Posts Tagged ‘target’

Cop Out Or Common Sense?

Wednesday, July 18th, 2012

“How can you be sure that you’re not just taking the easy way out?”

“If you let yourself off the hook once, won’t it be easy to do it again?”

Last week’s post clearly touched a few nerves. I understand that some business owners feel strongly that a sales budget shouldn’t be cut mid-year. But I have an answer for those 2 (and the other) questions which were fired at me this week.

You’re not taking the easy way out if……….

1. At the beginning of the year you applied your execution “know-how”¹  to the setting of the goal. You do that by inviting the key people responsible for achieving the goal to participate in setting it. Before giving the goal the “go ahead” you persist in asking probing questions until you understand how the goal will be reached. Questions such as:

• Which products will generate the sales? (e.g. old or new)
• Who will buy them? (e.g. existing customers or new ones)
• What compelling reason will they have for buying them, now?
• Who is responsible for getting the sales and making, delivering and supporting the products?
• How will they need to work together and why will they do that?
• Are our reward systems strong enough to make them want to work together?
• How will our competitors react?
• What are the milestones along the path to reaching the goal?
• Who is accountable for reaching the milestones – and do they know that they are?

2. By doing this you ensure that:

• The goal is linked to the company’s capability for delivering the results.
• There is strict accountability for reaching each and every milestone.
• There are contingency plans to deal with the unexpected things that life consistently throws in the path of even the best laid plans.

3. Even if, despite all of that, unexpected circumstances force you to consider lowering the goal, you:

• Relentlessly seek out and focus only on the facts – not opinions, emotions, feelings or anything else – which have caused the situation to change since the goal was set.
• Evaluate the alternative responses to those facts using logic and experience.
• Conclude that the only alternative that makes business sense, in the long term, is to lower the goal.

You’re not letting yourself “off the hook” because………..

Lowering the sales goal is not the result of an emotional reaction. Nor is it a step which is taken lightly.

The decision is based on facts (about circumstances which might not even have existed at the time the goal was set). It’s a rational, well thought out response to the situation.

To act in any other way is not a logical approach to business and so flies in the face of common sense.

¹ “Execution: The Discipline of Getting Things Done”, Bossidy and Charan, Random House, 2009, pages 32 and 38

If you enjoyed this post you’ll also enjoy Bad Strategy – How To Spot It

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Can You Lower Your Sales Goal During The Year?

Tuesday, July 10th, 2012

The meeting was moving along well until the topic of the annual sales target came up.

The leadership team wanted to lower it to a point significantly below the previous year’s actual results. They believed that the arguments for doing so were logical and made good business sense.

• Actual performance at the end of the first quarter was well behind target.

• Research, admittedly informal, revealed that sales producers made a limited contribution in their first year with the organization. Things improved in the second year. But it took 3 years for them to produce sales at a rate which would keep the organization at the level of the previous year.

• Because of growth, almost half of those responsible for producing the sales were in their first year with the organization.

• There had been a number of large non-recurring sales in the previous 2 years. And while it was reasonable to hope there might be some this year, it seemed unwise to plan on them.

Some of those at the meeting were shocked. After all, this was only the end of the first quarter.

The target was set a few short months ago. The leadership team believed it was possible then. How could they argue it was impossible now!

Then the view was expressed that companies couldn’t (or didn’t) change their budgets once the year started.

We hear this quite often and my response is usually “Who says they can’t”? There’s no external authority that says it’s not allowed.

Publicly traded companies regularly revise their budgets during the year (ask any RIM shareholder). They call the new set of estimates a forecast.

Why can’t privately owned companies do the same? What happens if, for example, it becomes apparent that the company can or will exceed its budget? There isn’t a leadership team I know that won’t revise upwards.

The challenge is when it comes to a downward revision. Our first response is that it’s giving up, quitting, losing. But that’s an emotional reaction.

What happens, for example, if the economy tanks; or a competitor introduces a new technology; or people with needed skills can’t be found; or financing for additional resources couldn’t be obtained?

All of these events can be demonstrated to have happened. They’re not a matter of opinion, they’re facts. To cling to a budget that was developed either before any of those things occurred or which assumed their impact would not be as great as it was seems illogical.

I mentioned some of the facts in this case earlier. Here are some others.

• Every member of the current leadership team was new to their role when the budget was developed.

• No analysis of the drivers of the organization’s previous results had been done in recent times. So none was available to help or inform the new team. 

• The previous leadership team had been in place for only a year and had other challenges to deal with.

• The handover period between the teams from was relatively short.

After some heated discussion the budget was lowered.

If you enjoyed this post you’ll also enjoy Where Do The People Fit?

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