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Five Actions that can make your Sales Forecasts a Hit – Business Operations Performance Management

by sincera | Oct 21, 2012 | Business, Business Operations, Leadership, Management, Performance, Productivity

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A good forecaster is not smarter than everyone else, he merely has his ignorance better organized ~ Anonymous

If you are in business or sales, this time of the year is tough. It is the season for budgets and forecasts. You are either looking back and thinking what went wrong or taxing your brains on how to get it right for the next year. Or you could be one of the lucky few who raked in more, much much more than you forecasted. Either ways, this is not a good situation to be in. Predictability is key to successful business outcomes. You cannot decide how much to spend and where to spend unless you know with great accuracy how much and where your revenue is going to come from.

What usually happens in the forecasting process is that the senior management asks their sales leaders for a forecast, the sales leaders check with their reps for a “gut feel” number. The sales reps come up with a number (maybe 10%-20% lower than their gut feel number, to play it safe). The numbers roll up to the senior management. At this stage, the management takes a look at the numbers and checks it with the number they have in their minds (the number that will satisfy the investors/owners), then either discards the sales numbers completely and make up their own numbers or if you are lucky, the numbers get approved. This is quite a hellish process as you can see with lots of stress and heart burn at every stage but no guarantees that the end result is the most accurate version of forecast.

Accurate forecasting is an art – there is no foolproof method or formula to get it right but there are a few steps or actions that business/sales people can keep in mind that can improve the accuracy of the forecast and make the process easier:

Action #1 – Understand what Forecasting Is and Is Not – A forecast is not an aspirational goal, nor a “quota” or a “crowd-pleaser” number, nor an administration activity nor a computer program output. It is rather a Projection of ACHIEVABLE sales revenue, based on historical sales data, analysis of market surveys and trends, and salesperson’s estimates. Many people at this stage confuse a sales plan with a sales forecast – this is disastrous as it affects the entire chain of the business cycle which depends on the achievable number to do its planning to delivery on the forecast.

Action #2 – Collaborate to Win: To make forecasts more effective, there must be a free-flow of information between all the functions to prevent duplicacy or contradictory data. There has to be respect for different point of views. Each function has its own insights – delivery timelines, ramp-up plans from engineering, capacity constraints from operations, campaign or events plan from marketing, customer satisfaction scores from customer support– all of these could have an impact on the end revenue results. Hence, it is important to have a strong mechanism in place to efficiently bring together different organizational functions to contribute their inputs in a spirit of collaboration.

Action #3 – Joining the Dots: A good forecast is never stand-alone. It takes into account trends from the past too like the previous year(s) sales in the same time period to account for the impact of seasonal buying patterns, a similar state of the economy, currency exchange rate fluctuations, availability of resources, marketing campaigns, etc. As Eugene O’Neill famously said – There is no present or future, only the past, happening over and over again, now. Given that a forecast has to predict the future, it makes good sense to base it on what is known – the past.

Action #4 – Reward Accuracy: Like in other management areas, what gets rewarded gets done. Sales people often have the mindset that their job is to sell and not forecast. This mindset is disastrous for the company bottom-line. Accurate forecasts have a huge impact on the company margins so why not put some of it back to reward the source of accuracy. It is important to put in place policies and practices particularly in the job performance evaluation criteria to reinforce the fact that forecasting is important for business success.

Action #5 Track and Improve: At best, a sales forecast is an educated guesstimate built on the basis of certain assumptions. And the basis for assumptions as well as the assumptions themselves change rapidly in the business world. Hence it is critical to review the forecast on a regular basis (fortnightly at the very least) to check if the assumptions still hold good. Measure your forecast accuracy, develop mechanisms and metrics to identify and eliminate the sources of error and plough the learning back into your sales forecasting process. This will ultimately help build confidence in the forecasting process and improve the accuracy so that the entire organization can benefit from better planning.

“Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight.”

Henry R. Luce (1898–1967), US publisher

What process or mechanism do you use to generate accurate forecasts? What other steps do you take to improve the predictability of your business? I would love to know.

