Growth
Industrial strength
How Richard Keyser took W.W. Grainger to the next level by cleaning up in markets he already had
By John Nank
Smart Business Chicago | September 2007
As Richard L. Keyser will tell you, turning around a company is
no easy task — particularly when the company is already successful.
“I attended a seminar a few years ago, and the title of it was
‘Turning Around a Successful Company’; that’s probably one of the
hardest business jobs you can undertake,” says Keyser, chairman
and CEO of W.W. Grainger Inc. “When a company is in crisis, it’s
pretty easy to stimulate change, but when things are going pretty
well, it’s much more difficult to get the attention of the organization.”
For its part, it’s not as though Grainger is hurting. Founded in
1927 and publicly traded since 1967, the Lake Forest-based distributor of facility maintenance products hit the $1 billion sales mark
in 1984, $5 billion in 2004 and posted record revenue of $5.9 billion
in 2006, while expanding operations throughout North America
and, recently, into China. That’s not to say, however, that there wasn’t room for improvement.
“We have been nationwide for a long time, but frankly, our positioning in a number of the major markets had gotten stale,” says
Keyser, who was elected CEO in 1995 and chairman in 1997. “When
you have an organization that’s been enormously successful, it can
easily become very inward-looking and lose touch with customer
priorities and begin to march to its own drummer.”
In an effort to maintain focus on customer needs and continue to
build on its success, during what Keyser describes as “the depths
of the post-9/11 recession,” Grainger embarked on an initiative to
increase domestic market share by systemically re-examining its
positioning in the nation’s top markets.
“We undertook a reassessment, city by city, of our whole presence,” Keyser says. “That includes, ‘Do we have enough branches?
Are they in the right places? Are they the right size? Are they well-enough merchandised? Do we have proper sales representation to
cover the market?’ We’ve dubbed it ‘market expansion’ because, in
almost every case, it results in a fair amount more square footage in
the market, it results in some new branches, some relocated branches and, in a few cases, some branch closings.”
The market expansion initiative, just one aspect of an overall
growth strategy, has already contributed positively to Grainger’s
branch-based sales growth, and by investing in infrastructure,
strengthening customer relationships and communicating the
strategy throughout the organization, all indications that point to
that growth continuing.
Investing in infrastructure
Before any growth strategy can be executed, Keyser says one
must first lay the proper groundwork.
“As most people know, you’ve got to build the foundation before
you build the house,” Keyser says. “Systemically, it doesn’t work if
you don’t.”
Because building the foundation for growth can sometimes be a
massive and painful undertaking, the decision to do so can be a difficult one to make. As a facility maintenance products distributor,
it is imperative that Grainger’s customers have what they need
when they need it. As such, creating the support structure included investing in a Voice-over Internet Protocol phone system, re-engineering its distribution network, expanding an already massive product line, integrating multiple market channels and
increasing the size of the sales force.
Today, Grainger is able to provide same-day or next-day delivery
of any of more than 350,000 products to virtually the entire country.
“It was a complete re-engineering of our back room with a couple hundred million dollars of investment,” Keyser says. “It’s a bit
like changing the tires on your car. You’ve got to do it, and you have
to do it because if you don’t, you’re inviting people in and saying,
‘Hey, come on in and try our lousy service.’ That may work for the
first quarter, but after that, you may not see them again.”
Because, in many cases, the products Grainger provides are not
necessarily central to its customers’ businesses, Keyser says it is all
the more important that the company’s 1.6 million customers not
be hassled while dealing with something they’re really just trying
to get off their desks.
“A service failure is the worst possible thing that can happen in
our business,” Keyser says. “We have lots and lots of customers,
and many of them actually visit us infrequently, even though they
like us a lot. So if we have a service failure, it can take a very long
time before that customer realizes that we fixed that problem.
Systemically, the strongest thing we can do is to have very high and
gradually improving levels of service.”
Moving forward, Keyser says he now considers the market-by-market evaluation an evergreen program that will extend far
beyond its original plan, which focused on Grainger’s 25 largest
markets. Additionally, in order to better monitor the success of
the program in improving service to customers, markets where
Grainger’s operations have already been tweaked will be revisited and readjusted where necessary.
“There are many more cities beyond the top 25 where we
require the same kind of reassessment, and by the time we get to
the end of the list, it will be time to look at the first ones all over
again,” Keyser says. “That’s probably where we might not have
been as aggressive in the past as we should have been, and we’re
going to have to allow that to happen going forward.”
