Fear. We all know what it feels like: The rising sensation that you might not be strong enough for what you’re about to face. Unlike in nature, where animals can quickly size up their likelihood of survival, our ability to recognize a threat and weigh our chances isn’t always so refined. In the business world, leaders often flee when what they really need to do is move forward.
Ego is also at play. Leaders often choose to stick with the plan, even when it isn’t working, rather than make changes and risk the consequences.
This isn’t a new phenomenon and yet the cost of fear is constantly rising. We live in a world where the pace of change is ever accelerating and the future is difficult to predict. As leaders, we’re often forced to make decisions without all the information we want or need — and yet timely action is a must.
What’s required is agility and confidence — the ability to look change in the face, decide how to act and move boldly in that direction. Leaders who wallow in fear get stuck in place. They suffer from “analysis paralysis” — waiting so long to make decisions that it’s too late to act. In order to be effective, leaders must push past the paralysis and be willing to take risks and face change head-on.
Here are a few ways to begin the process of breaking through the fear of change:
Admit you don’t know everything
The CEO of Manco, Jack Kahl, used to have a famous Socrates quote on his door: “I know one thing, that I know nothing.” Jack set the tone for the organization by continually driving home the message that everyone, beginning with him, was to be constantly learning, experimenting and improving.
Start mild before wild
Risk-averse businesses don’t have to go from zero to 60 overnight. They can begin by identifying mild strategies for increasing their risk exposure and move on as they become more comfortable.
The key is this: Whatever change you make, it has to be observably different. You must define in advance the impact you’re seeking to achieve so that you can measure whether you reached it. If you’re the only one who can see or feel the change, it isn’t significant enough. In order to accelerate results, your action must be observable to other people.
Question your motives
Even when teams or companies are in trouble, processes that are no longer doing any good are held on to. This happens because leaders want to prove that they’re right, rather than experiment with something new. If you find yourself continuing to push stale processes, ask yourself why.
Try on different lenses
No two people see the world in exactly the same way. As comfortable as we get seeing things our own way, the fact is we need to seek out the perspectives of others. Great innovations and change initiatives have begun precisely that way — when the circle of ideas was expanded to include people who might not otherwise have been consulted.
The ability to respond effectively in the face of change is a learned habit. And like any habit, it requires consistent practice over time to take root. Take the first step by experimenting with these strategies. Over time, your agility and confidence in the face of fear will undoubtedly grow.
Donna Rae Smith is a guest blogger and columnist for Smart Business. She is the founder and CEO of Bright Side Inc.®, a transformational change catalyst company that has partnered with more than 250 of the world’s most influential companies. For more information, visit www.bright-side.com or contact Smith at firstname.lastname@example.org.
Twitter - https://twitter.com/behaviorbiz
Twitter - https://twitter.com/donnaraesmith
Michael Feuer: Why every company needs an additional type of COO — They march to a different drummerWritten by Michael Feuer
We all know what traditional chief operating officers do and what characteristics typically make them tick. There is another type of COO that every company needs — whether they admit it or not — who shares the same initials as the former, but who has diametric responsibilities.
This person is a chief opportunity officer, although the title sometimes varies because the word opportunity conveys the wrong message to the less pragmatic.
The characteristics of this rare bird were probably honed when he or she was a small child. Most parents didn’t talk much about this offspring’s special traits outside the home.
We have all seen these kids in action. They have too much energy, are in perpetual motion and feel compelled to touch everything in sight.
They also ask questions and make statements that can shock or antagonize even the most understanding adult.
When they go off to school, they’re the ones who neglect to raise their hands when answering questions, but instead blurt out their responses. And most of the time they’re right, which tends to further aggravate teachers.
At their first job, they continue to be in constant motion, questioning everyone, everything and sometimes ignoring the chain of command. At the same time, however, they seem to discover previously unthought-of alternatives to thorny issues.
If they’re lucky, a more senior manager spots the hidden talents of this potential COO and begins instilling a little, much needed, discipline and tutoring on the realities of being politically correct to get things done.
