I’ve shared my views on the importance of bidirectional relationships and treating investor relationships as partnerships. Today, I write about another relationship truth. For most entrepreneurs—and everyone else, for that matter—there will come a time when a relationship is no longer a good fit. This has happened to me when values—mine and the other person’s—don’t align.
At CCAW, we had done business with a certain vendor since our earliest days. Eventually, we bought more from this vendor than from any other, and we’d become one of their biggest customers (for the products we purchased). As with any relationship, there were ups and downs. I was tech focused and pushed them to upgrade their technology so we could integrate our systems and grow the relationship faster. They thought the old manual way worked just fine. Despite this, we continued working with them. It got to the point that CCAW spent about $1 million with them every year.
It all seemed to work, until it didn’t. They began to gripe about their other customers to me and show attitude to our service team members. For years, I’d met annually with their executive leadership. After noticing these changes, I began inquiring about their company vision and values. Maximizing revenue and profit was their vision, and they had no clear values. It all started to make sense. As they grew, the lack of a clear vision and values caused them to stray from what made them successful.
Our internal data showed that sales of their products accounted for half our annual gross profit. I’d have to figure out how to replace it before I even thought about switching vendors. I was basically married to them. I decided to unwind and replace the relationship slowly over two or three years.
Within a few months, the working relationship between our service team and their sales team tanked, to the point that a blowup reached my desk one day. I reviewed the situation and knew I had to do something. The vendor was eroding our service team’s morale and taking up too much of our operations leader’s and my time. I decided to pull the plug on the relationship effectively immediately. Remember: half our gross profit! I was making CCAW instantly unprofitable. Needless to say, I was pretty nervous. I was under the gun. It was either replace that lost profit or go out of business.
Then a funny thing happened. Because our team didn’t have to deal with this vendor, it had so much bandwidth and time that we were able to invest in both new and existing vendor relationships. In a month or two, we had regained all the lost profit and then some. My service team was happier, our leaders’ time wasn’t being wasted, and the company was back to growing in a healthy and profitable manner.
Upon reflection, I now realize that I made rookie mistakes:
- Hire slow – I focused on growing the relationship with the vendor as quickly as possible. What I should have done is evaluate them more thoroughly before doing business with them or get to know them better before allowing the relationship to reach material scale. I should have found out what they stood for, and why.
- Fire fast – When you make a hiring mistake, it’s best to correct it quickly. Fire them right away. The longer they’re around, the more serious the damage becomes. I tried to ease the vendor out over time. Instead, I should have ripped the Band-Aid off and endured the short-term pain. I could have saved my team a lot of time, energy, and frustration.
We were lucky that things worked out well. Lesson learned: pay much closer attention to the values of people and organizations I associate with. If the values revealed by their actions don’t align with mine, I politely pass. It’s easier to avoid them than to rip and replace.
How has alignment of values affected you?