The Art & Science of Managing Partners In Asia
By Kenneth
Why is Asia Trade so different?
Isn't it too often that you hear “this doesn't work in Asia ”? Or, “It works in Australia but not in Japan ”. Closer to home, you may have heard “This works in Singapore but Indonesia is different”.
It's a well known fact that many business concepts that originate from the advanced economies like US are just not adoptable in Asia in a wholesale way. Managing channel partners in Asia is no different . The problems become more prevalent when channel management concepts have to transcend numerous languages and cultural barriers.
The Trade Method is Asia
In the absence of a Pan-Asia Wholesalers or Retailer, channels in Asia usually consist of numerous small and medium-sized entities that hire their own staff and in turn set up offices across Asia . This gives them full control and span of cash of margins, staff movements etc. But the highly fragmented Asian market space, cultural diversity, language and religion, make these models cost-prohibitive and non-scalable. The principals, with their ever shortening product life cycles and huge compliance cost from legislations like Sabine-Oxley are compelled to work with the channels with the above limitations.
Suppose as a principle, a manufacturer or a wholesaler will have the following model:
Add the following elements into the above matrix ...
Confidence and Strength
Extrapolate the above complexities by the number of countries you do business in Asia . Lastly add issues like distrust, lack of systems and processes, and the importance of relationship. And what you get is a dimension that just junks well established and proven US and Western concepts.
Why is there a huge mistrust with my Channel Partners?
Given the logical reasons to engage channels as a means of doing business, many organizations from US and Europe embark with great enthusiasms what we term as “Channels Flooding”. It starts right from the channel selection process. Due to lack of analytical data, the selection starts with recommendations from friends or business associates. These ad-hoc meetings lead to discussions on company structure, key executives, financial health and the deals at hand the partner can bring to the table. The partner, once signed-up, is assigned to the bottom of the marketing tier, that is, if the principal has one.
The complex incentive structure built into the contract often forces the partners to send their engineers and sales people to numerous training and certification courses. The partners are also managed by the principal Channels person on the ground that often conduct “management sessions” The reality is many such sessions are relationship building exercises and before anyone realizes, these sessions becomes dreadful since it is nothing but endless discussions on quotas, obligations etc. Channel stuffing happens due to partners' fear of losing distributorship. MNC's have started to clam down on such practices of channel stuffing that causes key executives to lose their jobs or go on job rotation. This impacts the relationship with the partners when such executives are rotated. While many executives keep coming and going, the channel partner remains the same. This vicious cycle of select/make-up/break-up leads to an “era” of mistrust.
The Missing Value in Managing Partners
Where does the source of this mistrust come from? The blame rests solely on both parties. The partner craves for more value addition into their business from principal that goes beyond just product training, giving rebates or discounts and superficial “management visits”
The principal while respecting the partners long standing tenure in the market place and the proud loyal team he has built over time, feel they face a wall when it comes to commitments by partner to hire & train the key resources and sharing of market / customer data.
The key essence being the inter-dependency between partners and principals, it always feels like it is held by a loose string. Most of the time, partners will get the principal to incur most of the selling expenses from product demonstration to prototyping. The principal left with no choice relies on the partners' network to obtain leads that he hopes may eventually leads to contracts
We say it is time for a change.
What's Next?
In order to meet the challenges of the new millennium, the principals must start giving value and the partners must start expecting value from the principals. For example, one of the key areas often neglected in partner selection is the mapping of values on both sides. We have all done recruitment of key employees before. In a good recruitment exercise, we start with “What is the ideal profile of this talent we are trying to hire?” Next we list the set of competencies (both hard and soft) of the potential hire and the rest of the exercise such as sourcing, selection, interviewing and closing kicks in.
Why can't we apply the same principles when we select a partner?
Often the principal wants to know the capabilities of the partners they manage. However, does the principal have a ready list of “talent assessment factors” and “List of Competencies” (both hard and soft)? The good news is that once the list of competencies is completed, the same set can be used to recruit and subsequently develop these talents. The key point is that some of the soft competencies cannot be developed or trained (think passion or resilience in a salesperson). If this soft talent is not assessed upfront, the principals' good dollars in training partners will quickly disappear down the drain. Speaking of training, often principals conduct training for their partners without consideration of why the training was conducted in the first place. Besides the obvious reason of upgrading the skills level of the partners, the key consideration is what lack in competencies in the partners skills the training is suppose to bridge. Ideally the competency the training program is measuring against is the same set that was developed for recruitment and assessment. Without this bridging exercise, the training for the partner is really without purpose.
Let us look at a scenario. Suppose after an assessment exercise for the sales personnel within a partners' organization, the principal has certified 2 salespersons and decides that the other 8 need different levels of development. After say a 6 months intensive development program by the principal, another 3 are certified. What will the competition be thinking? Well they will go ahead and pay whatever it takes to hire the 5 certified salespersons. The reason is that they now know that all the effort and money are poured into training and developing these 5. The point is that not only the principal must help the partner assess the skill levels of their key staff; they must also help them retain the certified staff. A world class principal will help their partners in giving advice on compensation and benefits, aiding the partner in motivating their key employees and even giving career advice whenever needed.
In conclusion, we have tried to explain the reasons why a complete revamp need to take place on how principals manage their channel partners. The key principles of complete channels management involve much more than giving training and those occasional visits. Partners' people (HR), financial health and total marketing have to be considered to genuinely add value to partners. There are many areas the principals can add value beyond the scope of this article. The key for all principals out there is to equip their channels personnel more “tools” to add value to the partners under their charge. Ultimately, we say strengthen the bonds of inter-dependencies between the principals and partners that will lead to better working conditions, trust and profits.
