Don’t like surprises? You can avoid them with forethought

As we write this, people around the world are getting ready to spend several billion dollars preparing for Halloween.  Here in St. Louis there are haunted houses where people go and pay good money to get the crap scared out of them.  They are treated to a series of events designed to surprise and terrify them at every turn.  We will not be attending…everyday life seems to offer plenty of surprises that are much scarier.  While there are good surprises, the ones that seem to shock us the most are the bad surprises.  This column will offer some business surprises that you may be able to avoid if you focus on their root causes. 

An important disclaimer:  We are not attorneys, accountants or labor law experts.  As you consider the implementation of any of our suggestions, you must discuss them with your advisors to insure they are correct for your situation and area.

Surprising your banker:  We think rule number one of banking is: Don’t surprise your banker.  Bankers hate surprises.  Surprised bankers often panic, which is a little like scaring an elephant…you may get trampled in the process.  Many wholesalers take their banking relationship for granted.  They have an operating line of credit.  They send financials to the bank every month, quarter or year, as required, and are pretty detached until it is time to renew the loan.  Currently we are enjoying an unprecedented time of low interest rates and lots of money is available.  This will end at some point.  While there are now more regulations than ever that limit the bankers latitude in your relationship, make no mistake, your bank and banker have options as they operate within those regulations.  When the bank trusts you and likes you, they can help you.  Few bankers understand our industry, so part of your assignment is to educate them about our industry and why many wholesale companies are good business customers/partners for banks.  If there are major changes or problems in your business, you may not want to spring those problems on the banker at renewal time.  As you build your relationship with your bank, you may want to discuss the kinds of business issues that they want to be alerted to.  

Surprise! A key employee leaves:  As we look forward, we expect that this will continue to get worse.  Many baby boomers have looked for long-term employment but might have had several jobs in their work life.  Most of their parents had the same job for most of their life.  Millennials, however, are cut from a different cloth than their parents and grandparents.  What fulfills their needs is different in many ways, but the most significant surprises will relate to their lack of attachment to their employer.  As a better opportunity beckons, there will be little hesitation to move on to their next adventure.  As an employer, this leaves you vulnerable to having key people leave through no fault of your own…they just want to go do something else.  Further, the smarter members of your team will be shown more opportunities.  There are a couple things you can do:

1. Treat your great employees better than the not so great employees — some wholesalers, in an effort to be fair, will not create any differentiation.  This often incites a resigned attitude, “why would I want to work hard if I get treated the same as all the goof-offs who are just working hard enough to avoid getting fired.”  The millennial experts say that millennials want to be appreciated, want to contribute, want to do meaningful work and want to know what is next.  They are, however, impatient and, as with many things today, want immediate gratification.  To some extent they are unrealistic but that’s the way they are and soon they will be the bulk of the workforce.  We think there is much to be gained through clear communication that sets clear, reasonable  expectations.  Of course, you then need to deliver on your part of the expectations.

2. People like to work with a team that they respect — companies should remember that keeping goof-offs on the team can be disheartening for the hard workers.  Even if you treat the great people better, their having to compensate and cover for the goof-offs is a pain.  Also remember that great supervisors retain people while bad ones chase good people away.

3. Say thanks for doing a good job — this seems to work with all generations and costs nothing.

4. Keep compensation fair — in our industry we cannot compete with companies like Google and Amazon but we can keep the pay in line with the local market. However, often we do not.

5. Create redundancy (where possible) — while this is not possible in every position, if one person has the keys to the castle and takes them with him/her upon their exit, it will create problems beyond the void in their previous position.

Surprising an employee with a bad review: Good supervisors maintain an ongoing dialog with their team.  When a periodic review surprises an employee, it often indicates that this ongoing dialog has not occurred or has not communicated the performance problems clearly.  Some supervisors are so fearful of hurting the employee’s feelings, they discuss all the good things the employee is doing along with the area that needs improvement.  Balance is important but when, at the end of a performance discussion, the employee thinks he going to get a raise and you think they are barely doing the job, the balance was wrong.  The ongoing dialog should clearly describe: the expected performance, how the performance is measured, how the employee is performing and, when possible, obtain input from the employee regarding what he will do to improve and when.  For significant problems like showing up for work under the influence, the tone of the discussion should differ from problems that do not relate to the safety of the employee and others.

