Prior to the July fourth holiday weekend, it seems Jeff Hickling, President and CEO of Ricoh U.S. found his position was to be eliminated.  Sources within the company that wish to remain anonymous have told us that Hickling is out.  This has been confirmed with a letter from Kevin Togashi, Chairman and CEO of Ricoh Americas Corp. that was forwarded to us.  For now, Kevin Togashi, Chairman and CEO of Ricoh Americas will direct the U.S. sales and operations.

While working hard to build Ricoh as a global presence, Hickling spearheaded efforts to coordinate their Global Managed Document Services (MDS).  A $300 million three year investment into their MDS infrastructure, global competency centers in Japan, Europe and North America and over 2,000 managed services sites would seem like a great start to a major endeavor such as this.  However, while Ricoh has made great strides at the Enterprise level, they have struggled as of late at the SMB level, particularly where the traditional dealer channel excels.

With so much going on in the market, with so many business plans and objectives, perhaps it’s not fair to point to a single issue as the reason for the shakeup at 5 Dedrick Place in West Caldwell (Ricoh HQ)…I mean 70 Valley Stream Parkway (IKON HQ).  Fair or not, a significant reason Ricoh is in the state they find themselves is that for two years, they have struggled with the integration of IKON into Ricoh. 

The reasons for this are both simple and complex.  Ricoh has a history of acquiring companies and then placing the people they acquired into senior roles within their organization, often at the cost of their own personnel.  While the talent pool at these acquired companies has been excellent, moves like these created resentment among current Ricoh mid level and even senior level management and a great number of these people have left or been forced out.  It happened when Ricoh bought Savin, when they bought Lanier and now that they have purchased IKON. 

The IKON acquisition provided challenges above and beyond what Ricoh faced with Lanier and Savin.  First, IKON was a much more formidable competitor to the current Ricoh distribution model in that they had hundreds of offices and a substantial presence in MPS, Enterprise and major accounts.  While Ricoh was making great strides at a direct operation through Lanier and Ricoh Business Solutions (RBS), bringing these groups together with IKON was going to be extremely difficult under the best of circumstances. 

This issue does not get any better when you consider IKON executives were handed the reigns to the company, a move that appears to have had a negative effect on morale within Ricoh.  A quick visit to glassdoor.com shows dozens examples of problems IKON/Ricoh needs to address, according to the people that work there.

Making the situation even more difficult is the fact that senior management from IKON is running the company from their own HQ in Malvern, PA rather than from West Caldwell, NJ where Ricoh Americas HQ resides.  Instead of creating a tight knit family, it seems there is an “IKON vs  Ricoh” mentality that has festered over the last two years leaving employees at all levels, particularly on the legacy Ricoh side, feeling like they’re the red-headed step child.  This goes from management all the way down to the field and the feelings of resentment run deep.  I have many friends that sell for RBS in various markets and the complaints I’m hearing are more and more frequent. What’s more, there’s a resounding similarity between them. 

RBS territories are reportedly being cut and given to IKON counterparts, significant accounts are being taken from RBS sales people and given to their IKON sales people and it goes on and on.  Perhaps it’s perception on the part of the RBS sales people but they tell me management does everything they can to ensure the IKON rep succeeds, even if it’s at the expense of the Ricoh rep.  RBS reps have indicated they feel legacy IKON managers go to great lengths to try to show upper management IKON reps are better than the RBS reps, even if this is partially due to an unleveled playing field.

There wouldn’t be a problem if this wasn’t a one way street and Ricoh employees were receiving the same treatment.  But to date, I haven’t had a single IKON person tell me their accounts were taken from them and given to RBS employees.  It’s obvious IKON is now running things and the feeling from my friends in the trenches is that the IKON field managers are taking care of the IKON reps differently than they are handling the Ricoh reps. This may not be true in every market, but this is a story I am hearing over and over again.

The other major issue is that, from where I sit and more importantly, from what their dealers are telling me, Ricoh’s strategies for global domination have left dealers feeling like they’re not part of the big picture.  For a company that only a few years ago had 70% of their U.S. distribution through the dealer channel (now down to about 20%), you can see why they might not feel like much of a priority.  Ricoh does seem to be trying to rekindle these relationships and during their Orlando dealer show in May they offered a great number of programs and plans aimed at helping dealers.

But at this point, is it too little too late?  I can tell you after visiting virtually ever dealer show this spring I saw Ricoh dealers everywhere looking for brands and companies like Samsung, Lexmark and others were making a great case as a second or third line.  At one point, Ricoh registered the highest percentage of single line dealers – more than 60%.  Our latest study (Imaging Systems Dealer Strategies for 2011) indicates the percentage of single line Ricoh dealers having fallen to 26%.  It’s difficult to imagine how IKON/RBS, with lower margins and higher overhead, can make up for these losses.