In short order, this heretofore rogue player begins to climb the organizational ladder, scoring a series of meaningful and unique accomplishments. This garners heightened recognition and a reputation as someone who can think outside the box and isn’t afraid to take well-calculated risks.
Making waves comes easy
Many of these iconoclasts’ ideas seem at first blush to be prosaic — the idea so obvious and simple it leaves everyone in the organization scratching their heads asking, “Why didn’t I think of that?” Other times, what initially seems to be an off-the-wall concept suddenly takes shape and emerges as a breakthrough.
We all know the names of innovators who have excelled and possessed the characteristics described. Some are famous business rock stars, such as the legendary Steve Jobs of Apple or Facebook’s Mark Zuckerberg. Others are unknown hidden gems within the ranks of America’s most admired, successful companies.
Many times companies don’t parade them in public, due to the commotion they invariably cause — the same reasons their parents exposed them sparingly to outsiders.
This type of innovator devotes his or her energy to looking for low-hanging fruit, or that special something that can transform a business from the ordinary to the extraordinary.
Their techniques are non-conventional and they frequently ruffle feathers. Usually for them to succeed, they must work in an organization that recognizes the fact that not everyone has to be cut from the same cloth.
Every once in a while, these one-time outcasts emerge as the leader of the enterprise with the letter “E” replacing the middle “O” in their earlier title. After that occurs, the newly minted CEO will deny to the death that he was ever the kid whose parents were reluctant to take anywhere. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at email@example.com.
When a breakdown happens in your production line, you’re ready to do whatever it takes to get things running again. What business leader hasn’t been there? And, if it hasn’t happened to your production line, maybe your computer system has crashed or some other essential aspect of your business. When these breakdowns happen, you’re ready to call anyone who can fix it.
Consider this story, told by former Browns coach Sam Rutigliano at a recent Men’s Fellowship Group in Westlake that wanted to hear his messages of inspiration — and connection.
A parable for the office
One day, a business owner’s production line breaks down. For an hour and a half he can’t get a hold of anyone to get the equipment repaired. And as we all know too well, time is money. While the business owner is frantically searching for help, a guy with a small hammer is sitting on a chair nearby claiming he can fix it. The owner says to himself, “This guy doesn’t have both oars in the water. What does he mean he can fix it? Forget it!”
Another hour goes by and the owner has now become so frustrated, he tells the man with the hammer, “Go ahead and fix it.” So the guy with the hammer gets up, takes aim, makes a sharp rap and everything is instantly in working order! The owner is ecstatic; he can’t believe the man fixed the machinery so quickly and asks how much he owes him. The guy says, “You owe me $1,000.” The owner can’t believe his ears, “A thousand dollars? It only took you five seconds!”
The man with the hammer replies, “That’s right. I’m going to charge you $1 for hitting the bolt, but $999 for hitting the right bolt.”
The lesson — making connections is important.
“Isn’t that what we are all trying to do every single day — connect?” Rutigliano says.
After all, the man with the hammer had the skill, but he and the owner had no connection.
People skills are a priority
It’s been said that the higher you go in business, the more your people skills are important and the less your technical skills matter. So as you climb the ladder, remember that it is more about relating to people than it is about clearing off your desk.
Soft skills shouldn’t get such short shrift. Some leaders may think it’s a weakness to show emotion toward the workforce. They simply need to realize the importance of regularly making a one-on-one connection that will build and help the organization achieve significant goals.
But who is that leader who will connect with you personally?
“For all of us, there is that one guy, that one person who sometime in your life is able to connect with you and get you on the right path,” Rutigliano says. For the former coach, who makes it known he has accepted Christ as his personal savior, focusing on one’s self will never reveal life’s purpose.
“It is in Christ that we find who we are, what we are and what we are living for,” he says. “The elemental purpose for our being on earth is to bring others to Christ. You make a living by what you earn, but you make a life by what you give to others.”
And giving to others means connecting to people — their values, the causes they support, their likes and dislikes, goals and desires, friends and families, their boundaries — on a human level. It’s as simple as that. ●
Dennis Seeds is managing editor of Smart Business Cleveland. If you have an interesting story to share about a person or business making a difference in Cleveland, please send an email to firstname.lastname@example.org.
