Sarbanes-oxley-compliance.us asked:


The progress that Sarbanes Oxley Act seeks to make in corporate governance is best understood by drawing an analogy with the total quality movement. In the days of statistical quality control, companies looked at quality after the fact and measured defect rates in a sample of their final output. This was not helpful since companies could not undo the damage, i.e., they had no way to recover the costs incurred on the rejections. The Japanese brought about a paradigm shift by implementing systems to produce quality products at the outset. They placed built-in checks on the production floor where errors in manufacturing were corrected before they were compounded as work-in-progress moved from one stage to another.

Similarly, the message of Sarbanes Oxley compliance is that management should change from a reactive approach to risky events to a proactive method which anticipates adverse situations, takes preemptive action before an unfavorable course of events snowballs into a crisis or the systems and processes are strong enough to weather the buffeting should unforeseen events strike.

SOX Compliance has removed the veil that hid many ills inside corporations. It now seeks real time information that can materially impact the financial performance of a corporation. Senior management cannot hide behind the familiar ruse that their task is to provide a strategic direction to their companies; they are now required to monitor performance metrics, in real time, to ensure that their companies are not overtaken by unexpected events. SOX Compliance has dramatically raised the standards of transparency, and accountability in companies to ensure that they can sustain a consistent level of performance. The key instrument to clean corporations of fraud and inefficiency is to provide detailed information, delivered electronically, to executives, shareholders and regulatory bodies. Strategic and tactical metrics to measure the health of corporations will play a critical role in the governance of corporations in the future.

SOX Compliance also frees the Board of Directors and the Auditors from the cult of the Chief Executive and provides them space to play their roles.Increasingly; they will bring their knowledge and creativity to manage the risks of companies.

Compliance would require data warehouses for storage of financial and non-financial data affecting risks and its analysis for continually reviewing strategies for risk management. In this framework, company executives and board members will not have any room to point fingers at someone else since they would have access to all corporate information and the responsibility to monitor it.

In the past, companies had a knee-jerk reaction to unexpected turn of events and usually were not the masters of their situation. Typically, companies could only patch up their balance sheets when their financial performance fell short. Nothing in the extant corporate governance legislation required them to analyze the root causes of lapses in performance and work towards improving the outcomes over time. Sarbanes Oxley requires companies to take a strategic view of risk and learn from their experiences to improve their model for coping with risk.

Phil Morettini asked:


In part I of this article we discussed the issues that lead to flattened growth. So what’s a befuddled and perplexed tech company CEO to do?

FINDING A SOLUTION

Well, the first thing I recommend is to really spend some time getting to the bottom of things. Instead of shot-gunning blame that may be misplaced, or impetuously blowing up established pillars of the business—conduct a real, objective analysis of the nature of the slowdown. I don’t suggest paralysis by analysis by any means, but do take the time to gather some data, so that your actions will be based on more than knee-jerk reactions.

Past that, it’s hard to generalize on a course of action, because the proper action will depend upon what you find in your analysis. But for the sake of discussion, let’s say that while there are a few factors that you find which could be leading to slower growth, no there isn’t a “silver bullet” reason that can be “fixed” to get the revenue curve again pointed up and to the right. Below are some general ways that I’ve found may enable you to “restart growth”. I might add that many of them are most effective if you begin them prior to actual revenue flattening:

Try marketing programs you haven’t used before

Usually when you get in a period of high growth, there is a workhorse program or two that has worked well for you, and there is a tendency to “keep doing what works”. Unfortunately, even the best conceived marketing programs eventually run out of steam. One of the keys to having consistently good outbound marketing, is too be constantly testing new ideas, placing small bets, and fine-tuning them if there is enough success to continue. As I’ve said many times before, product marketing is part art, and part science—with the art portion unfortunately upfront. You need to do a little trial and error to find a good program, and then the science kicks in, using data you’ve gathered to optimize it. But the key is to be constantly testing new ideas, in good times and bad. If you wait until your growth has already slowed, you may scramble for quite a while, trying to find an answer.

