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Distributor Planning

Six Steps to Implementing a Plan

It’s a new year and things are going to be different this year.  We spent a little time reviewing our mistakes of the past.  We are resolved – this year will be different.   We have a rock-solid plan.  New ideas, better ideas, discipline of action and a whole lot more are ready to catapult us to the vanguard of our industry.  The team brainstormed, labored and honed our direction to a finely polished point.  Like Alexander the Great, we’ll gaze out and watch the competition crumble before our well-orchestrated attack.  Sound familiar?

We start the year with the greatest of intentions.  Profit planning, sales territory alignment, pricing strategy, targeting and in many instances – a shiny new strategic plan.  That’s January.  Then what happens?  Well, according to Execution: The discipline of getting things done by Larry Bossidy former CEO of Honeywell and business advisor Ram Charan, the typical executive team spends less than four hours making sure the plan works.  Somehow they let planning replace execution in their consciousness. 

This isn’t going to be a lengthy treatise topping the joys of cooking up a plan.  If you don’t believe in planning, you’re probably beyond saving.  Instead, join me as we spend some time talking about how to turn that plan into results – the execution stuff.

To make this discussion real, we’ll come back to one very commonly discussed plan.  

Distributors struggle to maximize their gross margin.  Dozens of trade publication articles, consultative commentaries and presentations exist on the power of adding just one percent more gross margin.  Hundreds of plans for margin improvement can be found in the distribution community.  So, not only is this a great case study – it is real to a great many readers.  We will call this a pricing plan.

Remember this article is not about planning.  It’s about make the plan work.  Six steps to success?  Well there are other factors, but these six ideas will stack the deck in your favor. 

Step 1 – Somebody has to be responsible
If no one has the responsibility and corresponding authority to make the plan come to life, it’s damned from day one.  The adage two heads are better than one doesn’t apply here - committees are even worse.  One specific person must be responsible for seeing the plan through. 

This doesn’t mean one person has to do all of the work – most of the time this is impossible. But a single individual must be held accountable for pushing the plan forward.  Additionally, the power, judgment and authority to make the plan work need to abide with this person.  Judgment is critical - if this individual lacks the acumen to tweak the plan in accordance with changing business landscape, disaster could result.

With pricing plans, we need a single person at the helm.  They must understand selling dynamics, pricing situations and customer needs and possess the judgment factor we spoke of in the last paragraph.  The prestige and authority to stand up to the sales person pushback are a must have.  This cannot be low-level person.

Companies with ongoing success in this category appoint an executive level Pricing Czar to assume responsibility for driving the plan.  Serving as the ultimate authority in questions regarding margin and price, this person carries the full authority of the leadership team to solve disputes and handle pushback. His/her ruling is final.   

Step 2 – Develop metrics throughout the plan
It’s a long road from here to Nirvana – without measures the chances of successful completion drop off substantially.  Mid-course measures become the catalyst for revisiting the plan.  And, based on Bossidy and Charan’s observation – executives spend way too little time revisiting the plan during the year. 

Without a measure, forward progress becomes objective – a matter of conjecture – an opinion.  Opinions sway on mood, recent events and convincing arguments.  Setting milestones– holds everyone to the straight and narrow.

In a pricing plan the most obvious indicator is gross margin.  External forces like fluctuations in season, the economy and trends in commodity prices (copper, steel, oil, etc.) push us to look for additional measures - metrics lying just below the surface.  Information such as pricing exceptions, salesperson compliance to “system pricing” and margin shifts in product lines have proven to be more valuable in tracking progress.

Quite frankly, these are time consuming and difficult for the average company to sort out.  In the world of pricing process, a few thought leaders have emerged.  David Bauders and his Strategic Pricing Associates have built complex software algorithms to automate the metrics with a number of reports which inform the manager on the speed and direction of change.   Truly successful companies insist on this type of regular feedback.

Step 3 – If issues develop, understand the root causes and make adjustments
It’s not enough to know the plan isn’t working.  We’ve got to get to the root cause of the issues.  This can be derived by asking – Why, how, what?  Let’s face it every plan comes with unexpected issues.  Unanticipated conditions are part of the business environment – markets change, competitors react, suppliers fail to deliver and new technologies affect the playing field.  Rather than lamenting failure or worse yet sticking with a bad plan, we must search for the root causes of the issues.  Making wise adjustments to the plan is crucial to long term success.

