What is organizational alignment? Specifically, how can reporting assist with organizational alignment? What are we talking about? Organizational alignment is the concept that each level of your organization beats to the same drum. It is making sure everybody understands what the common goal is and making sure they understand what their role is in that common goal.
And I’m going to step you through a straightforward example using reporting to assist with organizational alignment. Why is this important? It’s probably obvious. It’s important that all levels of your organization understand what we’re trying to achieve so that everybody knows what their role is and how they are either contributing or preventing us from meeting that goal. It’s important that we’re able to see the behaviors that are helping us move toward that goal. It’s also important that we identify the things that are slowing us down. Making sure we know how to identify the problems and correcting those problems is key to our success in any organization. Organizationally aligned reports are a key component to the communication mechanism that’s required to make this possible.
It’s also important from the standpoint of correcting course quickly. Reporting can either be a lagging or a leading indicator. Lagging indicators are telling us what has happened in the past. Leading indicators are telling us what’s going to happen in the future. When we talk about organizational alignment, we’re really talking about both categories. The things that are important in the future of course are going to be the organizationally aligned KPIs, which are forward looking or leading indicators. I’m going to give an example of that, but that’s not to diminish the value of the lagging indicators. It’s obviously important to look at what we were able to achieve in the past. You can take the same approach. You can see what was achieved. Why the goal was or was not met. You can see the areas that can improve from a lagging indicator standpoint as well as a leading indicator.
So overall, organizationally aligned reporting enables an organization to keep their view on the goal, to make sure everybody understands the goal, and their role in meeting that goal.
Here is an example that I think that everybody is going to be able to easily understand. We’re going to talk about sales forecasts. So pretty much all organizations have some type of sales process, and that process involves people moving prospects. Well, first, identifying prospects and moving them through a pipeline. You might have a pipeline that starts with a raw lead and then the prospect moves into a qualified status. Then they move into whatever status. They basically move through the pipeline from the point of a raw lead that you’ve never talked to before all the way to a closed deal. At each phase of that process, often we are evaluating the likelihood of that prospect turning into a deal, and valuing the deal.
For example, if we have a hundred-dollar deal opportunity with a company. When we first get that company into our pipeline, there might be a 0% chance of closing the deal. The forecasted value of that deal is $0. As that opportunity progresses, the likelihood of it closing is going to increase. At some point that hundred-dollar deal might have a 50% chance of closing. Now we have a $50 forecasted value of that deal. Okay. There’s a lot more complexity to that, but just for our sake, it’s probably good enough to leave that basic description in place. We’ll move forward with what we’re trying to focus on, which is organizational alignment.
Using the sales example, let’s assume that we have three levels to an organization. We’ve got the C level, that’ll be your CEO, your COO, all of your C levels basically. Then we have our regional sales vice presidents. In our example, let’s say we have four regions, each of which has a vice president assigned to that region. Then within each region, we have several sales reps, maybe five or 10 sales reps per region. So, we have three levels in this example organization. You have the C level, the VP level, and then you have the sales reps or the individual contributor level.
The objective for the company is to meet their forecasted sales goals. Let’s just assume that this company is setting goals at the monthly level. They want to close X dollars in new business each month. That’s the goal. They have established these goals. They’ve broken them down at all the levels. They know each sales rep needs to have a certain number of deals closed every month. Then that rolls up to the VPs so that each region now has a total goal for the month. And of course all the regions would roll up into the overall companywide goal for the month.
As the month is progressing, we should be able to take those values, the likelihood for it to close, and resulting forecasted opportunity to determine if we are meeting, exceeding, or not meeting the goal.
So how would this work in reporting? Well, let’s take a top-down approach to this. The CEO, first, is going to want to simply know, are we on track to meet our goals this month? Let’s use an example, let’s say there’s a hundred thousand dollar goal for the month. We want to close a hundred thousand dollars in sales this month. That’s the goal. So, the first KPI that the CEO would likely want to see is the month to date forecasted sales in a goal. What’s the forecasted sales this month to date? How does that compare to the goal for the month?
Let’s assume that we have forecasted sales for the month. Again, this is month-to-date. There are some nuances I am going to describe. When we talk about forecasted sales month to date, we’re typically including the closed sales. This does not include what is forecasted to happen this month, as well as those that we expect to close this month. Overall, we’re saying, let’s look at all the sales that we think are going to close this month, the ones that happened to date and the ones that are going to happen in the future through the end of this month. Then, let’s take that number and compare it to a $100,000 goal.
If we have $99,000 in forecasted sales and we have a $100,000 goal, well, then we’ve got a 99% KPI. We’re 99% of the way to meeting our goal already to date. If we were midway through the month and we’re already at 99% of our goal, we know we’re doing good. If we’re at the last day of the month and we’re at 99% of our goal, then maybe we’re not doing so good. But the overall objective here is to give the CEO an indicator that is telling them we’re at 99% of goal right now for this month.
There’s all kinds of derivations that can be derived from this. You could do linear forecasting to try to estimate where you will be on the last day of the month if things continue along the same path. There are just all kinds of ways of handling this, but that’s outside the scope of what we’re talking about. The main point here is the CEO needs that top-level number in this example.
