In my work with a wide variety of organizations, I'm always on the lookout for new ways in which companies are applying business performance management (BPM) to have a direct, material impact on their goals. In the current economic climate (not surprisingly, perhaps, since cost management initiatives using BPM are already well established) I've noticed an increase in adoption of BPM to help address revenue growth issues.

I've also noticed that finance leaders are pushing their organizations to take BPM into other areas of the business, most notably into sales and sales operations, to help lead the revenue growth charge.

Sales has traditionally been slow to adopt BPM because finance-sponsored systems used to be less granular and less agile than sales required -- think daily and weekly reports versus monthly and quarterly ones, commissionable versus recognized revenue, and statutory versus management reporting. In addition, finance-focused BPM tended to be disconnected from customer relationship management (CRM) systems.

This is all changing now (See Exhibit 1).

By leveraging existing and new BPM processes and technologies, and by introducing a culture of performance -- for more on which, see Profiles in Performance, by Howard Dresner (John Wiley & Sons, 2010) -- finance and sales ops departments are working together to bring the promise of BPM to bear on the opportunities of customer acquisition, retention, and success.

Many current BPM processes and technologies can be naturally extended to encompass newer applications of BPM. For instance, overall revenue planning, workforce planning, and product sales targets can and should extend to, correlate with, and take advantage of the weekly sales forecasting process.

So what's stopping organizations from doing this today?

In this article, I'll highlight some of the missing pieces in the sales decision process, and I'll give recommendations for using BPM to close the gap between sales planning and revenue growth attainment, using the sales forecast as the bridge.

Dissecting the Sales Decision Cycle

In my firm's discussions with our sales manager clients, colleagues and friends about their weekly forecast conference calls -- both down the chain (with reps) and up (with sales execs) -- we've found that a handful of common themes often emerge. These include:

  • You can't do a sales forecast in a vacuum.
  • You have to look for what's possible and what's probable.
  • You have to sift through all the activities to understand which actions will have the most impact in moving a prospect forward.
  • Follow-through (on requests as well as promises) is key.

Most account review conversations turn into constructive enquiries: "Have you shown them this? Have you asked for that? How can we solve this issue?" The goal is to make sure there's a value match between your goods and services and the customer's business objectives (the value must be equal to, or greater than, your proposal price). This generates a multiparty conversation among the client, the reps, managers, executives, channel partners, technical folks -- anyone who can help make the value connection and close the deal. As Dr. Douglas Merrill, former CIO of Google, has said: "All of us are smarter than any of us."

While every organization is different, a high-level view of these common themes and the enquiry process reveals some commonalities that help us determine how sales decisions are made. The main steps in the sales decision cycle are:

  1. Understand where you are now and what's going on -- especially what's changed.
  2. Debate the options available to you and model the high-probability scenarios.
  3. Commit to the best course of action to deliver on your promises, and hold reps and managers accountable for their responsibilities.

Notice that in Exhibit 2 there are two overlapping domains that surround the basic sales decision cycle: plan and attainment. Within the plan domain, the cycle applies to annual or quarterly sales planning (setting targets, allocating resources to territories, setting price and product mix, planning for staff and quotas) as well as to daily, weekly, or monthly sales forecasting. Within the attainment domain, the decision cycle applies to the process of reviewing the actual results.

Also notice that one of the goals of the sales decision cycle is to work toward fact-based sales decisions as opposed to entirely gut-feel or guess-and-check methods, or worse, the "finger in the air" method (lick your finger, stick it in the air, and decide which way the wind is blowing!)

The Missing Link: The Debate

The Debate step is highlighted in Exhibit 2 because this is where we find the biggest gap in the typical sales decision cycle. The Debate is what links understanding to commitment. Let's take a closer look.

Understanding involves gathering all the relevant data about where you are in the current period (week, month, or quarter). In the system, for example, this would be all of your Opportunity data. You then organize the data in such a way that it's consumable by reps, managers, and executives; in other words, you turn it into useful information. You also display it in relevant ways: by forecast amount, by rep, by territory, by deal, by close date, by sales stage, by channel partner, by customer, and so on. And you analyze this information by highlighting variances to plan and forecast; or by showing what's changed over, say, the last week; or perhaps by showing trends and correlations.

Unfortunately, at most organizations, as soon as managers have completed the Understanding step -- the process of reviewing the current situation and what's changed -- they jump straight to making a decision about what to do: "North East, drop your prices to convert more Stage 8's to close this month." "Give Partner X an incentive to bring that big deal in." "Put more pre-sales engineers on that account."

If you take this approach, sometimes you might get lucky and the decisions will turn out right. But more often than not, you end up spending resources that won't help you much in making your number. This is especially true if you're also trying to make margin targets, since resource allocation decisions have an impact on the bottom line.

What's missing is the crucial Debate step. This should include the right stakeholders, at the right time. It should be carefully recorded in a system. And it should enable participants to take into consideration six key factors: assumptions, constraints, probabilities, possibilities, objectives, and alternatives.

These factors in turn should generate a variety of scenarios based on the question "what if?" For example:

"What if we accelerate that deal now by dropping our price? What's the impact on the quarterly target?"

"What if we deploy more resources now? Will that change the sales stage?"

"What if we hire more firepower in that region? Will we make our number as a company?"

"What if we give more ramp time to these reps? Will that hurt us or help us?"

