Consider this: You have just been appointed the first Global Account Manager for a large decentralized business. Your account is a leading global brand. You have been appointed because of your ability to get things done without supervision and authority. You have no game-plan to work to and your success or failure will define the way that all strategic account management is done in the future. You have been told to develop a more strategic relationship, but you quickly discover that part of the existing business is at risk! This could be either the making or breaking of your career. What would be your first move?
This is the situation that Anders Hagberg faced and the story of what he did to help turn the relationship around.
What is Parker?
Parker Hannifin Corp. is a world leader in motion and control technologies, with sales of $12billion, 57,000 employees and 417,000 customers in 1200 markets worldwide.
It is organized into eight global product groups (e.g. hydraulics and fluid connectors) subdivided into 118 divisions which together manufacture about 900,000 products. A strong country-by-country bias exists towards the divisional structure.
Parker serves three key sectors: aerospace (aircraft and space equipment), industrial (machine tools, factory assembly lines, entertainment equipment etc) and mobile (on- and off-road equipment). Within mobile for example, Parker designs complete hydraulic systems and manufactures the components for all types of vehicles. It is often said that almost any manmade moving object has a Parker product on it or near it.
The Year Zero Situation
Traditionally Parker’s sales force has been organized around the product groups and the countries it served.
“At the beginning we started work on synchronizing all our sales forces country-by-country to represent ‘One-Parker’ in front of our customers” says Anders Hagberg. “This sales structure worked well for certain customers, but the increasing demand from our global customers meant we needed to change our approach to them. We realized we needed to improve our synchronization between different countries and build better global relationships.”
So, Parker decided to create new key account roles for its top global accounts. Hagberg was appointed the first European-based global account executive for Parker and given the Large Vehicle Manufacturer (LVM) account to look after. (Large Vehicle Manufacturer is a pseudonym for the actual account in question.)
“We knew that LVM was a $25m account for one of our product divisions and a top account for group,” says Hagberg. “We also knew that LVM was an important account for other parts of Parker, but at that stage we didn’t know the total Parker sales to LVM.”
It was not long before he found that the relationship had some significant threats as well as opportunities. As a result of an Internet auction led by LVM’s procurement function, Hagberg was informed that an alternative lower-cost supplier had been identified. At the time Parker had a company policy of not participating in Internet auctions and so had not involved itself. However, because the scope of the auction was so significant, it had submitted its current prices.
“When LVM compared our current prices to the best auction prices they told us that they had decided to source our products elsewhere.”
It was very apparent that not only did Parker need to coordinate its sales efforts to grow its business but it also needed a coordinated response to this threat just to keep its business. Hagberg’s appointment had been made just in time.
Year 1: Audit the Relationship and Fix the Problems
Before Hagberg could start building a long-term strategic plan he had to address this immediate threat. Valuable time had been bought for him by being new to the relationship and through his appointment demonstrating the importance of LVM to Parker.
“At one of my early meetings with LVM we discussed this situation. I asked for – and got – a second chance to propose a solution for them, then I set out to understand who was involved in the Parker-LVM business. I tried to identify and visit the most important people from both sides. I mapped out the people involved, sales, products, activities, issues and a lot of other important matters.”
Hagberg visited every LVM location around the world and every Parker location significantly involved with LVM. This was a major exercise. LVM had manufacturing sites in Sweden, Germany, France, Poland, Canada, US, Brazil, Korea and China. Parker has around 25 different manufacturing and sales sites around the world serving LVM. As lengthy as this process was, it proved invaluable in helping him audit the relationship thoroughly, assess the potential and prioritise the work to be done. And he was surprised at what he found.
“It was more complicated and fragmented than I thought. For example there were many more people involved on both sides around the world than I first assumed.”
Hagberg also found a lack of effective coordination across the company and a basic unawareness of the total size of the LVM account. As a result, he immediately set to work to improve the communications mechanisms. The first mechanisms he set up included a:
- monthly LVM conference call between the key Parker sales representatives
- monthly report distributed to all Parker staff (both sales and operations) which showed key headlines about the relationship, including total sales by location and product group (for both Parker and LVM locations), business improvement activities, market and competitive climate for LVM and competitive issues for Parker. This provided a single point of information for all Parker’s global activities with LVM.
- a presentation about LVM and the Parker current and potential position of Parker. Hagberg carried this report on his travels for Parker and used the material to sell LVM’s importance.
