Sunday, 25 September 2016 19:19

Sales IS a Boardroom Issue

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Is Sales a Boardroom Issue? We always thought so and felt the question was self-evident. But this is apparently not the case as more and more small to medium enterprises (SMEs) we work with demonstrate a superficial understanding of the board members role in sales. There is also a surprising lack of published research on the topic, although we do list some references below. One excellent case study can be found here. Let me share our findings and then invite you to comment on this important issue.

When we ask businesses why they do not see sales as a boardroom issue, we get answers that broadly follow these three lines of reasoning:
  • sales is included in the financials and therefore needs no further emphasis
  • sales process is the role of the Head of Sales, not the board
  • we review product performance and it is an integral part of that review
Are these plausible reasons? There is validity in what is being said, but the question to look at from a governance perspective is: “Is this sufficient?”

We find that when the above reasoning is followed by a board, the coverage of sales becomes superficial and essentially a hands-off exercise. When we compare the amount of time and focus spent on sales against that spent on cost control, we see a ratio of 1:4 to 1:5. In other words, although sales is one of only two levers management can control directly for financial success, they spend much more time on the other lever – expenses - plus risk and administrative issues where a 1:3 ratio of sales : expenses and administration would be far more powerful.

SMEs that are performing well and growing exhibit certain boardroom traits that are quite straightforward and easily copied but too often it takes a change in management thinking, or a crisis, to get these traits adopted. Sales should not be a passive issue in the boardroom.

In SMEs that are performing well, members of both the executive and the non-executive directors ask for evidence and drill down into detail on the following ten questions:
  • what is the revenue plan (by product, region etc..)?
  • what assumptions were made to create the forecast?
  • how will the forecast be achieved?
  • what risks are inherent in the forecast and what mitigating action is being taken against the risks identified?
  • what is the average, high and low in time to sale?
  • what is the average, high and low in time to cash?
  • what is the sales efficiency – sale size, effort to sell, etc?
  • what is the rate of customer losses, complaints and refunds?
  • do we have the right skills and approach in our sales team?
  • are we projecting the right image in our sales and in our sales team?
In addition to asking for detailed answers to these questions, board members should be actively involved with key customers and key accounts. By doing this, they provide themselves assurance that the sales forecast is real, that therefore decisions on growth and investment are being taken on realistic business cases. Additionally they can be assured that they will be first to find growth among their competitors. This focus is supported by coaching and mentoring their key sales people and learning how the customer wants to buy. These help assure the sales process is designed to match and can be fine tuned when a change in customer needs is detected. See this excellent McKinsey piece on understanding the customer experience here.

Even the board structure is an indicator of the level of importance placed on sales. When the board contains at least one member who has been a salesperson on the road, not a former marketing director, then it is likely to have a much more nuanced understanding of the sales forecast and how the company can take advantage of small indicators when the buying patterns have changed.

In short, directors should engage with the people and the process of sales to assure themselves of the confidence level in the forecast, that the risks are truly being managed and not just relegated to another line on the risk register and that customers needs are truly being met.

Perhaps the fact that there is little published research on this topic means it should be self-evident but actual performance in the market indicates it is not common practice. Corporate governance standards have become more stringent in recent years so it is even more important than ever the board members assure themselves of the quality of the sales process.

In future posts we will look at behaviours that are essential for boards that have key account customers and consider some powerful questions for board members to ponder, and ask. Also, we will be looking at the impact of emerging big data and artificial intelligence capabilities and how the board can benefit from them.

Having dedicated a large part of our own careers to customer experience and top line sales, we believe emphatically that sales is a boardroom issue. We welcome your thoughts as to why so many SMEs don’t pay sales the in-depth, focused attention it deserves – the attention that can accelerate their growth and protect their business success long term.
Read 2577 times Last modified on Sunday, 09 October 2016 21:31

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