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Five Human Resource Metrics that link People to Business Strategy – Business Operations Performance Metrics

by sincera | Jul 29, 2012 | Business, Business Operations, Leadership, Management, Performance, Productivity

The abundance of information – from both internal and external sources – is the richest possible mine when it comes to understanding the employer brand, employee engagement and what employees want and need from the organization. The vital, and apparently missing, step is to transform the data collected into strategic advantage. The use of analytics, seems to be focused on external stakeholders and is yet to be used to its full effect when it comes to talent management. Only under half of CEOs (46%) use analytics to provide insight into how effectively skills are being deployed in their organizations.

This was a key finding in PwC’s 18th Annual Global CEO Survey, “People strategy for the digital age: A new take on talent”, which seeks to understand how businesses are preparing for the wholesale redesign of the world of work.

Clearly the standard HR metrics of Cost per resource, HR efficiency (no. of HR employees to total no. of employees), etc. which primarily help in driving down the costs are no longer sufficient in an environment where talent is the competitive edge for organizations. The need of the hour is HR metrics that are aligned to the current and the future business plans to ensure that not only is there no shortage of talent when we need it but also that we have processes and programs in place to create the right talent for our business.

When we create budgets for the year, we spend a significant amount of time planning where the revenue will come from and how the spend will be distributed across cost headers. In services organization, labour is the biggest component of both income and expenditure. Do we spend the same amount of time in planning how we would attract, retain and develop this big-ticket item so that the business objectives are met? Annual talent strategy planning is a must to develop and harness the potential of human capital – to proactively drive business outcomes instead of reactively responding to whatever the latest talent shortage crisis is. Based on my experiences in resource management and operations, here are the five human resource metrics that I think can help link your people strategy to your business strategy:

Human Resource Metrics #1: Competency Development Spend % – This one starts with identifying the key skills and talents that are necessary to execute on the company’s strategy for the year and create the competitive advantage while providing a platform for internal employees to learn and grow in their chosen career ladders. These could be technical (specialized software or hardware skills), functional (customer service, selling, tools and technology training) or managerial (leadership development, communication, succession planning, mentoring). Assess the current skill levels and the gap from where it needs to be and then draw up the competency development plan with budgets, timelines and desired outcomes for the year. Monitor the spend against the budget periodically (maybe monthly or quarterly) to ensure that there is focus on developing the right competencies that are needed for business success and that the plan is relevant to the current business scenarios.

Human Resource Metrics #2: Employee Engagement – This is the HR Mantra and enough research has been done to show that the EE figures of an organization are directly proportional to its business performance. Falling engagement levels are the precursor to higher attrition, lower productivity and increasing costs per hire. But an employee engagement survey just for the sake of measuring engagement is a waste of time and energy. The survey should be used as a tool to collect information that helps drive better results. Analysis should be done to isolate sincere actionable feedback from the “noise”. For example – what do your best performers think about your organization – does it allow them to perform to their optimum levels and get better every day? Invest and prioritize the engagement feedback that will really have an impact on key employee retention and overall employee performance and build this into your annual plan.

Human Resource Metrics #3: Quality of Hiring – This amounts to determining how a new hire’s abilities and performance varies from pre-hire requirements and expectations and is a metric that is generally calculated from 3-6 months after the hiring. Combined with the cost of hire (external recruitment spend+ internal labor costs) and the speed of hire (time taken to fulfill an open position), the quality of hire metric forms a great basis to measure the overall efficiency of your recruitment function and its processes (targeted sourcing, speedy reaction time, consistent screening process and continuous improvement). The impact of a wrong hire is huge on the business outcome and we definitely need to spend some time here to ensure we have the right data points and methodologies to ensure that we hire the right people for the right jobs. Some excellent data on this metric here : http://www.ere.net/2009/10/02/quality-of-hire-the-missing-link-in-calculating-roi-part-i-of-a-series/

