Having been in Executive leadership and sales management for many years, I was quite accustomed to someone higher up asking for more of something. Most of the time it was more revenues, but it could include more opportunities, more customer conversions, more wins, more …. It seems to be one of the traits of senior management to simply ask for more no matter what the circumstances might be. As a younger VP of Sales of course I would accept ‘the challenge’ and make best efforts. After years of doing this I began to wonder if the initial ‘more’ goals were actually realistic and achievable.
Many executives believe when setting goals, especially revenue, profit or growth-related goals that more is naturally better. So shoot for the moon and you might just get there. However if a goal is set abnormally high and is not achieved, even although the team may have executed very well, it can become quite demotivating. In fact I remember on one occasion the company’s quarterly revenues were really under pressure and we were forecasting to come in at 70% against the highly aggressive target. As a publicly traded company on the Canadian TSX, this was considered a disaster. It simply had to be fixed. That quarter my team and I did everything humanly possible and seemed to pull a rabbit out of the bag - we closed at 99% to target. For me it was the best example of coordinated sales teamwork I had ever seen, but one not-so-happy Board member commented to me when I was presenting the quarterly results, “Why are you so happy since you missed your number?” So even amazing performance above and beyond the call of duty can sometimes be seen as lack of performance! Interesting.
As I grew in confidence and experience as an Executive, I began to think more about the time-constants of change. These are the natural and expected times it will take for change to manifest even with the right amount of effort, money, belief or whatever thrown at it. I began to think that I could make my life a lot easier if I began to understand what these time-constants were, and how long they normally took to happen. My rationale at the time was that if the key decision makers in a company knew these time-constants well enough, then they could build them into the strategic planning process for the company, aligning everyone on the team to positively aggressive goals that would be ultimately achievable. This of course sounds quite easy but in practice proved to be very challenging.
As an example let’s consider one of the most cited examples of challenge within a company - increasing revenues! I have often been on the receiving end of targets that seem so aggressive that I know in my heart they are unachievable. However, whether through investor necessity, Board aggressiveness or lack of CEO experience, targets were accepted, and once accepted became cast in concrete. Of course at this time there is also the underlying expectation that once a goal is set then it will automatically be achieved. I have seen some great Executives land in very hot water for missing targets that were simply impossible to hit in the first place!
Consider if a company wants to increase its year two revenue forecast by 20%. Normally a top’s down approach is used to generate this ‘need’, and this need filters down to the rest of the organization who are then tasked with achieving it. Some initial due diligence should of course be done by the Executives responsible to deliver. If it looks like this goal cannot be hit, then its back to the drawing board to ‘tweak the assumptions’. This is normal practice in all companies I have worked for. If a design-in at a customer normally takes 12 months, then let’s shoot for 9 months. If production ramp-up at a customer normally happens over 2 quarters, then let’s make it happen in 1 quarter. And so the assumptions are ‘updated’ to allow the target to be justified. It all makes sense when you are tweaking numbers alone on an Excel spreadshee! In fact it’s quite easy to do with a little practice!
But imagine if there was a better, more pragmatic way of doing this essential of planning exercises. Consider if the plan is ‘right-sized’ to begin with. This means that the organization (the executives who are responsible for delivering the key metrics in the plan), have to produce a planning document that covers the metrics in details, the various assumptions being applied and lastly (and the one that seems to be most often missed), the key time-constants used in the plan. It’s these time-constants that are the areas that must be truly understood to allow insight into what levers may exist to increase the metrics. Now imagine that with this great background knowledge a plan is created called the likely-case plan. It includes a clear noting of the time-constants used and their normal duration for completion. For example if customer production normally takes 6 months to start after sample delivery, then keep it at 6 months. Resist the urge to tweak the Excel spreadsheet to say 3 months instead (of course changing to 3 months will magically increase company revenues:)
Now it’s time to create the best-case plan. This involves reviewing the assumptions to discover ones that can be tweaked, and of course reviewing in detail the time-constants, and which of these can be tweaked. Of course all or any of these can be tweaked, but the Executive leadership trick now is only tweak an assumption or time-constant if there is a corresponding and bought into plan from the team responsible for delivering it. This approach is both highly pragmatic and empowering since it flags to the organization the key assumptions and time-constants that will be flexed. It’s through this trusting approach that real performance gains are found, and allows the organization to operate in a positive, momentum-generating manner. The psychology behind staff feeling empowered and in-control, as opposed to under constant pressure due to targets that are too aggressive, are plain to see. Demotivated staff, key employee burnout, higher levels of sickness, and inevitable lack of engagement can all manifest when targets are set too high and don’t have a corresponding plan to achieve.
It is my belief that organizations will perform higher over the long haul, be able to positively engage when business cycles naturally go up or down, and simply be willing to do more for a company, when they are given responsibility for likely and best-case plans generated through their own inputs. I have often seen the most coming from people, departments and companies when they feel comfortable knowing the likely-case plan will be hit, and there becomes a fun, energy-enhancing excitement to try and hit the best-case plan.
So, resist the urge to tweak Excel spreadsheets in isolation, and instead create both likely-case and best-case plans with significant team input. Then drive to the best-case plans in all circumstances. Of course they will not always be achieved, but you might be surprised at how often they are, and how happy your staff are when truly driving the business!