We often work with CEOs of companies that are experiencing significant challenges in meeting their revenue target. When we ask them why they think they are missing their revenue objectives, many say they are not sure. Others guess.

Yet, in nearly all cases, the CEOs continue to try different things to achieve their revenue targets and growth, even when they don’t fully understand the underlying issues causing the shortfalls. They continue to expend significant resources to try and make things better, partly because they think they know enough to act, and partly because they feel they must act.

This is somewhat akin to a doctor prescribing treatment before a proper diagnosis. At best it will likely produce little or no results. The wrong treatment, however, can result in adverse health consequences or even death.

Similarly, when CEOs act without properly diagnosing the problem, at best this will likely produce less than the desired results. Worse, this squanders valuable resources that may be in short supply when they finally figure out the problem.

The real issue is that there is a significant gap between what the CEO thinks is going on, and what may really be going on.  We call this phenomenon the CEO’s Decision Gap—the gap of missing and misleading information preventing CEOs from making high-quality, effective decisions that lead to sustainable and profitable growth.

This article shall attempt to explain what this gap is, why it occurs, and how CEO’s can close this decision gap, allowing companies to hit their revenue targets.

The ABC Challenge

Every CEO has an ABC challenge:

• A – clearly knowing what and where the company is at today
• B – defining a clear and compelling future for the company (3,5, 10 years from now)
• C – formulating an effective plan for moving the company from ‘A’ to ‘B’ and executing on that plan

When CEO’s struggle to transition from the present to the future (make ‘C’ work), paradoxically it is because they have been successful at delegating most of ‘A’ to their executive team so they can focus their own time and energy on ‘B’. CEO’s build a team with the intention of sharing responsibilities—the executive team will focus on today’s business and run the company day to day. The CEO will focus on defining the growth path and revenue target for the future of the company.

However, the more successful CEO’s are at delegating today’s responsibilities to their executive team, the harder ‘C’ becomes to execute. Here is why.

Let’s say that the CEO spends 75% of her time working on the future and 25% of her time dealing with day-to-day matters. And let’s assume that the executive team does the reverse—roughly 75% of each executive’s time is spent on today’s issues (‘A’), and 25% is spent working on the future (‘B’).

In theory, this seems like a logical separation of duties and responsibilities.

In reality, it creates what we call the CEO’s Decision Gap—making the wrong decisions because of missing and misleading information.

• The CEO ends up having a very clearly defined ‘B’, but sketchy awareness of ‘A’ (this is typically true even when the CEO is a founder and once had hands-on knowledge of the business)
• Senior execs end up having intimate knowledge of ‘A’, but only sketchy awareness of ‘B’

The difference in their focus, gives them different perspectives.

An example of this difference leading to misleading information is that of missed revenues. The VP of Sales might think this is because she doesn’t have enough sales leads or enough sales people. The VP of marketing may say that there aren’t enough sales leads because of lack of budget to do marketing properly. Such “diagnosis” typically results in a request for more company resources being expended. Or Sales people say they can close business if engineering would give them the features they wanted, and so on.

The CEO, however, might see this as more of a ‘B’ problem. The company is not aiming at the right market, or doesn’t have the right strengths to become a significant or leading player in the right market. The CEO also wants to build the right products and alliances that give the company a significant competitive edge. In other words, the same limited resources can either go to what the executives are demanding be spent (that is on ‘A’) or spent on building the future (‘B’).

What we see happening most often is that CEO’s try to split the difference.

Since they can’t be sure that their executives are wrong, CEOs can’t discount the requests to spend more money doing what they are already doing that is NOT producing the desired results. At the same time, they know they have to make way for the future. They try to fund both.

Our experiences show that in the competition between ‘A’ and ‘B’, today almost always wins because today is far more well known to the company as a whole than ‘B’ –which is typically only clearly understood by the CEO.

However, missed revenue targets this quarter or this year, are typically the result of missed business objectives some years past. Revenue especially has a lag time of 2-3 years since products have to be developed and marketed before they translate into revenue.  Therefore, robbing the future to feed today only makes it harder and harder to feed today– future revenue targets will also be missed due to lack of building a solid future. CEO’s instinctively understand this and try to ensure that the future is well provisioned for.

