Achieving High Growth | Guidance for Middle Market Executives

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MIDDLE MARKET MAKES A MOVE
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Reserved. CEB5477313SYN
1
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CEB Middle Market Report
Q1 2013
The Middle Market Growth Story
With many middle market companies sitting on high levels of cash and the fiscal cliff in the
rearview mirror, middle market growth companies hit the go button in Q1, ratcheting up
expectations dramatically from Q4. The CEB Middle Market Near-Term Growth Index moved
12% higher, driven by revenue expectations of sales to new customers (up 21%) and existing
customers (up 15%). The CEB Middle Market Long-Term Growth Index edged higher, driven
by increased investment in capex, M&A, and R&D.
The era of functional navel-gazing
on behalf of midsized company
executives has given way to a
recognition that the intense drag
created by functional isolation will
not allow companies to achieve their
lofty growth goals.
Q4 Q1
0.00
2.50
5.00
3.47
3.90∆ = 12%
Neutral
Q4 2012 Q1 2013
CEB Middle Market Near-Term Growth Index
Scale = 0–5
Middle Market Makes a Move:
Achieving High Growth
By Scott Engler, Senior Global Executive Advisor, CEB Middle Market
Mark Clauss, Managing Director, CEB Middle Market
Source: CEB, Middle Market Executive Confidence Index, 2012.
To find out the implications for
your function, click on the links
below:
Contents
Middle Market Report 1–5
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Operations Report 11
Sales Report 12

2
CEB Growth Indicators
Percentage of Middle Market Executives Predicting Growth
CEB Production Indicators
Percentage of Middle Market Executives Predicting Growth
Revving up the Sales Engine...
Expectations for growth jumped sharply in Q1. Seventy-two percent of executives are now
expecting higher revenue over the next 12 months, an increase of 9% from Q4. Ninety- one
percent of middle market companies are expecting higher sales to new customers, and 85%
of middle market companies are expecting higher sales to existing customers.
0% 50% 100%
66%
82%
55%
79%
49%
79%
45%
67%
0% 50% 100%
61%
72%
76%
91%
64%
85%
Revenue
Introduction
of New
Products
Sales to New
Customers
New Orders
Sales to
Existing
Customers
Production
Capacity
Higher Q4, 2012
Higher Q1, 2013
Higher Q4, 2012
Higher Q1, 2013
…and the Product Pipeline
Eight out of 10 midsized companies expect more new orders and are looking to ramp up
product introduction and production to meet that demand. Thirty percent more companies
now expect to increase production (79% versus 49%) and 22% more companies are looking
to increase capacity.
CEB Growth Indicators Differences
Revenue: +9%
Sales to New Customers: +15%
Sales to Existing Customers: +21%
CEB Production Indicators
Differences
Introduction of New Products: +16%
New Orders: +24%
Production: +30%
Capacity: +22%

3
Q4 Q1
0.00
2.50
5.00
3.32
CEB Middle Market Long-Term Growth Index
Scale = 0-5
CEB Long-Term Growth Indicators
Percent Change in Companies Looking to Increase Expenditures Over Q4, 2012
The Capex Iceberg Thaws
Although near-term growth expectations have jumped markedly, the long-term growth
outlook is slowly turning positive after trending sideways in 2012. Companies are still
cautious but finally loosening the purse strings on long-term growth drivers. The overall
CEB Middle Market Long-Term Growth Index was up just slightly, but underneath, the
trend is more optimistic.
R&D
Expenditures
Number of
M&A Deals
Capital
Expenditures
0%
5%
10%
0%
5%
10%
5%
7%
5%
3.28
Neutral
More midsized executives are expecting an increase in capex, R&D expenditure, and M&A.
Just as significant is a drop in the number of companies expecting to decrease capex in 2013.
In Q4, 36% of midsized companies expected to reduce capex spending, and the number
improved significantly in Q1. Only 24% of midsized companies now plan on reducing capex.
Q4 2012 Q1 2013

