This question keeps coming up, so I’m going to answer it. Let’s start with the basics:
The only reason a for-profit business exists is to make profitable sales.
Read that last sentence three times, because there’s an entire MBA’s worth of business wisdom in it. If you believe that statement is true, then the follow must also be true:
In a for-profit business, every job has a single purpose — to help profitable sales take place.
Therefore, the value of EVERY activity inside EVERY for-profit business can be assessed by two criteria:
- Does it generate qualified leads, resulting in more sales, thereby increasing revenue?
- Does it reduce the cost of sales or cost of goods, thereby making the average sale more profitable?
Considering all of the above, the four major “non-sales” functions can therefore be defined as follows:
- Marketing — Every marketing activity should either attract new customers (generate qualified leads) or make it easier for sales to close business (reduce the cost of sales.) For example, a direct mail campaign is wasted money unless it attracts new customers, thereby potentially increasing revenue. Similarly, a “branding” exercise is stupid and pointless unless it creates credibility that makes it easier for sales to close business, thereby reducing the cost of sales.
- Engineering — Every activity that’s funded in Engineering should be to design new products and services that existing and future customers want, thereby making it easier to attract new customers, thereby increasing the revenue stream. New product design that results in products that can’t be sold or that nobody wants to buy is wasted effort; pure research (ala IBM Research) is wasted money if there’s no hope of a salable product eventually resulting from the process.
- Manufacturing — Every activity should be focused on building high quality products that attract new customers, while reducing manufacturing and distribution costs. While those costs aren’t traditionally counted as a “cost of sales”, they are really the same thing, because both cost of sales and cost of goods are only meaningful concepts if a sale actually takes place.
- Management — Despite all the blah-blah-blah about “leadership,” in the end a CEO’s only important jobs are to 1) sell the company to the public as a spokesperson, and 2) make sure that every other department in the company serves the needs of the Sales group. And don’t try to tell me that the CEO has an important job representing the company to investors. What investors want are more revenue and more profit. Everything else is just so much BS.
Does this mean that the Sales group should be performing all these functions? The answer is no. Not because they couldn’t do it, but because it’s a waste of selling talent. People who can sell — really sell — have got no business pushing pencils in the back office.
Instead, the Sales group should be telling these other groups what they must do, at least in a general sense, in order to ensure that profitable sales continue to happen. More importantly, all activity in all those groups must be measured and compensated based upon whether those profitable sales eventually take place.
So let’s restate the question:
Q: Should the Sales function drive the entire company?
A: Absolutely.
