After the prolonged recession and slow growth economy we've faced over the last few of years, the organizational cupboards have been mostly devoid of any good news. Across many industries, it has been common to see forecasts coming in below operating plan, suppliers shuttering their operations, and excess inventory being built due to unmet demand. In short, no shortage of bad news.
Inside every organization, someone has the job of delivering all this bad news, and that task often falls to supply chain leadership in the person of demand planners or S&OP leads. These are the people who have been on the hook as they facilitate the discussions to review business results and forecasts.
In the wake of several years of bad economic news, it would be easy to fall into the trap of negativity — yet negative attitudes are not rewarded in most corporate cultures. The dilemma for these supply chain leaders is delivering the reality of the bad news without being considered "nattering nabobs of negativism." A tough task.
"The Tyranny of Positivity"
Certainly, delivering a pessimistic outlook in the form of business results and a forecast runs counter to our aspirational culture. In the U.S., in particular, we are a "can do" people. We have been influenced by business writings and popular culture about the power of both being and thinking positive. Whether it is Tony Robbins, Norman Vincent Peale's "The Power of Positive Thinking" or the latest positivity tome, "The Secret," by Ken Blanchard and Mark Miller, we have been acculturated to being positive and visualizing great outcomes. We have leaders like General Colin Powell saying that "perpetual optimism is a force multiplier," meaning that being optimistic yields exponential results. It seems almost un-American to be negative.
A good friend calls this obsession with being positive the "tyranny of positivity." At times this focus on always positivity can seem "tyrannical," because as we all know, not all results are favorable.
Inevitably, despite the best intentions and most positive outlook, reality will creep in. Over the last few years, consumers flat out stopped buying, retailers contracted their inventories, SKU rationalization became a dominant theme, and many new products fell short of expectations. Forecasts were missed and demand planners and S&OP leads had to present the results, often putting them at odds with the folks that want to continue riding on the positivity train, regardless of whether it is heading in the right direction.
Even when bad news comes, people still look for the silver lining or positive spin in the results. Research came out years ago asserting that professional forecasters of every type were five times more likely to react to a positive trend than to a negative trend. As my father used to say, "The weekend forecast for Cape Cod is always sunny with a chance of clouds." It is simply in our nature to find the good in the bad.
In best practice, the most effective demand plans (and the resultant supply plans) are reality-based with a slight tinge of optimism. The baseline forecast should align with trends, activities, shipment history and plans, and the optimism comes from giving a knowing nod to the well-articulated and -quantified assumptions attached to sales and marketing activities. The benefit of being reality-based is that the organization does not over- or under-commit resources — and if the aspirations and assumptions do not pan out, they can be removed from the plan because they have been identified separately. Such demand plans are prudent and conservative, with an opportunity for growth if some of the external factors and go-to market plans begin to align.
Ten Tips for Delivering the Bad News
So how do you deliver bad news in an environment that craves positive thinking? It's not easy. Having been a demand planning manager and an S&OP leader through two recessions, I have had to deliver a lot of bad news. Below I offer some tips to managing the delivery of bad news based on my own experience having done some things right and, well, some things not so right.
1) Ask for permission to be reality based. I would often describe my role as an S&OP lead as being neither half-full nor half-empty. It is my role and assignment to be "half" — choosing not to take sides with the pessimists or optimists, but rather just "calling it like it is." If you are successful at being perceived as reality-based instead of negative, you may find that you are used as a touchstone when a senior executive wants the real pulse of the business. Ask your boss and/or S&OP leadership team for permission to call it like it is. If you present to the president in an S&OP meeting, ask for his permission as well. Let them know your intention is not to be negative but to provide the best, most realistic rendering of a plan.
2) Make sure any presentation is fact-based. Demand planners, as an example, should not necessarily have an opinion of a demand plan — they should let the facts guide any suggestions or recommendations. As a consultant, I would often suggest to demand planners and S&OP leaders that they view themselves as front page reporters, not as Op-Ed columnists. Their presentation should be fact based. For example: "The current shipment volume is -3 percent for the last 13 weeks, and -10 percent for the last 26 weeks, while the POS numbers are -4 percent and -12 percent, respectively, for the same time periods. It would appear demand is improving slightly in the near term, however it does not appear to justify the +5 percent lift in the plan. As there are no known distribution changes or trends that suggest volumes should increase above the current trend, we suggest moving the plan closer to the best near-term trend and revisiting this plan next month." Keeping the conversation fact-based helps remove excessive aspiration from the plans.
3) Pre-circulate all content. Sending out the "bad news" supply chain content a few days in advance of any meeting (such as an S&OP meeting) allows some digestion of the bad news. It also prevents you from being personified as the bearer of bad news. Make sure to annotate charts and graphs with neutral, fact-based comments, events and other elements influencing the negative numbers.
5) Avoid negative or editorial words. Do not use words such as "bad," "problem," "worse" and so on. Instead, use more empirical or mathematical words — "decline," "lift," "directional," "trend," "step change," "lower." Use the actual numbers to tell the story — do not editorialize or you will be considered Dr. Doom or the personification of the negative results.