4
Disparity Between Expectations for Revenue and Head Count
Growth and Cognitive Dissonance
Although large enterprise is reducing head count, Middle Market continues to add staff.
Twenty-one percent more midsized companies than large enterprise companies plan to add
head count, and 77% of midsized companies are increasing or holding the line on overall
head count.
Middle Market is far more optimistic than large enterprise when it comes to head count,
but revenue expectations continue to outstrip hiring expectations. Although 72% of
midsized company executives expect revenue to increase, only 50% of executives expect to
add head count to support that growth.
Reengineering the Human Capital Equation, 1 + 1 = ?
The disparity between revenue expectations and head count reflects a deeper change in
approach to human capital. Rather than add massive head count along with expectation
(as has been done in the past), middle market companies are focused on reengineering the
human equation to ensure the whole is worth many times more than the sum of
the parts.
Specifically, middle market companies are breaking through functional silos to enable trend
sensing, intelligence sharing, and strategic collaboration.
0%
40%
80%
72%
50%
Revenue Head Count
∆ = 22%
Source: CEB, CEB CIO Leadership Council Business Productivity Database, 2012.
1 Validation of value leakage estimates: Model assumes a typical project portfolio of $100 M annually with a 15%
expected return. Estimate of realized business benefits is validated by surveying the business sponsors of 51
systems implementations. Sources of value leakage are sized based on regression analysis of 163 drivers of
project business impact.
In two pronounced examples, two separate CEB middle market companies approached
the problem by physically reorganizing their companies around areas of practice and
strategic groups. They moved people out of their functional groups and into groups
where they now sit next to their functional peers in Marketing, IT, HR, etc., who are
working on the same initiatives—in effect, forcing functional collaboration via physical
proximity.
Many companies are looking to achieve collaboration benefits through IT investments.
Twenty-five percent more middle market executives surveyed in Q1 are planning to increase
IT capex than in Q4. CEB research found that companies tread with caution as satisfaction
rates are still low, and typically, companies realize 74% of their IT investments and capture
an even lower percentage of expected return.1
This view is supported by the latest research
on enterprise performance.

5
Relative Importance of Employee Performance Component to Business
Unit Profitability1
The bottom line is that improving performance in the new work environment requires
enterprise contribution—which means employees must be effective at individual tasks and
network performance. Business units with high enterprise contribution increased profits by
12.6% and revenues by 12.4%.1
Middle market companies have a distinct advantage in connectivity due to having fewer
locations, less complexity, and shallower organizational grids. They are focused on driving
new competencies, breaking down functional silos to create functional convergence on
strategy, and creating new roles to enable horizontal workflows.
This new focus on cross-functional efficiency and innovation can be seen very clearly in
the imperatives of midsized company functional heads on p. 6. From Legal to Finance to
Marketing, every list of functional imperatives includes initiatives to maximize the return
on human interaction across the company versus just a return on investment in functional
expertise.
Now, let’s take a look at how your function can increase performance.
Individual Task
Performance
Network
Performance
2002 2012
RelativeImportanceto
BusinessUnitProfitability
1 Relative importance in business unit profitability is determined by conducting a MANOVA analysis.
n (2002) = 13,047; n (2012) = 23,339.
Source: CEB, CEB Corporate Leadership Council, 2012.
Reengineering the Human Capital Equation, 1 + 1 = ? (Continued)
The importance of network performance—activating the ability of people to work
together—has risen by 200% over the past 10 years. The result of this tectonic change in
organizations is that the bulk of efficiency gains over the next five years will not result from
improving individual effectiveness in role but corporate connectedness, whereby each
function works in concert across the enterprise to drive exponential performance.
0%
50%
100%
22%
78%
49%
51%

6
Middle Market by Function
FINANCE
Finance has evolved into the key strategic compass of the midsized organization, with
CFOs now playing a co-CEO role in strategic development, risk sensing, and execution.
This expanded role is the result of the current economic climate, in which companies must
balance growth and profitability and reduce the risk of big growth bets. To meet these
higher-level demands, middle market finance departments are focusing on strengthening
strategy development, improving business performance management to drive execution,
and building processes and capabilities to increase the impact that Finance has on business
partner decisions.
The Top Four Areas CEB Is Helping Finance Executives
■■ Five out of the top 10 risks facing
midsized companies are
strategic risks.
■■ Fewer than 1 out of 3 companies
believe their teams consistently
derive business insight from data.
■■ Only 5% of the data Finance
provides is viewed as helpful by
the organization.
Developing and Executing Growth Strategy
CEB Insights and Tactics
■■ Reorient yourself as a strategic advisor, create a process that forces choice, embrace
risk as a core element of business performance management, and manage the
strategy, not the business.
Improving Business Performance Management
■■ Build an integrated business performance management approach to drive outcomes
and action.
■■ Select metrics and build dashboards that link to value drivers.
Building Effective Business Partnering
and Analytics
■■ Focus FP&A activities on providing insight that challenges outdated business
assumptions.
Streamlining Budgeting and Forecasting
■■ Increase process efficiency in budgeting and forecasting activities.
■■ Focus on improving management reporting, operating reviews, and other business
insight–focused processes.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

