Build your own board

Hose and accessories distributors have learned the value of having a sounding board to bounce off new ideas, discuss day-to-day business concerns and seek advice.

by Richard Vurva

Most small distributors either don’t see the need for or can’t afford the luxury of having a board of directors. Yet those companies could benefit from having a group they could turn to for advice and to discuss topics as varied as personnel policies, compensation issues, financial performance and company strategy.

For those companies, an executive forum may be just the answer.

Several distributor members of the National Association of Hose and Accessories Distributors (NAHAD) participate in executive forums, which are groups of about half-a-dozen non-competing distributors that meet on a regular basis to share business concerns and seek advice. The association plays a brief but crucial role in introducing forum participants to one another and providing a non-disclosure form for members to sign. After that, however, each forum decides on its own how the group will function, says NAHAD executive vice president Joseph M. Thompson.

Currently, 37 companies from all parts of the U.S. participate in six executive forums. One participant is Industrial Rubber & Gasket in Nashville, Tenn., whose president, George Fournier, compares the forum to a board of directors made up of people who are keenly familiar with his industry.

“It’s actually better than a board of directors. You could never put together a better board of directors than these individuals because they’re in the business themselves,” he says.

His group, which started in 1993, meets once a year on a rotating basis at each member’s location. The meetings span several days and sometimes include visits to manufacturers. The group discusses a variety of topics, from more mundane issues such as employee policies and cell phone service, to critical problems that every distributor struggles to solve, such as compensation plans, training, the role of specialty distributors in integrated supply and other operations issues.

“There’s nothing that we don’t talk about,” says Fournier. “The most important thing to any group is to generate a high level of trust and confidentiality. If you don’t have that, you’re not going to be able to divulge these things. What we discuss stays within the group.”

Valuable advice
Forum participation sometimes results in members making significant changes to their business. That’s what happened to Jack Kacsur of General Rubber Company in Milwaukee.

At a forum meeting a few years ago, when members shared financial performance ratios, Kacsur recognized that his cost of sales was high compared to other participants. All of the other executive owners had account responsibility within their companies. At General Rubber, most accounts were handled by salespeople who were paid on commission, which drove up the company’s cost of sales.

One forum member told Kacsur, “Jack, your business is too small for you to just sit back and run it.”  When he returned home from the meeting, Kacsur took a critical look at his business and decided to eliminate one salesperson and take over his territory.

“The forum really got me to look at my numbers comparatively to other similar sized businesses and make some adjustments,” he says.

Although the benefits of participation aren’t always so dramatic, other distributors say they’ve gained a great deal from belonging to an executive forum. Getting the opportunity to tour other facilities is one benefit. It provides members the opportunity to see how other distributors handle, store and process material.

“You get a lot of good information by walking through another person’s warehouse,” says Mike Lentz of Rubber & Specialties in Mobile, Ala. “You can see who their vendors are, how often they do deliveries, how their warehouse is laid out, what their computer system is and how that works.”

Knowledge is power
Lentz’ business partner, Charlie Cook, who runs the Rubber & Specialties branch in Pensacola, Fla., participates in another forum. He says sharing information about suppliers is another valuable benefit, and that forum members often buy products from one another.

“It’s like having an alternate supplier on items that you don’t carry. It’s sort of like having another warehouse stocking location,” Cook says.

He adds that forum members have helped him save time when searching for a particular supplier.

“You don’t have to find out the hard way that one supplier’s quality is not up to snuff, or their service is slow.  Other forum members have already been through that. Why go through that trial and error when you can call a group member for advice?” he says.

Kacsur adds that executive forum members sometimes serve as a sounding board for him to bounce off new ideas.

“All of our businesses are pretty much the same but there are differences in product mix, for example. It enables you to see things and to question whether or not what you’re seeing is useful to you. Can it improve productivity? Can it enhance safety? It’s been very beneficial,” he says.

Fournier attributes much of his success to ideas and information he gained from forum members.

“This is by far the biggest benefit we get from belonging to NAHAD. Sometimes, if I have a problem, I’ll call up one of the members and say, ‘This is what I’m running into.’ I don’t know where I could get the volume of information I get from membership just from the ability to call people in my own business,” he says.

Forum members share information with one another that they wouldn’t feel comfortable sharing with competitors. Sometimes, just getting an outsider’s perspective is helpful, particularly when members have varied experience levels, says Lentz. One member of his forum is an MBA. Another has a financial background. Each has different expertise.

“These guys are all struggling with the same problems, but they have different perspectives. We’re not all thinking the same way,” he says.

This article originally appeared in the September/October 2002 issue of Progressive Distributor. Copyright 2002.

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