Have an idea to share?
Engage with us on Twitter @ SmartBiz_NEOH
Andrew Outcalt: A workforce that can wear many hats helps smooth out the ups and downs of business cyclesWritten by Andrew Outcalt
All businesses today have to weather the good times and bad times. How you approach managing up and down cycles has a direct impact on employee morale, productivity, retention and your bottom line.
Employees are the heart of any vibrant, continuously improving organization. When sales and profits are down, they worry about job security and competition. That’s when management should be at its creative best, using a high level of communication and motivational tools to shore up morale and keep productivity elevated.
There are a number of proactive steps you can take to unify your team, boost employee morale and instill pride and loyalty in your company, which will pay dividends in both good and bad business cycles. Key elements include creative thinking and good communication throughout your organization.
■ Instill accountability. In a culture of accountability, employees take initiative. Many people think of accountability only when something goes wrong, but it has far broader implications. People who have a high level of personal accountability take initiative to ensure the success of a project, issue or action. They will provide early warning of potential problems and take action to resolve an issue.
Management needs to keep an eye out for employees who are accountable and reward them accordingly.
■ Cross-training the workforce. Training is a win-win because it’s proof that your company will invest time and resources to teach employees new skills while providing the company a more flexible workforce. You can cross-train both factory and office personnel.
For example, paint line workers can be cross-trained to support shipping and receiving or assembly cells. In an office environment, customer service people can be trained to monitor and reply to social media channels, as well as learn to do outbound telemarketing when in-bound calls slowdown.
■ Use frequent top-down communication. Frequent communication from the top is essential for an innovative, flexible workforce, and it is especially important when a business cycle is down.
To the extent that company ownership will allow, share financial or sales performance results on a quarterly basis and let your workforce know what new initiatives are being undertaken to increase sales, improve customer service and streamline operations.
■ Use frequent two-way communication. Hold regular meetings by department and be part of give-and-take sessions to learn what your employees are thinking and the ideas that they have to make improvements. Commit to better and more frequent one-on-one dialogue with staff members.
Provide ample opportunity for feedback and innovative ideas for improvement. Conduct job satisfaction surveys at least twice a year to help measure the results of your employee relations programs.
■ Reward initiative. It’s important to reward those who step up and take on more responsibility. Depending on the culture of your company, rewards can take many forms, from employee-of-the-month programs and monetary rewards for good ideas, to preferred parking spots and paid community service days when employees can volunteer for charitable causes and be paid by your company for a workday.
Your business is only as strong as your employees. Ultimately, if you build a culture of accountability, do a good job of communicating, give employees the opportunity to take initiative, reward them for their efforts and instill the company’s core values throughout your organization, everyone will reap the rewards no matter what the economic climate.
Andrew L. Outcalt is president of The Louis Berkman Work Products Co., which includes Meyer Products and Swenson Products. Both companies are vertically integrated manufacturers of snow and ice control equipment sold around the world. For more information, visit www.meyerproducts.com or www.swensonproducts.com.
The buzz about entrepreneurship continues to explode nationally — today, there are more than 1,200 incubators, 200 accelerators and 450 crowdfunding platforms available across the country to help young companies grow. Also in the mix are networking, training and support programs such as 1 Million Cups, Venture For America and Startup Weekend.
Higher education is another driver of the entrepreneurial spirit: According to the Kauffman Foundation, there are now 2,335 full-time undergraduate and graduate entrepreneurship programs.
What is true nationally is true here in Northeast Ohio. With the support from Ohio Third Frontier, JumpStart and its partners have formed a network of seed funds, mentors, incubators and accelerators, all intent on working together to accelerate the successes of the region’s diverse, high potential entrepreneurial firms.
While this support is helping our young firms make progress faster, it is also creating a new, unintended, challenge. The pool of startup companies is getting bigger and stronger nationally, but the pool of investment capital is not. Competition for money is increasing as entrepreneurs vie for their share of the follow-on funding pie — whether it’s from venture capital funds, angel investors or government grants.