7
Improving Manager Capabilities
■■ The most effective managers set clear and measurable goals for their direct reports
that link to organizational goals.
Sourcing New Talent
■■ Prioritize requests based on the potential sourcing value to the organization, and
engage hiring managers in sourcing activities.
Building Bench Strength
■■ Executives must identify future-focused competencies and enable leaders who are
both achieving current results and capable of leading the future of the organization.
Driving Functional Efficiency
■■ Identify the critical connections across talent management activities to improve
collaboration, efficiency, and effectiveness of key talent management processes.
Enabling Innovation and Adaptability
■■ Create a clear mandate for innovation, encourage risk taking, and work with
leadership to support development of new ideas.
■■ Employees reporting to
managers who are effective at
manager-led development have
25% higher performance levels,
40% higher retention levels, and
29% higher commitment levels
than employees reporting to
managers who are ineffective
at development.
■■ Great Global Leaders are almost
three times more likely to hit
their three-year performance
goals and lead teams that
have both 12% higher levels
of discretionary effort and a
13% lower risk of attrition than
average.
■■ Business leaders believe that
just 35% of organizations are
effective at talent management.
■■ “Building a Culture of Innovation”
is a priority for 54% of senior
R&D executives.
Middle Market by Function (Continued)
HUMAN RESOURCES
An increase in talent acquisition efforts and 25% strategic growth targets for 2013 pushed
HR budgets up 7%. To meet those targets, HR needs to think beyond individual role
performance and consider how to enable efficient workflows across functions to manage
talent effectively. The enterprise’s need to align the workforce to strategy and manage a
growing employee base is fueling a need to upgrade HRIS systems.
The Top Five Areas CEB Is Helping HR Executives
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

8
INFORMATION TECHNOLOGY
Across the board, midsized company IT spending is up, but IT’s role is rapidly changing.
IT executives are prioritizing business outcomes over assets, enabling the organization
to make IT decisions, and focusing on end-user output. Ultimately, IT is moving into a
more consultative role to the business to influence decisions and help the organization
understand how the pieces fit together.
The Top Five Areas CEB Is Helping IT Executives
■■ Seventy-six percent of
employees report a significant
increase in time spent working
with data and information.
■■ Sixty percent report exchanging
information with 10 or more
people on a day-to-day basis.
■■ Sixty-one percent of employees
do not believe the support they
receive from IT enables them to
be fully productive.
■■ Only one in five global IT leaders
are effective at delivering value
to the organization.
Instituting End-to-End IT Services
■■ Package the technologies, processes, and resources across IT needed to deliver a
specific business outcome.
Creating Strategic Roadmaps
■■ Drive consensus, bridge gaps between strategic plans and operating plans, and
coordinate IT planning across multiple organizational units and technologies.
Enabling Business Partner Responsibility
and Coaching
■■ Equip business partners to make better IT investment decisions and more effectively
manage IT projects.
Supporting Knowledge Work
■■ Equip teams within and beyond the IT organization to collaborate, work globally,
and generate insight from data.
Focusing IT Investment on Critical Business Capabilities
■■ Define services through business capabilities, and manage and measure services
based on business outcome.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

