Create value with good corporate governance

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To a layman good corporate governance and auditing may speak of accounting practices. The US Sarbanes-Oxley Act (2002), which may eventually become a model of how to create good governance and better standards around the world, goes even further. The Act established a framework whereby you need to create internal and external value for all of your company’s stakeholders, with sales and marketing playing a key long-term strategic role to deliver the right offerings to people that really counts: the customer. It also provides greater transparency for the benefit of all of the stakeholders and customers alike.

Andrew Dugdale, the founder and director of Intellectual Capital Development Ltd (ICDL), provides us with a more in-depth explanation:

“Sarbanes-Oxley is a new set of legal standards for corporate governance, and an altogether far more significant issue. Once this is clear, it is obvious how this relates to sales and marketing. Accounting is 'historic governance', strategy and execution of stakeholder value development is 'forward looking governance'. The impact on stakeholders and companies is clear: you can attain more business, created in a structured way, aligned to the business mission and vision, and delivered within the risk parameters defined by the executive team and shareholders… and a self contained audit trail to prove that maximum shareholder and stakeholder value was and is being delivered.”

Terry Kendrick, a consultant and lecturer on the MBA programme at the University of East Anglia says: “US moves towards stronger frameworks for corporate governance have, despite highlighting a number of scandals, been criticised for adding significant cost to audit. There is a need to show how good corporate governance creates value, not just cost, for the organisation – it would be a much easier sell to the board then! Given the modern consumer’s interest in ethical business it should be possible to draw a link between effective corporate governance and value creation.”

So while marketers don’t currently play a key role in many of the world’s boardrooms, the message is that they could and should. Sarbanes Oxley Enterprise Risk Management (SOX ERM) tools can not only help them to comply with the legislation, assisting in the creating of evidential audit trails, but they can also improve their own value and position within the corporate landscape. What is their significance otherwise? Well firstly, most marketers hate the idea of being accountable for what they do; secondly, sales people often see themselves as a separate entity to the marketing function and so the twain don’t meet. Thirdly, too many marketers think that marketing is just about marketing communications. The truth is that a new and joined-up approach should now be adopted to maximise the potential for more sales.

Sales and marketing should thus be more accountable, better able to manage and assess risk, apply profitable processes by working more collaboratively, and apply more effective systems of control tools like the ICDL’s Sales’ Accelerator, allowing salespeople to see how they and their companies can profit by exploiting certain opportunities. Marketers can also gain favour in the boardroom by demonstrating the effectiveness of their strategies, the value they have to the business and its stakeholders. They can, moreover, apply the knowledge they attain from other parts of the enterprise (including by being integrated with CRM systems) to create better strategies or maintain any existing ones that have proven their worth.

Now some CRM systems do have the ability to track audit trails, but SOX ERM tools take things a step further; they take a more planned, integrative and structured approach. ICDL claims that its tools have done what PricewaterhouseCoopers (PwC), commissioned leaders of COSO – the Committee of Sponsoring Organisations of the Treadway Commission, said was tough to achieve; they are able to create and audit what Dugdale refers to as the “forward-looking governance element.”

In response Dugdale says, “ICDL’s tools exist, are functional, robust and genuinely create value as well as enabling full compliance.” He also recognises that people are a key component of the whole thing, not just the technology. So much of his company’s focus is on workshops and developing strategic partnerships, as well, with the Institute of Sales and Marketing Management and academic institutions.

In a recent email to Dugdale, Dana VanDen Heuvel of Danvan.net – Interactive Sales and Marketing, commented: “I’m interested in learning more about your organisation and what you do…I don’t seem to see anything like what you represent, here in the States.” In fact Dugdale believes that everyone can fall in love with the whole process created by ICDL’s workshop and field-deployed web tools, he says, including:

  • Sales teams – because our tools create thinking space to enable them to qualify better, better align their offerings with their customers needs, and by doing this, and capturing the data as they develop it, we enable automatic upload of data through API to CRM systems, and automate the production of account and opportunity plans. More sales, less work, no drudgery! Field proven and web deployed!
  • Marketing teams - because our solutions create thinking space to enable them to create more competitively advantaged offerings, aligned into the optimal market segment, and the sales teams love their messages because they are based on current field captured high quality data
  • Business executives - because value-based evidence is instantly available of each offering, each market and each key account; how competitively advantaged (or not) they are in each of these areas; and whether their existing capabilities match current customer needs. This enables accurate development and culling of offerings, better alignment with markets and their needs, and clarity of vision in A&M strategy or Partner/Alliance strategies.

