Are You a Future-Focused Culture or a Cost-Focused Culture? (Culture Series, Part 3)

This is the third post in a new series on how to build a strong culture in your promotional products business.

From the combined experience of our senior leadership team running and managing distributorships, plus our years of consulting with hundreds of distributors, we’ve learned there are two very different types of entrepreneurs in this business:

1. Future-focused entrepreneurs who fix their attention on opportunities.
2. Cost-focused entrepreneurs who fix their attention on risk-mitigation and cost-containment.

Those two perspectives shape two distinct types of culture.

A cost-focused entrepreneur builds their business around loss prevention, decisions are prioritized around “How much will this cost us?” The future-focused entrepreneur prioritizes their business around “How much will this grow us?”

These two perspectives permeate your culture and contribute to an environment of either optimism or pessimism. Here are three signs that will help you determine whether you are a building a future-focused culture or a cost-focused culture: 

#1: Respect What You Inspect

 Have you ever put a value on the time spent tracking needless costs? Samples are a great example. Do you nickel and dime sample costs to salespeople or spend time analyzing sample costs excessively? Granted, you might not do the actual tracking, but does anyone on your team spend an inordinate amount of their time managing costs like these?

When I was a distributor, we monitored all samples costs closely. We even built our commission plans to factor in a certain percentage allowable for samples. But after a few years of obsessively tracking sample costs (and the freight attributed), we discovered that the overall sample costs, compared to the salesperson’s gross profit and especially compared to the opportunity with the client, was negligible. The costs represented a fraction of the client's annual profit and the percentage ratio hardly ever budged, so why track it?

Worse, what it did with our sales team was create an unhealthy attitude toward “spending too much money on samples” instead of focusing on whatever it would take to land the sale. 

A pervasive attitude of cost-containment can cripple opportunity-based thinking and stifle growth.

 If you are spending this kind of time tracking minor costs, ask yourself what your team could be tracking.

At RIGHTSLEEVE, Catherine Graham realized that tracking certain costs to save money was -ironically- expensive. So, she redirected their finance team to start tracking new opportunities, analyzing client sales, pulling insights from their most valuable customers and looking for growth opportunities. Instead of “how much is this client costing us?” the team began to research, “how many more opportunities can we create with this client?”

As a leader, you must respect what you inspect because your team appropriates your attitude. If you excessively run reports on cost versus sales, your team will recognize this and drive their energies toward what you respect. When cost containment becomes your priority, your focus affects your culture. Meetings and discussions become fixated on cost. Employees, who should be freed up to do their best work, instead, second guess themselves and spend negative energy on small savings today versus bigger opportunities tomorrow. 

#2: Sewing Seeds or Saving for a Rainy Day?

 Building a successful business is an endless cycle of investing. Entrepreneurs never cease plowing profits back into their business to ensure it is thriving.

Tiny but oh-so-important example: What is the quality of the hardware your team uses? How frequently do you refresh hardware? Some distributors still saddle their teams with dated, slow, and landlocked devices. Slow processing and limited bandwidth can cost a salesperson up to an hour a day. Multiply that out, and new equipment and faster internet quickly pays for itself.One distributor decided to replace all of their desktop computers with laptops. Certainly, laptops cost more, and laptops require docking stations and monitors at the office, but this savvy distributor knew that workplace flexibility is one of the most highly coveted benefits an employer can give their team (see our article 3 Secrets to Building a Thriving Virtual Work Culture). Plus, laptops (with cloud software) enables everyone to work from anywhere. This freedom gives employees the luxury to enjoy flexibility and have both a rewarding personal life and a healthy work life.

And can we talk about the unhealthy attitude toward skimping on software licenses? Granted, we have a vested interest in this, but it’s a shocking problem in this industry, particularly when you consider that speed is one of the most crucial aspects to winning business. It’s like tasking your entire team to build a house with a handful of tools that everyone has to share. Every time someone needs a hammer, they have to stop, call out for whoever has the hammer, and wait … and wait … and wait. Years ago, we shared ESP licenses as a team and you could hear people calling out around the building, “Are you in ESP?” When everyone needs a hammer, sharing a hammer is a ridiculously slow way to build a home.

