Coming off 2020 there are a lot of questions about 2021 that cannot be answered easily: vaccine rollout, Fed policy, fiscal policy, emergence of a new COVID strains, the second round of PPP, and the like. However, we live in an existential time, so we must communicate a direction to our employees. Leadership starts with a vision of how we behave during these times. Action items develop based on the situations we face at specific periods, but all action items are consistent with strategic direction.
So, what is the strategic direction for 2021? At Currie Management Consultants, we see strategic direction for 2021 as an integrated effort combining three elements: company culture, financial performance, and revenue development. We are constantly reviewing the performance of the approximately 300 dealers and distributors we see (now virtually) and their financial results. Those that are performing in the highest quartile (top 25%) exhibit behaviors that are more pronounced or are absent from those clients in the 2nd, 3rd, or 4th quartiles; and, as mentioned above, those behaviors center around: company culture, financial performance, and revenue development.
From our observation, 2020 quickly surfaced the power of (or lack of) company culture. Company culture is an ephemeral thing. It is not easily recognized, managed, communicated, or shared in an organization—whether large or small, centralized or decentralized.
Organization culture is the glue that holds the business process together. To illustrate this, look at the following culture slide from Currie Consultant John VanDeusen:
As this slide shows, culture is a piece of a bigger vision of how the business functions. We would like to have this vision as a conscious management process. That is a lifelong learning. But, absent a conscious understanding, culture is still present even if unconscious. Some organizations have very good cultures even if they do not know how to articulate them. The danger is that someone internal or external to the organization becomes an influencer and alters the culture without the knowledge and support of owners or executives. Sometimes years later someone says, “What happened to us? We used to be better than this.” Awareness of culture and its ramifications are critical for long-term success.
One of our favorite quotes comes from one of our favorite organization behaviorists Edgar Schein:
“The culture of a group can be defined as the accumulated shared learning of that group as it solves its problems of external adaptation (economic wellbeing) and internal integration (organizational health); which has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, feel, and behave in relation to those problems. This accumulated learning is a pattern or system of beliefs, values, and behavioral norms that come to be taken for granted as basic (non-negotiable) assumptions and eventually drop out of awareness.”
Further, culture is developed and delivered by the leadership team. More provocatively, in effective organizations, leadership is a function, not a set of characteristics of an individual. Ultimately, all members of the organization have their role in leadership that they learn over time. You can jump start that learning beginning with the current identified leadership team. For most organizations in developed markets, members function more effectively when they learn together.
Although 2020 was a difficult year financially for many, our client group performed reasonably well with some clients actually having record years. However, as we budget for 2021, we see many clients forecasting reduced sales and reduced profit. Much of this is related to anxiety and relying on the traditional budgeting process of negotiating with ourselves versus the process of benchmarking.
The Currie Management Consulting Financial Model is well established with many clients. However, since it has been around for 30 years, in most clients it has taken on the mantle of “establishment” not to be questioned. In fact, the Financial Model is actually derivative of the Currie Management Consulting Business Model. The two are integrated. It is difficult to fully understand one without the other. Further, if a business unit does not understand one part, they are likely to institute changes that significantly impact the other.
For example, the benchmark for Operating Expense in Service has an assumption of fully recovering service vehicle expense and shop supply expense. So, the Financial Benchmark for operating expense in the Financial Model has a Business Model benchmark of charging for those expenses. If we charge for those expenses that creates a benchmark of creating scripts for employees to use if the charges are questioned by customers. So, understanding the Financial Model and the Business Model are an integrated set.
Similarly, when we establish a Financial Benchmark for sales compensation, it triggers a benchmark for prevailing wages for a competent sales rep. Further, the Business Model also has a benchmark for gross profit contribution per sales rep (based on a performance matrix) and a call pattern of covering existing and conquest “A” and “B” accounts. All of these Business Model benchmarks tie together to achieve the desired Financial Model results.
