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Are You Allowing Employees, Suppliers or Customers to Hold You Hostage?

Small-business-blog-businessman-hostageRelationships evolve, be they personal or business. As they do, we often miss key signs that they are headed to an unhealthy place because we aren't paying attention or seriously need or want the relationship to continue. And suddenly we find ourselves "hostage" to the relationship.

Nobody likes to operate out of fear or feel that someone has a serious hold on them. In personal relationships this often makes the relationships unhealthy and destructive. We, usually, avoid these situations at all costs. Yet, entrepreneurs and small business owners often find themselves in these kinds of situations, be it with employees, suppliers or customers.

They allow threats of cutting off the relationship, either direct or implied, to force them to make decisions or operate in a particular way. No matter how important a person or organization is to your business, you should never allow fear to drive decision-making.

This often happens with key employees, who, either through their own personal insecurity or a mistrust of the company and/or its management, feel they need to protect themselves and become keepers of information and processes difficult to replicate. In my turnaround experience there was always the guy I call "Fred." Fred was the person who, during employee interviews and data gathering, people would say, whatever happens, "we can't lose Fred, he's the only one who knows 'X'." Guess who was the first one off the boat if cuts were necessary? You can't have a situation where one employee has that kind of power. It permeates the entire organization. Everybody knows it and it eventually hurts morale and attitude.

NDAs and non-competes are deterrents, but don't solve the problem. Cross training and documenting job functions and tasks help. But, creating a culture of mutual respect and trust goes a long way to not having these kinds of problems. And the essence of this kind of culture is communication.

Suppliers and large customers are a whole other thing.

With suppliers, it's, typically, a relationship that started innocuously when the company was just beginning and either the entrepreneur knew the supplier from past history or the supplier provided some advantage to the new business, be it unique capability, price, flexibility to work with a small company or simply geographic convenience. The relationship evolves and one day, the small business owner wakes up to huge price increase or delivery changes from the only supplier for a key part or process. They have no alternative because they never thought to get one.

Never have just one supplier for any key part, process or assembly. Always have at least two vendors for anything critical to product delivery or price. This keeps the relationships healthy, with them knowing if they can't meet delivery date or price, somebody else will.

Finally, having a single large customer is a "two-edged sword," that cuts both ways. It provides the small business with significant, often, nearly-guaranteed annual revenue. Typically, because the customer is so key, the small business "bends over backwards" to ensure customer satisfaction through the highest level quality and customer service. Further, though, the entrepreneurial operation can also get a little lazy and not press hard enough to expand its customer base. Hey, life is good when revenue comes in like clockwork!

But, at the same time, the customer can also attempt to extract more and more price concessions from the small business either using a subtle or not-so subtle threat of either reducing the amount of revenue provided by the relationship or opening the situation up for new bidding on the contract. And then the small business finds itself in a very tight box.

The lesson here is obvious. Small companies cannot be too dependent on one or two major customers. And that's often a painful, but necessary lesson to learn. If you see that evolving, put a plan in place that's almost a "disaster recovery" one. The plan's foundation should be - "what if Customer X went away?" You need to implement that plan immediately and operate as if the customer was going away tomorrow.

Being held hostage is never any fun. Know the symptoms of a bad relationship evolving with either employees, suppliers or customers and fix the problem before it reaches the unhealthy stage. Fear should never drive decision-making!

"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!

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1 COMMENT(S)

2013-05-12 10:46:55 by william scotti

Be Yourself and follow the, "Golden Rule". Remembering back, Manufacturers sales reps would give me an my brother lot's of attention and TLC. Territory Sales Reps., District Sales Reps., you name it. The Vendor, Manufacturer, Wholesaler or Company trying to sell us would sen us Tickets to the Red Sox, Celtics, Rock Concerts, Boston Theatre and Symphony events.
My point circumvents their practice of always trying to over sell us. Load us up on Merchandise, the company they worked for was trying to unload. Of course Owners, Managers and Buyers catch on to this. But it illustrates how shallow their motives are when trying to develop a personal relationship, with the ulterior motive
to push their own agenda. Only their business interests to their end. With no sense of purpose, relevance or to sincerely care about the future viability of the business they are selling to.

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