Look Sharp to Find the Most Profitable Answers

When sales falter in a region, the sales force may want to maintain its independence from interference and contain the problem by creating a solution using only its own people, perhaps by putting more salespeople into the field. This seems like a logical answer when no one knows the cause of the problem for sure.

Let's look at an example of when such an approach can be flawed. For instance, when Russia's economic woes led to a default on government debt in 1998, many distributors of foreign products in Russia were unable to pay for inventories of imported goods as the ruble plunged in value versus foreign currencies. Sales by many companies exporting to Russia ground quickly to a halt.

What do do? Some exporters tried to solve the problem by going into Russia and selling directly to the retailers themselves, then handing the orders to the Russian distributors. Since the distributors had too little money to buy the goods, they still couldn't order much. Selling wasn't the distributors' weakness, it was a financial liquidity problem.

The Gillette sales force quickly perceived that more help than with selling to retail accounts was needed in Russia, and added financial people to its team of problem solvers. Their solution involved amending Gillette's credit policies to undertake the currency risk for three days after the order was received (during which time the product could be received and shipped to the distributors' customers).

This policy enabled many distributors to borrow the needed foreign currency for working capital to support a "cash and carry" policy with the distributors' customers, who were ready and willing to pay cash to get the supplies. Soon Gillette's sales in Russia began to recover.

In retrospect, the Russian situation called for financial thinking and changed credit policies, not more sales people as many other companies perceived. Wise companies in this situation avoided unnecessary costs to increase their sales by focusing on just solving the credit issue, rather than by trying to do everything for everyone including selling to the distributors' customers directly for the distributors.

Why do organizations make mistakes when new situations arise? Chances are that each organizational function seeks to operate as independently of one another as possible. With that goal in mind, there's often reluctance to describe problems to others . . . especially the financial staff. Yet the other parts of the organization will probably be needed to define and implement an optimal solution. Certainly, no new credit policy is going to be authorized without financial review. Why not have the financial people involved from day one?