Strategic Account Management Blog

By: Greg Bartlett

Six critical guidelines to build (or rebuild) and support the top management team

For two years researchers Nathan Bennett and Stephen A. Miles were involved in a project focused on identifying keys to top management team success. In the process, the men had the chance to study the struggles of a number of post-merger and -acquisition executives as they labored to come together again in the new enterprise as a top management team. Through that research, Bennett and Miles identified six critical guidelines to help executives and boards effectively build (or rebuild) and support the top management team. The first three recommendations focus on activities that should start very early and be continually reinforced throughout the process. The fourth and fifth recommendations concern challenges that will be most pressing during the integration process. The final recommendation involves activities that should begin as soon as legitimately possible and become habitual as the new entity develops.

Guideline 1: Reduce role ambiguity.

Though M&A is often defined as adding technology, products or market share or achieving synergy, it is inescapably about people and their capabilities. The combined company must do what it can to control which employees leave and remain. Many potential “ship-jumpers” are vital to both the team and organization.

Guideline 2: Due diligence around talent is a dangerous corner to cut.

The second vulnerability management teams face in M&A reflects a naivete caused by inadequate due diligence around talent management. Sufficient attention should be given to assessing the personnel who will lead the new enterprise.

Guideline 3: Recognize that old habits die hard, but not all should.

Companies have well-established routines that are retained because, simply put, they work. There is an art to recognizing how habits serve different groups, how habits impact performance and the role they will play in the newly formed company.

Guideline 4: Don’t tolerate bad behavior.

The research revealed three common forms of harmful behavior in top management teams: cliques, information asymmetries and the sabotage of decision making. Moving beyond this requires strong leadership and setting very public examples from the top.

Guideline 5: Practice patience with purpose.

The completion of an M&A event is a heady time, but the immediate enthusiasm needs to be bridled somewhat during the new entity’s break-in period. The toughest challenge here is to find the rhythm for pushing ahead that properly balances the need to respect the potentially fragile nature of newly forming relationships with the need to produce evidence of positive results.

Guideline 6: Count and celebrate your blessings.

Everyone associated with the deal is in a difficult situation. This is the time to repeatedly reinforce and communicate the upside of the deal: that there was a clear reason the deal was pursued.
Source: Nathan Bennett and Stephen A. Miles, “Six steps to (re)building a top management team,” MIT Sloan Management Review, Fall 2008, Vol. 50, No. 1.

SAM-level negotiations are often some of the most complex deals, and therefore some of the most frustrating. How do you demonstrate solutions against price? Whether it is reacting to irrational competitive offers, or addressing demands to lower price, the pressure is on the SAM and his or her team to come back with the best deal for the company and the client.

At SAMA University Atlanta February 1-3, Carrie Welles, Vice President of Think! Inc. will be leading a session at SAMA University (Session #4, Strategic Negotiation: Claiming Value in a Negotiation & Turning in a More Profitable Deal) that allows individuals to bring in an account negotiation they are working on to create the best possible deal.

Q - In your session, you talk about determining and acquiring power during a negotiation. How important is this to negotiating the deal?

A - Hugely important. Determining who has the power in a negotiation will help illuminate how probable the deal is. In addition, it can be the difference in winning not just a good deal, but winning a great deal. We’ll review in our session how you determine that power, and subsequently build your courage.

Q - You ask participants to bring in real-world negotiations to audit during the session. Is there a particular type of deal that SAMs should bring into the class?

A - Our session reflects our real world, so any deal that has not closed yet is appropriate. To be most effective, I would suggest bringing a deal that is not set to close right after you finish the session, but rather one where you have room to ‘try on’ the concepts you learn and better your opportunity.

Q - Is there a common structure to strategic negotiation?

A - Absolutely. Research that we’ve done in the past two years suggests 97% of the time you can anticipate reactions of your buyer and use a structured ‘negotiation blueprint’ to help you prepare for a negotiation that previously you may have thought was ‘unpreparable’. 97%! That is a compelling number. AND, the negotiation blueprint encompasses only (3) concepts.