If the organization does not understand the integration of the Financial Model and the Business Model, they are constrained in effecting change. They may say they accept the Financial Model, but that is just compliance, not understanding. When a process like the Financial Model has been around for a long time, people will comply – but do they understand and can they take appropriate corrective action?
It the virtual meeting world of today you could take one department each week and go deeper into Business Model and Financial Model to create deep understanding. Schedule time with me here>
This strategic area should be very familiar to all of us. It is the lifeblood of any organization. Look at leisure industries during the pandemic. So, rather than create new untried action items, we see a need to reinforce basics as many clients have done. Those Business Model basics are centered in three areas: Sales Activity, Message Content, and Account Focus. Let us review them in reverse order.
Account Focus works off the analysis that the largest customers and prospects are 40% of industry revenue but only 2% of actual accounts. We call them the “A” accounts. (Industry data might vary slightly from industry to industry but is accurate for industrial distribution in both mature and developing markets.) Notice that “A” accounts are not “A” customers only but are “A” customers and prospects. So, this analysis focuses on all “A” opportunities first because that is where the money is. So, all “A” accounts are identified, analyzed, qualified, prioritized and assigned to sales reps for coverage. A detailed plan is prepared for each account and, if more than one sales rep is assigned to cover the account, an integration plan is created to support the implementation. We need clear understanding about the plan, which probably means we need all relevant parties to participate in creating and/or learning about the annual plan for a single account. Clearly, we can do this in a virtual world.
Similarly, we do this process for all “B” accounts who represent 30% of the revenue but only 8% of the accounts. So, this gives us detailed plans for 70% of industry revenue in 10% of accounts. Based on your capacity you might have to stop here because this process, if new, will begin to overwhelm an organization. Plus, if you get to “D” accounts (the last set), they are 10% of industry sales but are 65% of actual accounts. They can consume a lot of resources for only a little return. Perhaps they need a different process. Can they be handled electronically? Are they the focus for inside sales? Can they be covered by service techs? What other methods are available to us?
These “D” accounts are not the focus of our most talented salespeople. Also, they are not the focus of our least talented salespeople because least talented salespeople might not be with us in a few months.
So, those accounts of Currie Management Consultants who have focused all the talent of the sales department, sales reps and support and administration, on depth of coverage of “A” and “B” accounts, have actually shown growth in revenue in 2020.
Another item for revenue development for 2021 revolves around message content. What value statement do we deliver to customers and prospects to present and/or reinforce their relationship with us. This message content is critical for the sales department and also for parts, service, rental departments. Customers buy from people they trust. This message content initiative permeates all our communications with customers and prospects.
The third item sales activity seems obvious, but in today’s world we would raise the process of virtual selling. That entails prospecting, presentation, closing and all other interactions with clients – done virtually. Although everyone hopes for “back to normal,” perhaps normal will involve considerable virtual contact and communication. At Currie Management Consultants, we are launching a virtual selling educational program in the second quarter.
Another characteristic we see in clients with high revenue growth in 2020 revolves around Sales Management. Two items stand out: first, the high performing sales managers all say they are in on every deal, and second, they follow up with each sales rep daily. These are both grand statements and execution probably differs from manager to manager, however, it does express an attitude internal to these sales managers about their behavior as “position coach” and not as a remotely connected executive.
The comments to sales managers are often about the time to do these things. You hear other sales managers minimize this activity; however, these high performing sales managers have multiple strategies for accomplishing this. For example, they often lean on senior sales reps to do the daily calls with the junior reps. So, what stands out is their commitment to interacting with the team as a position coach and finding ways to do it.
We know how traumatic 2020 was for all of us and we are thankful that we made it through that time intact. Let us hope that 2021 will be a rebuilding year and bring us back to normal, but what is that new normal? The new normal is evolving, no one is sure what it is or how it will play out.
However, the three strategic areas identified here—company culture, financial performance, and revenue development—are cornerstones to effective organizations.
We at Currie Management Consultants are available to help you with all three of these areas. That could be one long session or one hour each month. What is critical is doing it: process and learn.