On Wednesday we posed a question that is considered one of the most difficult situations a manager can face in a company. First of all, I have to say I was pleasantly surprised by some of our readers’ answers, such as those from Juanma Varo, Yulibeth Sierra and the user JAC, who hit the nail on the head on the most important point, although we will also look at Ana Peña’s point of view. The question we asked was:
“You have a client who trusted you from the very beginning. This client has been with you for more than 10 or 20 years and has been loyal to you all along. There was a time when it was your most important client by revenue, but it stopped growing and has stagnated at 600,000 euros in billing. There was a time when you depended on it; today it is the one that depends on you.
Through the door walks another, bigger client that wants to work with you, on the condition of having exclusivity for your product in its area. In other words, this client would bring in five times as much (about 3 million euros), but on the condition that you stop supplying (show the door to) the client who has been with you all your life and stood by you at every moment.”
This simple question has often been used in the selection of top-level executives, purely to see whether the person truly understands what business, and the company itself, is about. A manager’s duty is to the company, and they must make decisions that make the business grow.
To avoid falling into any kind of cognitive bias, we need to strip away much of what this question contains.
In the end, the question boils down to: “I’m offered two envelopes to choose from, one with 600,000 euros and the other with 3 million. Which would I choose?”
Some will think it is neither ethical nor moral, but Juanma Varo argued that point perfectly, so much so that he demolished one of the arguments I had prepared:
“If we’ve had an employee for 10 years whose sales no longer perform, and we have the chance to hire someone else who offers us better results, do we keep the old one out of loyalty (or pity), even if it costs us money, or do we try someone new?”
Of course there are risks
On the other side of the table, this very case has led some small businesses to go bankrupt: they let go of some of their small clients to serve a big one, the strategy didn’t work out in the end, and the company was left with neither the big client nor the small ones.
But we are business owners and/or leaders. We make decisions, and if we want growth, we have to take risks. That is why, whenever there is a conflict of interest or territorial exclusivity, you always have to analyse it very carefully and demand guarantees and commitments, as well as having very well-defined strategies.
It is also true that in this case we are talking about a major increase in revenue. In other cases, where the difference is minimal, we should not consider abandoning a client who has stood by our company through thick and thin.
(Read: 10 wise business lessons from the best executive of the 20th century.)
But remember that in business you have to set feelings aside and think with a cool head only about what suits us as a company. That is why it is said that not everyone is cut out to be a great entrepreneur: there comes a point when you must be ready to eat or be eaten. Not everyone will be able to keep up with you, and you, as a business owner, don’t have to slow down to wait for them.
I also insist on this point: it is the company that should help its clients grow. That is the best way to avoid having to make a decision like this in the future.
Thanks to everyone who took part with their answers.
Further reading