Q - Price is always an issue, no matter how close of a relationship a SAM has with a client. How do you avoid getting stuck on price during the negotiation process?

A - Often, and in this economy especially, price certainly has a way of headlining a negotiation and our buyers & procurement executives are seasoned at keeping it that way. Price is part of the negotiation, no doubt, however a negotiation is never just about price. It really can’t be given all the other intrinsic pieces that make up our solutions, and subsequently, our offer(s). Our job as SAMs is to do a better job of putting value on all those intrinsic pieces and then making them known in our offers(s) so we begin to get credit for all of them. We’ll also learn how to do this in our session.

Q - Irrational competitive offers can often derail negotiation. Is there a way to prepare and protect against this?

A - Without question, however it does take the will to do the work and prepare appropriately, earlier on and in conjunction with your consultative sales process, so you can devise your negotiation strategy & stick to it. We offer a tool called “Multiple Equal Offers” that will allow a SAM to take pressure off price, competitive offers and all the while giving customer’s a few solutions, not just one. These solutions, or offers, encompass business relationships that you can have with your customer that will get titled - generally a departure of what we do - and are reflective of the business issues you will solve for them. This concept allows for a ton of flexibility and responsiveness to our customer!

In the 12/14/09 issue of Businessweek,  an article discusses the merits and drawbacks of a new management fad coming out of India, called jugaad.  One of the elements of jugaad is the ability to innovate on the fly.  And while it’s often associated with cutting corners in India, the concept as a management tool is being employed by some very impressive companies.

Excerpt:

U.S. companies are starting to put jugaad into practice. At Best Buy’s headquarters, in Richfield, Minn., Kalendu Patel, the retailer’s executive vice-president for emerging business, is holding jugaad workshops to help store personnel and managers come up with new products or services that could be added easily and inexpensively to generate more sales per store. Among the ideas: home health-care equipment.

This kind of thinking reminds me of one of the key concepts of  Strategic Account Management–creating demand.

A successful Strategic Account Manager will partner with his or her customer to develop new, scalable solutions.  If done correctly, it can be scaled up to a global level or down to the local level.  The partnership uses co-creation methodologies and techniques which allow the strategic supplier and the strategic customer to innovate business solutions directly relevant to making money and bringing growth to both partners.

What’s important to remember is that while this new fad may have some merit, there are already developed and proven methodologies that make SAM work.

Friend of SAMA Kevin Hoffberg is live blogging our Annual Conference keynote addresses. To read notes from Anne Mulcahy, CEO of Xerox follow this link.

Stay tuned for notes from today’s keynote by Jim Andrew, innovation head at Boston Consulting Group.

During last week’s SAMA University in Chicago, I stopped by LaVon Koerner’s course on Essentials of Strategic Account Management when he was in the middle of emphasizing the significant impact that a message of future pain or threat – and how to avoid it – can have on a customer’s decisions. Human beings tend to respond more forcefully to threats than to opportunities, Koerner argued. A strategic account manager spoke against the notion of emphasizing negative consequences at the expense of positive effects. The account manager said she did not want the customer to associate her with negative things. That’s understandable. The account manager’s comments are reflected in businesspeople who, for example, will never use the word “problem” in front of a client, e.g. “we have a situation here”. Now, here’s a situation drawn from the excellent business blog “Random Rantings” by Freek Vermeulen, an assistant professor at the London Business School (http://freekvermeulen.blogspot.com/).

Vermeulen cites a study by Nobel Prize-winning scientists that goes like this: Suppose the United States is preparing to fight an outbreak of an unusual disease that is expected to kill 600 people. There are two alternatives: Alternative A: 200 people are saved. Alternative B:  There is a one-third probability that 600 people will be saved but a two-thirds probability that nobody will be saved. In the experiment, a majority of participants chose alternative A. Next, the researchers stated the same scenario in this way: Alternative A: 400 people will die. Alternative B: There is a one-third probability that nobody will die and a two-thirds probability that 600 people will die. At this point, the majority chose Alternative B. They rejected Alternative A even though 200 lives would certainly be saved. By choosing Alternative B, the majority favored the certainty of preventing a negative outcome (the death of 400 people under Alternative A), and they chose Alternative B in spite of the fact that it carries a two-thirds chance that all 600 people will die!

