ALTHOUGH the financial crisis has forced many manufacturers to look for alternative means of getting their goods to their customers, tried and tested channels will always exist.
However, when engaging these channels, many organisations, especially from the United States and Europe, embark with great enthusiasm on "channel flooding".
This starts with the channel selection process, when manufacturers go with recommendations from friends or business associates instead of collecting and analysing relevant data.
The ad-hoc meetings with these channel partners involve discussions about company structure, key executives, financial health and the deals the partner can offer. The partner is then assigned to the bottom of the marketing tier.
Complex incentives built into the contracts often force the partners to send their engineers and salesmen for numerous training and certification courses. The partners also attend countless "management sessions", which are really endless discussions about quotas and obligations. Such "channel stuffing" goes on because of the partners' fear of losing distributorships.
When key executives leave or rotate their jobs, it also affects the organisation's relationships with partners. The executives keep coming and going, while the channel partner remains the same. This vicious circle of selection/make-up/break-up leads to mistrust.
The blame for the atmosphere of mistrust rests with both parties. The partner craves more value-additions to his business from the principal beyond product training, rebates or discounts and superficial "management visits".
The principals feel they face a wall when it comes to commitments from the partner to hire and train key resources and share market or customer data.
The key essence of inter-dependency between partners and principals always seems fragile. Most of the time, partners get the principal to incur most of the selling expenses, from product demonstrations to prototyping. The principal has no choice but to rely on the partners' network to obtain leads.
It is time for a change.
To meet the challenges of the new millennium, principals must start giving value and partners must start expecting value from principals.
For example, one of the key areas often neglected in partner selection is the mapping of values of both parties. Let us consider the recruitment of key employees as an example. In a recruitment exercise, hiring managers start by asking what the ideal profile is of the person the company is trying to hire. Then they list the competencies (both hard and soft) of the potential hire, before the sourcing, selection and interviewing proceed.
Why can't the same principles apply when selecting business partners? Often, the principal wants to know the partners' capabilities. However, the principal should already have a list of talent assessment factors and a list of required competencies drawn up. Once the list of competencies is confirmed, the same set can be used to recruit and subsequently develop the talent.
Some soft competencies cannot be developed or trained, for example, passion or resilience in a salesman. If such soft talent is not assessed upfront, the principals' investment in training these partners will quickly go to waste.
Principals should also determine why they conduct training for their partners. One obvious reason would be to upgrade skill levels, but the key consideration should be what shortcomings the training is supposed to bridge.
Ideally, the competencies should be measured against the same list developed for recruitment and assessment. Without such considerations, the training is often pointless.
Let us look at this scenario: After an assessment exercise for the 10 sales personnel within a partner organisation, the principal certifies two salesmen and decides that the other eight need different levels of development. After a six-month intensive development programme by the principal, another three are certified.
What will the principal's competitors be thinking by this time? Well, they will do whatever it takes to hire the five certified salespersons, because they know how much effort and money have been poured into training and developing them.
So the principal must not only help the partners assess the skill levels of their key staff, but also help them retain the certified staff. A world-class principal will help its partners with advice about compensation and benefits, motivating key employees and even career advice where needed.
Adding greater value
I have tried to explain why a complete revamp is needed in the way principals manage and motivate their channel partners. The key principles of complete channel management involve much more than training and occasional visits. The partner's personnel, financial health and total marketing have to be considered too.
Principals can add value in many areas beyond what have been touched on in this article. Ultimately, strengthening the bonds of inter-dependency between principals and partners will lead to better working conditions, trust and profits.