The Supplier/Broker Dance

Cutting the rug with a food industry CEO doing the Customers and Cash Boogie, our rhythm stalled for a few moments when I asked how broker reviews improve his organization’s financials.

Broker reviews do not improve sales. Their costs are buried in supplier financials, offering no insight into the supplier/broker relationship or processes that guide it. Supported by data, they also include storytelling, guesswork and opinion--all in good faith but insufficient for solving problems, making decisions or producing predictive outcomes: “XYZ account went out of business”, “You’re not paying enough attention to our line”, “Competitor X bought the gold level program”. Comparing period-to-period sales or results-to-quota when market conditions, leadership, personnel, competition and strategy keep changing is an exercise so imbedded in sales management culture that its cost-to-benefit is unknown and unchallenged.

Estimate the total number of salaried hours required to source data, assemble, analyze, travel, and conduct broker reviews. You can conservatively estimate a cost of at least $6,500 for each. Multiply times 20 brokers, and your company spends a minimum of $130,000. In net income terms, that equates to tens of thousands of case sales.

Have broker reviews really increased sales revenues for your company? Lifting a section from management handbooks, brokers and suppliers benefit less from this practice and more from consistent, reliable, collaborative processes between your company and theirs.

Resuming the Customers and Cash rhythm with my chief executive client went like this:

• Discard this costly, long-standing practice. Just as you would remove barriers to production efficiency, challenge any practice that is a barrier to sales productivity.
• Re-route broker review costs to curtailing or preventing firefighting in the sales system.
• Define and analyze the functions in your supplier/broker relationship before trying to measure them or drawing conclusions.
• Drill into the flow of activities brokers undertake on behalf of your organization: Scheduling, selling, communicating the voice of the customer, supporting customer programs, administrative paperwork, invoicing. Work with your organization to help take out complexity, cost and time wherever possible.
• Pay attention to the inputs and outputs of these primary functions because that’s where the real costs and inefficiency reside. Brokers don’t resist or resign lines that pay too little; they resist or resign lines that cost too much to represent.
• Effective supplier/broker relationships should be based on reliable, repeatable processes that are consistent across all markets, even when a change in leadership occurs on either side. Business can only be managed by the set of processes that define its activities.
• Collaborate with forward-looking sessions that estimate the resources required to deliver the numbers and cascade responsibility for achieving them throughout both the supplier and broker systems.
• Whether results are up or down, let your sales leaders review the processes that either contributed or derailed them--but only after you, as CEO, have been involved in establishing and imbedding them.

The supplier/broker relationship should be organization-to-organization, not sales manager-to-account executive: aligned with missions, actionable, consistently measured and reported, tracked as a time series, predictable and compatible with the way brokers do their job. CEO involvement in establishing guidelines is critical because broker performance is directly related to many of your organization's most important metrics: Gross revenue, salesperson productivity, strategic execution, new product introductions, customer acquisition, retention and turnover, and more.

Socrates said, “The unexamined life is not worth living.” Unfounded, calcified beliefs could be costly and slowing down your organization, preventing more effective practices from emerging.

Broker reviews is one of them.