“Because all of Parker working together and worked with our various LVM contacts, we had come up with a viable win-win solution. Through tying price adjustments and innovative product changes to long-term agreements, we were able to secure contracts between LVM and two of our product groups.”
The hard work had begun to pay off. This was a major relationship milestone and substantial improvement from the early days.
Year 2: Build your Transformation Strategy
Early on, Trier, Germany witnessed the first Parker-LVM team meeting, a significant event for Parker lasting three days. Participants included the vice president of global mobile sales, every sales representative and other key staff involved in the business. For the first time Parker had gathered all the right people from around the world focused purely on succeeding with one account. Everyone shared their activities with the other participants, and from this an initial three-year business strategy was developed. Later that month Hagberg organised the first executive partnership development meeting, which pulled together the key senior executives from both companies. This included the presidents, VPs, and senior VPs of procurement and engineering from LVM.
“This meeting was very useful in building relations across the senior management of both companies. We were able to update everyone on current and future projects; advise Parker of LVM’s various business areas, objectives and organisations; and advise LVM of the global capabilities of Parker.”
The meeting also helped explore opportunities for closer cooperation, including Parker being involved earlier in the product development process. There were also discussions about possibilities for joint technology teams, and LVM had an opportunity to explain its strategy for framework agreements, warranty charters, performance scorecards, etc. The meeting turned out to be crucial in changing the relationship.
“Up to this point I had just been working at our day-to-day operational contacts. Here I managed to get contact with the corporate people and begin developing a more strategic relationship.”
Another key outcome from the meeting was the setting up of quarterly reviews with LVM’s VP of purchasing and supply management, the purchasing commodities director and the two VPs of corporate engineering. Progress in the relationship and contracts was such that, within three months, Parker realised that it was at last considered a key partner to LVM with great potential for the future. Of the many reasons for this, the main ones were that Parker had now a speaking partner (the global account executive), the company had developed and was communicating one mission and one strategy globally; and the company had good mechanisms in place for joint resolution of important issues. The outlook appeared bright enough for Parker then to appoint a second global account executive to look after business units of LVM. The momentum established caused the account to be redefined as not simply LVM but the LVM corporation itself.
A big step was taken toward a formal global relationship when Parker worked with a specific internal product group to create one of its first globally coordinated solutions.
“We worked with all the divisions of the product group around the world that serve all the global LVM locations to create a very innovative solution that combines our global reach with local service capabilities wrapped up in one Parker contract. Although we have had to put a lot of effort internally to get here this will make the relationship a lot easier to manage from both sides.”
Year 3: Leverage the Relationship
Parker held its second executive partnership development meeting in October. It included Parker’s chairman & chief executive officer and other members of the CEO’s office, plus – from LVM’s side – the VP purchasing & supply management, the purchasing commodities director and the two VPs of corporate engineering. Both sides thought the meeting was extremely useful and agreed that they should meet annually, alternating between Europe and North America.
Now Hagberg is concentrating on developing the talent of local sales managers and has begun to train and mentor them in strategic account management. He has also made account management a more routine activity by establishing regular account review meetings. The European account team meets at least once a year, and there is a global account team meeting every 18 months (at different product group locations).
He plans to develop both a common central database for LVM and account-level profit and loss statements. He also intends to create a specific budget for account management and to better link account plans to the Parker-LVM business planning process.
There have been meaningful achievements in the relationship during these three years. Progress includes;
- stabilising the relationship;
- significantly growing the business;
- expanding the future potential;
- much better cross-selling;
- much improved teamwork from all angles;
- increasing the importance of the relationship to both Parker and LVM;
- the relationship has become more strategically based on long-term contracts, joint future technology projects and global leverage of total capabilities; and
- establishing a good foundation for further growth
Introducing GAM at Parker has been a real eye-opener.
“In the past LVM knew more about Parker than we did. Our salespeople only knew their piece of the action. Today, because we are working globally sometimes we see more of the whole picture than our LVM contacts do, and we can help them achieve their goals better.”
Parker now has a foundation for growing its relationships with other strategic accounts. It has learned that when you start strategic or global account management, piloting with a single account can be more effective than simultaneously nurturing many accounts. The rewards may be less at first but so are the risks. In strategic account management, as in life, it may be better to focus on rearing one winner than spreading much mediocrity.
Written by Edmund Bradford & Anders Hagberg.
This paper was originally published in Velocity, the house magazine of The Strategic Account Management Association (SAMA).