The Little Black Book of Strategic Planning for Distributors

by Brent R. Grover

Treat Employees as Assets, Not Expenses

Companies have different approaches toward leading and managing people. Author Brent Grover says he has his own views regarding things like how much information to share with employees or how best to hold them accountable, “but I don’t have the data to support an opinion about these choices being strategic success factors.”A lot depends on company traditions and leaders’ personalities.

“There is, however, one leadership decision that does seem to have strategic implications,” he says: the way leaders view their employees. Some view employees as highly valuable assets worthy of continued investment, while some behave as though employees are “an operating cost that must be kept at a minimum,” he says.

Brent acknowledges that employees do, of course, cost money. In The Little Black Book of Strategic Planning for Distributors, Brent estimates the cost of getting a new distributor salesperson to the point of being a profit generator at more than $150,000. But, he says, “if distributors capitalized these costs as one would a piece of production equipment – instead of writing if off as a current expense – that would be an asset on the balance sheet of at least $150,000 per salesperson.”

Trained sales reps are valuable, and Brent recommends distributors treat them that way. “Our findings over many years of working with distributors, and examining the data from all sources, indicates that distributors with a smaller number of more highly compensated people do much better than firms with a larger number of lower-paid staff,” he says. As a benefit of lower turnover, distributors who treat employees well have more experienced staff who make fewer errors. These distributors also enjoy lower training costs and greater customer satisfaction.

Monitor Your “Culture of Accountability” to Help Strategic Initiatives Succeed

Every company approaches holding employees accountable differently. Distribution consultant Brent Grover has seen companies at both ends of the spectrum, from those with rigid policies to those that rely on employees’ good judgment to ensure goals are met.

What matters more than a company’s initial approach to employee accountability is the ability to recognize when the culture and systems in place don’t work and to adjust accordingly. In The Little Black Book of Strategic Planning for Distributors, Brent encourages company leaders to evaluate the company culture to determine whether it is a help or a hindrance to executing long-term goals.

Brent encourages company leaders to think about the “culture of accountability” at their companies. “How do you decide who will be in charge of a project? Do you hold one person responsible for success or failure of a project, or spread (dilute) accountability over a group of people?” Brent says. Making changes might improve the chances of success.

Brent advocates a “parity of authority and responsibility,” where those responsible for projects are given the authority and resources they need to get the job done. He says leaders should ask themselves whether they are committed to making this arrangement part of their culture.

Brent provides more questions to get leaders thinking about their accountability culture and provides other tips for improving employee performance in The Little Black Book of Strategic Planning for Distributors.

Sow “Strategic Insight Kernels” to Reap Bigger Profits

Strategic insight kernels, seeds of knowledge distributors can use to grow new profits, aren’t always easy to find, according to wholesale distribution consultant Bruce Merrifield in a recent message to distributors. But when these insights are discovered and acted on, the bottom-line impact can be worth the search. (Read Merrifield’s message here.)

Merrifield says strategic insights hide in at least two places. One is within businesses, where distributors can find “the root causes for why a small percent of your customers and items are super net-profitable or unprofitable.” To identify these root causes, Merrifield recommends a cost-to-serve analysis to uncover line-item net-profit information. Companies can then follow Merrifield’s eight-step process to reinvigorate that core business.

Seeds of strategic insight can also be found externally, Merrifield says. He advises companies to look to the top 4 percent of the most innovative customers and suppliers in their channels to discover opportunities the competition has found and learn how they’re capitalizing on them.

One way to get to this information is to maintain open communication with suppliers, something Brent Grover recommends in his recent book on strategic planning. Suppliers, he says, have excellent insights into coming marketplace changes.

“Savvy supplier sales reps pick up signals about the shifting marketplace from their conversations with distributor managers and sales reps, as well as from end-user visits,” he says. Isolated examples of what companies are doing can provide a clue as to what other manufacturers or distributors may be planning to do elsewhere.

Brent to Share Planning Strategies during Thursday Webinar

Brent Grover will show distribution executives, directors and managers how to use the planning strategies outlined in his newest book, The Little Black Book of Strategic Planning for Distributors, during a free Webcast on Thursday, Nov. 8.