9
LEGAL
Growth and international expansion are putting pressure on middle market general counsel
to become more proactively involved in business decisions earlier in the process. This
change will speed execution and support growth by understanding business and technology
risks, educating business clients about risk-informed decision making, and ensuring a
culture of compliance and ethics. Middle market companies are bringing more legal
activities in house to both reduce outside legal spend and bring more expertise close to the
business.
The Top Five Areas CEB Is Helping Legal Executives
■■ Eighty-five percent of legal
executives tell us that managing
information risk is a top priority.
■■ Less than 50% of survey
respondents train employees
on the company’s records
management policy, and one-
third do not train employees on
appropriate e-mail use.
■■ CEB research indicates that legal
executives worry most about:
■■ Growth of unstructured data,
■■ Cloud computing,
■■ Remote access to information,
■■ Employee negligence and
misconduct, and
■■ Personal devices in the
workplace.
Improving the Consistency and Speed
of Commercial Contracting
■■ Improve consistency and speed by selectively involving Legal where it can most
impact risk and by simplifying agreements and processes for faster deal making.
Building or Improving Corporate Compliance
and Ethics
■■ Capture key risks across the enterprise, develop an employee-friendly code of
conduct, and create effective monitoring and reporting capabilities.
Developing Business Partnership Skills
■■ Understand business partner needs and expectations, build credibility, develop
influence, and align to business goals.
Managing Information Risk
■■ Gather realistic input by incorporating power users, design practical employee
programs, and enable risk-informed decision making.
Educating Business Clients and Employees
on Legal and Compliance Risks
■■ Design end-user-focused compliance training and communication by engaging
stakeholders and enlisting their support to drive accountability.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

10
MARKETING
Consumers don’t want relationships with brands. Marketers can get more brand
“stickiness” (brand intent, follow through, recommendation, and repurchase) by investing
in strategies that simplify consumers’ purchase decision paths as opposed to investing in
strategies intended to drive engagement with the brand. (So brands can stop trying to get
more likes on Facebook in the name of “engagement.”) On average, customers progress
nearly 60% of the way through the purchase decision-making process before engaging a
sales rep, which means Marketing is now playing a key sales role by informing the customer
earlier in the process. Marketing analytic skills are at a premium as well.
The Top Five Areas CEB Is Helping Marketing Executives
■■ Sixty-two percent of shoppers
search for deals online for at
least half their shopping trips.
■■ Analysis of customer data shows
there are only two significant
drivers of changing a customer’s
direction: teaching customers
about their own business and
providing them with compelling
reasons to act.
■■ Information volume is rising
60% per year, and 71% of CMOs
feel unprepared for this data
explosion.
■■ Forty-three percent of marketing
spend is wasted.1
1 This estimate is based on Rex Briggs’s analysis of more than $1 billion worth of advertising by 30
Fortune 200 companies.
Understanding Customer Buying Behavior
■■ In the consumer space, decision simplicity is the most important element of the
purchase path, and it drives stickiness more than long-term brand affinity or
engagement.
■■ Most B2B companies struggle with delayed sales engagement and stalled deals.
To push customers through the purchase funnel, Marketing must tailor to distinct
customer purchase needs and use key channels to build deal momentum.
Reshaping Customer Buying Criteria
■■ For content marketing to “win,” suppliers must do more than produce thought
leadership. They must teach customers something new about their own business and
motivate them to take immediate action.
Fusing Multiple and Emerging Communication Channels
■■ Build a clear, consumer-centric, strategy-led planning approach.
Building the Marketing Team of the Future
■■ Too many marketers are looking for agile marketers who are analytically savvy, can
make quick decisions, and have digital prowess. These individuals are rare, and even
if you can find them, they often underperform. Hire “focusers”—marketers who can
filter out noise, resist distraction, and never lose sight of long-term goals.
Harnessing Data for Focus and Decision Making
■■ Building data streams and gaining insight from them doesn’t need to be an all-or-
nothing exercise. Chances are the data your company already collects could be used
to improve marketing strategy and execution.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

