In an earlier post we looked at the 3 main reasons most organizations will miss their targets next year.
In the last post we examined the first of these in more detail – failing to understand the real reasons for individual under-performance.
The second reason most organizations will fail to hit their targets next year is by reacting to data points, rather than trends. Here are the three most egregious areas in which this happens:
1. Being asked to quote for an enormous contract.
Whenever a business gets asked to quote for a contract that is, for them, enormous (say anything north of 15% of the entire year’s budgeted revenues), something weird happens in that part of the brain that analyses how the business is doing: everything else gets muffled.
Like walking at night in a newly snow-covered, deserted street, the environment turns into something magical, and a sense that everything is going to be just fine envelops the corporate neo-cortex. While the quoting / pitching process is ongoing, it’s like everyone is hearing that Christmas song “We‘re walking in the air…”.
Then, when the business is lost, like the bright lights going on in the disco at 3pm (I know, seriously mixed metaphors), there’s a fierce scrabble to re-examine our budgets, at which point we realize that in the euphoria of the big pitch, everyone took their eye off the ball and we’re way behind in hitting our targets.
2. Landing an enormous contract.
But wait! It doesn’t need to end like that! What if we actually win this big contract?
Well, two things: (A) We’ve still lost the business we would have landed had we not all been focussed on the Mr Big pitch for the last 5 months; and (B) we’re now completely submerged in this idyllic snow-covered world we built in our heads during phase 1 – so the ‘eye-off-the-long-term-ball’ thing continues.
Plus, now all our other customers are getting tired of the obvious change in focus and priorities that we’re overtly signaling (no matter how hard we try not to).
3. Hiring an out-of-the-park big dog.
New hire arrives. New hire blows the gates off. Management is impressed. Management wonders “If new hire guy can hit these sorts of numbers, why can’t everyone else…?” Management revises everyone’s targets upward. Others fail to hit them. Targets not met.
Statistically, there’s always a likelihood that at some point you’ll hire an outlier – someone who performs at the outer ranges of your estimates. When the outlier is at the low end, you don’t revise everyone else’s targets down – you fire (or retrain) the culprit. When they perform at the plus end, there’s no immediate reason to assume that’s a sustainable, scalable performance range (I’m not saying it can’t be, I’m just saying that it’s not certain that it is).
The point with all three of these (and any other ‘spike’ events in the year) is not that they are bad things. They’re great things to have happen to your business. The trick is to fiercely sandbox them – treat them as lovely, wonderful anomalies; give them the attention they deserve, but be ruthless about keeping your main focus on constantly, consistently delivering on your core budget.