June  2004

Distributor Dilemmas
A Company's Day-to-Day Endeavors

The Numbers Don’t Lie—Part I
(But They Can Lead You Down the Wrong Path)
by Steve Linn

Some people might describe what I am about to say as the “woe is me” ramblings of a general manager who has been beaten down by the never-ending pressure of doing business in the millwork and building supply industry during the past 25 years. However, I suspect that I may be saying what so many frustrated managers would like to express.

I wholeheartedly agree that paying very close attention to your company’s productivity numbers in order to maximize your bottom line is essential. This is a statement anyone would agree with. Right? 

Now, before I send the blood pressure of most company accountants and comptrollers shooting through the roof, let me go on record by making this statement: I understand that running a successful millwork or building supply company requires a very close eye on all of the productivity numbers that affect the bottom line. You number crunchers have drilled the importance of managing the productivity numbers into my head for 25 years. I got it already, and I can certainly appreciate it. 

It’s Easy to Succeed
According to the company comptroller, it’s really quite simple to succeed in this business. All you have to do is sell as much as you can, get the highest gross margin you can, keep your expenses as a percentage of sales as low as possible, sell only the best creditworthy accounts, collect your money when due and turn your inventory at warp speed. You see. I told you that I understand. There’s nothing to it.

If you happen to be a general manager who must listen constantly to a sermon on productivity numbers, you might be thinking (but dare not say it out loud for fear of being labeled a weak excuse for a manager), “Easy there big comptroller person.” 

Here on earth, doing business involves more than just the numbers. It involves real people. It involves dealing with competitors that, for some reason, don’t seem to want us to be successful and employees that get cranky because they don’t think $9.50 per hour is enough pay for hand unloading a large truck of heavy door units and a mountain of trim in the mud and freezing rain.”

Of course, we don’t want to forget about the customers that expect your company to have an arsenal of highly experienced and clean-cut smiling faces with extra delivery vehicles standing by idling to deliver the 12 pairs of pole sockets at super sonic speed because they forgot to order them with their package. 

Finally, let’s not forget about all of those above you who scrutinize and second-guess your every decision. These are just a few of the many challenges that we face everyday as we try to perfect our productivity numbers.

Other Complicated Dynamics
Watching and managing the productivity numbers is certainly a must if you are going to stay in business for the long haul. I just wish that the accountants and comptrollers of the world would concede that there are other complicated dynamics that come into play when running a business. You know, the intangibles, such as compatible personalities, teamwork and employee satisfaction and fulfillment, really make us who we are. Maybe here in the real world it’s a little more complicated than just getting the numbers to line up perfect. Maybe, just maybe, achieving success means that we shouldn’t overlook such things as the importance of the salesperson/customer relationship or the importance of satisfied employees that need to have time for personal lives. If some of these things were viewed as priorities, wouldn’t good productivity numbers surely follow? 

Keep an Open Mind
Does your company have a fair compensation program that is designed to motivate and spread the wealth to the employees who work hard to make your business a success? Is your company being careful not to overlook the importance of having a general manager who has a good understanding and feel for the market and how all of the players and personalities are connected? 

Making a move on paper is one thing, but does upper management consider all of the dynamics and implications that come into play when real people and their relationships within the market are involved?

If you happen to be an owner or company comptroller, please open your mind to this concept. A business team is much like a set of building blocks that have been carefully stacked and balanced. If you make decisions solely on the numbers, consideration is not being given to the personalities and relationships that make up the delicate balance of your team. Pull out the wrong block or force a block into the wrong spot and your entire set can easily come crashing down. 

Here’s a concept: when productivity numbers are being analyzed, how about allowing for some perspective and flexibility to enter into the equation for your unique and challenging market conditions? Given your market, current economic conditions and depth and strength of the competition, what net profit percentage would the owners of your company find acceptable right now? Would your company be happy with 3 percent net? How about 5 percent or 8 percent?

The fact is that owners and investors ultimately demand an acceptable bottom line, and rightly so. My question to owners or investors is this: given your market and current conditions, are you being reasonable with your net profit expectations? Do you trust that you have a general manager who has the experience and feel for how to achieve the maximum bottom line obtainable under current conditions? Without handicapping your company’s ability for future success? 

If you do, then trust them and let them do their job. If not, then you don’t have the right person. 


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