Efforts need to speed up
In light of these factors, and to increase our regional competitiveness, we must continue to accelerate efforts to help local startup companies stand out and attract resources needed for growth. For example:
■ Select Northeast Ohio companies are becoming more interested in startups as a source of innovative technologies — a trend we hope increases. Support from regional corporations — whether as a beta customer, subject matter expert and/or investor — can bring critical resources to young entrepreneurial businesses while offering the large companies an early look at new technologies.
■ University-based technology transfer offices are increasing their focus on new ways to drive commercialization. Key initiatives include forming new seed funds to help develop innovative technologies and implementing new commercialization training programs.
■ High-net-worth individuals engaging more with organizations in our region to gain insights on how to navigate through the risks and rewards of investing. Organized angel groups such as North Coast Angel Fund are a valuable source of follow-on capital while ARCHAngels provides a forum to connect entrepreneurs with potential funders and resource providers. An ever-increasing number of highly qualified individuals are volunteering their time to help the region’s most promising young tech companies. With the support of the Burton D. Morgan Foundation, JumpStart has introduced a mentoring program to efficiently and effectively expand our ability to deliver assistance directly to some of the region’s most promising entrepreneurs.
The future is clear
Why is all of this support so important? Young entrepreneurial companies are our nation’s new job creators: According to the Kauffman Foundation, between 1980 and 2005, all net new job growth in America was produced by companies less than five years old.
Although the momentum we have built around a culture of entrepreneurship in Northeast Ohio has been substantial, our work isn’t done. Increased collaboration — and plenty of creativity — can further strengthen our entrepreneurial ecosystem and drive significant economic impact. ●
Jerry Frantz manages the entrepreneurial services and investing team at JumpStart Inc. and has helped provide advisory support to more than 75 portfolio companies. Contact Frantz by email at email@example.com. For more information, visit www.jumpstartinc.org.
Think back to your school days. You may remember an exceptional teacher who got through to you — one who helped you make a solid connection, clarifying the material until you arrived at that “ah-ha” moment.
Powerful, meaningful connections like these are the essence of successful marketing campaigns.
But it takes more than a creative slogan to make a message click — it requires a strategic approach with messaging that is relevant to the audience, delivered in a manner that is engaging and consistently brand-driven. In my experience, I’ve found the most effective way to make those connections is to employ an integrated approach.
What is integrated marketing? A truly integrated marketing campaign maximizes the benefits of multiple channels in one coordinated effort. It delivers a clear, concise brand-driven message that remains consistent across all channels.
I often see customers approach integrated marketing backward: They start with the end product first, taking a brochure which they distribute at a trade show — and then, mail to customers, upload it to their website, post it on their social media sites and then re-flow it as a blog post.
In marketing, “consistency” does not necessarily mean “the same.” What’s missing, most often, is a strategic approach that includes four key elements.
The right strategy
Identify your goals first: Do you want to inform and educate people? Prompt them to take action? This critical planning phase identifies your market, target audience, relevant messaging and effective marketing channels.
Consider that you might have multiple audiences — existing customers, people who have visited your website, etc. — the campaign messages must speak directly to these individuals with content that’s relevant to them, while still promoting brand continuity.
Each marketing channel has its strengths and limitations; consider this as you identify the best means to reach your demographic. By having a consistent, impactful message woven together using different channels (social media, printed material, promotional items, SEO, etc.) you can ensure consistency and leverage the impact of the cross-channel reach.
Consider that once you send a message to someone, it’s now old. As you continue to connect with this person, you need to change things up, ensuring the message is different, yet still relevant to them. Using multiple channels allows you to reconnect with your audience throughout the campaign to reinforce your message, drive relevancy and prompt action.
Data and tracking
A campaign has many moving pieces. It’s wise to consider all variables when crafting your campaign: Which channels will you use (who uses these channels, what are they using them for)? After you make the initial connection, how do you nurture that contact?
By tracking online activity, looking at where your audience is spending their time (i.e., Twitter vs. Facebook) and capturing responses, you can build a solid data set that defines next steps as you measure results and then adjust and re-deploy to hit the right target, with the right message, using the right channel.
