BAD BUDGETING!

Budgeting for salespeople is a fraught process. We all know this, but when you have poor managers using it to batter salespeople major problems can arise. We were involved in mediating a dispute at one of our clients between a salesperson and the company's CEO - a brief summary follows;

The company is a newly created small subsidiary or a much larger European multinational. The company has an established customer base in Australia as their new direct sales operation took over from a distributor. In 2022 the company recruited industry recognised, well-connected technically strong salespeople in each state to lead their direct sales efforts.

At the beginning of 2023 sales budgets were handed down to each salesperson without consultation with them. As it transpired the numbers had been set in head-office in Europe and were grossly excessive for the Australian market. The new Australian CEO did not push back on Europe on the numbers. He just meekly passed the numbers on to the team.
The salespeople all pushed back on him and the CEO's response (in writing) was that he knew they were "a stretch", but they would be provided with every resource needed to achieve the goals. The salespeople were not convinced.

By April it was clear that the targets were never going to be met and pressure was being applied to the salespeople who were already stretched. It was inferred that the salespeople were not working hard enough. By end of April the pressure from the CEO had effectively morphed into bullying. Two of the salespeople lodged general protections claims with Fair Work Australia. This was the point Locum People was asked to mediate a resolution.

It was clear from the communications from the CEO to the sales team that he was blaming them for not meeting the budgets set for them, even though they had had no say in the numbers and given their knowledge of the market, had known from the outset that the market size simply did not support the sales expectations. He was blaming the salespeople to cover for his own incompetence in not listening to them and setting them targets he knew they would not meet. He set them up to fail. Had he terminated them, the company would have likely lost an unfair dismissal claim. Had the employees resigned in disgust at their treatment, it would have likely been a successful constructive dismissal claim.

The company sells highly specialised products and there are few salespeople in the market with the level of industry and technical knowledge required to be successful. That the company has these salespeople was a coup in itself - nor could it afford to lose them as they were essentially irreplaceable. There would also have been reputational damage to the company had they lost them.

Our goal was to keep the salespeople in the business while trying to rescue the relationship they had with the CEO. The salespeople were actually reasonably easy to mollify. They just needed an acknowledgement from the CEO that he had got the budgets wrong. Unfortunately he was unprepared to do this, and was unable to demonstrate to us how he came up with the numbers - other than saying "this is what head-office wanted".

As this was his response we then contacted the European head-office and spoke with global CEO. We explained the situation, He was completely unaware of the dissatisfaction in Australia. He then said the local CEO should have come back to him at the start and told him the numbers were wrong way back at the beginning of the year. He also knew he could not afford to lose the salespeople. It turned out he was quite reasonable. He even said he expects his local CEOs to push back on this type of stuff as they have the local knowledge not him. That's what he is paying them for.

The final result was a re-writing of the budget with the input, and buy-in, of the salespeople and an apology from the local CEO to the salespeople. Further the local CEO engaged a Locum People consultant to be his executive coach to assist him in changing his behaviours so that such instances did not recur. All parties put a line in the sand and are now working together professionally and will be successful. The Fair Work claims have been dropped.

The lessons here are as follows;

1. CEOs of Australian subsidiaries need to push back on unreasonable requests from head-office. It's their job. If you're a local CEO who is not prepared to do this - you shouldn't be in the job.
2. When budgeting it is critical to get the input of your sales team. Salespeople are not afraid of sales growth, but targets need to be realistic. If sales people are not listened to, and their suggestions ignored there will be no buy-in, and it is unlikely you will be able to hold them accountable for not meeting the targets.
3. Setting expectations that cannot be met and then blaming an employee for not meeting them is bullying under the definition of FWA. This applies to budgeting as it does other management tasks. Don't do it.
   
   

If you have concerns about how your budgets are being set, please contact Locum People for a confidential no obligations talk.