Wholesale Change hosts Ian Heller and Jonathan Bein, Ph.D., recently spoke with J.D. Ewing, CEO of COE Distributing and board member for the National Association of Wholesaler-Distributors (NAW), Institute for Distribution Excellence.
COE Distributing is a national office furnishings distributor and manufacturer with a passion for creating inspiring work environments. Raised in the family business, Ewing became CEO and the sole employee in 1989. COE Distributing is one of the largest distributors of office furnishings in the U.S. with more than 100 employees, growing to more than $100 million in 13 years.
Ian Heller: You’ve talked about how building your own brand invigorated your sales and marketing teams, but it feels like there’s a broader cultural thing going on that’s working for you. You use one of my favorite quotes from Peter Drucker: “Culture eats strategy for breakfast.” How did you build that culture and how does having your own brand invigorate that?
J.D. Ewing: I was introduced to the book, “Becoming Your Best ” by Steven Shallenberger about eight years ago. We’ve used that book as a model for years, and it’s been one of our featured books in our book club. It has 12 tenets of what you must do to be your best and how becoming your best will help you personally and how it improves the way you interact, communicate and collaborate in business. We have had great success with it.
Heller: I think it’s cool that you have a book club within your company. How does that work?
Ewing: It started with the “Becoming Your Best” book, and we use it for new hires now and anybody else that wants to join. Our VP of Customer Experience and VP of Sales both run the book club. We talk about the takeaways, good and bad, as a group. What did they like about it? How can they apply it? What did you not like about it? Our workforce, including sales reps, management and executive teams is dispersed across the country. It’s a great way to consistently connect, communicate and collaborate.
Heller: Culture is so front and center for many in our listening audience today. How do you measure employee engagement and employee satisfaction, and how do you incorporate that into what you do differently?
Ewing: We use employee net promoter score (eNPS) to get quarterly employee feedback on “Starts, stops and continues.” What should the company start doing? What should the company stop doing? What should the company continue to do? Once we get that feedback, the executive and management teams review it each quarter, respond to it and post it on our intercompany message board so everyone, whether they chose to participate or not, can see suggestions, responses and actions.
This flows into our company culture and the processes we have in place. Acknowledging the employees and the time and effort they put into providing suggestions is critical — letting them know they were heard and that we will take action.
Jonathan Bein: That’s such a powerful message if I am an employee at COE: that you are willing to share the entire results and respond thoughtfully. What have you been doing to measure customer satisfaction and the customer experience?
Ewing: On the customer side, we use the Net Promoter Score (NPS) and we’ve been doing that for about five years. We also use a version of the “Start, stop and continue” to allow our customers to tell us what they like, don’t like and would like to see. These responses are extremely helpful because we get a direct feel for the market and how we are treating them — things they may not otherwise share. We also acknowledge the time and effort of their responses.
Sometimes, it’s about getting on the phone and saying, “Hey, I saw your response and we want to change this effective immediately.” That sends a powerful message. When there are problems, somebody is just begging to be listened to and acknowledged. We also get direct feedback on phone calls. The executive team will talk to customers regularly and our customer service group provides feedback on customer interactions.
Bein: Would you say the feedback is instructive for what you need to do to provide a better customer experience? Have you seen the NPS go up over time? What has been the trend?
Ewing: We’re pleased with our NPS score. We’re never completely satisfied because we always want to improve. We’re well north of 50. We’ve been as high as the low 70s. We’ve been as low as the 30s. That took place in the depths of supply chain issues 12 months ago.
Bein: As you know, we see a lot of customer data that measures below the level of NPS. A lot of distributors took a hard hit on the whole product availability issue and NPS scores came down as a result. It must send a great message to your customers when they hear a specific follow-up on something they suggested resulting in an operational change. That’s incredible.
Ewing: If someone is speaking it, it matters to them. The worst thing that can happen in any instance, is that an employee, partner or client gets ignored. We try in every possible way to make sure we acknowledge them and let them know they are heard.
