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.