Our second summer poll asked "Who is responsible for margin?" OK, we understand that this is a complex question, and the answer will depend on the interplay of corporate strategy and organization. But our goal is to provoke some disucssion of important issues in the price management, value-based pricing and value-based sales space and just maybe to uncover something new. And this question seems to have struck a nerve. As of Monday August 8 there were already more than 100 votes and 35 comments, some of which put forward a strong point of view.
If you have not already voted in the poll, and would like to do so before reading further, you can vote and comment here. And even if you have already voted, you may want to go back and read the most recent comments and check the trend!
Most people would agree that margin is an important thing to manage as Margin x Revenue = Profit and companies are generally valued on their profit, or more specifically, their earnings per share. This is even more true in a stressed economy (Anyone feeling any stress about the US and European economies?). It is going to be increasingly difficult for some companies to grow revenues over the next few years. The combination of financial uncertainty and the need by many governments, companies and individuals to deleverage (i.e. to pay back debt) will limit revenue growth. Under such circumstances, the best way to support stock prices is to increase margins. So the question "Who is responsible for margins?" will remain an important one.
There were some surprises in the answers.
It is no surprise that most people think the CEO is the person responsible. Winning margin depends on getting all parts of the company aligned. Product and service development must bring to market the right mix of offers to take advantage of market opportunities. Pricing has to set prices and develop pricing and communication strategies that communicate differentiated value and capture it in higher prices. Sales has to resist pressure to focus on the top-line and erode margin by inappropriate use of discounts (see our previous LinkedIn Poll - Discounting is common in B2B sales becuase ...). And the CFO is responsible for financial discipline and overall financial goals. Given this, it is not surprising that most people pointed to the CEO as the one person who can pull all of this together. But if that is the case, one has to wonder how many CEOs have pricing and margin on their priorities.
What is surprising to us is that so few people pointed to the CFO. Margin is a financial measure, and in conversations we have been having with pricing and sales thought leaders this summer many people have pointed to the growing role for the CFO in both pricing and sales. So why the low response in this poll? It could be sampling error of course, not many people who are CFOs responded to the poll. Or it could be that people in sales and pricing are not really aware of CFO priorities at this time. This is something to probe.
It is interesting that the second most popular answer is that the "Head of Products or Services" is responsible for margin. Looking more carefully though, the Comments suggest that this is really two different answers. Some interpreted this to mean that "the business unit manager with P&L responsibility is responsible for margin." Others interpreted this to mean that "product and service development, who create and deliver the product or service, should be responsible for making sure that it is profitable." These are both legitimate points of view, but they are not really the same answer (LinkedIn polls are really only useful for very simple surveys or for starting up conversations).
As of Monday August 8, the same number of people felt that pricing and sales are responsible for margin. Regardless of whether they are responsible or not, they certainly have a big impact on margin, and in the real world of B2B they need to work together to realize this impact. The LeveragePoint platform provides a way for sales and pricing to collaborate to make sure that B2B companies are winning the margins they need.