8 Factors for Distributor Advisory Council Success

With increasing threats by digital giants and other channel disruptors, value-creating distributor-manufacturer partnerships are more important than ever. This article is the third of a three-part series on the benefits, critical value and keys to success of distributor advisory councils (DACs), based on interviews with 300 distributor principals.
New bright production facilities at factory producing blocks view from above

Editor’s note: To help manufacturers avoid the typical pitfalls encountered when they organize and manage a Distributor Advisory Council, The Corporate Development Institute (CDI) surveyed nearly 300 distributor principals in a variety of industries to determine which manufacturers had the most effective DACs. Since distributors usually carry the lines of several competitive manufacturers, they are readily able to compare manufacturer policies, practices and councils. These same distributors repeatedly named 24 manufacturers with the most consistently well-run distributor councils. The CDI then interviewed these 24 companies to identify and describe which management practices led to their more effective DACs.

How does a manufacturer or distributor know if a Distributor Advisory Council is productive and worthwhile? There are eight ways to gauge the effectiveness of any DAC. If any one of these conditions are not being met, corrective action is quickly needed to improve the council’s long-term success.

1. Top management and leadership team commitment

The presence of a manufacturer’s CEO, COO, group president, and/or general managers in meetings demonstrates true DAC commitment. Without commitment of senior management, any council will be less effective. Senior management can mitigate roadblocks, prevent delays and initiate greater distributor involvement. Top management’s commitment to the council also should come from engineering, IT, sales, manufacturing and quality assurance.

2. Cross-section of distributor members

A wide range of distributors helps identify and verify common issues. Diverse council members have more perceptions and experiences to share. An absence of demographic diversity among distributors will reduce the problem-solving potential of the forum. Entrepreneurial and publicly vocal distributors with good year-to-year sales growth will usually be the most valuable council members and critical for the DAC’s success.

Also see:The Case for Distributor Advisory Councils.”

3. Focus on commonly held issues

Common issues are what brings a distributor advisory council together. The purpose of the forum is to openly discuss concerns and develop consensus recommendations for the manufacturer to consider. Deviations from these joint issues or focusing on isolated requests will weaken the council. Even if a DAC suggestion cannot be implemented, the manufacturer should explain why the suggestion cannot be resolved.

4. Openness, transparency and high mutual trust

To encourage candid, two-way communication in any distributor advisory council, both manufacturers and distributors must be forthright about each issue discussed and share as much information as possible. To maintain trust, all members should be treated equally with no secrets or company stores.

5. Bylaws to define governance and meeting procedures

Sound bylaws help a DAC determine its purpose, mission, membership size, membership selection and tenure, leadership, topics, meeting frequency and location, and corrective actions when needed. Council meetings can be a balancing act, so the chairperson should follow Robert’s Rules of Order.

6. Well-prepared and followed agenda

An agenda acts as a meeting roadmap, with a skilled DAC chairperson as the guide. The council leader must allow sufficient time to discuss each agenda item without over-indulging on a particular topic. The absence of an advance agenda and thorough preparation will not lead to a productive meeting. (And, for what it’s worth, cell phones should be silenced and texting should not be allowed during DAC meetings.)

Also see:What the Best Distributor Advisory Councils Look Like.”

7. High percentage of common issues acted upon

At least 80% of all agenda issues should be corrected or acted upon within a reasonable amount of time. When the same issues appear on the agenda meeting after meeting with little or no progress, the process needs to be improved or distributors will lose interest in attending the council. When an issue cannot be resolved, the reason(s) should be reported at the DAC meeting and included in the minutes that all distributors receive.

 8. Commitment of distributor members

When progressive distributors believe a DAC is worth their time and investment, they will anxiously participate. When too many DAC members are halfheartedly involved, they will begin to miss meetings, arrive late, leave early, send substitutes and submit few or no issues. These behaviors signal serious problems in a DAC’s mission, organization and management, and deserve attention. When a distributor member of 3M’s DAC misses two consecutive meetings, he or she is dismissed from the council. 3M also does not allow substitutes to attend for distributor principals, nor do they allow attendance by teleconferencing.

Prudence with teleconferencing

Despite being advantageous during times when council members cannot meet in person (such as during the COVID-19 pandemic), teleconferencing cannot replace the many benefits of face-to-face meetings. With travel expenses increasing and managers seeking to contain or reduce costs, manufacturers and distributors were asked whether teleconferencing and technologies such as Skype and Zoom were worth using for DAC meetings. The overwhelming response was an assertive, “No.”

They emphasized the following negative reasons to limit teleconferencing:

  • Teleconferencing does not provide eye-to-eye contact and body language to guide discussions and clues about how people really feel about a subject.
  • The lack of personal interactions before, during and after sessions will not surface, and more sensitive concerns from both manufacturer and distributor attendees will not be raised.
  • Bonding and in-depth personal relationships that typically develop in meetings, at dinners, and during social outings would never occur.
  • The more reserved and introverted members will be inhibited to speak up.
  • Discussion of graphs, data and charts will be difficult and awkward at best.
  • Cultural differences in some countries (such as Japan) discourage people to speak up frequently during teleconferencing.

For special half-day meetings, teleconferencing might be considered. But these cases should be outliers, lest the DAC risks a less productive, less incisive meeting where ideas, opinions and issues are withheld.

Distributor advisory councils are not a panacea for every manufacturer-distributor issue. However, a number of leading manufacturers including Caterpillar, 3M, Loctite and Parker Hannifin have utilized distributor advisory councils effectively for decades as the primary vehicle to acknowledge distributors as partners rather than adversaries. The late consultant Peter Drucker noted this paradigm shift when he wrote, “Adversary relationships may work when you don’t have to see the bastards again. But when you must work with each other every day, manufacturers and distributors must work toward win-win approaches.”

This concludes our three-part series on distributor advisory councils. (Read part one here, and read part two here.)

To learn more about DACs, download the full report, Build Stronger Partnerships with Distributor Advisory Councils. Based on interviews with more than 300 distributor principals, this report provides a best-practice roadmap for manufacturers and distributors on why and how to create DACS that can help supply chain partners target markets and align resources more effectively.

James Hlavacek, Ph.D., is chairman and founder of The Corporate Development Institute, a global management development company based in Charlotte, North Carolina. He has helped create and improve distributor advisory councils for a wide range of companies. He has more than 40 years’ global experience as a management educator and strategy consultant, working with long-term clients such as Parker Hannifin, Lockheed-Martin’s Skunkworks, 3M, Unilever, Caterpillar, SC Johnson, Timken, Henkel-Loctite and BASF. In addition, he has served as a board member for Fortune 500 companies and several successful venture capital startups. Previously, Hlavacek served as chairman of marketing at Case Western Reserve University and director of the Institute for Executive Education at Wake Forest University’s graduate school of management. He is the author of six books and more than 50 articles.

 

 

 

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