On Understanding And Liking

I’m telling this story now because I anticipate referencing it by way of analogy in a day or two.
For a small part of my career, the distribution manager for the company I worked for at the time reported to me. Like most semiconductor companies, we had multiple approaches to sales. In many parts of the world, our largest customers bought directly from us. We provided technical support, took their orders, extended them credit, and delivered product to them directly. But smaller customers bought our product from distributors. The distributors, at least in theory, provided customer support and credit. The distributors were our customers. We shipped to the distributors and they paid us for a product inventory from which they delivered, at margin, to what were our shared customers.
But in reality, it wasn’t quite that simple. Many of our distributors handled competitive product from other manufactures. So it was always a struggle to make sure that they sold our product rather than the other guy’s. A significant part of the distribution manager’s job was to make sure we got more than our fair part of the business. To accomplish this, Larry, the distribution manager who is the subject of this post, needed to increase and maintain distributor share of time and mind. There were a number of ways we could influence share of time and mind at the business to business lever but at the individual distributor salesperson level there was really only one thing that worked: give them a reward for doing their job!. Typically, this took the form of some kind of promotional sales contest where they could get gifts, trips or money.
Larry came up with a seemingly unending parade of these promotional contests. In general, they went like this. Every time a distribution salesperson sold some of our product, he or she could earn points toward a reward. The horse race was typical. Larry would set up a board with a linear track and one toy racehorse for every salesperson. He would do this for every distribution office, and there were dozens of them around the country. With each sale the salesperson advanced his or her “horse” toward the finish line. Whoever’s “horse” got to the finish line first might get $250.00 or a TV or some other prize. Another popular contest involved a large corkboard with many balloons having our logo or some motivational phrase on them. One balloon would have $100.00, sometimes $1000.00, or a certificate for a trip or something. The others had ones, fives, tens, and twenties in deceasing frequency. At the end of the “work” day, each salesperson threw a dart at the board for every sale of our product. If they hit a balloon, he or she got to keep whatever fell out. Remember, all these salespeople were on commission and these little extras were attempts to get them to sell our product rather than someone else’s.
I never thought much of this. I always thought the distribution companies should hire adults as salespeople. But this was a long standing tradition, so such games were all but unavoidable. That didn’t keep Larry and I from having a little dance about each and every one of these contests. The conversation would generally go something like this,
Larry: “We need to get some more action out of ABC Electronic Distributors.”
Me: “Yeah, their numbers sure are in the tank. Maybe we should fire them.”
Larry: “Duane, you don’t understand distribution. We haven’t done anything for them lately.”
Me: “Okay, once in a while ABC shows promise. What do you think we should do?”
Larry: “Well, I’ve been talking to their president and he thinks we should have a contest.”
I never believed this for a minute. Distribution management had far more devious means to extract money from their suppliers than proposing sales contests.
Me: “Okay, let’s give it a try but keep the budget, excluding your travel, under $1000.00.”
Larry: “A $1000.00 per office!?”
Me: “No, a $1000.00 for the whole shebang.”
Larry: “Duane, you really don’t understand distribution! If that’s all I have to spend, I might as well just set it on fire.”
Me: “Can I watch?”
Larry: “We need to get their sales up to where you won’t want to fire them”
Me: “Why? We have other distributors who are doing just fine.”
Larry: “Give me a break. I need at least 20 grand.”
Me: “Larry, give me a break. Last time we threw 10 grand at the problem and it seemed to help for a while. I’m willing to do that again. But this time, we will measure success not by increased sales but by increased profit on those sales. Part of the costs of that increased profit will be our 10 grand entertainment expense for ABC’s sales staff. If this doesn’t help, ABC’s president, you, and I will be having a little conversation that I’m sure you and I will long remember. I’m equally sure he will laugh about it on the golf course the next day.”
Larry: “I’ll see what I can put together but if you really understood distribution you wouldn’t limit what I can do this way. I’ll be back with a detailed plan on Friday.”
Me: “I don’t want to waste your time or mine in reviewing the details. You can be completely sure that I won’t approve of them. Just do what you have to do. I do want to hear from Bob (our controller) about how he plans to monitor success.”
Larry: “Sometime when we aren’t so busy, I’d like to sit down and help you understand distribution better. That way we won’t continually need this kind of discussion.”
Me: “Good luck with the campaign.”
And that is how our conversations on this topic would generally end. The campaign would barely pay for itself but at least we didn’t slide backwards.
Larry was one of the hardest working and most enjoyable employees who ever reported to me. If today someone were to ask me to set up an electronics component distribution network, I would seek his help. But one time Larry came to me with a particularly harebrained, costly, idea that had no hope of even incremental success. So, I sent him away to come back with something that wasn’t nuts. As he left my office, he turned and said, “Duane, you really don’t understand distribution.”
To which I calmly replied, “Larry, you are wrong. I understand distribution perfectly well. I just don’t like it.”