Now, executives don’t do this to be contrary to the CEO. They are simply acting on what they believe is their mandate—on what they are measured and compensated. They are trying to do to the best of their abilities what they believe the CEO expects them to be doing.

However unintentional, the CEO and the management team are not exactly on the same page—neither about today nor tomorrow—resulting in the CEO’s Decision Gap.

The Real Challenge of ABC

Imagine a racing boat with a team of world-class rowers all rowing in perfect unison. The boat moves very quickly towards the target, apparently effortlessly.

Now, imagine some of the rowers falling out of synch with the others, even just a little bit. Suddenly, the boat moves in jerky motion, slowing down, and requiring more effort to keep it going. Worse still, if the rowers sit facing different directions, then no matter how hard each rows, the boat will not move much.

This is essentially what happens in many companies as they grow. Without meaning to, executives begin running their departments almost like separate companies. All of a sudden, invisible but real walls appear within the company. Even when CEOs realizes that this is happening, our experience has been that they totally underestimate the extent to which this is occurring– the degree to which the rowers are out of synch with each other.

While CEO’s want the company to be highly innovative and rapidly introduce new products and services, the various executives are trying to secure resources in order to meet their departmental mandates. While the CEO wants to build scalability into the business by revamping and sometimes overhauling it, the executives are resistant to changing anything that might mean they lose control.

In short, things take too long to build or change. Everyone is working on too many things at the same time, none of them going anywhere anytime fast.

This is the CEO’s ABC challenge—how to make the company move towards ‘B’ when ‘A’ is consuming all available attention, time, and resources.

The Power of GAP Audits in Reaching Revenue Targets

A GAP (Growth, Accountability, and Performance) audit shows a CEO to what extent the company is rowing in synch and whether the rowers are all facing in the direction that the CEO set (‘B’).

At the core, the GAP audit tries to answer the following key questions:

1. Do all senior members clearly understand what B is? Are they fully onboard?
2. Are all non-executive managers who implement company-wide and departmental policies knowledgeable regarding B? Are they on board?
3. Are the compensation and reward plans supportive of B, or are they highly biased towards A so as to make B undesirable and a nuisance?

A quick but intense GAP audit will answer these and more. Within a week, the CEO will have high quality information enabling him/her to make effective, informed decisions, thereby avoiding wasted time and money, and avoiding employee frustration and burnout.

Why GAP Audit’s Are Effective

Internal research for the purpose of planning are always in danger of infection from three fallacies—accepting assumptions for fact; accepting myopic (departmental) view for global; and settling for the obvious rather than the subtle.

• False Assumptions— A major contributor to the perspective gap is the proliferation of unsubstantiated assumptions. New people accept the way things are without challenging them. Veterans start believing human defined policies and procedures as inviolate as natural laws. Many a time, we hear “That won’t work” or “It can’t be done” because someone tried years back and was not successful.

An independent GAP audit assumes nothing and starts by asking a series of “what”, “why”, “who”, “where”, “how” and “when” to sort fact from assumption.

• Departmental myopia creating lack of objectivity – Executives not only have stakes in the status quo (‘A’), but also have very specific and narrowly defined departmental stakes. Eventually, these executives tend to assume that what is clearly a priority for them is also a priority for others. When each executive starts to think this way, then departmental priorities compete for the same limited company resources. They are now rowing out of sync and in different directions.

An independent GAP audit has no loyalty to and will not favor any one department. It will ask the same questions with the same objectivity with the single purpose of bringing out the truth.

• Expediency –looking for underlying and subtle issues requires concentrated and uninterrupted effort—a luxury that many executives believe they can’t afford. They can devote only small amounts of time to the issue and look for expedient outcomes.

The independent GAP audit occurs in one continuous stream for about a week, enabling key insights to emerge and for the dots to be more easily connected.

Conducting an independent GAP audit enables CEO’s to quickly close the perspective gap, enabling them to make high quality informed decisions that lead to an effective ‘C’, ultimately achieving their vision (‘B’)

Do you need an independent GAP Audit?

