The big boys are coming out of the succession ether. These “big boys” are the franchisers and manufacturers representing a wide range of industries that rely on entrepreneurs to sell their products and make their customers happy.
Until recently, these big boys acted as though they didn’t respect the talents of their distributors nor acknowledge their vested interest in their ongoing success. The predominate opinion was:
“We don’t need to worry about the succession of our distributors; there is an endless source of replacement candidates; it is really to our advantage if a distributor fails because we get to pick a replacement that will drink our Kool-Aid.”
Over the past few years though, changes appear to be emerging. There has been a movement amongst the big boys to develop and implement a succession planning partnership with their distributors.
Why the change in attitude?
The economic downturn of 2008 is a potential and likely source for what led some of the corporate figureheads to reflect on their circumstances and actually count the cost of losing a retailer, wholesaler, franchisee, etc. to the bad economy. When the economy took a nose dive, the big boy executives came to recognize three big realities:
Distributors and retailers who had not addressed credit continuity, business performance, and management synergy and teamwork, all of which are critical to succession, could not withstand the economic downturn.
There was not an endless source of candidates waiting to replace failed distributors.
When the banks were unwilling to extend reasonable credit terms for inventory or floor planning, those well capitalized entrepreneurs that would normally step up and take the risk were nowhere to be found.
In some unfortunate situations, manufacturers and franchisers withdrew from markets and suffered significantly due to reductions in volume. For many others who were faced with the prospect of having no market representation, they began to accept less than ideal market representatives out of desperation. These new distributors or retailers were considered inappropriate for a variety of reasons including: bad customer service reputation, limited inventory capability due to inadequate capitalization, inadequate facilities and support staff, and representation of competitive brands with inherent conflicts of interests. The net result was some of their distribution points went dark.
Before their epiphany, the reality was that many of the big boys would have loved to cut out the “middle man” and their belief was:
“We are smart and really understand what is going on. Those lucky dudes making bundles of money selling our products are just the benefactors of being in the right place at the right time and in some cases the benefactors of the sperm lottery.”
However, the bloody noses and black eyes incurred from trying to apply a manufacturing-franchiser mentality to direct sales led to the reaffirmation of the business axiom: know what you do and do what you know. As a result, the big boys have come to both recognize and respect their specialty of creating products and concepts, and, for the most part, they have also now come to value their distributors and franchisees for the unique talents and resources they have (and need) to be effective.
From experiencing the 2008 downturn, manufacturers were left with some positive and some negative results.
Good News – Many of them found substitutes, maintained distribution, continued service to customers and maintained market share.
Bad News – Their brand suffered, which is still evident by the ongoing struggles these big boys face with the substandard distributors, retailers, and franchisees they picked up in the downturn.
The markets may have recovered, but many of these big boys have come to a realization that their failure five years earlier to encourage the development of succession planning to their distributor network has led to their inability to regain and grow market share. Now, many of these big boys are left frustrated and spending far too much of their time, effort and resources trying to pick up the pieces.
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