Progressive Distributor - Managing through tough times

Managing through tough times

by Richard Vurva

We knew the good times would end sooner or later. After nine consecutive years of sales growth, specialty tool distributors this year adjusted to less than stellar performance.

According to STAFDA’s Quarterly Trend Report, the first two quarters of 2001 saw a drop in sales compared to the same quarters in 2000. Overall, in a year-to-year quarterly comparison, sales were down 4.1 percent in the first quarter and 1.5 percent in the second quarter.

Some regions of the country managed to buck the downward trend. The Mid-Atlantic, South Central and Pacific regions reported sales gains in both quarters.

The Northwest appears to be the hardest hit, turning in double-digit decreases in both quarters.

Still, despite the poor economic conditions and uncertainty about the future, most distributors remain optimistic. In seven out of 10 regions, STAFDA distributors predicted modest growth for the third quarter.

“Interest rates remain low, which helps prevent any collapse of the housing and service trades,” says STAFDA executive director Georgia Foley. “Infrastructure spending should continue to remain strong, and that will continue to help a lot of our members.”

Shore up for the future
In some cases, distributors view an economic slowdown as an opportunity to make changes in their company to strengthen their market position at the first signs of a turnaround.

For example, in spite of slow sales, Mill Supplies of Fort Wayne, Ind., has developed new service offerings for customers. The company has beefed up its safety training programs, offering training in areas such as ergonomics, hand protection, fall protection, slings, hand tools and power tools.

“When you get someone at the job site doing safety training, it not only provides knowledge to the worker, but it verifies the value that you as a distributor give to that customer,” says Mill Supplies president Jim Beckstein.

He acknowledges that it can be difficult to keep salespeople motivated when business is slow. He urges his salespeople to double up on their calls during downturns.

“My advice to our staff is to continue calling on people. Now is the time to invest in that call. Discuss things you can provide for them that they might not be aware of, so when things do get back to normal, you’ll be ready to go,” he says.

STAFDA president Jim Smith of Nail Fast in Albuquerque, N.M., believes that one way to keep employees properly motivated is to share information with them.

“Share information not just about what’s going on in the company, but what’s going on in the industry and the economy in general and how those things relate back to the company,” he says.

He also keeps a close eye on expenses, making sure resources are applied to appropriate activities.

“We try to make sure sales guys are involved in sales and not replenishment or delivery or answering accounts receivables questions,” he says.

Your employees
are watching
When business is bad, it’s especially important for owners and managers to lead by example. Whether they verbalize it or not, employees take clues from the actions of their managers and look to them for leadership. One of the things they look for is reassurance that their company has a strategy that will get them through the bad times.

Unfortunately, according to a survey by Development Dimensions International (DDI), a human resources consulting firm, and HR.com, a Web site for human resources professionals, many managers are failing as leaders. The survey indicates that two out of three employees have low or moderate confidence in their companies’ leadership.

What can managers do to boost their standing?

“Don’t withhold information,” says Bruce Katcher, an industrial/organizational psychologist and president of the Discovery Group, a Massachusetts-based consulting firm.

He says many managers communicate on a “need-to-know” basis. They withhold information on future plans and financial results. When employees eventually learn about their leader’s plans, they feel the information has been sanitized or delayed.

“Be honest at all times,” he adds.

If employees feel they have been misled or lied to, you will lose their trust, perhaps permanently.

Finally, Katcher says, leaders should communicate face-to-face as often as possible, listen to employee concerns and act on employee suggestions.

Keep an eye on competitors
One danger during an economic slowdown is to become too focused on internal issues. Jim Henderson of Dynamic Sales in St. Louis tries to stay abreast of what’s happening among competitors. For example, as industrial sales have slowed, he has noticed distributors that previously focused their attention on the maintenance staffs at industrial plants begin to show up at construction job sites and in contractors’ offices.

His company’s sales are evenly divided between industrial and contractor business, so a significant drop on either side can dramatically affect the bottom line.

“We work on making sure we’re diversified so we don’t have all of our eggs in one basket,” he says.

Many competitors, particularly the big box stores, continue to inundate local markets with advertising and promotional material. This is one reason that, despite the temptation to cut costs, distributors don’t want to abandon sales and marketing efforts.

“You might have to be a little more judicious in how you spend your money or how you evaluate what works and what doesn’t work, but if you retreat, you’re going to be in trouble,” says Smith.

A learning opportunity
STAFDA’s Foley advises distributors to examine all aspects of their business with a critical eye and ask themselves key questions. Are inventory levels where they should be? Are we carrying the right products? Is the warehouse functioning as well as it could be?

This is also a good time to educate employees, she says. She points to STAFDA’s cost-effective quarterly teleconferences and the University of Industrial Distribution as two ways to help employees brush up on their business acumen.

“This is the best opportunity to educate your employees so you’ll be ready to take advantage when business does pick up again,” she says.