The CEO of a $9B technology firm reviewed various reports, each indicating that profitability was not improving despite taking several actions to increase revenues. The CEO met with senior leadership to urgently address this profit shortfall. Pricing, product, marketing, and even IT acted to address pricing and improve profitability. Unfortunately, confusion reigned as each department made demands of the other, independently made decisions, and resources were stretched thin. Implementations were delayed or poorly executed. It looked like the next quarter’s results were going to show little profit improvement.
Does this scenario sound familiar? Probably all too familiar. In fact, a 2015 HBR article stated 75% of cross-functional teams are dysfunctional.
What’s the failure point in this story? There could be many. But the lack of cross-functional coordination was a critical point of failure to accomplish pricing performance improvement.
Here are three essential qualities to improve pricing teamwork and ultimately profits. Each recommendation centers on building a strong understanding of pricing objectives well before beginning price conversations with customers.
First, communication is essential. I am not referring to volume of communication here. I mean more quality communication is essential. Short, in-the-moment feedback sessions will help the team focus on organizational goals. These brief sessions address challenges that often distract individuals and put team success at risk. These discussions also offer frequent opportunities to share the “why” of the goal and not just the “how.” An individual’s decisions can better serve the team when they understand how their contribution fits into the larger objective.
For example, one data services company was under customer pressure to discount. The cross-functional team evaluated the risk of losing the opportunity. They decided to stand their ground and communicated that decision to their functional teams. This allowed all teams to support the decision and prepare for a worst-case of losing the opportunity. The customer had no outlets for finding discounts—the team stood firm and closed the deal without further discounting.
Second, focus on the price setting process, not a point in time. Even with the best price, team members need to be prepared for market changes. Frequent input from the field allows the team to be more agile in planning and response. This planning prepares team members to better anticipate customer demands and develop responses that are supported by the entire organization.
Third, trust is the overarching principle of a successful team. One paragraph is not going to do justice to this topic. Yet teams need to focus on building and sustaining trust to be truly high-performing. Trust is the foundation of teaming. No one can be in all places at all times so they must trust that others will do what is needed. Trust enables individuals to react to the unexpected, respond appropriately, and to make trade-offs with the team goal in mind. Trust empowers each member of pricing team to proceed with confidence.
Developing a reaction plan is a good way to build trust within a team. For example, when rolling out price changes, identify several potential customer reactions and then the team’s appropriate responses. This planning prepares the team to react to specific situations and not react in the heat of the moment. This type of preparation helps your team stay true to the end goal.
Cross-functional teams draw on the expertise of capable people to accomplish a goal. A high functioning team develops a solution for the entire organization, better aligns multiple functions, and reduces preventable and damaging conflict. The payoff is often faster growth and higher profits – a goal worth pursuing!