The current business cycle is defined partly by the difficulty that most distributors – as well as traditional bricks-and-mortar companies – experience in engaging and retaining top-notch employees. Technology companies have changed the equation for an entire generation around the company-career relationship, but what’s the solution for distributors?
For context, I have to go back about 15 years when I embarked on a multiyear research project to identify the key characteristics of successful distribution companies, ones that differentiated themselves from the competition. A key characteristic was in the culture and how certain distributors combined a customer- and employee-centric focus to consistently outperform competitors across revenue, profitability and growth metrics. Retention of both customers and employees was off the charts.
A $100 million industrial/plumbing distributor, for example, had an open-seating arrangement with cubicles that only had low dividers, not full walls. This included the executive team and even the CEO – well before the dot-com boom. It was tough to get hired, and cross-training and education were relentless across the company. Very clear performance metrics and team-based bonus plans had every associate held accountable by their peers, not their managers. Every employee worked one Saturday morning every six weeks, including the CEO.
This is not necessarily the solution, but this distributor was years ahead of the paradigm that drives the “new” tech workplace cultures by building an open culture with very clear rules and rewards. The problem many traditional companies face today, including plenty of distributors, is that the same organizational structures from 20 years ago are still in place. But what worked for baby boomers, driven almost exclusively by monetary rewards, is secondary to the social, educational and aspirational motivations of today’s emerging workforce.
This happens in every industry. Amazon, which just passed Walmart as the most highly valued retailer in the U.S. with a market value of about $250 billion, has built an incredibly intense and dedicated culture. Costco, known for its employee-centric culture, also has done extremely well. The airlines are a classic case of profit at the expense of customers and employees, and yet Southwest and JetBlue have cracked that model with employees at the center.
Culture change is a difficult, long-term process, but this area demands a hard look. Your model might need some tough love to update. If you don’t, you risk losing the talent that can build the next version of success over the next 10 years.