The first 12 registrants/attendees of the 11 a.m. ET webinar will receive a free copy of Brent’s book. All participants will receive a 20 percent discount on the book.

The Little Black Book of Strategic Planning and the webinar on Thursday will help distributors shift their focus from day-to-day problems to long-term opportunities by explaining how to successfully organize and execute a strategic planning project.

Register for the free event.

The Role of Communication in Accurately Assessing Your Company

When planning team leaders assess company strengths and weaknesses during the planning process, they’re not always honest with themselves about possible constraints to company growth, according to author Brent Grover in The Little Black Book of Strategic Planning for Distributors. It can be difficult for leaders to admit weaknesses such as over-dependence on generous vendor terms, heavy concentration on one or two major suppliers or customers, or inefficient processes or staff.

For a distribution company to grow and achieve long-term goals, management must confront the reality of how well or poorly their company is positioned for success in its geographic, product and customer segments. Brent says distributors should ask themselves: “Does the company have enough talented salespeople on the street? Are they highly qualified? Does the company have the right product lines? Does the business block and tackle well (high fill rate, timely delivery, low error rate)?”

For some of these questions, the greatest insight may come from customer-facing employees. But if workers don’t have a strong rapport with management, they may not be comfortable speaking openly about what’s working and what’s not working in the business. Strong communication, Brent says, is key to building that rapport.

“A distributor’s commitment to strong, two-way communication ensures everyone understands the company’s compelling goal, that each individual understands his role in achieving the goal, and that trust will be built and maintained through ongoing effective conversation,” he says.

Brent lists seven things CEOs should communicate with employees to achieve trust and achieve buy-in in The Little Black Book of Strategic Planning for Distributors. Making two-way communication with employees a priority helps them feel more comfortable with company leaders, and they’ll more readily provide the accurate feedback leaders need to help them understand and confront company weaknesses.

Work with Suppliers to Realize Strategic Objectives

Better communication with suppliers can help distribution companies realize strategic planning goals, according to distribution industry consultant Brent Grover. In Brent’s new book, The Little Black Book of Strategic Planning for Distributors, Brent explains why distributors should keep communication lines with suppliers open during the strategic planning process.

One reason is that suppliers can provide competitive information not available elsewhere. “Suppliers are remarkably forthcoming about what is going on with their distributors, their competitors and their competitors’ distributors. In fact, one of the most accessible and objective sources of information about a company may be the right person at a large supplier,” Brent says. Savvy supplier sales reps pick up signals about the shifting marketplace from their conversations with distributor managers, sales reps and end-users, and these signals can indicate present and future moves of competitors.

Supplier-to-distributor communication can also reveal where their strategic goals align and deviate, helping distributors identify which supplier relationships are most important. In The Little Black Book, Brent offers a case study of a specialized distributor of safety products experiencing friction in its key supplier relationships. The company was among the nation’s largest distributors for a critical vendor, yet the supplier threatened to cancel the distributor’s exclusivity in its market segment.

An outside facilitator’s meeting with the suppliers revealed strategy gaps between the supplier and the distributor. With this new information, the planning team was able to determine which vendors’ products and new technologies were the key to the distributor’s distinctive value proposition and future growth. As a result, the company changed its product emphasis and selling approach to better align with those vendors.

Brent doesn’t advocate that distribution companies share all the details of their strategic plans with suppliers, but integrating supplier intelligence and goals into the planning process can help distributors identify the best competitive direction for their companies as well as the most ideal supplier partnerships.

Brent Grover, Condoleezza Rice to Speak at STAFDA Conference

Distributors of light construction, industrial and related products will get a chance to meet author Brent Grover at the Specialty Tools & Fasteners Distributors Association convention next month. Brent will present two workshop sessions at the event, and STAFDA members will receive a discount code for 20 percent off his new book, The Little Black Book of Strategic Planning for Distributors.

STAFDA’s 36th Annual Convention & Trade Show will take place Nov. 4-6 at the Orange County Convention Center in Orlando, FL. Former U.S. Secretary of State Condoleezza Rice will be the keynote speaker during the General Session Monday, Nov. 5. The convention is open to STAFDA members only.

Brent also made an appearance at the Affiliated Distributors’ Industrial Supply Division North American Meeting earlier this week. Brent exhibited at the 4-day event, which wrapped up yesterday.

