When a company or business unit misses key strategic targets, such as production or sales and services goals, which are the key metrics upon which its current growth trajectory is modeled after, this creates the conditions for analysts to use different benchmarks to accurately forecast their valuation models, and for a CFO and CEO to curtail using ambitious forward-looking statements.
What are forward-looking statements? According to a 2004 Harvard Business Review article titled, Just the Facts and Forecasts, written by Carolyn B. Levine and Yuri Ijiri; forward-looking statements are:
“…forecasted numbers in a financial statement which involves educated guesses. But that’s not always clear in the statement itself….Business people know that financial statements are impressionistic. Because GAAP requires accountants to include forecasts in statements, some numbers are by definition, educated guesses…That’s a problem for CEOs and CFOs to certify the accuracy of statements that involve conjecture, opening these executives to legal liability for sometimes unavoidable inaccuracies…”
Fortunately, when key financial metrics are missed for several quarters in a row, with negative impacts to year-over-year financial projections, organizational realignment is often the executive action taken. This is done to better align or realign employees in key positions, to recalibrate their strategy and create a new path forward.
If the path is unclear Mr. (or Miss) CEO, don’t do it! If you intend to separate job functions to organize your business by segments, it could be an ingenious move, depending on how it is structured. However, if you are separating job functions to later on reassign the same individual (who could not deliver in a former role) to lead the new segments you have created, please don’t do it!
For example, if you have an executive as your organization’s Head of Sales and Service, but the executive failed to deliver on meeting year-over-year sales targets by a wide margin, which impaired or raised doubts about your business growth trajectory; do not bring back this person to lead the new segments just because he or she is whom you are most comfortable with, trust and want to be part of your direct team. This reassigned executive will better serve your organization’s purposes by continuing to excel in a job function best suited for his or her demonstrated success. For example, being reassigned as a Customer Experience Executive, if he or she is already delivering stellar performance in customer satisfaction, customer experience or customer delight scores is a better choice.
Just like marketing supports sales, service does as well. Therefore, the most important role within your organization—besides being CEO—should be your Head of Sales and Service, not your Head of Product Engineering or of Technology. These roles are very important, since they enable and support the creation of the value you offer to the consuming public with high-quality products, top-notch engineering and product innovation. However, if your products are moving slow from your shelves or manufacturing plants to the end consumer, because your sales operation is not as dynamic as your engineering and technology operations—you simply will struggle to drive exponential revenue growth or will simply achieve marginal revenue growth.
While some may disagree with my editorial comments regarding the Head of Sales and Service function being the most important role besides a CEO, I will digress to say if your Head of Sales and Service is only responsible for driving sales revenues and therefore only makes he/she an executive generating top-line growth since top-line growth executives do not have any accountability for managing expenses, or curbing escalating controllable costs, then it’s not in the most important role after the CEO. However, if your Head of Sales and Service has P&L responsibilities, which means he or she is responsible not only for driving top-line revenues, but also for bottom-line revenues (which are revenues derived after expenses or net income), then he or she is clearly in the most important role after the CEO.
As a CEO, if you have organized your business by segments, having three Regional Heads of Sales and Service, please give them P&L responsibilities. In doing so, you are not only holding them accountable for the quality of bottom-line revenues they drive and deliver, but you are also building your organizational bench strength.
As a Strategist, I ran a $1.1 Billion consumer bank market with direct P&L accountability for nearly five years, within a model which was organized by segments and had several cost centers booking revenues in my responsibility center. Experience and applied skills should be important in selecting a Business Strategist or Consultant to advise and support, or even help coach your new segments’ Heads of Sales and Service. If you are interested in discussing business-segments alignment with different roles and how support functions can be best integrated based upon my experience, let’s have a conversation.
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About the author: Lynda Chervil is an entrepreneur, author, environmental sustainability advocate and active promoter of sustainable brands and luxury brands with sustainable practices. She is the principal of Pearl Strategic Consulting, a business strategy consulting practice. She graduated from New York University with a Master’s of Science in Integrated Marketing Communications and had held many roles in new business development, sales management and executive leadership.
She is also an affiliate member of the Institute of Consulting (Membership P0449911) and has completed the full advanced-level training requirements registered with the Institute of Value Management Certification Board, as a professional in Value Management (Certificate N0: ADV2 257). She is also a recipient of the Chartered Management Institute, Level 7 Award in Professional Consulting (Certificate number P04429911).