SOX ERM awakes some external issues for shareholders and other stakeholders, reveals Kendrick. These relate to market analysts who often assess businesses on their sales potential. “How good are these public sales’ forecasts?” he asks and says, “We regularly see companies over promising and under delivering on this. More transparency and accountability in marketing and sales will make it possible to have a greater degree of confidence in the ability of a company to meet its objectives.” Tools like the Sales’ Accelerator, he feels, can help companies to show how realistic those forecasts are.

With customers being very sensitive about a number of external issues, like the environment and what they eat, the creation of an audit trail has other benefits too. It will ensure that ethical practices are followed, and if you do so this will have not only an impact upon your sales, but it could also bolster your brand image. It will also highlight the negative aspects, those that are highlighted by the he COSO ERM framework which warns that “several levels of sales or divisional management might collude in circumventing controls so that reported results meet budgets or incentive targets”.

Lastly Kendrick warns, “You can have the best financial measures in place but unless your current and future customer base is well managed and not at risk then, potentially, you have no income to financially manage.” Everything is theory, he says, until the pounds or dollars go into your corporate bank account.

So while many may complain about the extra costs associated with auditing, in order to comply with Sarbanes-Oxley, the benefits are clear. They may not yet be for UK and other European Union-based companies, but my research tells me that many firms are becoming increasingly aware of its potential impact. In fact most of the consultants I spoke to think that it might become law here too in the near future. By using SOX ERM tools now, you can keep ahead of the game and increase your competitive advantage.

By Graham Jarvis
Editor, CIMTech International
Tel: 0776 682 3644

21st October 2004

Further Reading:

1. ICDL - www.thebusinessaccelerators.com/
2. eWorldwire.com - www.eworldwire.com/
3. Making Sense of Sarbanes-Oxley Tools – Richard B. Lanza, CPA, PMP
4. Sarbanes-Oxley Spurs ERM – by David M. Katz of CFO Magazine
5. Fear Factor - Sarbanes-Oxley offers one more reason to tackle enterprise risk management
6. Portfolio Management Forum
7. When ERM Meets SOX - Companies can turn their Sarbanes-Oxley compliance effort into a competitive weapon by merging it with an enterprisewise approach to risk management – Joanne Sammer
8. Using COSO ERM to Comply with Sarbanes-Oxley
9. Sarbanes Oxley (SOX) and Business Process Management (BPM)
10. Going Beyond Sarbanes-Oxley Compliance: Five Keys to Creating Value - Mark S. Beasley and Dana R. Hermanson
11. Fear factor: Sarbanes-Oxley offers one more reason to tackle enterprise risk management - Special Report on ERM - Russ Banham
12. Strategic Risk: Am I doing OK? – Terry Kendrick
13. Executive briefing on strategic marketing risk management. Gee Publishing Ltd, May 2004. Terry Kendrick (Series editor: David Hillson) . ISSN 1742-6669

About ICDL

ICDL stands for Intellectual Capital Development Limited. It is a name that reflects directly upon our two principal activities. The first is the application of fresh thinking to our clients' sales and marketing strategies. The second is the translation of our ideas into practical, flexible tools that can be applied by our clients to their own unique business challenges.

Our tools and development programmes have been adopted by global organisations, such as BT Syntegra and Carillion. They are ideally suited to the delivery of the audit trailing and management accountability specified by rulings on corporate responsibility, such as the Sarbanes-Oxley ERM Draft Legislation in the USA. In addition, they can serve as practical replacements for sales training and they can even link to customer relationship management solutions such as Oracle, Onyx and ACT.

ICDL was established in 2000 to build tools, processes and events that drive forward sales productivity. The company was established by Andrew Dugdale whose career spans 22 years in global sales. He is Vice Chairman of the Royal Counties branch of the Chartered Institute of Marketing and sits on the MSSSB (Marketing and Sales Standards Setting Body) a government-sponsored steering group, looking at setting future standards for excellence in sales and marketing.

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About Terry Kendrick

Terry Kendrick has been a business consultant since 1987, initially in information sources and management and subsequently in marketing planning. Since 1987 he has worked on marketing planning and CRM projects for over fifty organisations in a wide range of manufacturing, consumer and services marketplaces in seventeen different countries.

Terry has published business-to-business and academic papers on customer relationship management and risk management in marketing. Other publications include an executive briefing for Gee/ Sweet & Maxwell on strategic marketing planning and risk. He has contributed lectures on strategic risk management, consultancy skills, organisational change and research methods as part of the MBA programme at the University of East Anglia. He has also presented sessions for Cranfield School of Management, the University of Strathclyde and the Mediterranean Institute of Management in Cyprus.

In addition to general strategic marketing planning and research expertise Terry has a particular interest in competitive intelligence (CI) and risk management. He has written for the worldwide Society of Competitive Intelligence Professionals (SCIP) and runs CI and risk management workshops for companies and other organisations. He is currently undertaking PhD study in the application of risk management tools and techniques to strategic marketing planning.

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