Channel partners can be golden for growth

Dave’s note:  Here comes my favorite “tell-it-like-it-is” CEO, Kim Shepherd, with another of her pieces from her experience managing a completely virtual company with over one hundred employees located through the United States and beyond.  

By Kim Shepherd

In 2006, I gave a keynote speech at the Newspaper Association of America’s national conference in Chicago. During the speech, I spoke to a group of managers who have seen their revenues shrink by over fifty percent in recent years. I gave them a speed lesson on how the newspaper business can build a new river of cash through channel partnerships.

A Channel partner is a person or a company with a complementary service, who is knocking on the same doors as you, and who is connected. I don’t mean that they are on channel_partnersLinkedIn, attend networking groups, and talk a big game. I mean connected to the degree that when she tells a member of her network to jump, that member says “How high?” Rather than viewing him as a potential competitor, view him as a partner with direct influence over your prospect list.

Isn’t that someone you want on your team?

With a little bit of structure and ingenuity, you can supplement your sales efforts by leveraging channel partnerships. At our company, we have Channel partners who are previous clients, major corporations, and some of the most respected consultants in our space. Compensation doesn’t have to be complicated, either. Just take what you would normally spend on a sales lead, and give that to the Channel partner in the form of a revenue share.

[Email readers, continue here…] The most important rule is to feel good about any dollars that go to a Channel partner. I remember during one leadership meeting, our Operations Manager brought it to our attention that we were writing $80,000 in Channel partner checks that month and what were we going to do about that? My response was: FANTASTIC! Writing lots of Channel partner checks is the right kind of problem to have—it is not a fixed cost and it means business is coming in. Win–win.

The challenge for the person at the head of this initiative—which is currently my role—is that you have to accept that you will kiss a lot of toads before you meet a prince. Much like any sales organization, you are going to run into three types of people: hunters, gatherers, and vegans. You’re familiar with hunters and gatherers, but when meeting Channel partners, you’ll also run into people who really just want to go out to lunch and talk, go out to dinner and talk, meet for coffee and talk. They have the potential to waste big chunks of my time, so I classify them as “vegans” for being so low in calories. Good Channel partners are hunters with a “protein–rich” diet of connections.

Unfortunately, it is almost impossible to classify a Channel partner until you have some time invested, but I have never felt that any time spent with a potential Channel partner is wasted. Some Channel partners I had flagged as vegans after several lunches and no leads actually turned into “octopuses,” or a “hub” Channel partner who introduced me to eight other potential partners. I take a long–term view to the time I invest, and know that every now and then, I will meet an octopus in an unexpected place.

The final word on Channel partners is in keeping with my overarching message on glue. For a Channel partner to be a long–term asset to your company, wrap them up in your culture as much as possible. At our company, we give our Channel partners customized web portals where they can log on and instantly see their pipeline and upcoming payments. We also invite them to our All–Staff meetings for a dose of the Kool–Aid, as well as our annual holiday networking party for a bigger, more elaborate “thank you.”

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How to battle the dragon AND avoid the encounter.

Sometimes a competitor is just too entrenched, too strong, too well equipped to directly face in battle.  At least that is the conventional wisdom.  Yet, there are constant examples of new entrants into a niche that grow, prosper and sometimes even become dominant.

So when do we know which course to take?  Quietly abandon a niche?  Refuse to engage?  Or charge in full speed?

In one industry I know well, the dominant player with 22% market share was acquired by one of the largest companies in the technology world.  Everyone, including those connected with the newly acquired dominant player, wondered what changes would affect battle-the-dragontheir company and their personal lives and fortunes.  Well, even though that acquisition is still playing itself out on the field of battle, it appears quite clear that the new parent has directed its new subsidiary to abandon the lower end of the market and focus upon the larger sales, corporate customers, and major brands.

And if that new strategy is proved to be true, the five–hundred–pound gorilla in that niche just moved out of the way of many of its smaller competitors, leaving a market that will surely see a scramble of new competition in the near future.

[Email readers, continue here…]  What if you had abandoned that market, reallocated your resources, and focused instead upon other non–competitive geographical or industry segments?  There’s an example of avoiding the encounter and losing the lead position when an opportunity to compete surfaces unexpectedly.

But doesn’t it take seemingly unlimited resources to compete against the gorilla in a niche?  The answer is found in defining the niche itself.  Has your competitor left a geographical area virtually untouched?  Forgotten about selected vertical markets within the niche?  Been skewered for slow customer service?  Each of these discoveries would provide an opportunity to compete and perhaps win, defend and build from a distant base to fight the larger battle.