For more analysis of the phenomenon of “framing effects” see Vermeulen’s blog at http://freekvermeulen.blogspot.com/2008/10/framing-something-as-threat-or.html. In this economy, it is important for strategic account managers to carefully consider whether or not to “go negative” in framing a scenario for their client. In many cases, negative is more powerful than positive, and the sure propect of a loss carries more impact than the sure prospect of an opportunity. And with a big election looming in the United States, the experiment also shows why negative campaigning tends to be effective in politics. <Sigh.> Is anybody else suffering from campaign fatigue? –Tony Monterastelli

By Bernard Quancard
President and CEO
Strategic Account Management Association

Recent SAMA research tells strategic account management practitioners a great deal about how to handle their businesses in a sluggish economy. Our 2008 Report on Current Trends and Practices in Strategic Account Management brings a wealth of data and insight into the art and science of strategically managing customer relationships.

The first significant conclusion from the survey is that SAM is a growth engine. Whether at the high side of the business cycle or the low, the survey clearly indicated substantially higher organic growth realized by strategic accounts. To be more specific, 70 percent of program directors, senior executives and functional support professionals reported that their strategic accounts grew faster than non-strategic accounts in the fiscal year. Strategic accounts increased revenue by an average of 18 percent versus 9 percent for all other accounts. Several elements explain this higher growth:

• Customer intimacy allows the strategic account manager to amplify the share of the customer wallet through constantly finding new customer needs and therefore new solutions by way of enhanced products and services.
• Most strategic customers globalize and grow particularly fast in emerging markets. The SAM is better positioned than anyone to anticipate new opportunities in various countries.
• Perhaps most importantly, a strategic relationship with the customer very often allows the SAM to co-create with it. Different stakeholders within the customer company have different needs. A good SAM will be able to drive a process to co-define these needs and co-create solutions.

The second significant conclusion from the survey is that SAM brings higher customer satisfaction and loyalty, both of which are particularly relevant to keep or increase market share and growth in a slow economy. Even if business is diminished with a strategic customer, in many cases the SAM will be able to build share and co-create with the account, thereby maintaining the same (or close to the same) growth rate in a down economy.

And let me emphasize another idea. When times are tough, business enterprises tend to require ever-higher expectations for immediate, tangible benefits on new projects and initiatives before investing in them. As a result, productivity-enhancing projects become more numerous and drown out investments in new capacities. Cost control frequently supersedes growth. Again, the SAM is ideally positioned to shift the portfolio of offerings toward productivity solutions because of the SAM’s intimacy with the account, strategic knowledge of the account and wealth of relationships developed through the years at the account.

The third significant conclusion from the survey is that a high number of SAM programs are young. (Eighty percent have existed six years or less.) Many times the company has a track record with SAM, but the program itself has been restructured or restarted. Since merely 12 percent of those surveyed reported that their SAM programs were “fully functional and effective,” it makes the case that the SAM initiative is a significant investment for a corporation (with significant potential return) and has to be seen as a long-term investment. Best-in-class programs reach a point of excellence only after several years (four to six or even 10), and these programs are the ones that are particularly effective in a sluggish economy since the quality, reliability and loyalty of customer relationships counteract the downturn’s effects.

In conclusion, I strongly advocate that my fellow executives strengthen their SAM programs in slow times because SAM will remain a growth engine no matter what. The “developed through the years” customer intimacy, loyalty and satisfaction inherent in a SAM program does not fail to uncover new opportunities to grow market share, co-create and globalize with the customer. The result is sustained growth—yes, even in a down economy.

Bernard Quancard is President and CEO of the Strategic Account Management Association. Before joining SAMA he was Senior Vice President at Schneider Electric SA, where he founded and directed Schneider’s successful SAM program, Schneider Global Business Development.