Shared software slows and frustrates your team. The business moves too quickly to be suddenly stopped short by no-access and the unnecessary grumbling that filters through your culture, because of this hindrance, is a small cultural signal you send that says “cost is more important than opportunity.” Build a future-focused business by ensuring everyone has the tools they need to do the job at all times. Continual investments in your business are hallmarks of a future-focused culture.

Pro-tip: Get on a cycle of regular updates. Be prepared to replace the hardware your team uses every three years. This ensures you’ll stay on top of the fastest technology and it also minimizes your team’s frustration. And ask your team, “what tools do you need to do a better job?” 

#3: Reframing Costs

 Often, we build a cost-focused culture unintentionally. We’re not trying to stifle growth, our intentions are good!

A great example of this is an unhealthy fixation on shipping costs. Yes, freight is expensive. Yes, Amazon has created a free-freight obsessed buyer with their Prime offering. But all too often, we allow costs like freight and over-runs to slow our progress by giving cost-mitigation too much attention. Some distributors will even bypass their order entry system to enter their orders through an apparel providers website to “save money” on freight …. only to duplicate their order entry when they reenter the order back into their system. They think they’ve saved money, but they’ve actually cost the business (and payroll is far more expensive than freight costs).Freight is a perfect example of how a cost-fixated culture only sees expense while an opportunity-based culture considers freight a landed cost that becomes a part of the final invoice (which boost overall sales per invoice). Even with heavy goods, like mugs or bulky items, freight can and should be a revenue stream. (It’s okay. Really. FedEx and UPS wouldn’t be in business if they didn’t make a profit on freight and you should too).

Admittedly, we fixate on costs when forced by clients to do so. Clients can redirect our energies with a simple push-back about freight, but it’s our job as creative consultants to help reframe any cost associated with an order and change the perspective of the buyer. Yes, freight is a challenge but what is the worth of that project to the customer? What if that order didn’t arrive in the customer's hands, what’s the real cost? The opportunity cost? If we ship via a cheaper method to save on freight, what project or initiative is at stake? It’s our job as consultants to reframe ROI and focus on what matters most: a killer project delivered on-time.

Over-runs are another surprising example of good intentions gone bad. An increasing number of distributors are now only billing exact quantities and eating the costs of over-runs. Why? Because they realize that all that time waiting for a supplier invoice slows the billing cycle, stifles cashflow, and increases errors. Moreover, the time spent monitoring lagging invoices for over-run costs is expensive. Sitting on orders because we need to bill three more items on an invoice is an expensive babysitting job. Consider what Jack Welch, the former CEO of GE once said: 

“There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cashflow …”

 Save time and eliminate over-run billing. You’ll increase your billing cycle and free up your team by simply removing an over-attention to over-runs.

These simple examples illustrate a point, that you are either a cost-focused culture that emphasizes loss-mitigation or a future-focused culture that celebrates opportunities. A future-focused culture places a strong emphasis on growing existing client sales. It’s a culture that invests in marketing and outbound activities, and a culture that rewards and respects new business development at all times. When you focus on opportunities, you breathe life and energy into your organization and create an environment of optimism. (Stay tuned for our next few installments where we’ll unpack this in more detail).

Due to this being a deadline-driven business, you and your team have a finite amount of discretionary time at your disposal. Where you decide to invest your time shapes who you become. With your limited time, don’t major in minors; build a future-focused team who makes daily choices that prioritize opportunity-creation over cost-containment.

“Culture guides discretionary behavior …. Employees make hundreds of decisions on their own every day, and culture is our guide. Culture tells us what to do when the CEO isn’t in the room, which is, of course, most of the time.”*

This is part two in our series on culture, for part one, visit 4 Ways to Design a Culture of Innovation and Inspiration.

*Frei and Morriss, Uncommon Service: How to Win by Putting Customers at the Core of Your Business