the resources at their disposal. This can be averted if the Sales teams had an insight into the operations or if they have done a stint in the operations. Generally Sales teams have no idea of how the operation functions.
    Sales teams seem to have unlimited resources at their disposal, in total contrast to the resources at the disposal of the operational teams.
    Operational Managers seem hesitant to speak out or challenge the Sales teams as the sales teams seem to be a protected species. General Mangers tend to support the Sales teams as they need the Sales teams to bring the business in. Challenging decisions made by Sales teams could be seen as a lack of capability in running the operations…..
    the list goes on….
    no wonder the two are at logger heads at all times.

    • Dr,

      Sales teams must be challenged, but you are correct, they are a protected species. Upper management focus too much on top line revenue. But it’s what you “take to the bank” that matters.

      Thanks for your comment.

    • Deepak,
      You are correct that both are equally important but only if those in charge do not chase the money first and allow sales to “sell the nightmare” that operations are left to fix.

      Thanks for your visit and comment here.

  4. Sales managers need to know the cost of doing business, but the big problem with sales is that they don’t know when to say “NO”
    I can’t meet that price. Their fear loosing a piece of business is greater than the reprimand from their bosses.
    Go figure….

    • Once the driving force is generating top line revenue as first priority, the operations will always come in second place. But our budgets are never second…

      Thanks Alan for your comment and visit here. I thought you would like this topic.

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