Bein: We’ve referenced an idea in previous shows that comes from the book, “The Loyalty Effect ” by Fred Reichheld. He is the one who invented NPS. The idea of the loyalty effect is there is an interdependency between employee NPS and retention, and customer NPS and retention, growth and profitability. As one rises, the other rises. Have you seen that effect in your business?
Ewing: I would like to say we have. The one caveat is the recent supply chain challenges. The pandemic created a completely different environment overall. As a result, we don’t have a clear correlation due to at least two black swan events in 24-36 months. There is a correlation, but the market and environment have been so disruptive and choppy, we don’t have a clear picture.
Heller: Is your workforce decentralized or do most people come into an office environment?
Ewing: We are fairly decentralized, as was required about 36 months ago. However, it opened up the entirety of the country for hiring. We hired some tremendous talent we otherwise never would have talked to or considered. If we were to mandate everyone come back to the office, we would lose that talent. No one is going to jump on a plane to come to the office for eight hours. I don’t feel comfortable mandating that people move to a particular area to come to the office. We were not virtual or remote when the pandemic hit, but we were conducting communication via video. So, it wasn’t foreign to us.
We met an executive team hire face-to-face about nine months after we hired him. That was the first time we had shaken hands. It goes back to the culture. If you can’t create a culture that allows relationship-building to take place virtually, that is where any company is going to struggle. We have been fortunate to develop a culture that allows virtual relationships to thrive.
Heller: How do you incentivize employees? Is it tied to company performance?
Ewing: Certainly, there are performance-based opportunities. If we look at our distribution centers, there has been a talent shortage across the board. It’s been a real struggle. We’ve had to adjust our hourly wages to keep up with the market about two to three times more frequently than pre-pandemic. We do quarterly bonuses based on company profitability, which everyone in the company takes part in. I refer to it as a non-formal profit-sharing quarterly bonus because it is not a formalized plan. We also have our 401k and profit-sharing plans as well as a pension plan. Those are formal, documented benefits.
Heller: It appears that you have a learning culture at COE Distributing. Do you hire specifically for that, or can people become that way when they join COE? It’s hard to build a learning culture in a company because learning is work. How do you infect people with the learning virus once they join?
Ewing: We look for people that have a desire and excitement to join a company that provides that opportunity. Throughout the interview process, if you ask the right questions, you can identify the right candidate successfully. They have to want to do it; they have to be able to collaborate and communicate.
We use a couple of different hiring methods. From a supervisory manager level, we use Top Grading. That is a fairly rigorous interview process, but it provides enough information to see if there’s a cultural fit. We hire for culture first and skill second. You don’t have to use Top Grading, but with the right process, you can gather that information and make more informed and long-term hiring decisions.
Heller: A lot of the CEOs we talk to are struggling with employee retention. Do you find using the NPS and having a learning culture has helped in that regard?
Ewing: Yes. You have to have fun with what you do. There’s still work to be done. Overall, the entirety of our team knows the company is there to support them. We want to allow everyone to grow, to get better on both the personal side as well as the business side. If it’s all about business, that’s where burnout happens. Folks opt out when it’s not a healthy environment. The struggle is to create that change, that cultural shift. It’s got to come from the top and be continually reinforced, spreading the responsibility across the executive and leadership teams. It has to be real. It has to be genuine.
Heller: Do you have tips for people early in their careers who would like to achieve your level of success?
Ewing: Number one, it’s about the people. We have great things going on, but we wouldn’t if we didn’t have great people. We have to give them opportunities, believe in them, encourage them, and engage with them. Number two, getting it right isn’t always possible. Mistakes will be made. The key is how you react to those mistakes.
Ian Heller is the Founder and Chief Strategist for Distribution Strategy Group. He has more than 30 years of experience executing marketing and e-business strategy in the wholesale distribution industry, starting as a truck unloader at a Grainger branch while in college. He’s since held executive roles at GE Capital, Corporate Express, Newark Electronics and HD Supply. Ian has written and spoken extensively on the impact of digital disruption on distributors, and would love to start that conversation with you, your team or group. Reach out today at firstname.lastname@example.org.