Among its benefits, integrated marketing promotes a consistent voice and brand image, while delivering cost efficiencies in creative/content development, planning and delivery. Another advantage: As you look at different channels and track results, you can drive marketing dollars into the appropriate channels that are most effective.
As with any marketing effort, give your integrated marketing campaign reasonable time to produce results. Build a foundation and then develop a plan based on your business segment, market and audience.
With the right message, aimed at the right audience, using the right channels, you’re well on your way. ●
Tim Connor is president and CEO of The Shamrock Companies Inc., a leading provider of integrated marketing, communications and project management solutions with headquarters in Westlake. Founded in 1982, the company serves a diverse, national client base utilizing four fulfillment warehouses and 15 sales offices across the United States. For information, visit www.shamrockcompanies.net.
Connect with Tim Connor on Twitter @tjconnor
Connect with Tim Connor on LinkedIn http://linkd.in/1dh3kyG
It’s exciting to see new projects revitalizing downtown Cleveland and older neighborhoods that have endured generations of neglect. Redevelopment of the East Ohio Building and The 9 on East Ninth Street, Fairmont Creamery in the Tremont neighborhood and St. Luke’s Pointe on Shaker Boulevard come to mind.
All of these projects incorporate mixed-use design. People can live, work or shop under one roof. The wonderful amenities of city life — theaters, restaurants, stadiums and other attractions — are within easy walking distance. It’s no wonder living space in and around downtown is in high demand. In the case of St. Luke’s Pointe, new senior housing compliments an innovative micro-entrepreneur center, an array of commercial space, schools and community organizations, all within walking distance.
Incentives are key
These projects have something else in common. They relied on a combination of funding sources that include federal programs and tax credits. Without federal incentives such as New Markets Tax Credits and Low Income Housing Tax Credits, it’s quite possible one or more of these developments would never have left the drawing board. NMTC and LIHTC projects are transformative; they rebuild places and rebuild lives.
Both tax incentives encourage investment in distressed, underserved communities. While the LIHTC program focuses exclusively on the residential component, the NMTC program has a broader mission and serves as the catalyst for mixed use and commercial developments in Northeast Ohio and the nation. Both leverage private capital and state dollars with impressive results.
The incentives work by allocating tax credits to investors through authorized entities called Community Development Entities. Investors who make qualified equity investments reduce their federal income tax liability by claiming the credit. In turn, investors agree that at least 20 percent or more of new housing units are income based — they are free to set market rates for the remainder.
Under the auspices of the Greater Cleveland Partnership, the CDE known as Cleveland New Markets Investment Fund II has financed 30 projects and invested $102 million since 2003. That $102 million attracted other loans, state funding and private equity to create a total of $664 million in development.
Over the past 10 years, NMTCs have helped to create 4,600 permanent jobs and 2,200 construction jobs, 1,171 market rate rental housing units and 216 affordable rental housing units in Cuyahoga County. The credits have helped finance more than 2.7 million square feet of new office, retail and commercial space.
As I mentioned, these tax vehicles lift up both people and communities. In 2012, the median household income in my district was $31,331 and 16 percent of all seniors lived in poverty. Moreover, Cleveland has lagged behind other major cities in attracting and retaining college graduates. A livable city center helps.
The demand for quality, affordable housing is acute for all age brackets. Yet over the past 30 years, federal spending on community development — as a share of gross domestic product — has fallen by 75 percent.
The next round of NMTC allocations to be awarded this year will be the last unless Congress reauthorizes them. As an enthusiastic supporter, I will encourage my colleagues to approve reauthorization. With stronger communities, we all benefit. ●
U.S. Rep. Marcia L. Fudge, D-11, is now serving in her third consecutive term. She was elected in a special election in November 2008, re-elected in the general election that was held that same month. In 2012 she was unanimously elected by her colleagues to serve as chairwoman of the Congressional Black Caucus in the 113th Congress. For more information, visit www.fudge.house.gov.
There are many stereotypes people are faced with every day. Whether they are based on skin color, religion or social circle, various judgments fill the adult world with preconceptions about people based on one characteristic.