Ask questions to better understand the situation– things like:

  • Why are we falling behind our milestones?
  • What has changed since we laid out our plan?
  • What must change to get back on track?
  • How can we bring other resources into the equation?

Don’t think generalities – specifics are the name of the game.  Insist on the same from your staff and coworkers.  Drill down to the root causes of the issue via investigation.

Jumping back to the real world and a pricing plan – many companies find they struggle to meet the initial goals of their plan.  On the surface, a person might just assume the competitive nature of “our business” prohibits implementation.  However, deeper drilling may uncover a host of root cause issues.  Here is a short list:

  • Perception of competitive pushback
  • Supply contracts which limit ability to change prices
  • Incorrect system data where the prices are not properly maintained
  • Packaged deals tying prices of many items together
  • Too many product combinations to manage properly

Interviews with companies who have instituted world class pricing plans indicate a willingness to attack each of these root cause issues systematically.  For instance, Industrial Supply Magazine’s Distributor of the Year, Stellar Industrial Supply conducted a series of ongoing employee meetings to combat the competitive pushback issue.  They addressed the root issue and pushed their plan over the goal line.

Step 4 – Insist on individual compliance with the plan
Are there individuals who refuse to follow the plan?  Many a great plan fails because a few dissenters stonewall the execution.  Whether done in the open or covertly underground, these must be addressed. 

Change is difficult and threatens the experienced more than the novice.  It’s not uncommon for a long-term team member to oppose some aspect of the plan.  Except in the most blatant of cases this manifests itself with half-hearted or delayed activities.  For instance, they may sheepishly try the plan once and announce failure.  This is incredibly frustrating and damaging to morale – particularly in selling situations.

In research for a new book The Target Driven Sales Process, we discovered a number of businesses who could not determine whether product introductions failed because of product design flaws or due to poorly executed product launches.  A good many of these managers noted successful salespeople who were conspicuously lacking in their ability to launch any product that falls outside the “mainstream” offering.  

In the world of planning for price improvement – measuring individual compliance appears to be vital for success.  Again referring to the work of David Bauders’ Strategic Pricing Associates; we notice easily accessible compliance reports are a tool for building results.

The Pricing Czar is provided with a report measuring compliance to the pricing strategy by division, sales group, territorial branch, product line and sales person.  The report indicates not only those not expanding the pricing process but delivers “what if” numbers - showing potential assuming various levels of compliance. 

Step 5 – Instruct, educate and coach throughout the plan
Catastrophe awaits those who ignore the human element.  Our plan – no matter how basic – must contain a mechanism for instruction of those involved in execution.  As we contemplate the education piece - let’s remember; human learning requires repetition.  There is a good reason for our repeated expose to the same TV ad or Radio jingle – Madison Avenue has this stuff down to a science.
Launch your plan with an instructional session and repeat that session at points along the way.  Provide metric related updates for the group.  And, for those who lag behind – provide personalized coaching.  Remember – good coaches motivate each person according to that person’s personality.  Some people need encouragement; others a pep talk and finally the laggards described in step 4 may need a shot of something stronger.

Switching back to our pricing plans – we find top-flight companies have well developed educational plans in place.  The very best actually launch the instruction well ahead of any other piece of their plan. 

Interestingly enough, as one explores the pricing system developed by Strategic Pricing Associates, they find a wealth of training information designed to anticipate the issues arising as a company goes through the plan.  Topics like understanding value, the buying habits of various organizations, pricing sensitivity and competitive pressures are rolled out ahead of the very first systemic change. 

This brings us to our final point in developing a plan.

Step 6 – Look to others for implementation tips
No, this isn’t a couched come-on for consulting companies.  Implementation tips flow from a number of places – basically anyone who has been down a similar road.  Folks like benchmarking partners, distributor trade associations, and business networks.  And yes… consultants sometimes fill this role.

Understanding the pot holes on the road to executing your plan eliminates a great deal of frustration and save countless hours spent reinventing the wheel.

Finally a conclusion… 
Whether we are just launching out with a new plan or mid-way through a rough and rocky implementation, following these six steps will maximize our success.  Finally, remember even the best of plans must be tweaked along the way – think implementation, adaptation, implementation.

Frank Hurtte, the Founding Partner of River Heights Consulting speaks, writes and consults on the topic of knowledge-based distribution.  He is the recognized expert in the field of Distributor Specialists and Target Based Selling.  He can be reached via www.riverheightsconsulting.com or email frankehurtte@riverheightsconsulting.com
 

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