One more thing, absolutely common to technology companies:  generations of technology do not transition easily. Leading players in one generation often do not transition well into the next, as they carry the burden of a large existing user base with demands for support, feature–functionality and attention that drain the resources of even larger companies.  I’ve seen these waves of technology first hand in one niche, counting six such waves during the past 35 years, and watching new entrants arrive during each transition to attract customers with new products using new tools, sometimes to grow larger over time than the last generation’s dominant player.

So, how do we answer the question?  Battle or avoid?  We look for the under-served niches, avoid the direct encounter until dominating at least one of those niches, and use the profits and reputation from that small victory to take on ever–larger niches once dominated by the gorilla.  We’ll call that clever avoidance for the sake of a much fairer but later battle.

Posted in Growth!, Positioning | 1 Comment

What do you wish you’d known yesterday?

Wouldn’t it be great if there were no more digital or printed reports to tell us what happened in the past?  I know. We need financial data for comparison, and to a degree – for planning.  But we should be thinking of finding ways to make data available to us much earlier, when it is more meaningful and actionable.

Call it “pervasive access” or just–in–time reporting.  Or better yet, near real time looking-backinformation that we can use to make changes, decrease costs, or better manage assets like inventory or cash – or people.

If there were no reports, we would have to manage by exception, more by observation than by analysis.  Perhaps we’d use a real time dashboard, one in which all information is fed from direct input from processes in motion.

[Email readers, continue here…] See, the value of information does decrease over time – more than we recognize.  We fall into the habit of looking at weekly or monthly reporting, and react to trends by holding meetings, changing processes after the fact.

But what if you could develop changes in your business processes so that information, even big data, would be available and analyzed for exceptions almost instantly?  How much money, time and resources would we save?

So that should become a departmental or corporate goal for you.  Find places where reporting can be made by exception, not routine.  Call center getting behind?  Production slowed or stopped?  Sales slipping unexpectedly?  Why wait until the damage is done?

Find the areas where a real time exception reporting is possible and proactive.  Develop a system for early, even instant alerts when things get beyond comfort or safety.  And dump or consolidate the much later reports to save valuable time at period end.  Can you find at least one of these to implement today?

Posted in Growth! | 1 Comment

Eye of the needle? Why worry over your bottlenecks.

Think for a minute whether there is any process or person that could be classed as the eye of the needle in your organization.  Is there anything,  process or person, that stalls the flow of work from start to finish?

A CEO once told me that she was ‘the eye of the needle’ in her organization, purposely controlling quality of service and making sure all of her direct reports let her know of each A businessman trapped inside a bottle trying to crawl out through the neck with his partner pulling on the cork from the outside

decision and action they undertook.  Her intentions were pure and admirable. She wanted only the highest quality for her organizational reputation.

But the unintentional effect was that she inserted herself into every process as the bottleneck that actually defeated her goal of making her organization a model of efficiency and quality.  Such behavior removes individual incentive to innovate, and lessens the chance that her direct reports will grow through learning to manage and in turn delegate effectively.

[Email readers, continue here…]  Sure, you should worry over quality and speed of service.  And sure, you should worry over bottlenecks that reduce the speed of completion of the total task.  But the worst way to do that is to micromanage, to become the bottleneck in the process, to discourage individual creative thinking by others.

It is a fine line for young or first time CEOs to walk.   Removing bottlenecks is one of the more important tasks for a senior manager.  But never should that happen at the expense of creating just such a bottleneck in the process by being one.

Posted in Protecting the business, Surrounding yourself with talent | 1 Comment

How to avoid “death by meeting.”

Imagine yourself with a calendar requiring you to be in six meetings in a day.  Day after day.  How long would it take to induce you to rethink your use of time – and that of the others sitting (or standing) beside you?  More important, how long would it take to realize death-by-meetingthat there is something wrong with the enterprise when it takes constant meetings to get the job done?

Slowly in many cases.  And expensively.

The best performers and managers dislike meetings and show their disdain by being abrupt or at the opposite end, distracted.  Often the most attentive ones involved in constant meetings are those who feel protected, shielded from measurement of personal performance, or at times less self–motivated to perform.

And the cost to the company of those meetings?  Staggering, if you take into account the lost production time of those present, not just the salary cost.

[Email readers, continue here…] And yet, there are times when co–ordination between people and groups requires a meeting, whether in person or over digital channels.  So let’s examine ways to make meetings more efficient – those that are actually required.

The concept of a scrum is a good one to use in many cases of immediate need to coordinate a working group.  Attendees stand rather than sit, reinforcing the urgency and need for a short meeting.  Individuals address issues that are blocking them from completing their tasks, requesting help from the others in removing the blockage.  Scrums are effective and should be short, scheduled, and supervised.