When you start to ask these questions (after you've gathered the relevant information, and before you make a decision on how to impact your number) you not only engage with the right people, but you also uncover issues and generate information that can improve the quality of your decision-making. (See Exhibit 3). You can create a variety of scenarios that show the impact on the rest of the organization (top line and bottom line). Then you can easily pick the right one, the one that optimizes your resources while improving the odds of making your number, and commit to it.

We've found that the Debate is the least structured, least disciplined, and least tracked component of sales resource deployment, deal close acceleration, and the overall sales decision cycle. Finance and Sales Ops can take the lead here and encourage the company to pay close attention to this crucial step.

When you create a process for the Debate and methodically capture it in a system, you get these benefits:

  • You can revisit your assumptions, scenarios, and models, and actually measure how good you are at forecasting.
  • You improve forecasting processes, taking out the guesswork and improving accuracy.
  • You communicate decisions more effectively to those who need to know.
  • You can help your company develop a better memory -- the ability to re-use decision-making processes in similar circumstances in the future.

Closing the Gap

Because I believe that the optimal application of BPM is one of the keys to competitive advantage, I naturally look for performance management systems that cover each of the three steps in the sales decision cycle. Here's what I've noticed about the software landscape (Exhibit 4).

While BPM (including business intelligence) tools help companies gather and analyze sales data, and customer relationship management systems help them track selling transactions, the technology we've found in the middle of the sales decision cycle is typically still ... spreadsheets! Not that spreadsheets are bad per se, of course; they're just not the multi-user, multi-dimensional, easily maintained, collaborative systems that the Debate calls for.

BI tools or CRM systems alone can't do what's needed to implement a robust Debate platform in your company. You can't write multiple versions or ‘what-if' scenarios back to either of those. And you certainly want your Debate system to be extended into multiple areas of the business -- sales ops, product management, and finance, for example. It's unlikely your CRM system will extend into your financials or HR systems, and it's not an easy task to extend BI applications to different business domains without undertaking a complex (read: expensive and long) data warehousing initiative.

The ideal technology to fill the systems gap would be a component of BPM. It would also integrate the Understand and Commit steps; it would be a one-stop place for handling the entire sales decision cycle.

One BPM technology that can help an organization keep track of the Debate and steer it in the right direction is a model of the deal. This would show, first of all, how things have been progressing (expected close dates, forecasted amounts, sales stages, etc.) over time.

Second, it would indicate the impact that winning or losing (or delaying) the deal would have on the current quarter's numbers (forecasted bookings vs. plan) for the region and the company; the partner pipeline (if appropriate); and the reps' own performance (vs. coverage and quota).

Third, it would allow for an unlimited number of easy-to-generate what-if scenarios.

In order to enable the Debate, all the concerned parties would likely want to share the deal model, in the contexts of the region, partner, and company plans. And they'd want to share it in two ways: as an information consumer (getting visibility into the history of the deal and the potential impact); and as an information contributor (inputting the variables that drive the "what-if" part of the model, such as potential new close dates, discounts, deal amounts, and sales stages.)

Of course, you'd want the model to be as easy to use as possible, easily accessible by all the concerned parties, and always at their fingertips.

A Forecasting Breakthrough

Here's a good example of how a BPM-based approach can help.

A small but rapidly growing software-as-a service provider wanted to bring more discipline and control to its sales forecasting and analysis activities. The business had difficulty tracking and analyzing changes to its sales pipeline week over week, day-by-day, and version-by-version. Collaboration among sales managers, sales ops, and finance people was ad hoc at best. The company also wanted to measure sales rep performance against quota and plans to achieve faster, more fact-based resource deployment and improve sales activity decisions. And, ideally, it wanted to align sales capacity with demand.

Spreadsheets were used for most of this work, and the company relied on at least three dynamically linked workbooks for its forecasting and modeling activities. This was "a nightmare to maintain" according to users, and the system couldn't handle all the dimensions the organization needed (for example, by product and by week).

The VP of Sales Ops decided to augment the company's business performance management capabilities by implementing a SaaS-based multidimensional planning, forecasting, and modeling tool that connected directly to the firm's CRM system.

The company can now instantly access all the CRM data that sales ops, finance, marketing, and services need to collaborate on their weekly pipeline analytics. Managers can easily produce any reports they want based on those analytics. They can track rep, partner, and territory performance in the context of the pipeline and forecasts; evaluate the pipeline and quota coverage for future quarters; plan capacity and quotas; and drive service delivery operations.

Within hours of implementing the solution, Sales Ops had a better view into the pipeline than it had ever had ever before. In fact, managers immediately discovered that coverage for the upcoming quarter was terrible, and they raised a red flag for the Sales VP.

The company now has a rounded view of the sales forecast in one place, and it can create an infinite number of what-if scenarios to determine the impact of decisions about deals, reps, targets, pricing, product mix, and partners.

Next Steps

Of course, technology is just one part of the puzzle. To improve sales and revenue growth decisions, you'll need to involve the right people: your reps, sales managers, and executives, certainly, but perhaps also people outside your four walls, such as partners, suppliers, and customers. You'll want to establish a clear process for the sales decision cycle and enforce decisions on your data so that everyone can agree on what it means. But with those pieces in place and a robust BPM engine powering the decision cycle, you can deliver valuable new insights, eliminate hit-and-miss sales tactics, and hugely improve your reps' chances of making their all-important numbers.