Being there for the customer
Fostering customer relationships must be proactive, not reactive. As such, gone are the days when a sales representative could
simply drop off a catalog and wait for a phone call. Rather, Keyser
says it is a necessity that employees familiarize themselves with
customers’ businesses to the extent that they can anticipate client
needs.
“The only way you can really help a customer is to help them
grow their sales or lower their costs or expenses and lower their
investment,” Keyser says. “Understanding at a given point in time
what those customers’ priorities are is essential, and the only way
you can do that is to be there.”
Truly being there for customers is impossible with a sales force
spread too thin. While it might be intuitive to assume expanding
market share would mean more clients for each of Grainger’s
salespeople, in fact, the opposite is true. Since 2002, Grainger has
increased its number of sales representatives by 70 percent while
lowering the average workload from around 250 to 35 clients per
representative over the same period. As a result, salespeople
spend more time with each customer, allowing them to build multiple relationships within each client organization. Keyser says the
results are apparent.
“Especially with our larger customers, there are many people in
a facility who may be buying our kind of stuff,” Keyser says. “They
might not all go through one purchasing agent or one individual.
So we need multiple relationships with a given customer, and the
only way we can do that is to empower and enable our salespeople to spend more time with a customer, and that suggests fewer
clients. It does work. The more focused we get our people, the better we do.”
While maintaining focus on customers’ needs is crucial at all
times, Keyser says doing so during times of growth and change
requires paying extra attention to what customers are thinking,
how well they are being served and how they can be served better.
“Maintaining continuity of customer relationships as things change
is doubly important,” Keyser says. “Because quite often for us, the
needs customers might have that we can fulfill can be somewhat
infrequent, maintaining top-of-mind awareness in between those
occasions is an ongoing challenge. The only way we can do that is to
be there.”
Building consensus around strategy
Regardless of the efficiency of your infrastructure or coziness of
your customer relations, no plan can get off the ground without
employees who are aware of and buy in to the direction that the
organization is taking.
“It’s always an important challenge to keep employees aligned
with what you’re trying to do as an organization,” Keyser says.
“That takes lots of communication and lots of training to make
sure that the employees’ needs, as well as the company’s needs,
are well taken care of.”
Keyser says communicating a vision and strategy and creating
alignment behind it requires a multifaceted approach that, on an
ongoing basis, utilizes many different vehicles, such as an employee publication, the company intranet, various employee training
programs, etc.
“It’s on multiple fronts,” Keyser says. “It’s using the organization’s
structure to communicate. But also, particularly with today’s technology, there is great opportunity to do a lot of direct communication through various types of media and electronics to have people
more directly engaged as you go forward.”
A helpful tool for Keyser in building consensus around Grainger’s
market expansion strategy has been identifying influential positions in the organization, encouraging those individuals to buy in
to the strategy and making them, in effect, cheerleaders for the
cause.
“Getting the really key people in the organization to buy in and
become zealots goes a long way,” Keyser says.
In doing so, Keyser says it is important that those individuals
have a sense of participation in the development of the company’s
direction. Because Grainger’s growth strategy is based in large part
on adjusting the company’s presence in different markets across
the country, its key group of individuals included local management, which was empowered to help develop, along with a core
planning group, the repositioning strategy within their own markets. As a result, management at the local level is committed to and
accountable for making the plan a successful reality.
“(Each market’s plan) will be consistent with what we’re trying
to do, but it will be uniquely tailored to their market,” Keyser says.
“It will be a much better solution than we would get if we just tried
to dictate it to them. They own it and coupled with that are their
commitments to the kind of results it’s going to produce.”
To further familiarize the organization with company strategy,
once a year, Grainger holds a field meeting with about 4,000
employees, during which case studies are presented that feature
video interviews with actual customers outlining what Grainger
did well and what could have been done better. E-learning programs are utilized on an ongoing basis for sales and operations
training. A branch auditing system is in place that allows representatives from different branches to critique the operations of
other branches, offering suggestions and sharing best practices
across the organization.
Regardless of how information is presented, Keyser says the goal
of any training program is the same.
“There are all kinds of training,” Keyser says, “but at the end of the
day, the soft part of training is, ‘What do we really want the customer
to experience and how do we use the tools that we have to make that
happen?’”
HOW TO REACH: W.W. Grainger Inc., (888) 361-8649 or www.grainger.com
