To properly address the New Reality we have to look backwards. From the 1960’s to 1980 management felt pretty good about things. Sales revenues had increased, profits were up, life was good. We thoguht we must be the greatest generation of business managers ever. But it was all inflation.
When Paul Volcker and the Federal Reserve raised interest rates to kill inflation there was a serious adjustment. Businesses reinvented themselves. Operating metrics became all the rage and we developed business models for everything.
Well in a few years we felt pretty good again. With a couple of exceptions sales went up and profits went up and things were good again. But it was all leverage. With George W Bush at the helm we witnessed some of the most severe disruptions in our lifetimes. But we had to lick leverage and he and his Treasury Secretary Hank Paulson started to get it done.
In 1980 for every dollar of US GDP there was $3.70 of debt. By 2005 that debt had grown to $30.00 (The Trillion Dollar Meltdown). I shudder to think what it is today with our deficits and spending seemingly totally out of control. We are clearly in a new era when the Federal Reserve keeps printiing money and the currency continues to be debased. We have to reinvent our businesses again. We have to repair balance sheets and we have seen that happening. For everyone BUT the goverenments, all governments. Don’t forget I live in California and we make Greece look good.
We have seen encouraging signs in the equipment world. Equipment sales have been up dramatically – 30%+ to 40%+ for two years in a row. But we still have a big hill to climb to get back to the previous peak. This is not going to change for a long, long time – that is the new reality. You will survive and perhaps thrive IF your focus is on Parts and Service and for some of you Rentals. If you don’t have that focus….there is a significant risk to you. The time is now.
Labor Efficiency
Service Departments the world over are concerned about efficiency and effectiveness. There is a very easy method in which we can measure and manage the labor we offer to the marketplace. There are two critical pieces of information from which we must start. The first is called Gross Profit Potential and the second is the actual gross profit.
Gross Profit Potential is the number that you would obtain if you took all of the labor in your department at the published labor rates and the average wages of the technicians employed. From these two numbers you would get the potential gross profit. Take that number and divide it be the published labor rate and you will get the gross profit potential. That is very straight forward and very easy.
The actual gross profit you can get from your financial statements. Just be sure that it is only labor.
Then a simple division will lead you to labor efficiency. Divide the actual gross profit by the gross profit potential and there you are – labor efficiency. How do you stand up in this measure? You must be over 90%. The time is now.
I’m Back
Well guess who is back. I have been conducting classes for the past four days and travelling for two of them so I have, unfortunately, neglected you. One of the sessions was on Customer Service and the other was on Parts Management. We start into a two day session tomorrow on Service Management.
It appears that the interest in employee development is beginning to pick up from the desperate savings that distributors were driving attempting ever since 2008 and Lehman. The bad news of these savings as noted in a previous blog is that employees see that and make note of it and when business picks up many of them will determine that the grass is greener on the other side of the hill and leave you.
The largest challenge over the foreseeable future is going to be to attract, hire and retain the talent required for the job functions in your business. And this is a very serious problem.
Automation will absorb some of the shortages but not all. Management, or better said leadership, is required to set the tone and the direction for employee development. The time is now.
Friday Filosophy #3
Whether or not you think you can or you can’t. Either way you are right. Henry Ford
You can easily judge the character of a man by how he treats those who can do nothing for him. James D Miles
Go confidently in the direction of your dreams. Live the life you’ve imagined.
Words of Wisdom #4
Sleeism # 4
It is hard to soar with the Eagles
If you are up all night with the Turkeys
Sometimes it is hard to remember that the morning comes awfully early. When you are having fun in the evening and into the early morning it is wise to remember that the sun comes up every day (so far) and that you have to be race ready when you get up. It is not a sign of weakness to get to bed in the middle of a party. It is purely an understanding of the responsibilities we have the next day. The time is now.
Standard Times – Does Your DMS Pass the Test?
Many Dealer Management Systems (DMS) allow a dealer to access a manufacturers’ information on standard times that are used to reimburse the dealers for warranty work. There has long been disagreement as to whether the time provided is adequate. That having been said it is also true that someone is trying to help a dealer in establishing standard times for repairs – the suppliers.
So what if the time is inadequate? Or in some cases it might be too generous. That just means you need to do a little more work. Meet with your technicians and determine the factor to apply to the time in order that the work can be performed within the time, consistently, and allow you to develop a labor schedule to follow. Well this is where the DMS has to allow the dealers to apply factors to the times provided with the supplier interface and create dealer time files. Does your DMS allow this? Don’t you think it should? When you have reasonable times to apply to a job assigned to a technician you can build a schedule. With a schedule you can develop a completion date for all work. With a completion date that you can meet consistently you will get more business. Isn’t that what you want?
I suspect you should pose this question to your DMS provider. Can you take the standard times provided for warranty and apply a factor by component code, or operation, or a machine group or even machine model. If you can’t I submit to you that it is important to be able to do this simple thing. The time is now.