11
OPERATIONS
Midsized companies are introducing new products, ramping up capacity and production
at faster rates than larger companies, and putting new demands on Operations to find
efficiencies and strategically align to support growth. Sixty-six percent of companies are
introducing more new products, and 55% are expecting increased order volume. Midsized
companies, more than larger companies, have a greater opportunity to fine-tune processes
for efficiency, rethink design, and work closely with Sales to manage inventory to drive
expansion.
The Top Five Areas CEB Is Helping Operations Executives
■■ Only 35% of executives believe
their S&OP process is even
somewhat effective.
■■ The average company spends
25% of the value of its inventory
just to hold it each year.
■■ Only 37% feel that Operations’
KPIs align with overall corporate
objectives.
■■ Functions that have a higher
proficiency with metrics drive
performance by 24%.
Optimizing Sales and Operations Planning
■■ Communicate the value of a standard, global planning approach.
■■ Clearly align stakeholder roles and responsibilities back to measurable planning
activities, and implement a repeatable framework that balances enterprise
standardization with local flexibility.
Ensuring Strategic Alignment
■■ Evaluate business assumptions, assess customer strategies, and communicate
desired strategic position internally and externally.
Revamping Inventory Management
■■ Understand the true drivers of inventory costs, and plan strategically around them to
create sustainable lower costs.
Increasing Metric Focus
■■ Clearly link Operations’ metrics back to corporate and customer objectives,
evaluate and filter metrics’ key performance drivers, and build living scorecards and
dashboards tailored to day-to-day decision making.
Transforming the Procurement Function
■■ Balanced, mature project portfolios that include initiatives to drive both cost
structure transformation and product and brand enhancement deliver higher value
and are driven by three core functional capabilities: idea quality, execution ability,
and selling ability.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

12
SALES
To fuel growth, midsized companies are investing in more “sales feet on the street.”
Seventy-three percent of middle market companies are increasing their sales forces, with
the majority of that increase bolstering field sales (62% of the sales budget) and to a lesser
extent sales operations, inside sales, and field sales management. Midsized companies are
reporting less reliance on discounts and a shorter average sales cycle compared to large
companies.
The Top Five Areas CEB Is Helping Sales Executives
■■ The best organizations are
building a culture that allows
for higher performance and
retention levels, not to mention
a better ability to attract top
talent.
■■ Although customers are
spending again, the way they
are buying has changed. They
are more informed and do not
contact suppliers until they
complete 57% of their purchase
process.
Driving Sales Transformation
■■ Empower reps to sell to an empowered customer who is capable of learning what to
do on their own.
Getting in Early and Shaping Demand
■■ Shape demand by teaching customers where they learn by executing four critical
pre-funnel selling activities.
Creating More Precise Sales Force Segmentation Models
■■ Ensure your teams and resources are aligned appropriately to hit growth goals.
Building an Insight-Selling Organization
■■ Enable your teams to replicate Challenger® behavior through different-in-kind
messaging, talent development, and sales process.
Partnering with Marketing to Move up the Decision Chain
■■ Help reps reduce cold-calling time by generating leads using social media.
below:
Contents
Finance Report 6
HR Report 7
IT Report 8
Legal Report 9
Marketing Report 10
Sales Report 12

13
About CEB
CEB is the leading member-based advisory company. By combining the best practices of
thousands of member companies with our advanced research methodologies and human
capital analytics, we equip senior leaders and their teams with insight and actionable
solutions to transform operations. This distinctive approach, pioneered by CEB, enables
executives to harness peer perspectives and tap into breakthrough innovation without costly
consulting or reinvention. The CEB member network includes more than 16,000 executives
and the majority of top companies globally.
Visit Us to Learn More
www.research.executiveboard.com
About CEB Middle Market
CEB middle market programs operate on the principle that the collective experience and
resources of a member network can more swiftly and effectively resolve challenges than any
one of its individual participants. Through shared funding of a central research team and
the contribution of proven ideas, our members receive immediate and unlimited access to
ongoing best practice research and business intelligence, essential tools for productivity and
effectiveness, and an unparalleled peer network.
Key Facts
■■ Serves seniormost executives and their teams at midsized organizations
■■ Designed for organizations with annual revenue less than $1 billion
■■ Supports career growth and development, management challenges, strategy
development, and execution of operating plans
■■ Each program has more than 1,200 best practice studies, benchmarking reports, and
tools.
CEB Middle Market Functional Programs
■■ CEB Corporate Legal Exchange®
■■ CEB Finance Leadership Exchange®
■■ CEB HR Leadership Council®
■■ CEB IT Leadership Exchange
■■ CEB Marketing Leadership Roundtable
■■ CEB Operations Leadership Exchange
■■ CEB Sales Leadership Roundtable®

Achieving High Growth | Guidance for Middle Market Executives

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Achieving High Growth | Guidance for Middle Market Executives