Observations from CFO Enterprises CPM conference

I had the opportunity to present at CFO Enterprises annual Corporate Performance Management (CPM) conference in New York last week.  Robert Kaplan opened the conference with an update on The Balanced Scorecard and Activity Based Costing.  He used some great examples of companies like Volkswagen to illustrate how organizations are mobilizing the entire company towards executing a few key strategies utilizing the Balanced Scorecard.   David Axson, of Accenture (formerly a partner at the benchmark research firm – The Hackett Group),  opened the second day with a great session on our need to recognize that the speed and impact of world politics, business events and even weather have an increasingly stronger direct influence on this year’s financial plan.   Organizations must be more nimble in their planning, forecasting and budgeting processes in order to survive.

Most of the speakers talked to the finance audience about alignment, strategy and execution.  Each and every presentation I attended mentioned increasing revenue and increasing forecast accuracy – from both a revenue and cost perspective.  The challenge I observed however is that many of the follow-on conversations led back to the traditional topics of how to improve budgeting, consolidation and forecasting.   This has been the traditional view of CPM over the years.   I believe that while this is important and necessary, it’s missing a key element - sales force alignment.   It’s hard to find an organization that doesn’t have strategies that involve penetrating new markets, selling more to customers, launching new products, yet there was precious little conversation about how to align and motivate sales teams in order to execute these strategies.  

Based on the feedback that I received at my session and the follow-on conversations I had with attendees, it appears that I hit a nerve. When CFOs think about strategy and organizational alignment their perspective on what sales should be doing is quite often at odds with what the heads of Sales believe.  One example of this disconnect is that most sales organizations are striving to introduce incentive plan simplicity.  Many CSOs believe their sales compensation plans are too complex, too confusing, too rigid, and are looking for ways to simplifying them in order to drive the desired behavior from their sellers.  Many of the leading compensation plan consultants argue that a good sales incentive plan should have no more than three components.  

Yet when CFO Research Services surveyed CFOS about the same topic, CFOs responded the most important thing that Sales could do to ensure reaching its goals is to Encourage Sophisticated Sales Behavior.   They want to drive up-sell, multi-year deals and other high-margin offerings.  The goal is to drive bottom-line improvements and overall customer retention.   Increasing sophistication is at odds with increasing plan simplicity.

Both the Sales and Finance leadership are motivated to improve sales but their views of the solution lead to conflicting tactics.  This is just one area of the discord.   Sales Self-Service, the right role for business analysis,  how best to set sales targets,  technology to support sales management are just a few of the topics that Sales and Finance need to agree on in order to work together to drive organizational alignment and driving increased high-margin business.

When considering how to execute strategy and improve organizational alignments CFOs and CSOs need to make sure that they are aligned first.


If you would like copies of some of the research I reference here just let me know and I will forward it to you. 

6 New SPM Trends - Trend 3 - The Increasing Role of Finance

In a recent survey conducted by CFO Research[1],  CFO's were asked whether the finance function would play an increased role in sales incentive management (including plan design and administration).  While many finance departments are already heavily involved, 52% of the respondents said they will get even more involved over the the next two years.  It’s not surprising to see this interest from Finance.  In times of economic uncertainty, compounded by the concern about negligible revenue growth, many CFOs are seeking opportunities to improve margins.  They are no longer focusing just on cost reduction; rather they want to improve margins by driving sales of the most profitable products and services, not simply by selling more of the high volume offerings.

According to the survey, 61% of the Finance team wants to see ‘more sophisticated selling’ by their sales teams. Sophistication, in the minds of Finance, means encouraging team selling, bundled offerings, multi-year deals, cross selling, and increased selling of high margin products.  They also want to see a tighter link between the setting of quotas and the specific revenue goals of the organization.  It’s frustrating to see the organization make a strategic decision to try and drive business growth in one area, only to find that the sales plans drive a very different behaviour.  Reconciling the plans to the strategies can often take over a year, which results in delayed execution of strategy and missed opportunities.

From a Sales Operations/Human Resources perspective, leading ‘experts’ on incentive compensation plan design are encouraging organizations to simplify plans and make sure that incentive plans have as few measures as possible (often stating that best practice plans have no more than three measures). 

Finance’s drive for more sophistication versus Sales Operations and Human Resources drive for focus and simplification of incentive plans appear to be at odds.   The best resolution is to get ahead of the curve.  This is a great opportunity for all business interests to converge and share their perspectives on the challenges and high priority items for moving forward. 

Successful organizations work with finance to not only agree on the sales plans and drivers but to agree on time-lines, decision making processes, constraints and any potentially conflicting viewpoints on plan design, implementation priorities and targets.  The combined group needs to come to consensus and then communicate their shared goals across the organization.  Failure to do this often leads to different priorities and misaligned goals.   In turn this leads to inconsistent and often conflicting communications being delivered to the sales organization.  A coordinated effort leads to common goals, sales alignment and increased performance.

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[1] Managing Sales Incentive Compensation Amid Uncertainty, CFO Publishing, March 2010