Stanley Black & Decker Shifts Resources to Meet Strategic Objectives

Stanley Black & Decker (NYSE: SWK) has agreed to sell its Hardware & Home Improvement Group to Spectrum Brands Holdings for $1.4 billion. With 90 percent of the H&HI Group’s revenues coming from North America, Stanley Black and Decker says the divestiture is a step toward continued diversification of its geographic footprint.

While some of the sale proceeds will go towards share repurchasing and debt reduction, the company will reinvest much of the profits from the divestment to help fund the acquisition of Infastech, a global manufacturer and distributor of fastening technologies headquartered in Hong Kong.

The strategic reallocation of resources as a way of targeting profitability “sweet spots” is something Brent Grover discusses in his latest book, The Little Black Book of Strategic Planning for Distributors. Brent says that although many distributors are tempted to “target” everything, targeting must be done carefully because all companies have limited resources.

Brent advises companies to analyze geographic markets, products and customer segments to determine whether each area should be grown, maintained or harvested. Grow and maintain categories continue to receive supporting resources, while harvest categories don’t receive any additional time or money.

Stanley Black & Decker’s decision to divest its Hardware & Home Improvement Group reflects a renewed focus on segments with high growth potential – not just those with currently high revenues. “While HHI is a healthy and profitable business,” says Stanley Black & Decker president and CEO John Lundgren, “its characteristics are inconsistent with Stanley Black & Decker’s strategic objectives of diversifying our revenue base through further expansion into targeted end-markets with higher growth and margin profiles, including emerging markets.”

Brent shows distributors how to find their own profitability sweet spots, both present and future, in his new book. He explains how to determine which geographic areas to grow, maintain, harvest or discard by using segment and growth-profitability matrices, which are included with the book.


Five Strategic Planning Mistakes Distributors Make

Only 40 percent of distribution companies utilize a formal strategic planning process, and even those who do make critical mistakes. In The Little Black Book of Strategic Planning for Distributors,wholesale distribution industry expert Brent R. Grover offers examples from his experience advising distributors to help company leaders avoid common mistakes.

  1. Failing to assess the internal environment. C-level executives, who operate at a distance from customer- and supplier-facing positions, may have an inaccurate view of the company’s internal environment. Many leaders, Grover says, tout their companies as great places to work or easy places to do business with without having the data to back it up, and inaccurate feedback exacerbates the problem. “Management is too often told what they want to hear from employees, suppliers and even customers,” he says. To obtain the unbiased internal assessment critical to understanding a company’s enablers and constraints, distributors should consider having an outside party help with the information collection.
  2. Confusing the company mission statement with the company goal. Mission statements tend to be bland and unoriginal, and are often too subjective to be very compelling. On the other hand, strategic goals should be SMART: specific, measurable, actionable, realistic and time-sensitive.
  3. Misunderstanding the company’s key profit driver. Many distributors think that the driving force behind their company’s revenue is their selling method or their logistics system. For most distributors, though, “the driving force is either an extraordinary knowledge of product applications or a remarkably deep understanding of their customers’ needs,” Grover says. Companies that can accept that their logistics, technology and sales methods are probably similar to competitors’ will be better prepared to design effective business strategies.
  4. Focusing on the wrong customer segments – or none at all. Grover says many distributors continue to invest in their largest revenue segments without regard to growth potential or profitability. Targeting must be done judiciously since, as Grover notes, all companies have limited time and resources at their disposal. “The strong temptation of distributors to target everything must be resisted,” he says.
  5. Failing to align the plan with business processes. “Many companies have spent huge amounts of time and money writing the perfect (or nearly perfect) plan only to show a presentation to the board of directors and then place the binders in the corporate archives. But musty books on a dusty shelf don’t do anything to address the imperatives of a compelling goal, role clarity and mutual trust,” Grover says. Summarizing company strategies into a one-page plan, which is built off  the data that backs up the plan’s conclusions, helps get employees get excited about where the business is going and clarifies their roles in getting there. Leaders should openly communicate the details of the plan to subordinates and should adapt management processes and incentives that support it. “Executing the strategy should not be a new activity or project for the company; it is built into the way the business is managed,” Grover says.