Being surprised that an employee is stealing from you: If your company has employees, the potential is always present.  Based on our years of working with clients, we would hazard a guess that most companies with more than five employees probably have a problem.

We think the most common item that is stolen is TIME.  As employees carry their phone with them, it has become quite common to call, text, tweet, facebook, candy crunch, etc. while on the clock.  Employees carry their phone to the rest room and “camp” there for extended periods.  Many naïve employees think this is a constitutionally granted right like free speech and are surprised when someone tells them to stop doing it while on the clock.  
We think the next most prevalent theft is product.  This can come in two forms, the employee steals product for himself or he steals product for someone else.  Stealing for himself is fairly clear although the methods can be pretty sophisticated.  The stealing for others is much more subtle and can occur in the form of discounts, returns, “freebies” or as they now say “hooking up” a friend.  

While there seem to be fewer instances of this, you cannot forget the all-time favorite, embezzlement.  Over the past 20 years, we have been told some amazing stories of people stealing huge amounts of money from their trusting employer.

What can you do?  

1. Don’t teach them to steal.  When owners and managers divert company resources to their own use, they are both telling employees that it is OK and showing them how.

2. Clearly communicate how much an employee is allowed to steal before there are serious consequences.  The obvious answer is zero, yet companies repeatedly catch people stealing say a tool worth $15 and respond with, “you have to pay for the tool and stay after school.”  Your team now knows that the “OK to steal” number is at least $15.  The same or another thief might try $25 to see if that triggers the company’s wrath.  We have long recommended that companies publish their “OK to steal number” so employees don’t have to test the company in order to find the number.  We also think the number you publish should be zero.  This is one area where we think you treat the great employees and the goof-offs exactly the same.  If your best salesperson steals from you he is still a thief.

3. Put financial checks and balances in place to detect problems.  Most wholesalers have video systems in place to reduce problems in all these areas…they also help to discourage the customers who wander may through your warehouse.  

4. Be clear about the consequences.  Publishing that you intend to prosecute as well as terminate can raise the stakes for potential thieves.

5. Some companies do audits and use shoppers for two reasons: 1) to catch problems; 2) to put everyone on notice that there is oversight.

Surprising an employee with a dismissal: Good managers come to a performance-related termination meeting knowing that the employee already knows that they are being terminated and why.  The ongoing progressively more stern discussions between the employee and his supervisor have alerted the employee of the problems as well as the clear metrics and time frame that have driven the timing of the meeting.

Ideally, this kind of rational progressive approach is perceived as fair by the other employees.  Even when the dismissed employee is a no-good, dirty rat, the other employees might extrapolate your treatment of that individual to how they might be treated if there are problems.

There are exceptions when an employee committed some illegal acts, egregious safety violations or when the employee has exceeded the “OK to steal” amount.  Stealing terminations are complicated when the company has not published the number and, we hear in some states, are subject to labor claims.  “I know you caught me red-handed and that this is a felony but since nobody told me that I wasn’t allowed to steal from the company I think this is a wrongful termination.”  

Surprise! A key customer leaves:  Since customers are often able to change suppliers on a whim, it might be good to consider some actions to reduce the likelihood that they will surprise you. Some ideas:

1. Get compromising photos or video of the customer stealing candy from a small child and threaten to post it on YouTube.

2. Remember to tell customers that you appreciate their business…it’s hard to overdo this one.

3. Continue to ask them what you need to do in order to continue to deserve their business and to earn a greater share of their business.  This is often most powerful during an executive visit to their place of business.  A lot of wholesalers have forgotten how much can be learned in a customer visit.  Some wholesalers like to think of themselves as the lord and master of the realm holding court with their customers (who cast are in the role of peasants).  

4. Build a suite of services to offer along with your products.   This is actually almost as good as those compromising photos.  When customers become addicted to your service offering and are afraid to leave you, they become day-in and day-out steady buyers and they are less concerned about price. These services can range from a killer webstore to lots of other services that help them close business, complete jobs profitably and bill for the jobs when finished.  For our white paper with ideas on some services you can provide, email jen@go-spi.com

As always we hope this gets you thinking about these and other business surprises that you want to avoid this Halloween season and beyond. 

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