Building a Future for Distributors and Dealers of Building Products
Volume 44, Issue 8 October 2005
A Viewpoint from WMMPA
Managers Are Bread By Three R's
By Kellie A. Schroeder
As a business leader, you cannot make a decision today without consulting the three Rís: Return on Investment (ROI); Return on Objectives (ROO); and Return on Relationships (ROR).
These three simple terms have absolute power over each and every decision you make on a daily basis whether you realize it or not. You weigh each item that is thrown your way by determining its value, worth, purpose, functionality, etc., to your business plan by the three Rís. You also let the three Rís overtake your personal life decisions, but that is a tangent we wonít explore here.
Although living by the three Rís makes good business practice, there are those who take it too far or are too extreme in applying ROI, ROO or ROR. If they cannot clearly see the benefit to the bottom line in the equation, they refuse to venture away from the positive R factor and therefore miss great opportunities.
Just as the children of today have evolved into instant gratification addicts, we have nurtured instant gratification managers and bottom line junkies due to our business practices this last decade. Vision beyond the bottom line has been stripped away from their makeup as a result of the Ďprove it or lose ití attitude. Opportunities that cannot be directly and/or instantly measured are being tossed in the circular file. This concept should strike fear into the hearts of business leaders everywhere. I know time is precious, but vision takes time and dollars.
If you remove vision from your management team, I firmly believe you foster a sense of fear in their psyche: fear of operating on a different playing field than those who need concrete, positive dollars instantaneously upon completion of a program, project or event.
What is the R Factor?
For the last 10 years, the three Rís have been refined in your business acumen as they grew in popularity and became the Ďití phrases for the late í90s and early millennium. Saying these terms today are considered passť, but management teams across the nation still let ROI, ROO and ROR reign their corporate world. The Rís rule. Period. As to why the R factor rules, it is simple-measuring whether the investment, objective or relationship is worth achieving for the initial investment (risk, time, money, support, etc.) with favorable results as the outcome leading to advancement of the business directly affects the bottom line. Got that? Wait, what did I just say?
Breaking down the R factor can be much easier done than said. Yes, I wrote that correctly. It is less complicated to work out the problem of the R factor than state it as I did above. Here is a good example: if you believe that the objectives of your new marketing campaign (A) will promote product sales, and you are willing to invest huge dollars (B) to achieve (A) after calculating the risks of (B) to your bottom line, you are working within the R factor.
In our industry, managers at all levels are working through the R factor every hour as they go through their workday. A sales manager for a lumber company making a call on a potential new customer walks into the potential customerís office with ROR foremost in their mindóestablish rapport or a relationship bond, and then go for the sale. At the back of his or her mind is ROI; how much time should he or she invest trying to obtain the new account? Will they actually buy product?
As the potential new customer on the other side of the desk, ROI is leading their thoughts with questions on the lumber cost, the quality of the product, the service of the lumber company, etc. Also, he or she is sitting there questioning their ROR factor as it pertains to their current lumber supplier.
If the cost of the new lumber company is cheaper, should they break with their longtime supplier to save a few bucks? Will good olí Bob forgive him or her if they jump ship for the new, cheaper lumber company? Are you getting the picture here?
The Danger of Living Solely by the R Factor
I believe we are each aware of the R factor and how to specifically work our problems through its formula. However, I do not believe living solely by the R factor is healthy for business. In fact, it is downright dangerous. By removing the vision from those governing our businesses, we paralyze growth in critical areas such as product development and business expansion (sales or entities).
Right now you should be wondering to yourself if the prove it or lose it attitude is prevalent in your company. Are your managers living in fear of pursuing an apparently good idea with you since the numbers do not back them up? Or they are letting a great opportunity pass them by because they have no way of justifying the cost to participate?
When to Let ROS Take Over
The WMMPA is heading to Kauai, Hawaii, February 14-19, 2006. This will be the ultimate ROI, ROO and ROR challenge to many a manufacturer to apply. How does one justify attending a Winter Business Meeting at the Kauai Marriott Resort & Beach Club? Before you work through the R factors, I present you with one more to consider: ROS, Return on Smiles.
Sometimes in business, you need to reward and recognize your employees and yourself for all of the hard work put out during the year. When you write out your objectives, include education, expansion of contacts, relationship building/retention and potential sales. I think the ROS factor will be huge when coupled with education, networking, a palm tree, an orange-glow sunset and the aloha spirit.
If you are a manufacturer of wood mouldings and millwork, and would like to attend the WMMPA Winter Business Meeting, contact our office at 530/661-9591, send an e-mail to email@example.com or visit our web site, www.wmmpa.com.
Get yourself to a WMģ meeting, we want to talk to you!
Kellie A. Schroeder is the executive vice president of the WMMPA.
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