Human Resource Metrics #4: Resource Utilization % – This is the most common metric used in human resource management and for a good reason. It is the ratio of the resource’s billable work to the total amount of work and hence has a visible and direct impact on a company’s revenue and margins. What I want to highlight here is the need to go beyond this number and look at the underlying reasons for variations in the numbers and focus on them for improvement. Numerous factors can change utilization rates, including inconsistency in calculations of what constitutes work and billable work, late and cancelled projects, increased training and ramp –up times and ancillary job demands, such as paperwork. Keep track of employee expertise areas and availability status in a central skill database, so that you can the quickly move people into a project and maximize utilization. Cross-train technical staff to respond quickly to changes in client demand. Developing a versatile and flexible workforce keeping in mind future customer requirements reduces idle time. Develop a bench strategy and a robust demand and supply forecasting process to stay on top of the target utilization numbers.

Human Resource Metrics #5: Revenue per Employee – This is a simple metric but the most important one to gauge and measure the success of all the plans and initiatives as outlined above – quarter on quarter and year on year. It also helps to compare the performance of your organization with similar organizations and set benchmarks internally for your HR and resource management functions, the data on total revenue and total headcount of companies being easily available. The revenue per employee should steadily increase leading to expanding margins and improved profitability. This is a number that must feature on all management reviews as it helps keep focus not only on the denominator (costs – and there is only so much cutting that you can do) but also on the numerator (revenue – where are we getting maximum value out of our labour and why – to drive strategy in the directions where it is working).

One size definitely does not fit all when it comes to metrics – and you may have your own views on what metrics are best suited to drive the talent advantage for your organization. One thing is common though – we need to collect consistent information on our resources, use metrics that enable decision-making and ensure that talent management strategy remains relevant with overall business strategy and contributes actively to business growth. We need to choose the metrics that help the management to make quick and sound business decisions that are based on facts rather than feeling. What has worked for you in this area – I would love to hear and learn from you.

Five Working Principles for Business Operations Performance Management – In Gratitude and Honour of Seth Godin

by sincera | Jul 15, 2012 | Business, Business Operations, Career, Leadership, Life, Management, Managing Yourself, Performance, Productivity

Isn’t it strange (in a good way) how sometimes someone who you have never met or interacted with can have such a profound impact on your life and work? I think it was two years ago when the CEO of one of the places that I have worked in quoted Seth Godin in a discussion. I went and looked him up and wow – did he make me think! Seth posts every day and almost every single one of his posts have made me take a step back and take a close look at one or other area of my life and work. If you already follow him, then I am sure you have also experienced this – if you haven’t yet, then I suggest you go and subscribe to his blog here – I can confidently say that your thought processes will never remain the same.

This blog is a compilation of five of his posts from 2012 only (and it was very difficult choosing five, I may need to do a follow-on post) that can inspire you to change the rules of the game in business operations and management:

Working Principle #1: Ask Why Often – Why ask why?

“Why?” is the most important question, not asked nearly enough.

Hint: “Because I said so,” is not a valid answer.

Why does it work this way?
Why is that our goal?
Why did you say no?
Why are we treating people differently?
Why is this policy?
Why don’t we enter this market?
Why did you change your mind?
Why are we having this meeting?
Why not?

Working Principle #2: A Path which may look like a shortcut may not actually be a shortcut – Quick shortcuts (in search of)

There aren’t many actual shortcuts.

There are merely direct paths…

Most people don’t take them, because they frighten us–too direct, I guess. It’s easy to avoid the things that frighten us if we wander around for a while. Stalling takes many forms, and one of them looks like a shortcut.

Things that look like shortcuts are actually detours (disguised as less work).

Working Principle #3: Identify and focus on the Leak First – Insatiable

Long-lasting systems can’t survive if they remain insatiable.

An insatiable thirst for food, power, energy, reassurance, clicks, funding or other raw material will eventually lead to failure. That’s because there’s never enough to satisfy someone or something that’s insatiable. The organization amps up because its need is unmet. It gets out of balance, changing what had previously worked to get more of what it craves. Sooner or later, a crash.

More fame! More money! More investment! Push too hard and you lose what you came with and don’t get what you came for.

