Talent Matters

If we have to sum up 2025 distributor sentiment in one word, it would be “uncertainty.” Distributors navigated regulation, tariffs, price increases from manufacturers, flat sales, weak housing starts, and labor shortages. Tariffs and other policy uncertainty, as well as M&A and private equity roll-ups are all likely to continue this year.

For this reason, you should focus your attention on execution, customer experience, and value-add services.

1 Distribution is a relationship business, but today the key drivers of purchase decisions are availability, price, brand, and services. In 2026, distributors should invest in developing their technical capabilities, improving customer experience, offering value-added services, and driving innovation.

2 Customer experience encompasses a range of services, including easier/quicker order intake, faster quotes, technical sales support, application engineering, and digital services. Quicker response, easier access to information, technical know-how, and consistent service make customers come back.

3 Consider what more we can do for our customers that enhance customer loyalty and retention, such as design, engineering, light-processing, kitting, assembly, rental, and delivery/logistics services. Services also command higher margins.

WINNING IN 2026: IT ALL COMES DOWN TO TALENT

Most distributors are already familiar with the above strategies. The challenge is in execution. Process discipline, priority, and time are some of the constraints, but the biggest challenge is talent. Critical skill gaps in strategic growth, pricing/margin management, inventory planning, operational excellence, and digital transformation are holding back distribution growth.

In 2026, make a plan to improve your talent acquisition, development, and retention practices. Invest in resources, develop metrics, and make small improvements. Here is a list of action items:

Talent Acquisition:

• Develop a compelling Employee Value Proposition (EVP) by clearly defining your company values, benefits, culture, and approach to developing people.
• Enhance your employer branding by optimizing your career website with EVP content, including your company’s history, career paths, development opportunities, community engagement, and more.
• Internships are a great way to build a cost-effective and sustainable entry-level talent pipeline. Retention rates are significantly higher for converted interns compared to direct recruits.
• Total compensation – market and communicate your total compensation and growth potential.

Talent Development:

• Develop structured career paths. Train managers to have “growth conversations” about where an employee will be in three to five years, provided they perform and improve their skills.
• Succession planning (including internal promotions) is something on distributors’ back burner. Make it a priority in 2026 to plan formal succession plans and associated development.
• Invest in people – their education and training at all levels of the organization, particularly for high-potentials, mid-level managers, and leaders.

Talent Retention:

• Effective onboarding is where retention begins. Create a structured pre-boarding and onboarding process with manager involvement.
• Salary benchmarking – utilize industry-specific, public, and geographic data sources to benchmark salaries at least once a year. Adjust your salaries (both merit and equity) to be competitive, particularly for entry-level and hourly positions.
• Work on culture every day. Toxic culture is the No. 1 reason for employee turnover. People join companies, and they leave a manager.
• Engagement – employees who are engaged are more likely to remain productive and stay with the organization. Frontline managers are the key to engagement.

Market share gains and new customer acquisition are key to achieving growth in 2026. Focus on being hyper-local and aligning with customer needs. The pursuit of excellence is not only expected but also essential to growth. And your people are your growth engine!