Board meetings are often killers.  Hardeners of the arteries of progress.  Most devolve into a series of reports from each constituency, spewing facts that could have been printed and passed to the board ahead of time.  Board meetings should revolve around issues, not progress.  Reviewing sales account by account is not an effective use of a board’s collective time.  Attacking critical issues after providing background information and perhaps a list of alternatives is a good use of board time.

And if there is little to discuss, perhaps the wisest decision of all is to just cancel the meeting and bank the time saved for more critical use.  Certainly, most of us would applaud the decision to return a bit of lost time to its rightful owners.  And to avoid the occasional (slow) death by meeting, so common in companies today.

(Cartoon courtesy of LaughChat.)

Posted in Surrounding yourself with talent | 1 Comment

How to simplify your commission structure

Is your commission structure so complex that even you must have help understanding it – and calculating a commission on a pending bid?

Sales people are incentivized by money.  They usually are able to calculate what’s in it for them before they make the final presentation and ask for the order. But what if the commissioncommission plan is so complex that even the people who should be most excited cannot understand or calculate the winning numbers?

Far too often, I come across companies with commission structures that take into account “all” the possible permutations of profit on a sale, causing everyone to wait for an accounting person to complete a cost analysis in order to find the magic number, or for a manager to rule on percentage splits for territories or products.

[Email readers, continue here…]  For those who have tried (and perhaps built) a commission structure based upon anything other than gross revenue, there are some relatively easy solutions for simplification.

First, forget the extremes in cost of goods or labor costs for the sake of ease in calculation – and for more effective motivation for the sales staff.  Pick a number for the cost of sales for outside purchases of hardware or services, and assign a standard percentage to these.  For example, make all outside hardware and services commissions calculated at 25% of the contract sales price, and all inside services commissioned at 50% of the billed amount (as a basis of that line item for the percentage to the sales person.)  Then make a rule that exceptions for commission calculations can be made only for contracts above some large trigger amount.  Codify that the sales person cannot discount lower than some percentage of the stated prices, usually ten percent, without management approval – and possible commission percentage impact.

For recurring revenue, the commission should be calculated in advance for some stated number of contract months.  Cancelled contracts would result in a chargeback against pre–calculated commissions, and charged against future earnings.

Many smaller companies pay commissions as cash is received.  This complicates the accounting process, but importantly not the incentive to the sales people, who have long since been able to calculate the total commission on the order, and look to the extended payments as a form of deferred revenue, not as a penalty.

Company executives have come up with permutations for protection of cash flow or profitability since the dawn of commission time.  But we can address the motivation and resulting follow–though by sales people as a result of these many types of permutations.

And simplification almost always leads to better sales efficiency, motivation, and more closings by those who now understand their portion of the profit from their work.

Posted in Protecting the business, Surrounding yourself with talent | 1 Comment

A simple test: “Are we managing like jerks?”

Are we who issue orders to associates or employees ever acting as jerks?  We’d never like to think so, or we wouldn’t do it in the first place.

If someone is saying “This is confusing to me” when you’ve given an instruction or order, there are a number of ways to respond.  Of course it may be appropriate to explain your reasoning, or ask what part of the instruction is confusing.

But, as one CEO pointed out to me recently, it may be more appropriate to ask yourself if Manage-like-jerkthe instruction was necessary or worth the effort in the first place.  He worded it a bit differently, as in the headline to this insight.  Sure gets your attention.

Managers can be jerks as easily as anyone with a bit of power misused or misdirected.   So here is the simple test.  Before issuing any kind of order to perform a task, think of how this might be interpreted by the person receiving the order.  Take the cynical view – the worst case possibility.  Because it’s a guarantee that many of those on the receiving end will do just that.

[Email readers, continue here…]  Did your proposed order pass the jerk test?  Will the requested outcome advance any of your goals – or just provide an increment of satisfaction?  Will the output be used in a meaningful way?  Or will this just be another reason for that cynical associate or employee to label you with that term?

Now raise the stakes of that order to the corporate level.  Will a whole department or all those under the level of the issuer feel a bit of the jerk syndrome?

Well, then. You have a tool for the question. And you know how to use it.  Think back to your past.  Ever think that of an action by a leader in your past life?

Posted in Depending upon others, Surrounding yourself with talent | 1 Comment

Hire on ability. Fire on fit.

This is not necessarily the way we intend to behave as managers, but our headline reflects the reality of most experiences when viewed in retrospect.

We carefully vet the potential hire for experience required.  Ninety days or longer later, if that person is terminated by management, it often is for actions resulting from the HR_1person’s relationship with others in the organization more often than failure to perform the specific task for which the person was hired.  Especially in companies with unusually stifling cultures allowing few errors or deviations from the handbook or rules, some new employees just cannot adapt.