Now we know that top-level number is 99% of goal. That’s where we’re at right now. The other thing that I think is always useful for the level that a report is focused on is to also give that person or a group of people a view of both a higher level and a lower level. Let me explain. A CEO probably is at the highest level. We gave the CEO the company level, which is that 99% of goal number. But we may also want to give the CEO a view of the regional breakdown. If there’s four regions, and the regions are broken down as follows: south region 80%, north region 110%, east region 90%, and west region 150%.
Now the CEO can see, great we’re at 99% a goal. The CEO now also can see who is exceeding the goal, who is lagging behind the goal, and who’s just kind of treading water. That is important information. Now the CEO knows that the south region has 80%. He can address that 80%. Maybe the south region will be over the goal if they can course correct on that 80%. This type of a KPI is a leading indicator because we’re talking about forecasted sales goals. Knowing that we’re at 80% in the south region, and let’s just say that we’re halfway through the month in this case, well maybe there’s something that can be done. Maybe that 80% can be corrected at least to some extent before the end of the month, which would obviously impact the organization positively. So, the CEO now has a view of the company wide number as well as the breakdown by region.
Now let’s go down to the next level, which would be the regional sales vice presidents. The regional sales vice presidents need to have a view of their region’s performance. Like I mentioned before, it’s always nice to give a particular level of view of both one level up and one level down from where they’re currently focused. In this example, we’re talking about that south region VP. Well, we’re going to go ahead and give the south region VP that same 99% of goal number for the company. So now the VP knows the company as a whole is doing 99% of goal. And we’re also going to give the sales VP just their region’s performance, the 80%. This varies, of course. Sometimes the sales VP might get a view of their region and all the other regions just to give them some perspective. Overall, I think the general approach that works best is to give each Sales VP a view only of their region. They stay focused on their region.
The level below the regional VP would be the individual contributors or the sales reps. That 80% could be broken down into however many sales reps are part of that region. Let’s say there’s 10 of them. Each of those 10 would now have a KPI that shows their individual forecasted sales percent of goal for the month broken down again by sales rep. That is going to show the sales VP which individuals are exceeding their goal, and which are not exceeding their goal, and which are falling behind their goal. The region that is 80% of goal right now.
If we are already at the end of the month, then someone is not actually meeting their goal. That’s not great. That gives the sales VP something to focus on. Whereas let’s just say that we’re at the halfway point in the month and the sales VP is looking at this number and we’re already at 80% of our goal. Great, everyone is on track to meet their goal.
In either case, the number one objective, make sure the sales VP is focused on the same thing that the company has set as the goal, which is the forecasted sales in this example. Also give the sales VP a view of their performance and the things that impact that performance, which in this case is the individual sales rep’s performance.
Now let’s go one more level down and talk about the sales reps themselves. Let’s say, these are the people that are working the pipeline. They’re making the phone calls. They’re going out and meeting with clients, however they manage the communication and the generation of business. They’re out there doing that work. So, they’re not so focused on that 99% number for the overall company. They’re one of a hundred or so sales reps in this organization. And while it’s always good to know the 99% number for the company, they probably are a lot more focused on their own number. What is my performance right now for my forecasted sales percent of goal for the month? Am I on track to meet my goal? That’s the most important thing. The second most important thing is, how are they comparing to the regional performance.
It’s always nice to give the group that we’re trying to provide an organization-aligned report for, a view of both one level up and one level down from where they currently are focused. In this case, let’s just assume that the sales rep is the lowest level in this organization structure. There’s nothing lower to report on, but we’re going to go ahead and give that sales rep the higher level KPI as well.
At this point, we’ve done a couple of things. We’ve created an organizationally aligned reporting mechanism, and that means that everybody in this organization that’s involved in this business process now knows what the goal is. We know we’re talking about revenue goals, sales revenue goals, and we know how to measure those goals. We’re all measuring them the same exact way. If this is done in the typical way, we start from the lowest level data and we can simply roll that up within the organization structure, ensuring that there’s no mathematical problems in the process. We take every single individual sales rep’s numbers. We roll that up all the way to the region. Then we roll that up all the way to the CEO level. And we know that everything is going to work out mathematically perfectly every time.
The other thing we have here is a way for each level in the organization to understand how they’re impacting the goal and to hopefully proactively course-correct once they see that things aren’t going to meet goal. The sales rep can see if they are going to meet their goal or not. If not, they want to know why they are not going to meet their goal.
The sales rep can proactively go up to the regional VP and say they have an issue. They are not going to meet the goal. They can ask for help on how to address it. The same thing is true from the regional VP to the CEO. If the regional VP sees that the region is just not doing well, well that regional VP can proactively go to the CEO and say why they have an issue. For example, they have a major downturn from COVID that’s impacting everything. They have a weather anomaly that caused closure of offices. Whatever the issue is, they can communicate that proactively. Once everybody understands what’s being tracked and how it’s being tracked, the communication mechanism becomes a lot simpler.
Additionally, organizationally aligned reporting tools are very nice to also have the ability to drill to detail. Not only drilling from one level to the next level, like we talked about from CEO to regional sales VP to sales rep. Also to be able to drill into the detail.
