Left Brain Right Brain

Why do we find comfort double teaming audit work and single teaming sales calls?

People that love math get a sense of achievement when they solve problems and get the right answer. The certitude, the exactness, and the feeling of being right bring subsequent benefits when the math student learns how accurate he was.

Taking this to the SOX/Sales realm, the act of testing controls provides a similar sense of achievement, the sense of getting the right answer. Understanding this motivating force leads us to blog entry #3.

The problem is that some companies still test more controls than they are required to test under 404 requirements. With AS5, external auditors no longer render opinions on the adequateness of management’s testing. Instead, they render an opinion on whether controls that prevent/detect a material weakness are designed and operating effectively; however, legacy AS2 efforts are difficult to tear down unless other activities are defined for the control testers. Overcoming the motivation to test and retest the same control is difficult when the current year procedure is “how we did it last year”, a gratifying sense of achievement awaits the tester because no alternate activity has been defined.

SAS65 and AS5 describe the situations in which the work of others may be relied upon; the scenario where we don’t have to doubly test a control activity. The SEC 404 Guidance for Management describes how the amount of evidence to support Management’s 404 assertions may vary, in some cases evidence can be obtained simply by walking around.

In testing SOX controls, the best practice is to maximally rely on the work of others unless there exists a specific risk or qualitative/quantitative factor of concern. In short: single team the audit.

Salespeople hunting prospects (potential customers matching the profile of your best customers) get no sense of achievement like the smart math student. Because most prospects don’t buy when asked the first time, there is a great tendency for sales professionals to hunt prospects alone. Being rejected or receiving a “no” answer is so much easier when one is by himself.

Despite lower sales success rates, humans tend to hunt their sales prospects alone.

Selling products/services by more than one person is a best practice. Double teaming communicates the benefits and the “asks” better than single teaming. Everytime.

Bank tellers double team instinctively because banks are designed with a counter full of bankers working side by side. The double teamers outsell the lone rangers by wide margins.

In selling, the best practice is to double team every sale unless the salesperson is simply responding to a customer request for the product/service. In short: double team the sale.
Questions & Actions:

Can the amount of controls testing work relied upon by your auditor be increased? Review SAS65, AS5 and the SEC Guidance for Management to identify the opportunities to reduce the amount of double auditing taking place over your 404 controls.

Does your sales force double team every prospect? Double teaming ensures the benefits are completely described to a prospect and ensures younger professionals see how it’s done all while maximizing revenue growth.

Count What Matters

On my 6 mile run this morning I was reminded again of the notion that “what gets measured gets managed” – Peter Drucker. If I don’t count the specific behavior that leads to a desired result then I don’t understand said activity.




The same is true for testing SOX controls and selling products/services.



For example, the operational frequency of a control activity determines the number of samples selected for testing. If a control occurs many times a day then the test sample size is 25 selections; if it happens daily then the sample size is 15 selections; and so on.



To play on Drucker, measuring the frequency of an activity is necessary to manage the level of effort spent testing operating effectiveness.



When selling products/services is the activity, I understand and count the antecedent to selling. If I’m not counting antecedents to a sale, then I’m not closing any deals. In my world, the antecedent to a sale is directly or indirectly asking a prospect (potential clients who match the profile of my best customers) for the business.



Pareto’s 80/20 rule guides me. 20% or fewer of the control activities contribute the most assurance to preventing 80% of the causes of a material weakness. 20% of my prospects generate 80% of my sales.



Generally, business processes with large numbers of control activities are candidates for finding time to redeploy against sales efforts. Processes like payroll (with a lower risk of material misstatement) offer the best opportunities for reducing on the number of controls and redeploying related effort elsewhere – to activities like spending time asking for the business.



Questions & Actions:

1. When was the last time you counted the number of control activities in the processes impacting financial reporting? The control activity count may be higher than you think. Look for activities that can be eliminated from your population of controls to save time the amount of time spent testing these.

2. How frequently do you ask for the sale in a meeting or during eminence building activities? An old friend of mine said that a qualified prospect needs to say “no” 7 times before they are no longer a prospect. Identify your prospects that haven’t said “no” 7 times and ask for the business, again.

The Holy Grail: Leverage your SOX skills to save money and drive sales

This blog is most likely not for you.  I think there are only about 1000 people that want to reduce the costs of Sarbanes-Oxley requirements while simultaneously redirecting internal talent to projects that drive shareholder value by increasing sales. 

In my experience, a few of the obstacles include: 

1. fear of doing things that might cost a person his job;
2. uncertainty with focusing on debatable activities that drive shareholder value; and
3. inexperience with practicing how to get out of one's comfort zone. 

A few questions to consider:

1. Why can't the skills obtained through the course of preparing for SOX be used to drive sales?
2. Where are the allowable "loopholes" in the regulations that allow for a company to implement internal controls over financial reporting in the most efficient way possible?
3. How to motivate those charged with SOX to read the guidance as passionately as someone might read religious literature [or the last thing you read with intense interest]?

In this blog I will identify ways a company can overcome the fears of wasting its blood and treasure and not optimizing the relationship it has with its customers.  To overcome these fears, I will discuss topics to help 1) save time with SOX compliance and 2) redirect this [free] time to activities that drive sales.  See post #2 and beyond!

Please use your personal name or initials and not your business name and do not put your website in the comment text as both will come off like spam.  Have fun and thanks for adding to the conversation!