Unfortunately, stereotypes stretch outside of the adult world and onto the younger generation. I hear many things when talking to adults about the work I do for the community, but I hear one thing more than any other: “It’s great to see a young person actually doing something!”
While I am aware this is meant as a compliment, I often take offense when told I am one of the few members of my generation taking action.
There is a strong stereotype that my generation doesn’t care, makes poor choices and is just plain bad. Yes, there will always be the 1 percent of teens my age who don’t care what happens to the world we live in, but they are far from the majority. There are young people doing amazing things, big and small, every single day.
Changing the world
I recently was selected as one of 10 national winners of the Peace First Prize. The prize is meant to “celebrate the powerful contributions of youth peacemakers.” I am extremely honored to be associated with a group of individuals, ages 9 to 22, who are changing the world.
From my project, the Tolerance Fair, an event meant to bring communities together; to the goals of others, such as bridging the gap between young people and police in Detroit; to providing teddy bears to orphaned children — I have learned about amazing projects being done by young people that are creating a big impact.
While there is a class of people in my generation who are following their passion, and dedicating parts of their lives to changing the world for the better, there are millions of teens making a difference in their own little way every single day.
Small acts do matter
One project that I launched is called Good Deeds Matter. The purpose of this campaign is to highlight the small acts of kindness. We ask kids to decorate a 5-by-5-inch puzzle piece describing their personal good deeds. The pieces show kids helping each other with homework, cooking for friends who are ill, donating food and taking time to volunteer.
When put together into mosaics, these pieces visually showcase a wealth of kindness.
So yes, there are some teens who would want to watch the world burn, but thankfully they are the 1 percent.
All that I would ask of an adult (or anyone for that matter) is to see the other 99 percent who will be there to fight that fire. Whether it’s the big-scale projects that can move mountains, or the little acts of kindness that add up to an ocean of good, you better watch out — because my generation’s 99 percent is changing the world as we know it.
Justin Bachman, a junior at Solon High School who has Tourette’s syndrome, founded the annual Tolerance Fair of Northeast Ohio. This year’s event will take place on March 9 from 1 to 5 p.m. at the Cleveland Convention Center. More than 200 nonprofit and resource organizations will be on exhibit. For more information, visit www.honorgooddeeds.com.
In his book “What the CEO Wants You to Know,” Ram Charan shares the universal laws of business success that it doesn’t matter whether you are selling from a fruit stand or running a Fortune 500 company, the same basic fundamentals dating back to his days working in the family shoe shop in India still hold true.
At Clark-Reliance, we focus on sharing concepts from the book with our employees with the goal of helping our team understand the basic fundamentals that drive business results. Every member of Clark-Reliance becomes a leader when the basic fundamentals of business are promoted and executed.
There are three things to hone in on in any business in order to be successful: cash generation, return on assets and growth. We want our team to understand these important concepts individually and the relationships that exist between them.
Charan tells you right up front ... you don’t need a formal education and it does not matter what size your company is, you still need to think about your company in the simplicity of a street vendor. He stresses the importance of keeping the entrepreneurial spirit that he learned on the streets of India and shares his sage advice:
Cash generation — Cash is generated when the inflow of revenue exceeds the outflow. The cash that goes out applies to salary, taxes and supplier costs. Cash in is generally payment from customers. Cash is the business’s oxygen supply.
If you do not have cash, nothing makes business sense. The underlying goal is to make sure that everyone is involved in the daily thinking of, “How can I generate cash?” Simple things such as getting invoices out on time by assuring mailroom efficiency will help with cash generation.
Return on assets — Return on assets measures how well you are using the capital you have invested in your business. You may use capital to buy equipment, plants, computers, inventory and more. What kind of money is being returned to you through the use of those assets? How fast do raw materials go through a factory and become finished goods and then get sold?
The velocity or speed with which you turn your inventory into sales has a great impact on your return. Within the return on assets calculation lies gross margin: your sales dollars less your costs of producing the product. Watching and evaluating your costs to produce your product gives you valuable clues to your competitiveness and material costs.
Growth — The question you have to ask is, “Are you growing profitably?” How do you continue to encourage growing profitably? The customers are critical to this analysis. You have to make sure that you are going to produce a product that the customer base knows that they can use to reduce their costs and expenses.