An insatiable appetite is a symptom: There’s a hole in the bucket. Something’s leaking out. When a system (or a person) continues to demand more and more but doesn’t produce in response, that’s because the resources aren’t being used properly, something is leaking.

If your organization demands ever more attention or effort or cash to produce the same output, it makes more sense to focus on the leak than it does to work ever harder to feed the beast.

Working Principle #4: It is not about You, it is about the Outcome -The quickest way to get things done and make change

Not the easiest, but the quickest:

Don’t demand authority.

Eagerly take responsibility.

Relentlessly give credit.

Working Principle #5: Caring Enough is a competitive advantage in your hands – “It’s not business, it’s personal”

It’s too easy to blame the organization and the system and the bottom line for decisions that a person would never be willing to take responsibility for.

Whenever you can, work with people who take it personally.

And finally a bonus one from Mr. Godin that I can’t just resist putting in here – It’s never too late…….to start heading in the right direction.

There are many new initiatives that I started on and new directions that I took in the last year inspired by Seth’s daily doses. Who inspires you ? What blogs do you follow that are a must read for you? What do you think of the five principles above? Have you tried them at work ? What other posts from Seth have you found thought provoking? I would love to hear back and learn from you.

Five Considerations that can Make or Break your Business Budget – Business Operations Performance Management

by sincera | Apr 8, 2012 | Business, Business Operations, Leadership, Management, Performance, Productivity

An annual budget is like a map for the business. Miss the directions on the map and you may land up in places best left uncharted. But how do we ensure that the directions on the map are right in the first place? A lot of focus is given on the financial nitty-gritty of the budget and rightly so. But the best financial people can’t create a budget that can be met or exceeded unless business understands and creates the right environment for its success.

Through my experience in creating, tracking and reviewing budgets, I have found that it is important to have the following considerations in mind during the budgeting process to ensure that the final output is something that is realistic enough to not leave you scratching your head wondering what went wrong and where at the end of the financial year :

Consideration #1: What is your starting point? Often people use last year’s budget as a starting point and apply percentages for growth and inflation. In today’s market scenario, that is not a very wise thing to do. Check your run-off rate (orders in the bag or backlog) situation first and then the funnel. Determine the return on investment that you have made in previous year on new products and services that are likely to bear fruit to arrive at the stretch that is possible. Validate your assumptions against the market growth in your segment as well as the trends in the previous year to finally close on the plan for the next year.

Consideration #2: Do you know what your short-term (year ahead) AND long-term (3-5 years) goals are? While short-term goals for the year are usually determined by your management (could be you) or your investors based on the size of your company and you may not have much say in that, there has to be a built-in plan in your budget for the year(s) after that. What do you need to invest in now in order to ensure that your growth in the long-term is secured? This will have an impact on the margins target for the current year and hence an important consideration on where you want to allocate your available money in this year’s budget.

Consideration #3: Is your team ready and enthused? This by itself is the single most important factor that could make or break your budget in my view. Has the budget creation process been a participatory one with the key members of your team involved, engaged and aligned to the goals in the budget? Are they enabled enough to drive the growth or manage the costs as needed? Are they willing to collaborate and support each other to make the year a success? It all boils down to the culture that is prevalent in the organization – no budget can be met if your team is not ready.

Consideration #4: What is your Plan B? There has to be enough provisions in your budget to allow for changes midway if things don’t turn out as expected (Murphy’s law again – what can go wrong will go wrong). Also the budget should be created in such a way that it remains a “living” budget – to be able to move around a few allocations for investments areas and growth areas based on performance trends during the year without affecting the target business metrics.

Consideration #5: Are your systems and processes ready? Break down the budget into tasks with timelines, identifying the stakeholders best suited for each task, aligning existing processes and designing new processes and metrics to ensure sustainability IN ADVANCE. Assign accountability within the organization not just at the senior levels but right up to the front-line staff to ensure everyone knows and is signed up for the budget. This helps in providing a clear line of sight for achieving the budget while building confidence in the budget within the organization itself. Review your systems (including approval mechanisms and dashboards) to ensure that you have every tool you need to monitor the progress on your budget.

