“The one thing you can count on is, every time you talk to your employees and you tell them something, they are going to remember,” says Klipsch, the company’s chairman and CEO. “When the facts all become clear, they know whether they got the straight scoop or not.”
When the national economy went into the tank in 2008, Klipsch knew changes needed to be made. He also knew that he had to be very forthcoming with employees about what they were facing at the company, which he says has net sales well in excess of $175 million.
“Whenever there is any change that occurs anywhere in the organization, we lay it up on the table and explain it,” Klipsch says. “We don’t hide it. We keep it as open as we can. It has to be a proactive, consistent, almost 24-7 intent to keep your employees informed with what’s going on.”
Klipsch’s business of selling high-performance speakers began to nosedive in October 2008. The company’s core business is for residential consumers, and with new home construction down sharply, Klipsch knew his product would take a hit.
He needed to make a quick read of the market, figure out where to focus the company’s sales efforts and then get his team on board with the changes.
“Every company’s challenge is to be sure their vision of who they are and what they do is current and correct,” Klipsch says. “The vision of a company in a growing economy like ours was in 2008 is one thing. The vision of a company that needs to survive a serious recession gets less strategic and far more tactical in nature.”
Klipsch knew he had to adjust. By developing a clear vision and communicating it to his team, he was able to stay focused on what needed to be done to survive.
Figure out what you do
Klipsch defines vision as a narrative statement about why you’re in business. Figuring out the answer to this question is a key component to success for any business.
“We’re in the loud speaker business,” Klipsch says. “Then the next cut would be, ‘OK, are you mainly commercial loud speakers or residential loud speakers?’ In our case, we’re residential loud speakers.
“Then you’d say, ‘Are you trying to sell standard products at commodity price points where you’re looking for high volume in dollar sales but lower margin in the per unit sales? Or are you prepared to take lower sales volumes by maintaining a higher quality product at a higher gross margin? We’re the latter. We call that premium loud speakers, best of class.”
The point of this exercise is to be clear about what your vision is supposed to be. If you don’t know that, how can you expect to be attractive to a market with many, many options for just about anything you can think of?
“That vision statement has to nail down all those variables,” Klipsch says. “You are this, but you are not that.”
It’s not as if Klipsch hadn’t had to modify its vision before the recession. The home entertainment industry has been in a state of tremendous flux for more than a decade.
“It’s more matching up to the ever-changing dynamics of the retailer, and then, in our case, understanding new product categories that the consumers have bought in to like earphones and ear buds and docking stations for their telephones and other devices,” Klipsch says.
You need to be in touch with the people who buy and sell your products to get a read on what they are looking for you to do.
“You do that by having interaction with your consumers so you know what’s happening at the ultimate consumer level,” Klipsch says. “There is no reason to wait until the end of the month to know what’s going on during the month, and how we know is by interacting with our customers on a daily and weekly basis all the time. I was with one of our largest retailers all day yesterday and for dinner last night. In those meetings, we get a feel for where they are. If they are starting to see more traffic and are starting to see a recovery and are increasing their orders for October and November, that’s an indicator.”
When two or three other indicators tell you the same thing, that could be perceived as a trend.
“If only one retailer is doing it, maybe he has some unique capability, but it doesn’t represent the market,” Klipsch says. “That’s the judgment call we have to make every day.”
When you’re talking to your buyers and sellers, don’t just ask questions. It doesn’t hurt to talk shop once in a while and get into the details of your strategy.
“We develop strategies so that we provide a product to Best Buy that’s not like the product we provide to hhgregg. The strategies we come up with are meant to give the major retailers some unique product lines and somewhat separate from what some of the other major retailers are selling. So the merchandisers at those different retail stores are participating in how they would like to see that strategy evolve and how they would use their part of the strategy to their advantage. There is a coordination that is occurring.”
As Klipsch has expanded around the globe, the company has also focused on developing strong relationships with distributors so it has a contact point from which to gather feedback about consumer habits.
“They become the primary interface for language issues, credit issues and inventory issues,” Klipsch says.
