When it comes to fulfilling our duty of care as directors, we know that we must be actively engaged and informed. We can’t hide behind business judgment if we haven’t done our part to be informed. That means actively reviewing meeting packets, engaging in meeting discussions, asking pertinent questions and proactively seeking relevant information.
Yet there are often operational issues, about which boards lack basic information, that are integral to strategy and the responsibility of the CEO, and therefore squarely in the purview of directors.
The question is how a board can provide proper oversight if there are gaps in board knowledge and expertise, even as the distinction between operator and director is frequently reinforced with the admonition of “nose in, fingers out.”
In some cases, consultants and board advisors provide appropriate, occasional insight and guidance around specific topics. Executive compensation and PR crisis communications are examples of critical topics for which the board has responsibility but doesn’t need embedded board-level expertise.
In contrast, no board would be considered complete without financial expertise and talent management is increasingly integral to strategy and numerous operational decisions. Those are common competencies identified in a board skills matrix.
Here’s the challenge: If the board doesn’t have adequate operational experience in fundamental disciplines, then they’re poorly positioned to fulfill their remit of strategy and management oversight. If they don’t have adequate operational familiarity, then they can neither formulate the right board-level questions to ask nor consider management’s responses in the context of actual experience.
That’s a problem, particularly when the gap in operational expertise exists in areas of core business success, especially in the revenue growth functions of marketing and sales.
Consistent, Predictable Revenue Growth
Peter Drucker said simply “(the) purpose of business is to create a customer.” A company’s ability to do that consistently and predictably — to retain those customers while they add new ones and to expand the relationships with existing customers — largely determines its growth rate and valuation.
In other words, oversight of the revenue growth functions of marketing and sales are critical to the board’s discharge of its fiduciary duties to the owners.
Yet, how often are these skills specifically included on a board or in a skills matrix? Marketing is somewhat common on business-to-consumer (B2C) company boards, but rarely among middle market business-to-business (B2B) besides rapid growth technology. Sales is virtually never called out. It’s as though finance, M&A, legal, HR and other skills are critical to success, but sales “just happens.”
There was a time when sales was simpler. A time when many senior execs and directors in today’s companies may have sold themselves or cut their teeth in businesses where the growth did, seemingly, just happen.
But that was in a market environment where sales reps controlled access to information, when decision-makers didn’t defer to buying committee decisions, when buying teams were a couple influencers and a decision-maker, and when business was conducted face to face.
Today, in contrast, even in traditional industries, buyers bring expectations to business interactions shaped by their consumer experiences. Research shows that buyers are 70% of the way through their sales journey before they want to speak to a sales rep. More than 60% of B2B sales reps consistently miss quota. And up to 40% of deals are lost to the status quo and end in “no decision.”
Companies with a strong sales culture find it’s increasingly difficult for their reps to get to the table with “outbound” prospecting, particularly with new logos. They’re increasingly reliant on receiving orders from repeat customers rather than creating orders with new ones.
Those that embraced digital marketing early created a volume of helpful content driving traffic to conversion-optimized websites and built a strong flow of “inbound” leads. Even early movers have seen results decline lately as information overload and AI search results erode traditional organic results.
Marketing and sales best practices are quickly evolving and becoming increasingly integrated. Traditional, even recently hip, approaches are increasingly unreliable. It is a perilous time for companies to allow normalcy bias to create comfort and delay action.
The operations questions are manifold.
- What’s changing with their buyers’ buyers? What’s working? What’s not?
- What predictive metrics and KPIs are tracked?
- Are close rates, length of sell cycle, customer acquisition cost, lead conversion rates and pipeline accuracy stable, declining or rising?
- Does management have data to know which levers to pull, and to what degree, to grow revenue?
- When was the sales process last reengineered?
- What sales methodology does the team use?
The board questions are simpler. They include:
- What trends are management observing in key marketing and sales KPIs? Why have they selected those metrics? Which are providing confusing data?
- What deviation over what time frame will trigger action?
- What initiatives are underway, planned or considered to improve the absolute and relative results?
- What are the biggest risks they’re tracking?
- What is the process for manipulation and recasting sales forecasts from their CRM pipeline into their board packets? Is the board receiving a polished narrative or actual data?
Who’s Asking Those Questions?
The reality in many traditional middle market B2B companies is that management and staff are often unaware of fundamental changes in market expectations and marketing and sales best practices that are pioneered in other industries.
That means the board’s oversight role is particularly important. But to perform that oversight, the board must include directors with contemporary expertise in the critical revenue growth functions of marketing and sales, just as in finance, operations and the focus industry. Absent that expertise, it’s unlikely that the board can ask the necessary diagnostic questions, effectively evaluate management’s answers or provide proper guidance to the management team.
In other words, the board may not be able to fulfill its fiduciary charge.
Ed Marsh is a member of the New England Chapters of both the Private Directors Association and the National Association of Corporate Directors. He is founder and principal of Consilium Global Business Advisors, chief revenue officer of IntentData.io Inc and president of Fusion Concepts Inc.