Too much code-speak isn’t beneficial

BY RICH SCHMITT

Management specialist

Years ago, National Lampoon magazine published a translator for phrases that were commonly used to describe people. The list included things like: “He/she has a great personality” or “He/she is a great dancer.” 

They listed the politically correct (pc phrase and then provided a much less pc translation. As you might also remember, National Lampoon did not care about offending people or being pc, so I will not repeat any of their translations here. As you probably know, however, “He/she has a great personality” was commonly used to mask an individual’s significant flaws.

In visiting with well over 100 wholesalers over the past six months through consulting, our seminars, training and industry meetings, I have noticed some generic phrases that surface repeatedly as wholesalers describe their business and situation. As I consult with wholesalers, there are two key principles that I try to use:

• Deal in facts
• Don’t kid yourself. 

I mention these phrases since, in some instances, the person using the phrase might be ignoring the facts and kidding himself and his team.

Translations a la Schmitt

Here’s my translator for some of the phrases I’ve heard used in our industry.  It converts each phrase into a Possible Translation (pt) of its real meaning. For some of the phrases, I have included some Additional Thoughts (at).

1. Business is a little soft --
   1. pt: Business is really bad. We don’t want to demoralize the team by telling them how bad business really is.
   2. at: The team probably knows -- or at least suspects -- that there is a problem. Their first concern is always, “What does this mean for me and my family?” Their next questions are, “Didn’t the captain of the Titanic tell the passengers and crew that they were taking on a little water?”, “How bad is it, really?”, “Is anybody taking corrective action?”  It is important to communicate in a credible way that also gives your team confidence and direction so they can contribute to the company’s success.  Pretending that there isn’t a problem tends to produce the worst outcomes.
2. All my customers are blah-blah-blah or None of my customers are blah-blah-blah --  Where “blah-blah-blah” is just about any general phrase describing customers. For example, “All my customers think price is the number one issue.”  Another example, “None of my customers read the fliers that we mail to them.”
   1. pt: My grasp of our customers is so limited that I can not summarize my understanding of their needs and issues into a single sentence. 
   2. at: Unless the statement is: “Our customers are all individual and different,” I would probably challenge whatever point is being presented. I would have the same concern if someone used a single general statement to describe their suppliers or employees since each one is unique.  I have observed many flawed decisions based upon very small, very skewed data about customers, suppliers, employees and situations. I have also noted that, as humans, we have a bias toward the most recent data that we have gathered. If a customer is yelling about a delivery screw-up, a manager might conclude that operations is a mess when, in fact, there was a single problem. A second delivery problem might lead to a witch-hunt in some companies. I agree that recent data is critical, but each event can be an isolated problem or might indicate a trend. 
3. My people understand gross margin -- 
   1. pt: We had a training session a couple years ago to educate our team but, frankly, I’m a little weak when it comes to gross margin myself.
   2. at: From our testing, I can tell you that statistics show your people almost certainly do not understand gross margin -- and your senior managers probably do not understand gross margin. This lack of understanding probably costs the company money every day. (For more on gross margin calculation and our gross margin test, e-mail me at rich@go-spi.com)
4. My people wouldn’t steal from me -- 
   1. pt: I hope my people aren’t taking advantage of my trust. I have such lax checks and balances, it would be difficult to detect theft. I probably wouldn’t do anything if I did discover a thief.
   2. at: It is likely that some of your people are stealing from you and sometimes it will be the people you least suspect. You must watch for indicators of theft and dig into each situation. During a consulting interview, an interviewee will sometimes mention that another employee or customer is doing something that seems suspicious. I always report the situation to the owner and recommend that it be thoroughly reviewed. In most cases, there is no real problem but each incident must be taken seriously.  I liken it to smelling smoke in your home or office. You cannot ignore it. You must act immediately. You must determine if there is a fire and if there is, get it extinguished. If an employee is stealing from you, it is critical to use all legal means to remove and prosecute the individual. In most areas, your lawyer will not allow you to discuss the case, but he might allow you to post newspaper articles and other public notices on your bulletin board to remind everyone that you take theft seriously.
5. Our branch managers and sales team set pricing because they are closest to the customer --
   1. pt: We hope the field team knows the market but our margins keep eroding. They blame the soft market and say that customers are getting really sensitized to pricing. The people at hq don’t have a clue about how the products should be priced so giving them the pricing “ball” would be a disaster. Plus the field team revolts every time we take any price-setting action at the corporate level. 
   2. at: In many cases, the field team doesn’t really understand how to properly price products but they don’t want to relinquish control. Their strong push-back can also be a fear that hq will really mess up the pricing. Also consider that “closest” can also mean that the field team cares more about their customers than the company they work for. This misguided sense of loyalty can be disastrous when it drives your pricing.
6. Our customers don’t want or need internet access --
   1. pt: We don’t have any sort of web order entry system. We don’t have a website or our website is just a bunch of links, some broken, to vendor sites. Our sales team is getting questioned about our e-commerce tools but they have no story to tell. 
   2. at: While I would be the first to tell you that most customers are still doing business as they have for many years, some of your current and prospective customers are probably interested in some sort of on-line access. (Some of these tech-savvy guys might be very desirable customers.) Over time, without electronic tools in your marketing toolbox, you will become a secondary or third-level supplier to a growing number of customers. A growing number of contractors are technically savvy and interested in partnering with wholesalers who serve them now and who have the tools for the future.
7. We have a great web order entry; our customers don’t mind that our system requires that they memorize our 6-digit internal part number --
   1. pt: Our substandard internet order entry system forces our customers to remember our randomly generated 6-digit number to order a product. The keyword search stinks unless the customer also understands the hundreds of inconsistent abbreviations that we used in our product descriptions. The 12 customers who use our system on a regular basis really don’t like it. They will tolerate it until a competitor provides a better alternative. We provide customers with a printout from our computer system that lists each 6-digit part number with an inconsistently formatted description. To help make that 2-inch-thick report “useful,” it is sorted by that same randomly generated 6-digit number.
