This last week I found myself in a passionate discussion with one of my sales people regarding a pricing strategy for one of our top customers.
As it so happens, this particular customer was, at one time, one of our largest but for whatever reason their purchases were now significantly lower. While it is true that the recent economy has had some effect on this company, it is also true that this particular company has begun to source some of their components directly from overseas sources.
The net result is that their purchase volume was down and therefore the fixed costs associated with doing business with this company suggested that a price increase was inevitable.
My salesman argued passionately that this was the wrong time to raise prices and in fact we should lower pricing in an attempt to entice the customer to abandon their efforts to source their components off-shore and purchase more of their products from us.
I argued back that this was exactly the right time to raise prices in that we were being "cherry-picked" by the customer, while still offering them low pricing for products that they were simply unable to find elsewhere. In addition, the total sales from this customer were now relatively insignificant so the risk of losing their remaining business would not greatly impact our bottom line.
This exercise was a healthy exchange of ideas between two people who wanted to do what is best for the company but saw the problem in two divergent ways. It was one of a thousands of small decisions that are made each year by me and others at our company. The results of some of these decisions turn out good while others turn out not-so-good.
Making hard decisions and taking responsibility for the results of those decisions requires leadership.
A leader is someone who can set a course for an organization, company or department and then make the difficult decisions along the way to keep focused on the destination. Leadership is not about being the most popular person in the room but rather it’s about the relentless pursuit of an organization and those within the organization to become better at what they do. At best it’s difficult...at worst it’s impossible...
People start businesses every day because they believe that they have what it takes to be successful. They believe in their product...their service...their ability to enlist others in their crusade...and their skills to convince customers that they have the best solutions to their problems.
Although a person can go to school to learn business fundamentals like accounting, marketing, and operational management, rarely can one go to school to learn organizational leadership.
So where does one turn to in order to acquire the elusive leadership skills needed for effective management? Over the past 30 years, I have found a variety of invaluable resources to help provide me with both training and feedback enabling me to develop new skills and ideas.
Advisory Boards
As I began my first company, one of first things I discovered was that I didn’t know as much as I thought I knew about business and leadership. It was then that I decided that I needed to surround myself with a group of advisors, with specific knowledge, who could help educate me in several important areas of business.
These areas included: insurance, accounting, legal, human resources, IT, and facilities. I took the time to assemble a group of experts in these areas who I could look to in order to give me solid advice and help me to navigate the complexities associated with these issues.
I didn’t waste valuable time and effort trying to become an expert in these areas because I already had experts working on my behalf (although ultimately I did become very knowledgeable in these areas over the course of time due to the great training provided to me by my board of advisors).
Mentors
Throughout my life I have sought out people who have amassed a great deal of experience in both business and in life. These are typically older people who, as they approach the fall of their lives, are looking to share their vast array of knowledge and experiences with a willing listener. These people have been invaluable to me as friends and confidantes. Although they might not be versed on the latest technologies, they do understand people and understanding people is one of the key attributes of a leader.
Coaches
Coaches are very different from mentors. Whereas the main focus of a mentor is to share their experiences and skills with me, the main focus of a coach is to keep me accountable. They help me to set reasonable goals, expectations and desired results. They don’t focus so much on the "why" but rather on the "how" and the "what". It’s their job to keep me focused on doing the right things and providing me with feedback in areas to improve.
Peer Groups
In my experience, the greatest amount of my personal leadership development came from my participation in peer-to-peer organizations. Peer groups are formal or informal organizations of like-minded individuals who have a common interest with others within the group. This could be a professional society like IEEE or AMA. It could be a group of entrepreneurs who meet regularly to share ideas and issues. It might be a civic-minded group or service club like Kiwanis, Lion’s Club or Rotary.
Many years ago, as my first business was struggling to get off the ground, I had the opportunity to join the Entrepreneur’s Organization (EO). This is a phenomenal international organization where small business owners can meet with like-minded individuals from around the world to discuss like problems and issues, discover resources, explore new ideas and share best practices with other members in a safe and confidential environment. In addition, EO uses international conferences and university events to bring together entrepreneurs throughout the world to meet with global leaders and connect with one another. Many of the fundamental ideas I write about each week are byproducts of those I developed while a member of EO.
Although I am no longer a member of EO, I still regularly participate in several un-moderated peer groups that help to create and foster new ideas and methodologies.
I believe that leaders are not born but rather developed over time. No amount of training will truly prepare us for every situation that may arise.
Many people along the way helped to make me a better person...and a better leader.
Despite spending years honing my skills, each day I still wrestle with making difficult decisions, creating and implementing a clear vision and strategic plan, as well as dealing with difficult people.
Each day I am challenged to learn something new... each day I succeed... each day I fail... such is the way of a leader...
Thank you very much for your support of OptiFuse where we hope to always lead from the front rather than push from behind.
As it so happens, this particular customer was, at one time, one of our largest but for whatever reason their purchases were now significantly lower. While it is true that the recent economy has had some effect on this company, it is also true that this particular company has begun to source some of their components directly from overseas sources.