If we can incorporate the thinking above along with rigorous financial planning and analysis, I am confident that the budget would become an enabler to meeting the performance objectives rather than an obstacle as it is commonly perceived.

“Before you start some work, always ask yourself three questions – Why am I doing it, what the results might be and will I be successful. Only when you think deeply and find satisfactory answers to these questions, go ahead.” Chanakya (circa 370- 283 BC)

What factors do you consider when preparing your budgets? What tool or process do you think most helps in successful implementation of a budget? I would love to hear and learn from you.

Five Ways Business Operations Can Drive Strategy – Business Management

by sincera | Dec 17, 2011 | Business, Business Operations, Leadership, Management, Performance, Productivity, World of Work

This topic focuses on the role of business operations in Strategy Planning and Implementation. I have spent a considerable part of my career on working in and evolving the role of business operations – while many people do understand that operations plays a major role in the implementation of strategy, very few actually realize that business operations can drive strategy.

Business Operations (see definition in Wiki) is often perceived as tactical with little or nothing to do with strategy (have heard the role referred to as back-end, boring, clerical – you get the drift). On the contrary, nothing could be farther from reality – given value, authority and attention, operations can make a significant impact on building your strategic plan and ensuring that it does not remain only at a planning stage on beautifully presented slides.

Here are five ways that Business Operations can drive Strategy – tried and tested many times through my long operations career:

Driver #1: Leading Indicators

Dashboards, Metrics, and Reports are all in a day’s work for an operations team. While the main purpose of operational dashboards are to track, analyze and improve lagging indicators like earned revenue, margins, costs, attrition, quality etc, they could be a rich source of leading indicators and levers for strategic decisions. Sales pipeline, say prospective customer requests for Information/proposals – RFIs/RFPs – can help predict market demand. Sales conversion cycles can be used to predict future revenues and the best times to hire or invest in new strategies. Customer Satisfaction scores can be used to determine target market segments. Margins broken into per product/offering or per customer can be used to arrive at the most likely to be successful offer/product strategy. The operations team can link metrics to strategic planning as they are closest to defining measures and setting the targets.

Driver #2: Predictive, Proactive Data

The business operations team is your best source of data and analysis of historical and current trends to predict the future. What products and services can be released, whether they will be successful, whether customer base will expand or shrink based on a strategic decision, or whether investments will pan out as desired – all these critical elements of the strategic plan can be vetted by good quality data organized with a high level of granularity. A year-long data strategy is a must for the successful creation of any plan that depends on trends. The operations team is usually the best fit to be the repository of such data given their engagement in and their understanding of the complete business cycle.

Driver # 3: Test Launches

The Operations team can help vet Strategy Plans before it is put into full-scale action. Think of the operations team as a well-oiled engine with hands-on people and defined processes to handle painlessly all situations that could arise. Use this team to test launch in a small way your “dream” because it is in the operation cycles that innovative ideas can get a reality check on whether the idea/strategy can actually transform profits and further sustain the business.

Driver #4: Mapping Operational Vision

A Good Strategy Plan will always entail some level of organizational transformation, a shift from business as usual to unchartered territories. The Operations team can assist in creating a map with directions to these territories – clear communication is critical to the success of strategy. Breaking the strategic plan into tasks with timelines, identifying the stakeholders best suited for each task, aligning existing processes and designing new process to ensure sustainability, assigning accountability within the organization – all help in providing a clear line of sight for achieving the strategy while building confidence in the strategy within the organization itself.

Driver # 5: Implementation

Here is where strategy boils down to business results. Using all or some of the factors above, one can come up with a great strategy plan, but that does not mean the plan would be successful. Citing Murphy’s Law, anything that could go wrong usually does. The business operations team drives the successful outcome by tracking all aspects of the strategy plan while ensuring that there is no impact on business as usual activities. Skilled operational leaders can translate the strategic dreams into tangible business results.

No one knows the inter-dependencies between people, process and opportunities better than the business operations team in an organization. So why not leverage this team to create fool-proof strategies?

How have you applied innovation into your business operations ? Do you tap this team in your strategic planning process ? Would love to hear from you.

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