   2. at: Some of your customers are using the internet to select and purchase all sorts of products online. They have experienced many web ordering systems and probably know how easy your site ought to be. One of the big challenges in our industry is the Boomer generation, of which I am a proud member. Many companies are being run by Boomers. We are the generation that straddles the rapid move to technology. Most of us were born when computers used punch cards and when a fraction of the computing power we now have in our phones consumed whole buildings. Some of us have learned the new technology and some have not. A problem can occur when your marketing and/or tech teams are not tech-savvy. They cannot properly evaluate the tools you provide to your customers.
8. My people do a great job of listening to customers so I focus on the strategic issues --
   1. pt: I haven’t seen a customer in years. I haven’t visited a contractor’s shop or a job site in five years. Those sweaty guys want to talk about nascar and other stuff of no interest to me. 
   2. at: Unfortunately, success seems to create a superiority complex in some owners and managers. I also see this phenomenon in some “Success+1” generations as they are sometimes more interested in the country club than job sites. (Success+1 is the generation the follows the generation that made the company successful. I must also add that there are a great number of dedicated, hard-working Success+1 people in our industry.) I never begrudge successful managers and owners their proper rewards, but when they begin to resent “those smelly contractors” there is a negative attitude that will soon permeate the company.
9. Our sales team is compensated on gross margin so they really care about getting the highest price possible --
   1. pt: Managing salespeople is always a mess. They spend much of their time negotiating with management to lower the price. We implemented a gm-based compensation plan hoping that it would counteract our lack of pricing control. We hope this “auto-pilot” approach will overcome our lack of field sales management. We didn’t think about the fact that our sales team still gets compensated for low margin deals that are not even break-even for the company.
   2. at: The intent is to get the sales team aligned with the best interests of the company. Smart salespeople quickly determine that a small commission on a low margin sale is better than no commission on a lost sale. This can result in the sales team being unaligned with the company’s goals. (Some salespeople assume that the company has a magic accounting system that allows the company to somehow make money on single-digit gm sales. They think that this must be so since it would be stupid for the company to permit and pay commission on sales below its break-even point.) I recommend against any plan wherein a salesperson makes commission while the company is losing money. 
10. My receivables are in pretty fair shape --
    1. pt: My receivables are in pretty bad shape. I’m scared to death. I can’t sleep at night. Some of my slow-pay customers bought new boats with the money they should have used to pay down their account with me. Since I have no personal guarantees from them, they can, pretty much, walk away or cruise away from their commitments to me. 
11. My pricing is pretty good --
    1. pt: My pricing is pretty bad. There are thousands of overrides. We got our pricing under control five years ago. It was under control for about 10 minutes but we haven’t really looked at it since then. We just keep adding overrides as “Band-Aids” to address daily problems.
12. My pricing is out of control --
    1. pt: My pricing is a disaster. I have millions of overrides. My guys hand-price more than half of all transactions. My team lowers margins even when the customer hasn’t objected but simply because they are offended when the company charges over 25% gm for any product. Margins are eroding. The situation seems hopeless.
    2. at: In all times, pricing is a priority but in slow times it is especially critical to make as much money as possible on every sale.
13. My customers don’t use catalogs --
    1. pt: Our big competitors have a catalog. We tried to create a catalog years ago and never got it done.
    2. at: Many trade customers, maintenance departments and institutional customers use catalogs. New technology in software and in printing can make catalogs affordable and within reach of almost every wholesaler. Catalogs should be a key element of your ongoing marketing plan. (I need to disclose that I have a bias since we have a catalog software company that produces catalogs for this industry.)
14. Customers don’t come to our counter any more --
    1. pt: We have a lousy counter. The area is a pig-sty, the counter guys have chased away all the good customers with their insults and bad service. The only customers who remain are on-hold everywhere else in town or our pricing is so low they will tolerate the situation.
    2. at: The counter and will-call have traditionally been good business for many wholesalers. With today’s high delivery costs it probably makes sense to provide a great experience to your counter and will-call customers.
15. Our showroom is highly profitable --
    1. pt: My showrooms gross margin percentages are higher than the rest of the company.
    2. at: The expenses associated with the expensive facility and professional staff often make showrooms much less profitable than trade business. Further, since many wholesalers don’t operate the showroom as a strict profit center, there are showroom expenses that do not get properly associated with the showroom operation. (Special order returns are returned to stock. Labor and delivery charges are not assigned to the showroom.) This results in a false sense of profitability.
16. Everyone in our market is having an off year --
    1. pt: We’re having a lousy year. My friendly competitors tell me their sales are off too, but it might be a smoke screen since I think someone is stealing my customers.
17. A new computer system will solve many of our operational problems --
    1. pt: We have operational problems.  We don’t know where to begin. My software salesman says his company has “magic” that will fix my problems.
    2. at: When it comes to operational problems, the “magic” is not software.  I think the “magic” is in hiring good people and creating good processes and practices. If you have the wrong people and poor processes, a shiny new computer won’t fix your problems. Those people will mess up more things and blame the computer, which will execute those poor practices at a blindingly fast rate.

I’ve heard some of these phrases so many times that I mentally file them with “the check is in the mail” and “I will respect you in the morning.” 

As I said before, my rules for consulting (and also for business) are:

• Deal in facts
• Don’t kid yourself. 

Of course, some of these people aren’t leveling with me, but I think a greater number may not be leveling with themselves. So my challenge to you is to listen to yourself over the coming months and decide whether you have lulled yourself into a level of complacency that will hurt your company’s success.