Yet, we hired the person based upon our perception of the ability to do the job designated. And yes, some of those hires can be vetted on the job and found unable to perform to standard, deserve a negative review and possible termination within the first ninety days of hire for that reason alone.

[Email readers, continue here…] But experience tells us that more often the person just didn’t fit in, a reference as much to the culture of the enterprise as to the efforts of the new hire.  Should we be so abrupt as to consider letting someone go based upon their lack of a good fit within the organization?

My experience is that it is better for both the new hire and the company to make the termination decision quickly, humanely, and within the first ninety days of hire.   The shock to the employee, to the culture, to the corporate pocketbook, and to legal challenge is much less than when the process is extended again and again to find the right fit for someone who is just not quite right.  And if that person is visibly or vocally unhappy, the problem becomes toxic and even more dangerous to the culture of the organization.

Firing on fit is an important rule to consider when examining the early work of a new hire – within the first ninety days.  For the sake of protection, there should be at least several coaching sessions and a documentation of these sessions in the employee record.  But the ninety–day rule is reasonably common across government jurisdictions to protect employers when making early termination decisions.

Everyone hates to let someone go.  It’s one of the hardest things a manager does.  But it is important to protect the corporation and help the new hire to move on – when warranted.

Posted in Depending upon others, Surrounding yourself with talent | 2 Comments

Celebrate your mistakes!

How do you teach your work force that mistakes are OK as long as they learn and don’t repeat them?  By being a visible example.  A friend and fellow CEO states that he publishes each of his mistakes in his company internal blog along with the lesson he learned.  “If the CEO can do this, he gives permission for anyone to confess as well,” he states.

You may not know it but the National Transportation Safety Board has for years offered a reporting program for pilots, air controllers and others involved in aviation safety.  Anyone Einstein_Never_made_mistake_quote-231x300reporting an accidental safety error (such as flying into restricted airspace) within ten days is granted immunity from FAA prosecution, as long as the mistake was not an intentional breaking of the law.  Even NTSB understands that mistakes are learning experiences as it insulates accidental infractions from prosecution in order to learn and solve problems communally.

What is your culture?  Do you respond to an employee mistake with a warning or even punishment?  If so, it is a sure thing that fear will cause your employees to hide them, cover them up with quick fixes if possible and worry over the consequence of creativity efforts or of pushing the envelope a bit.

Doesn’t the whole enterprise fail a bit each time a learning opportunity is lost or someone hides actions from management?  And what does it say about your corporate culture and your individual management style?  Even if you condone the overreaction of others in management, aren’t you then guilty of reinforcing such a culture of punishment over learning?

Celebrate your mistakes.  Others will follow.  All will learn to share for the sake of safety, growth and open culture.

Posted in Depending upon others, Protecting the business, Surrounding yourself with talent, The fight for quality | 5 Comments

Why bother to sit in with customer service?

Over fifty years ago, I was CEO of a record manufacturing company in Hollywood.  We were the only such facility on the West coast to provide and control the entire process from studio, through finished vinyl record pressings in the same building, therefore able to promise quality control others could only dream about.

As founder and CEO of the then public company, I was expert in several of the “clean” processes such as studio recording, record mastering, cover design and photo–Lead-and-learnlithography.  But if I knew then what I know now, I would have spent time working with my employees in each of the subsequent and more mechanical processes such as printing press management, record press management and shipping control in order to better learn my own business and hear first–hand suggestions from the line.

I lost an invaluable opportunity to learn from the front line.

[Email readers, continue here…]  Later, as CEO of a fast growing computer software company with over thirty employees in customer service alone, I did learn the lesson, as I sat in on customer service calls on occasion to get a more complete understanding of the process, pressures and opportunities for improvement.  Then, when my manager of customer service sent a request up the line asking for funds for equipment or expanded staffing, I would understand the need, sometimes offering suggestions for improvement to try before making the investment.

It had taken years to learn that empathy comes from experience, not just perceived understanding.  And that there is such a thing as a business leader showing empathy while making good strategic decisions.  I learned that employees appreciate knowing that their executives have experienced and can understand their world.  I learned that tough decisions, such as denial of a request, are better received when all affected know that there was a deeper understanding of the issue and reasons for the response.

All because I learned to sit in and understand the position, the workflow, and the challenges at each stage in the process of customer service.

Are you too busy to learn each step along the corporate process enough to understand issues and challenges?  Start by sitting in with customer service.  The benefits are immense.

Posted in Finding your ideal niche, The fight for quality | 3 Comments