1. Are you missing your targeted objectives in any of the following areas—revenue, market share, profitability, customer satisfaction, and innovation?
2. Are you missing the above by more than 10%? Are you missing them more often than you care to admit?
3. Have you tried different things to solve this problem and nothing has seemed to really work?
4. Are managers constantly saying they need more people to achieve what you are asking of them, while you are starting to suspect the issue is more of productivity level (for example, revenue by employee is lower than it should be)?
5. Do you see inconsistencies between managers that do whatever it takes to make a customer happy, and yet don’t have the same sense of urgency regarding deadlines and targets? Do you find yourself perplexed as to why the inconsistency in dedication between these two phenomenon?

If you find that the answer to the above is far more “Yes” than “No” then you should seriously consider conducting an independent GAP Audit.

Some Real Life GAP Audit Results

Here are some real life stories of how our GAP audits revealed issues that neither the CEO nor executive heading departments were aware of:

• An interview we held with three sales reps—the top, middle, and bottom producer in the sales organization—revealed that these three sales reps used completely different sales methodologies and tools to identify sales opportunities and close deals. This led to further investigation that revealed that the rest of the sales reps also used different tools and methodologies, whatever the sales rep brought from their previous company.  While the VP of sales gave each rep the same quota, some underperformed, others achieved over quota, and still others came around the quota. While the best performers almost always performed consistently, the rest did not, and as a result, the company had difficulty consistently meeting its revenue target. The VP of sales continuously requested hiring more sales reps. However, that would not have addressed the real issue of inconsistent performance.
• An interview of key executives showed that these executives had different opinion from the CEO, and from each other, regarding what the company strategy, core markets, and competitive advantage were. The CEO, saw the company as a product company wanted the company to be a technological leader in its chosen market. However, he was continually frustrated with the company’s inability to bring out new products and watching competitors beat them to it. The VP of operations, on the other hand, saw the company as a service company and continually pulled engineers to do custom jobs for clients, citing that these were very important customers and “our customers come first”.
• A company consistently missed a number of its targets including revenue targets, new product launches, and customer satisfaction ratings. While the various department heads consistently requested more budget to hire more so that they could meet their targets, our audits revealed that the real reason that the company missed its targets had to do with its culture rather than with shortage of resources
  • No one in the company was held accountable for completing anything by any deadline unless it was a work order specifically requested by customers. All other internal driven deadlines were therefore not only missed, but fully excused by management as soon as an employee said that he or she was working on a “customer request”.
  • Employees typically worked eight hours a day. When the eight hours were up, they turned of their computers and left, even when they had not completed what they had set out to do. As a result, deadlines came and went with no one really paying attention to them.

These are all system challenges that many companies face when they grow from a startup with a handful of employees to an established company with 50 or more employees. Once upon a time, the CEO knew everyone by name and knew exactly what they did and how good they were at it. Now, the CEO sees many strange faces and relies on his or her executive team to manage the productivity and direction of the various employees.

A GAP Audit is the only way for CEO’s to understand where the gaps are so they can begin to close these gaps and achieve their revenue targets.

The SOMAmetrics CEO GAP Audit™

The SOMAmetrics GAP Audit™ consists of three main phases:

• Information Gathering – during this phase the auditor gathers detailed information from a number of sources primarily: people, systems and tools, and company published material.
  • People—Surveys and interview with senor and middle management; top, middle, and bottom performers from various departments
  • Systems and Tools – what tools are used for what purposes. Are these designed for the past, the present, or the future?
  • Company published material – an inventory of Sales and Marketing tools and resources.
• GAP Analysis – during this phase, the information gathered from the above three sources is analyzed for consistency, clarity, and coherence. Perspective analysis is a key part of this phase.
• Recommendations – the last phase is an executive presentation outlining the findings of the GAP audit and recommendations for closing identified gaps, based on industry standards and our own experience working with over 100 companies

The GAP Audit typically is completed within 5-7 business days from start to finish, consisting of two site visits (one for interviews and the second for presentation of findings).

Please contact us today to find out more about this crucial first step to accelerating your company’s growth.