The net result is that their purchase volume was down and therefore the fixed costs associated with doing business with this company suggested that a price increase was inevitable.
My salesman argued passionately that this was the wrong time to raise prices and in fact we should lower pricing in an attempt to entice the customer to abandon their efforts to source their components off-shore and purchase more of their products from us.
I argued back that this was exactly the right time to raise prices in that we were being "cherry-picked" by the customer, while still offering them low pricing for products that they were simply unable to find elsewhere. In addition, the total sales from this customer were now relatively insignificant so the risk of losing their remaining business would not greatly impact our bottom line.
This exercise was a healthy exchange of ideas between two people who wanted to do what is best for the company but saw the problem in two divergent ways. It was one of a thousands of small decisions that are made each year by me and others at our company. The results of some of these decisions turn out good while others turn out not-so-good.
Making hard decisions and taking responsibility for the results of those decisions requires leadership.
A leader is someone who can set a course for an organization, company or department and then make the difficult decisions along the way to keep focused on the destination. Leadership is not about being the most popular person in the room but rather it’s about the relentless pursuit of an organization and those within the organization to become better at what they do. At best it’s difficult...at worst it’s impossible...
People start businesses every day because they believe that they have what it takes to be successful. They believe in their product...their service...their ability to enlist others in their crusade...and their skills to convince customers that they have the best solutions to their problems.
Although a person can go to school to learn business fundamentals like accounting, marketing, and operational management, rarely can one go to school to learn organizational leadership.
So where does one turn to in order to acquire the elusive leadership skills needed for effective management? Over the past 30 years, I have found a variety of invaluable resources to help provide me with both training and feedback enabling me to develop new skills and ideas.
Advisory Boards
As I began my first company, one of first things I discovered was that I didn’t know as much as I thought I knew about business and leadership. It was then that I decided that I needed to surround myself with a group of advisors, with specific knowledge, who could help educate me in several important areas of business.
These areas included: insurance, accounting, legal, human resources, IT, and facilities. I took the time to assemble a group of experts in these areas who I could look to in order to give me solid advice and help me to navigate the complexities associated with these issues.
I didn’t waste valuable time and effort trying to become an expert in these areas because I already had experts working on my behalf (although ultimately I did become very knowledgeable in these areas over the course of time due to the great training provided to me by my board of advisors).
Mentors
Throughout my life I have sought out people who have amassed a great deal of experience in both business and in life. These are typically older people who, as they approach the fall of their lives, are looking to share their vast array of knowledge and experiences with a willing listener. These people have been invaluable to me as friends and confidantes. Although they might not be versed on the latest technologies, they do understand people and understanding people is one of the key attributes of a leader.
Coaches
Coaches are very different from mentors. Whereas the main focus of a mentor is to share their experiences and skills with me, the main focus of a coach is to keep me accountable. They help me to set reasonable goals, expectations and desired results. They don’t focus so much on the "why" but rather on the "how" and the "what". It’s their job to keep me focused on doing the right things and providing me with feedback in areas to improve.
Peer Groups
In my experience, the greatest amount of my personal leadership development came from my participation in peer-to-peer organizations. Peer groups are formal or informal organizations of like-minded individuals who have a common interest with others within the group. This could be a professional society like IEEE or AMA. It could be a group of entrepreneurs who meet regularly to share ideas and issues. It might be a civic-minded group or service club like Kiwanis, Lion’s Club or Rotary.
Many years ago, as my first business was struggling to get off the ground, I had the opportunity to join the Entrepreneur’s Organization (EO). This is a phenomenal international organization where small business owners can meet with like-minded individuals from around the world to discuss like problems and issues, discover resources, explore new ideas and share best practices with other members in a safe and confidential environment. In addition, EO uses international conferences and university events to bring together entrepreneurs throughout the world to meet with global leaders and connect with one another. Many of the fundamental ideas I write about each week are byproducts of those I developed while a member of EO.
Although I am no longer a member of EO, I still regularly participate in several un-moderated peer groups that help to create and foster new ideas and methodologies.
I believe that leaders are not born but rather developed over time. No amount of training will truly prepare us for every situation that may arise.
Many people along the way helped to make me a better person...and a better leader.
Despite spending years honing my skills, each day I still wrestle with making difficult decisions, creating and implementing a clear vision and strategic plan, as well as dealing with difficult people.
Each day I am challenged to learn something new... each day I succeed... each day I fail... such is the way of a leader...
Thank you very much for your support of OptiFuse where we hope to always lead from the front rather than push from behind.
So who finally won the debate about the rate increase? Your offering this week reminds me of an article I read in the 80's about competing based on "price alone" - Sola Pretium for my Protestant friends! The article was entitled: "What to Do When the Other Guy Wants to Give It Away". The articles answer to this thorny problem? DO NOT. Good call, Jim…
ReplyDeleteUltimately we ended up raising their prices as a part of our new published price guide that all customers received.
DeleteThey were upset at first (as were several customers), but it appears that they will continue to do business with us when they need to buy products that they cannot source from other places.