An issue Ricoh is now faced with is that there were always feelings of mistrust between the dealers and Ricoh, which frankly speaking, is not much different than other brands.  This becomes more of an issue when you add the layer on top that these dealers are now working with the IKON management, a group of people they have had no relationship with over the years.  This isn’t rocket science; it’s quite easy really.  The dealers need to work with people they know and trust and while IKON executives may be trying their best, the fact is until recently, they have been one of the Ricoh dealers’ main sources of competition for years.  They were the enemy and now Ricoh dealers are supposed to sit on the other side of the table and trust them.

Compare Ricoh’s situation to Konica Minolta, a company pushing hard (much like Ricoh) to enter that top tier level of office equipment manufacturers.  Konica Minolta’s dealer channel was in shambles.  There was animosity in the field between branches and dealers and based on BTA surveys, Konica Minolta was near the bottom in most key metrics with respect to dealer satisfaction.  While the direct channel was successfully moving along with the integration of Danka and their branches, the dealers were extremely unhappy.

So what did Konica Minolta do?  They brought on Rick Taylor, who dealers LOVE.  Rick immediately created rules for the field to level the playing field.  And while Rick still resides in sunny CA, he makes the trip out to Ramsey, NJ almost every week to steer the ship from the helm, not from an office in another market.  Rick then brought on staff to help the dealers.  He didn’t grab just anyone financial experience; he hired people with a reputation and presence in the dealer community.  Who did he bring on?  Alan Nielsen from Ricoh, who dealers love.  He then hired Mark Pollack, another former Ricoh VP with a stellar history of working with the dealer channel.  Suddenly, Konica Minolta has climbed from the cellar in that annual BTA study and is consistently getting better (according to their dealers).  Konica Minolta hires an executive team with an excellent reputation in the dealer community and two years later they’re much happier and more productive.  Coincidence?  I don’t think so.

Do you know who is in now at the bottom of the dealer ratings?  You guessed it.  Ricoh is, in virtually every single category.  I have never seen a company rate at the bottom of every category in that study.  This is not a surprise to Ricoh management.  We have communicated this information to them on more than one occasion.

So what can Ricoh do at this point?  Can this be fixed?  I think it can.  They already began reaching out to the dealers at their last meeting in May with new programs.  Although it may be difficult with Ricoh announcing 10,000 layoffs, it would be a great move to bring on some executive level management with a strong reputation and history working with dealers.  There is a lot of talent out there that has a history with dealers and these are the kinds of people Ricoh could turn to in order to improve what was once their most lucrative channel. 

It’s not too late to fix this channel.  Ricoh has  good products, great pricing and solid programs.  There are areas where the dealers are screaming for change and most of them are clearly spelled out in the recent BTA study I mentioned. 

Another area where Ricoh could improve is with respect to communication – both internal and external.  I can tell you that the Ricoh employees we spoke to were livid that they found out about the layoffs from outside sources rather than through internal sources as they found out about the exit of Hickling. 

Communication with the analyst community could also use some enhancement.  There are many people like us who offer unique perspectives on the industry and can provide excellent feedback on strategies before they are implemented, problems we see in the field, etc.  While our commentary wasn’t overly popular at Ricoh when we began writing about the dealer channel issues in back in 2010, things might be a bit different within that organization today had they looked outside the box and considered feedback from outside sources.  It wasn’t only us writing about the problems we saw within Ricoh.  Analysts such as Brian Bissett, Bob Sostillio, Frank Cannata and others have discussed Ricoh’s channel issues. 

Next, Ricoh needs to figure a way to better integrate the IKON and Ricoh cultures.  With the acquisition this far in the past, it seems absurd that there is still an “us vs them” mentality.  I know the IKON executives don’t want to move to northern NJ or they would have done so by now. But certainly it would be a positive move if they were working side by side with their Ricoh counterparts rather than working from their old HQ.  If Rick Taylor can trek across the entire country each week for Konica Minolta, certainly these guys can get everyone together at Ricoh HQ with more regularity.  It’s got to be difficult making daily decision with your executive team located so far away.

Eliminating the cultural differences between legacy IKON and legacy Ricoh employees is paramount and easier said than done.  However, if Ricoh can accomplish this and work as a unified team, they could be a force to be reckoned with.  In reality, they already are.  Think how much stronger they could be if they were all in it together.