The goal is to be in touch with your customer and the market and be able to tweak your vision to meet the changes as they occur.
“It’s an ever-changing set of priorities that you tend to have to constantly evaluate,” Klipsch says. “You’re looking at your key profit centers. You’re deciding whether one has growth opportunity or the other one. You just want to protect and stabilize and you reallocate resources, therefore accountability, to evolving new responsibilities as the business has evolved. Let’s face it, your two resources are people and money, and you’ve got a limited amount of both.”
Talk to your team
As you start to figure out the vision piece to the puzzle, don’t do it alone.
“No matter what position you have in senior management, there needs to be at least one other person that you have value in their opinion,” Klipsch says. “Two people really do make more thoughtful and better decisions than any one of us could. Two people or three people ask other questions, generate other thoughts and bring in other things to consider. And after you complete that discussion, you end up making a more informed decision because you didn’t do it all by yourself. That’s true no matter what level manager you are.”
If you don’t feel like you have clear lines of communication in your business, Klipsch says you may want to start troubleshooting by looking in the mirror.
“If you do want an interactive management team where you do listen to people because you do respect their opinion, they have to believe you respect their opinion,” Klipsch says. “That selling job is up to the CEO. If you’re complaining that your team is weak, go look in the mirror.
“If his people are not prepared to say, ‘Hey boss, I disagree with that or let’s rethink that,’ if they are even hesitating doing that, then I promise you they are mo
re than hesitating. There are lots of things going on that they don’t agree with and the CEO’s style or what he said or how he said it has made it impossible for other people to feel like their recommendation makes any sense.”
If you don’t have a good relationship with your management team, pick the person on the team who you trust more than anyone else.
“Pick the person in the senior management team that you frankly have the most confidence in and the two of you start talking about what’s wrong with the entire management team,” Klipsch says. “Start with one person and try to build a team of two or three people. Maybe I replace somebody or maybe I replace one or two people. But you still have to be accountable for that team or you’re not the CEO.”
When it comes time to speak to the company as a whole, go in with your eyes wide open.
“Most employees in most companies know whether they are working for a company that has a management team that’s aware and is trying to do the things that need to be done or whether they have a management team that is ineffective,” Klipsch says. “There’s not an employee of any company today that doesn’t go home and wonder, ‘Could this economy be worse and could I lose my job?’ If anybody said they never have had that thought, whatever they are drinking, I’d like to have a drink of that.”
Once you’ve communicated the plan, it’s up to you to enforce accountability that the plan is adhered to.
“The thing that makes accountability work is reporting,” Klipsch says. “It’s clarity on whether the objectives are truly being accomplished in the time frame they were supposed to be accomplished.”
Klipsch is a big believer in a single piece of paper with four to six bullet points that clearly list the areas of responsibility for an individual.
“Let them expand on that from their perspective on what those mean and then agree about the writing,” Klipsch says. “Have a document written that both sides say, ‘I understand that, and I agree that’s what we want to do.’ It’s very focused on three or four topics and you make it clear what you are looking for and what time frame you want and the intended results you want. Then you’ve got to report on it at least monthly. There’s got to be a checkpoint each month that says, ‘I’m on track,’ or, ‘I’m not on track,’ ‘I have issues,’ or, ‘I don’t have issues.’”
So how do you make sure that managers stay current with the checkpoints?
“It starts at the top with the major corporate objectives and then drops down to lower-level departments to pick out the things they can do relative to the corporate objectives because not every department has a role in every corporate objective,” Klipsch says. “So department by department, by having a top-down approach, eventually what you’ve done is tied in the lower-level organizations in some support way for what that higher-level objective is.”
With a redesigned Web site debuting earlier this year and 35,000 members in its online forum, Klipsch is doing its best to weather the economic storm.
“There is no crystal-clear answer when you have the evolving and dynamic marketplace that you sell to where your customers change quite often,” Klipsch says. “It really is the senior management team’s responsibility to collectively ensure the vision and the financial model and the team that’s put in place in fact matches up to expectations.”
How to reach: Klipsch Group Inc., (800) 554-7724 or www.klipsch.com