Pitfall 5: Customer Contracts Are Kept Confidential (Lesson 6)
Unfortunately, it seems that the recurring reason for not sharing vital customer information is that businesses simply don’t trust their staff enough. Over time, this fear or overprotectiveness around staff knowing functional specific contract details becomes part of the cultural norm.
The really bad thing about this is that businesses don’t realise how much value is won, lost and foregone every day when staff have no knowledge of what “good” looks like contractually. So, they just keep on doing what they’ve always done.
If deliveries have been scheduled five days a week, there’s every chance staff will just keep scheduling five days a week, regardless of whether the new contract states deliveries must be four days a week.
This is because it’s rare for someone to say, “You know, we’re budgeted for X on deliveries and you’re giving away value by doing Y.” The information doesn’t get shared with the people who need to know.
So, nobody ends up knowing the game plan except your customer. Contracts get locked up, and the vital information that could positively impact the margin of the business remains hidden.
Engagement Is The Price
One of the biggest prices your business will pay for not sharing customer contracts with your staff is the loss of employee engagement or “connectedness.”
Staff members don’t see themselves as part of “the big game” when key information is not shared with them. The very frontline staff members who could ensure contractual compliance have no opportunity to be vigilant or enforce terms.
How can they, when they don’t know what the game plan is? They don’t know the rules, so they acquiesce to ongoing customer demands, and this costs your business incremental revenue and margin.
Staff members often fail to realise the importance of their role. They often have no idea how much they contribute to the profitability of the business. This is true whether they’re part of logistics that distributes goods or accounts receivable that collects customer payments.
One $6 million customer who routinely pays invoices three days late could cost a supplier roughly $3k per annum (using a WACC of 6%). It may seem small, but it’s also totally avoidable, provided accounts receivable know the specific payment terms and are empowered to maintain them.
You can’t maximise your potential as a commercial business if you don’t have all your staff working from one playbook and feeling connected to each other.
Premierships don’t come easy!
Display Your Art
I’m told that creating a great work of art takes many hours of vision, creativity, and sheer willpower to complete. Artists hope that the result is a masterpiece, able to inspire and inform, worthy of being on display.
A long negotiation that culminates in a valuable supply contract is like a masterpiece. The same commitment to vision, creativity, work and willpower is required to achieve a successful outcome.
Why not put succinct summaries of contracts on display? Why not make them available for viewing by those functions in the business who could gain so much and contribute even more by seeing what they contain? Even a simple “toolbox talk” on the relevant sections could be of great value.