So let’s start with the sales rep in this case and talk about drill to detail. The mechanism that’s used to implement this type of reporting is pretty common across all of the reporting tools. We’re not talking tools typically, but nearly all tools have some way of allowing you to right click on something, right click on a number and drill to detail. If I’m right clicking on a sales rep that has 50% of goal KPI and I drill to detail, and I tell the reporting tool, I want to see the details behind that number, then another level of reporting can be provided. Let’s just say, with the example of 50% of goal, that 50% of goal might be made up of a hundred records. Those 100 records include each individual opportunity that was expected to close this month.
So, we have new opportunities. We have lost opportunities. We have existing opportunities that we carried over from month to month. And each of those opportunities has an estimated value. Each of them has a likelihood of closing. Then, by getting the product to those two numbers, you’ve got a forecasted revenue. So, being able to see the individual opportunities could also expose some additional information. It might expose, for example, that this particular rep lost a really big deal this month. One that was expected to close was lost this month. That’s why we’re not meeting the numbers or not expecting to meet the numbers at the end of the month. It may be that there’s just not enough new deals. Maybe level one sales, outbound sales are not generating enough raw opportunities for the rep to go out and work leads. Those basic pieces of information are important when we start asking why. Why are we not meeting goal? And looking at the detailed report often can give us some clues as to why.
That same thing can be done not only at the sales rep level, but at any level. It’s often important to somehow either prioritize or to filter down or create exceptions. Do something to limit the amount of information that’s being presented. When we’re looking at the sales rep and we’re trying to figure out what the activity was for the month, there’s probably a reasonable number of opportunities that sales rep is working in that time period. We can just list every one of them out.
When we’re talking about the regional sales VP trying to figure out as a region, all the sales reps in the region, what their opportunity pipeline looks like for the month, and why things are looking good or not looking good. It’s not as useful to list out a thousand different opportunities that a single VP is going to call through. It’s probably a lot more useful for the VP to have a prioritized view of that detail.
So we still want to be able to drill to detail. We still want to be able to see the details behind the numbers, but we probably don’t need to see all of them. We probably only need to see the ones that are unexpected. Let’s get a drill to detail that shows us the lost opportunities this month, and maybe even trend the number of lost opportunities through time, month to month. So, we can see this month’s lost opportunity value out of line with what we typically see. That’s a much better reporting mechanism for a sales VP than simply having a thousand or thousands of opportunities listed out. It would just be too difficult to understand what’s important in that list.
And the same is true when we go to the CEO level. You’ve got to give a report to the CEO that it’s going to be consumable. At the CEO level, maybe we have 50,000 opportunities that we’re tracking this month. Whatever that number is, it’s probably too high for any one person to cull through all this information. But very similar to the sales VP, it would be possible for the CEO to look at a trend of lost opportunity value through time.
At the company level, you can now drill to detail behind a particular region, for example. Then, figure out is this region having an issue with an increased lost opportunity or maybe they’re exceeding the goal. Maybe we’re trying to figure out how this region can exceed goals this month. Is that because they have a lot more opportunities this month? Is the new opportunity count higher than it has been in the past when you look at a time series? Is it because they have a higher likelihood of closing these deals for one reason or another? That’s the kind of insight that’s really, important for the CEO, but all levels of an organization to be tracking.
So overall, organizational alignment through reporting is not really that complicated. It all starts with leadership establishing the goal. What is the goal? What are we trying to achieve? And once we do that, we have to say, how are we going to measure against that goal? How are we going to measure performance against that goal? Now we know those two things. The rest of it is trivial. Let’s break it down by, in our example, our organization structure. It doesn’t have to be by organization structure, it could be business functioning related. There are all kinds of ways of dealing with this. But it’s simple to think about organization structure. Let’s break it down. Let’s make sure that everyone is measuring in the same way against the same goals. Everyone understands their impact on that goal.
Once you do this, you end up having every level of your organization working toward the same goal. It’snot rocket science, but it also is easy to miss. It’s easy to take reporting and provide your CEOs with this nice dashboard and just forget about the regional VPs and the sales reps. It’s good. It’s better than nothing. It’s better for the company to have some consolidated reporting, but it’s a lot better whenever all levels that impact that particular objective actually have reporting that explains their impact on the objective, as well as a view of the higher and lower-level performance.
Lastly, I want to say about is this isn’t just about sales revenue forecast. You can apply this to pretty much any report that you’re building. If people are doing something in the business, if there’s a business process in place, and it’s an important enough process that we want to monitor it, then this same type of concept nearly always applies.
For example, healthcare. If we’re interested in provider utilization, doctors in a healthcare practice are one of the most valuable assets. If we’re interested in making sure that doctors are utilized highly, then let’s go all the way to the individual doctor level and let’s measure their utilization. Let’s take that up to the clinic level. Let’s take that up to the whatever the regional level. Let’s take that up to the practice level and let’s take that up to the company level. You can take these same concepts and apply them to all sorts of scenarios. Again, the concept is simple. Let’s make sure that our organizational goals are using reporting to align all levels in the organization to the same objective.