Have an internal “growth” brainstorming session

Ideally you are doing this before you fall into a revenue rut. But regardless, do bring together people in your organization, to bring out the ideas they may have to give the top line a kick start. Do hold these sessions in an open, non-threatening and non-political environment. It’s important that people are able to speak freely, and not be ridiculed, if they come up with an idea that’s “too far out of the box”. That is often where strategic breakthroughs are made. And don’t just limit these sessions to executive managers. Remember, the people at the bottom of the org chart are often the ones closest to the business, and are sometimes able to more easily spot a big opportunity that the company could capitalize on.

Hire some outside help

Consultants have a very bad name in some areas—unfortunately, sometimes with good reason. But bringing in someone with deep marketing or management expertise, with a different viewpoint than the internal management team, can sometimes be the quickest way to new approaches that will turn the ship quickly. I’d recommend staying away from folks that that have a cookbook formula, have only been consultants and not operating executives, or take too much of an academic approach. Every company, market and point in time is different, and needs to be analyzed as such. But hiring the right outside consultant or firm who is creative, analytic and “been there and done that” can have a big impact. PJM Consulting has often worked as a change agent in these situations, and increasing or restarting traction is an area of specialty.

Look at entering an adjacent market

If it’s determined that your current market space is getting saturated, one of the first things to do is to look at adjacent spaces. Preferably, look somewhere that you can leverage your current marketing, distribution and brand, but also possibly where you can apply existing company technology to a different customer’s problem. The key here is don’t go to a complete green field, that looks attractive because it’s large or growing fast, but where you have no real business competing. Again, it’s best to be taking this step in anticipation of slowing growth in your current business—rather than waiting until it happens. Getting traction in new areas can take some time.

Consider M&A to fill out your product line or distribution system

If you’ve been caught by a surprise slowdown and you need to do something quickly, a strategic acquisition can sometimes be the answer. I warn you to proceed with caution here. M&A is fraught with danger—statistics show that most acquisitions don’t work out well. You need to think it through, proceed carefully, and don’t get overly excited by the thrill of the deal chase. If done well, however, a strategic acquisition can be a real shortcut to entering an adjacent space, filling out your product line for an existing strong distribution system, or adding sales channels to your strong product offerings. This is another area where PJM Consulting has strong experience, and can offer assistance.

THINK IT THROUGH BEFORE YOU START SHOOTING

There are obviously endless other potential ways to explore, when attempting to jump out of a revenue rut. I wanted to suggest a few to stimulate your thinking—and more importantly, steer you away from some “knee-jerk” reactions, that often make your situation even worse.

What have you done in the past when you need to restart growth?

Donald Mitchell asked:


New circumstances are most often first perceived as a threat when budgeted profit or cash flow objectives are not met. Since such potential shortfalls are happening somewhere almost all the time in enterprises, the organization’s first reaction is to look for relatively painless ways to cut costs to overcome the shortfall.

This tendency is reinforced by the likelihood that all the senior people in the company receive much of their annual bonus for meeting budgeted results. This so-called “incentive” creates a common interest in smoothing over the bump in the road so the company can grow profit and cash flow results at the rate it had planned.

Enterprises that have public shareholders receive a double incentive to meet this goal because additional compensation is tied up in stock options that will fall in value if shareholders are disappointed in company results. Finally, if the shortfall cannot be overcome, heads will roll in some cases. That threat is never far from many peoples’ minds in an organization.

For most companies, this standard operating procedure often turns into a mad scramble to cut costs that permits little room or time for thought about the long-term consequences. For example, for about two decades a well-known packaged goods company had an earnings shortfall early in almost every year in its largest division.

The first planned expense to be cut in each case was the money for promotions designed to create more brand loyalty among consumers. Year after year, loyalty to the company’s brands in that division dropped, and profits slumped.

But company executives often restored enough profit performance to save some part of their bonus. How? They used defensive strategies.

For instance, they offered special incentives to retailers to purchase products at the end of every year so that retailers often bought four to six months’ supply at one time. This meant that the products were often less than perfect when used, and all consumers were trained to look for annual “give-away” price reductions that discouraged them from buying the products year round at full price. Brand loyalty was further harmed as a result.

For this company, reactions to the hostile environment characterized by a decrease of loyal consumers were made worse by the actions taken to protect the budgets. The real solutions (finally taken about twenty years after the irresistible force problem arose) were to improve the quality of the products and to build brand loyalty among the consumers. To facilitate these solutions, the annual “year-end load” was eliminated.



Damon