Monday, December 31, 2007

Obligatory New Year Resolution

The beginning of every year, we as business people are obliged to set new goals for the upcoming year. I have gone through this process over 30 times in my career. During this time I have noticed one striking trend. Those who believe succeed; those who don’t, don’t. Brian Tracy in his Psychology of Achievement spends a great deal of time helping people reset their subconscious so that they can achieve the success they have always wanted. His story is that you have to concretely believe you can succeed before you can actually do it. There is a lot of data to support that this is fundamental to individual success. What about corporations?

Thirty years of business planning has taught me that it’s very true of corporations as well. If the annual plan is a hope and a prayer, it will not succeed. Many companies have a top down planning approach. Those in the know determine the cash requirements of the corporation to survive and meet expectations for the coming year. They then extrapolate the revenue number taking into account cost of goods and cost of sales. The revenue number is then passed down to the individuals responsible. Sometime, like when I work for British Telecom, the number is inflated as it is passed down to assure each management group is successful. The final number given to each sales person is a result of this process and doesn’t reflect the reality of their market. The people at the top “believe” in their number because it makes sense. The people at the bottom find the number arbitrary at best and will strive to do their best.

A deviation to this strategy is a top-down, bottom-up approach. While the executive management is forecasting from above, the sales force is forecasting from below. They meet in the middle and develop a compromise. Sound better doesn’t it? Heisenberg taught us that this isn’t necessarily so. My experience collaborates this. The people at the top assume the people at the bottom are going to sandbag (low ball) their numbers and the people at the bottom assume that the top is going to inflate the numbers. Everyone knows it’s a negotiation, therefore it’s best to build in some level of compromise. In this case neither party”believes”. Both have had to compromise and assume the other is not being fully honest in the process. This by the way is true.

So, how do you get everyone to believe? The answer is to take a more systemic approach. If you haven’t ever done this it won’t happen for 2008, but it can happen in 2008. The object is to align the entire company toward a single goal. Everything is tied to achieving that goal; from product development, to marketing, to sales, to legal, to accounting, to procurement, to support. Everyone knows their responsibility for achieving that goal and believes they can do their part. No one is part of the “sales prevention” team. The sum of the parts becomes greater than the whole. What’s the systemic approach?

This takes some thinking. It is not intuitively obvious. If you are a glass half empty type of person, you may not see how it will work. Every activity must be tied directly to revenue and carry a specific expense associated with that activity. Some will be profit centers and some will be cost centers. But they are all tied to the final objective. Deciding how this will work within your specific corporation may take a lot of thought. Many departments don’t like this thinking because either they don’t truly understand how their department impacts revenue or they do understand and they would just as soon you don’t. A good place to start is to map out the process, cradle to grave. Apply your vision and mission to the process, you do have one right? Make sure everything aligns, and then start doing the math. Always seek input from those responsible for implementation.

Reprogramming the human subconscious to succeed is a consistent, repetitive process. The same is true of corporations.

The corporation that believes…. Succeeds.

No comments: