With this the fourth year of flatline growth and cutbacks, the recession has brought a whole new meaning to ‘scarce’ resources. In practice, ‘scarce’ is still relative, in that money, as always, seems to be available for the ’important’ customers and vital projects.
Traditionally this obviously meant attempting to make your customers and projects more important and vital, in response to any cut-backs. However, in unprecedented times this may not be the best approach for the company. In fact it may be preferable to focus upon securing a fair share of available resources, and then demonstrating above average returns on any investment in the customer.
The starting point for putting ‘scarce’ in perspective has to be the supplier’s financial performance. Whilst some companies provide an eloquent rationale for each reduction in a budget, most ‘arbitrary’ cut-backs usually have a root cause identified in the latest published accounts. However, even greater precision is usually available in the more recent internal management accounts, with access restricted to those with proven ability to handle and even affect the results.
Scarcity thus represents an opportunity for NAMs and their role to be seen as drivers of company profitability. Their account strategies need to be seen as a sub-set of the overall company plan, with their contribution vital to its delivery, and their involvement in the formulation of company policy a necessity, especially in times for which there are few if any precedents. In practice, NAMs usually have to earn the necessary respect, and the following approach can help.
Essentially, companies balance risk and reward in attempting to produce an acceptable level of Return On Capital Employed in the business, in turn driven by a combination of net margin and capital rotation. If sales are lower than expected, both margin and capital turn are driven down, so a company attempts to cut expenditure and assets, and key resources such as Time, Money and People become scarce. As a result these resources also become more valuable. It is vital that a NAM understands the scope and basis for any allocation of resources, given the scale of sales shortfall in the business. The NAM should try to determine a defensible and fair share for the customer, given its share of business, investment classification (Invest, Maintain, Divest) and stage of lifecycle, ideally already captured in an approved Account Plan.
Any resources available for investment in the customer should then be focused upon using trade funding to improve Net Margin and Capital Turn for both supplier and customer. The funds allocated should be invested on a strict ROI basis, with payment of the monies tied to demonstrable compliance and achievement of agreed KPIs, and all aimed at directly improving the customer’s ROCE. It is obviously vital that the customer be helped to appreciate the scarcity-value of all expenditure, including free credit, within your offering, along with its impact upon their financial performance by calculating the incremental sales they would need in order to generate net profits equivalent to the sums being invested in their business.
Finally, it is vital that a build-up of preventable Deductions is not allowed to dilute any gains made.
Apart from optimising their skills in numeracy and financial presentation in the allocation of time, money and people, NAMs should also evaluate the extent to which each decision, programme, function, job, policy, and system supports the primary mission of optimising ROCE for both supplier and customer.
In addition, in managing major accounts, NAMs should focus upon building the personal qualities that have become more valuable because of their increasing scarcity in the current climate.
In fact, Seth Godin lists Respect, Honesty, Good judgment, and Long-term relationships that lead to Trust as a way of building customer loyalty in the face of cut-rate competition. However, he also adds a neat twist that could benefit account managers in attempting to optimise scarce resources: if possible attempt to outsource everything except your insight into what your customers really need and want to buy.
In fact, this total customer focus, dedicated to determining and meeting real need, and coordinating all company resources in their application to the customer’s business whilst ensuring that the supplier generates an acceptable ROCE, has to be a state-of-art definition of the role of NAM, the ultimate scarce resource in these unprecedented times…