You also want to assure that your engineers design the product with the customer’s needs in mind. The customer’s satisfaction with design, performance and price directly affects the basic fundamentals of your own growth, return on investments and cash generation.
This book is a tremendous tool to get everyone in the business to grasp, understand and to drive good results moving forward. The best methodology that we have utilized is to give employees something they can read and go back and answer questions and use examples to implement in our industry. ●
Matthew P. Figgie is chairman of Clark-Reliance, a global, multi-divisional manufacturing company with sales in more than 80 countries, serving the power generation petroleum, refining and chemical processing industries. He is also chairman of Figgie Capital and the Figgie Foundation.
Rick Solon is president and CEO of Clark-Reliance and has more than 35 years of experience in manufacturing and operating companies.
To learn more about Clark Reliance, like its Facebook page www.facebook.com/clarkreliance
Connect with Clark Reliance on LinkedIn www.linkedin.com/company/clark-reliance-corporation
Small and middle-market companies aspiring to land national accounts may have advantages over larger competitors by offering more flexibility, greater efficiencies, better service and faster turnaround.
But often that’s not enough to win the business of the biggest and best brands, and the benefits that smaller organizations bring to the negotiation can be offset by downsides such as lack of buying power, fewer resources and limited national and international licenses.
Benefits of client profit sharing
One breakthrough strategy for attracting and retaining major clients is to share profits with them. Client profit sharing can do the following:
■ Turn a customer into a partner with common goals.
■ Increase client engagement and loyalty.
■ Lower the cost of doing business.
■ Increase revenue and net income.
■ Drive information sharing and entry into new markets.
■ Spur innovation and developing new products.
■ Bring products and services to market quicker.
■ Grow referrals to potential clients.
There are several critical factors for analyzing client profit sharing viability.
First, the supplier should assess the opportunity not just from its own position of strength and financial interest, but also from the combined competitive advantages that both companies bring to the market. The assumption of profit should, however, be backed by mutual due diligence.
At the same time, there should be adequate margin in the individual profit to insulate the supplier from breaking even or losing money in the case of unanticipated cost increases. The shared profit model should also be competitive overall with the supplier’s lower-volume business, so the incentive to fulfill orders or provide services is equal.
The price of the product or service for which profit is being shared should be set at fair market value. The price shouldn’t be raised just to retain the supplier’s usual margin before the split at the potential expense of losing business to overpricing.
Forging a custom contract
Another benefit to profit sharing is forging a custom contract that safeguards the supplier and client in a way that typical agreements usually don’t. By detailing specific rules of engagement that include regulatory compliance, the interests of both partners are best represented and protected, and the doors to opportunity open wider.
Ongoing evaluation is essential to stakeholder satisfaction. Profit sharing agreements usually renew annually, but continuous appraisal is vital to optimum performance. Uphold deliverables and discuss modifications that can improve outcomes. Likewise, monitor the commitments of your partner to ensure equity and goal achievement. It takes two to make it work, but only one to break it.
Whether you’re a service company or manufacturer, prospects for creative client partnering abound. When two businesses merge their unique competencies, the synergies can result in mutual benefits well beyond a one-way transaction. Reciprocity is the key to endurance.
If you’re a small or midsize enterprise looking to push through the barriers for doing business with national firms, proposing profit sharing could be the attention-grabber that gets you in the door. Even if the concept doesn’t materialize, the points you get for trying may be high enough to turn the heads of decision-makers.
If nothing else, it shows potential or current client that your company is innovative, nimble and genuine about being more than a supplier. With a business commitment of any type, these are the ideologies of a lasting, productive relationship.
Eric Lofquist is co-owner, president and CEO of Magnus International Group Inc., an award-winning sustainable global products company. He is a regional and national EY Entrepreneur Of The Year™ whose business has ranked No. 1 on the Weatherhead 100. Contact him at (216) 592-8355, ext. 223 or firstname.lastname@example.org. For more information, visit www.magnusig.com.
Connect with Eric Lofquist on LinkedIn www.linkedin.com/in/ericlofquist