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Sunday, 10 February 2019

Vulnerable to a Major Customer? What About Your Suppliers!

Over the years several companies with which I have been working have quietly and dangerously become vulnerable to a major customer.

It is axiomatic that the sensible approach is to keep the customer base as broad as possible with none accounting for more than around 15% of turnover.  This should, as far as possible, be accomplished not by reducing the direct influence of a major customer but rather by directing the marketing effort towards other sectors of the market.

However customer creep can and does happen and before you know it, one of them starts to account for a really major part of turnover.  I recall a business in domestic lighting dealing with a major outlet in the UK for their range of products.

Over a long period of time the customer placed more and more orders and at the same time, the demands started to increase.  In end, they accounted for more than 80% of turnover and whatever they said they wanted, the supplier had to comply.

It wasn’t a matter of “jump”, it was “how high do you want me to jump?

When I warned the Managing Director (and owner) that the company was massively vulnerable, he said firstly that he couldn’t refuse a good order from a good customer and in any case he had a great relationship with the buyer.  In fact he used that unpleasant comment of: “I have the buyer in my pocket”.

Guess what happened?  The buyer moved on, a new buyer was appointed and brought existing relationships with non-branded manufacturers.  Within six months my client had lost the account and was effectively out of business.

A salutary tale but what about your suppliers as well?  I had a client who manufactured a high tech product and one day called me to put off a meeting as he had an important matter to deal with.  Later in the day I happened to be in Manchester and, lo and behold, there was my client walking towards me.

He said: “ I have just been to see our lawyers.  One of our major suppliers who manufactures a special component exclusively for us, has gone into administration.  We have had to make an offer to buy the supplier’s business from the administrator just so that we can maintain supplies and keep our business going.

Another salutary tale.  We keep our eyes firmly fixed on our customers, and rightly so, but it should never be at the expense of watching the supply chain where events can be and often are detrimental to the company’s success.

The problem is, of course, that we can become complacent.  Orders are coming in, the customer may be starting to flex muscles but we can live with that and at the other end suppliers are happy to deal with us and seem to give us good service.

The question is, how often do you put these assumptions to the test?  The order book is usually very visible throughout the business but is the supply chain visible as well?

At the current stage of the global economic cycle some industries are booming and as a consequence demands on the supply side are becoming overwhelming.  Suppliers can be so busy that smaller customers by definition are expected to take a back seat.

The result is that the service to their customers suffers, relationships with the suppliers become fraught and everything becomes a problem rather than an opportunity. Those are perfect conditions for fire fighting rather than working to a sensible plan.

The really key imperatives in any business are the relationships with customers and the markets in general, relationship with significant players in the supply chain and, above all, the health and well being of the critical members of the team.

That last is possibly the most important and needs to be at the top of the agenda when critical factors in the business are being considered.  Make sure that they are all high on the agenda for regular top team consideration.

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Sunday, 3 February 2019

A Toxic Team Member? Do Something and Quickly!

When I started to publish the blog, more than nine years ago now, I resolved it would be written to maintain certain values and resolved that it never becomes self-indulgent. Foremost among these values was that it would not be overtly or covertly political.  

For example I have   something of a reputation now among my Vistage CEO peer group of revealing  some aversion to the BBC Today programme primarily because of the standards of interviewing. Of course we just cannot hide (would that we could) from the insidious and all-pervading influence that they wield in these pre-Brexit days. We can always switch off, of course.

I cannot hide, however, when one of the members of my group bemoaned to me the discovery that one of his prized team members was indulging in office politics and something had to be done about it.

When Dr Henry Kissinger left front line politics to become a full time academic he commented that his experience of the ferocity of  university politics made him long for the peace and tranquillity if the Middle East and I can fully understand his concerns.

The fact is that whenever and wherever we have a group of intelligent people nominally at one to deliver successful business outcomes, the situation can often be blighted by  an individual who is more concerned to construct a position that is more individually advantageous than one that contributes to the overall success of the organisation.

Another value I laid down was to encourage as far as possible topics that engender a positive outlook rather than look for situations that cry out for correction. An admirable objective but one that needs to be examined from time to time.

Wise sages say that it is far better to put emphasis on things that are positive and doing well rather than spending time, effort and emotion on correcting  unsatisfactory positions in the business and I agree with that wholeheartedly.

However there comes a time when things get out of kilter and the influence of the business terrorist becomes evident. In its worst manifestation this is a member of the team whose output and performance levels are high but whose attitude, behaviour and lack of team ethos overcome the positive.

It is the gloom-monger, the naysayer and the rumour provider who constantly gets in the way of being a successful team player.

One of our Vistage US speakers says that we hire on skills and fire on attitude and that is a maxim well worth examining.  When we recruit from outside the business we naturally look for a replacement for the dearly departed and occasionally even a direct replacement.   This means that experience and technical abilities become essential whereas we actually need someone who can merge effectively into the team and contribute as such.

On that basis the last thing that we need is someone who has a personal axe to grind and whose whole attitude militates against good team ethics.

The problem is that this is often a creeping disease and it can take time to for a leader to realise that there is a problem.

In any case it is usually a problem that must be resolved if the team is to operate effectively.  Make no mistake, everyone on the team knows the problem and waits for some action to be taken from on high.

The question is always what to do about it?  On the one hand the individual’s performance is acceptable but the attitude and behaviour is not.  Can this be changed? Probably not so what is the remedy?

Remember that we usually can’t change people’s attitude and behaviour.  The best that we can accomplish is to build an environment which enables the individual to change - if they so desire.  If they don’t then surgery may be the best option based on the realisation that no individual however productive can be allowed to destroy a team and that can easily happen if we don’t take action.  

A disruptive team member is always a toxic influence and it is not good to wait for the eventual response of “What took you so long?

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