6) Always define the prevailing trends. Many people focus on the delta to the forecast; I suggest zeroing in on monthly, quarterly, half-year, year to date or year-over-year trends for both shipment and consumption data (when appropriate). Define the prevailing trends in your business, product category or SKU, whichever is appropriate.
7) Bring other facts to the table. Often referred to as "deep dives" — where all organizational knowledge about the negative results is culled for analysis. In essence, by digging in and getting at the root cause of the poor results, you become part of the solution and not the problem. If there is a problem product category or platform in your business, try to use research and analysis to explain it better. Look at competition, econometrics, pricing, promotional activity, point of sale, channel dynamics — you should leverage all appropriate extrinsic data in your marketplace that will help management better understand demand. If inventory is an issue, bring EOQ's, batch quantities, lead times and so forth to the discussion.
8) Create a "bad news sandwich." Wrap bad news in a layer of good news and actions to improve the status quo. As an example: "Sales for product line X have been increasing steadily over the last four months, while product line Y has seen a step change decline in demand over the same period of time. We expect that a pricing change in Y to match our competition will stabilize demand, and we are putting together an elasticity study to find the 'sweet spot' price in this changing market."
9) Do not fight. There are countless examples of organizational battles in S&OP and other such meetings where a negative presentation of results brings out a highly defensive position either by Sales or Marketing. Let them have their say. Do not put yourself in the role of defending a negative result or plan. I simply say, "Let's compare facts/numbers offline, and we can bring them to the next meeting." Stay calm. These are not your numbers or results — they are the organization's. Sales and Marketing are on the hook and compensated for hitting those numbers. It is natural for them to spin and or defend their optimism.
10) Do not fudge, fake, guess or have an agenda. In order to stand as the beacon of reality, do not deceive, hide results, gloss over or carry a personal agenda into the discussion of any business results. There may be times when you do not like a supply planner or a brand manager. That should have no bearing on your presentation. If you are the person responsible for presenting results, metrics and forecasts, you need to maintain the highest possible level of professional integrity.
Certainly some of these suggestions are common sense — and some may just be good reminders. But these tips and techniques should help supply chain leadership remain positive, focused and reality-based when the results are unfavorable.
Advice for Sales and Marketing
After completing the above article, I asked a former colleague of mine, Glen Fossella, to comment on this article as written. Glen is a highly successful sales executive specializing in software and technology sales. During a layover at Hartsfield Airport, Glen layered in his own advice to Sales and Marketing professionals. These are not meant as a counterpoint to the suggestions above. Rather, they are his own suggestions for how sales and marketing professionals can work effectively within the S&OP process when the news is less than positive.
1. Accept that one of two things broke badly. Either the plan was wrong or the execution was poor. Didn't get the support? Crybaby. Bad economy? Wimp. Bite down and start chewing; it's broken and you need to get on with repairs.
2. Do NOT pre-circulate content. A little counterintuitive here, but unless it's part of your standard S&OP process, pre-circulating a response to the bad news in the S&OP content may be perceived as defensiveness or an attempt to head off a tough meeting. There's bound to be plenty of hallway talk; use that as an opportunity to socialize initial reactions and potential course corrections. But don't step on the S&OP lead or attempt to dictate outcomes; there's plenty of work ahead, and you'll need support and collaboration to get through.
3. Get under the hood with S&OP. Numbers are our friends. That's how we make the big bucks when things go well, right? Enlist the S&OP lead to gain a full understanding of the results, and get a head start on the post mortem. They're staring at the numbers every day; ask them what they think went right and wrong.
4. Leave the pig lipstick on the dresser. Spinning, deflecting or avoiding facts at this point helps neither the organization nor you. Keep your language neutral and impersonal. But remember that the results stink — not you. Is there a beat-down in your future? Maybe, but that's short term. Your job is to figure it out and fix it. Attend to that.
5. Focus on the "why." The S&OP lead gets paid to deliver the "what." Then it's your job to provide the post mortem. Analyze the data, work to ascertain what went wrong, deliver a dispassionate presentation, and then begin the process of developing a new plan or remediating the existing one.
6. Create a "good news sandwich." You didn't just wake up to this mess; you've been making adjustments and taking steps along the way. Wrap good news in the layers of bad news. Fore example: "The EMEA rollout gained traction faster than expected. Early successes are helping us focus resources on our strongest partners and verticals." It helps the team maintain a balanced view of the situation and stay constructive.
7. Do not fight. If you were hung out to dry by Operations, Finance or even your boss, it's fair game to discuss execution problems — if they are documented and measurable. But take the confrontations and acrimony off line. There's seldom any profit in battling things out in public.
About the Authors: Patrick Bower is Senior Director of Corporate Planning for Combe Inc. He can be reached at firstname.lastname@example.org. Glen Fossella is Vice President of Sales and Marketing for Rosetta Technologies Corp. He can be reached at email@example.com.