Change is compelling….change and hope.
The Canadian Economist John Kenneth Galbraith once said “When mankind is confronted with making a change or proving why they shouldn’t change…. why do people get busy with the proof?” The common excuse for resisting change is the same everywhere – fear. A lot of fears – fear of the unknown, fear of failure, fear that others will be better than we are, a bunch of fears – to the point there is another interesting question to pose to yourselves “what would you do if you weren’t afraid?” That is the more interesting question.
In our Unit I management training we deal with change and paradigms and I try and get people to understand that resistance to change is both natural and normal. Most of us are settlers not pioneers. The pioneer is the risk taker. They blaze the trail for the settlers. When the pioneer is finished with their explorations the settler will ask “is it safe out there?” Then if the answer is yes off they will go to the new lands. But the options available for the settlers are limited because the pioneer had the first choice.
I submit to you that your customers want you to be leading not following. They want you to lead the changes. And in this world in which we live change has become a fact of life. Change comes in waves it is not incremental. If you don’t get in on the initial waves you want to hope that you can enter later without a large loss. That is an interesting word – hope. Put with the subject of change it is really interesting. How has that worked for you so far? Not all change is good. So you have to be pretty discerning don’t you. You have to be able to evaluate the situation, consider the options and then make a decision. It doesn’t get easier over time. It might in fact lead you to missing out on chances. How do you view change? The time is now.
Generational Changes
Some time back I looked around a room I was in and noticed that I was no longer the youngest person in the room. Of I course I still felt like the youngest in the room. But think back to when you started your first job. What did you think of the older people around you? Were they to be respected for their age and knowledge? Did you look at them wondering why they did things that particular way? Do you remember working with your father and how he was always telling you how to do things?
I think we in North America have a perverse method of teaching people at an early age. We teach them to be obedient. Now don’t get me wrong there is nothing wrong with obedience and manners. In fact I quite like them both. I do want to take issue with the fact that we are creating robots to some degree. We don’t teach people well enough to be critical thinkers. We don’t teach them to think on their own. And when they do think on their own we label them something – rebels, trouble makers and other names.
I think we need to embrace the younger generation in a more positive manner. Every younger generation gets a bad rap including the current crop of kids (maybe I shouldn’t call them kids). Imagine. They are better educated. They have more computer skills than were dreamt of when I was entering the work force. The attribute that I like the most is that they are not as patient as we were. They won’t put up with the nonsense that some of us endured. Are you ready to listen to what they have to say? Can you imagine that they might have a better way to do something? I get excited when someone asks the question “why do you do it that way?” I want to know what they mean, what they are thinking. There is always the possibility to do things better. You have to embrace these changes as never before. The time is now.
The New Reality – Part Deux
The juxtaposition of the last two blogs is intriguing. I couldn’t ignore it. I have received a lot of flak about my pronouncement of the New Reality. People suggested that I need to be more careful in how I communicated things. That it could be dangerous, I might frighten some people.
Remember Jeff Bezos – social cohesion at the expense of the truth.
I don’t think anything will get better if we ignore it. I had a wonderful teacher in Grade 8 for geometry. My majors at University were Mathematics and Physics so I rather enjoy arithmetic. But I was stubborn as heck and had a hard time with Geometry. Why?? – Because I refused to memorize the theorems. Sound familiar to any of you? Well I had a special grandmother who I call “Granny the Great” who got her Master’s degree in the 1910’s – a truly amazing woman. She got me in line and by the end of the year I was near the top of the class. I learned to memorize things. Well this teacher told me that it wasn’t going to get any better if I kept putting it off. It was going to get worse. Of course she was right.
Lou Holtz says it well.
I want to add a corollary to this list. You have to know what to do and how to do it. So there is another chapter on the New Reality. Nothing will change until we change. The time is now.
The New Reality
To properly address the New Reality we have to look backwards. From the 1960’s to 1980 management felt pretty good about things. Sales revenues had increased, profits were up, life was good. We thoguht we must be the greatest generation of business managers ever. But it was all inflation.
When Paul Volcker and the Federal Reserve raised interest rates to kill inflation there was a serious adjustment. Businesses reinvented themselves. Operating metrics became all the rage and we developed business models for everything.
Well in a few years we felt pretty good again. With a couple of exceptions sales went up and profits went up and things were good again. But it was all leverage. With George W Bush at the helm we witnessed some of the most severe disruptions in our lifetimes. But we had to lick leverage and he and his Treasury Secretary Hank Paulson started to get it done.
In 1980 for every dollar of US GDP there was $3.70 of debt. By 2005 that debt had grown to $30.00 (The Trillion Dollar Meltdown). I shudder to think what it is today with our deficits and spending seemingly totally out of control. We are clearly in a new era when the Federal Reserve keeps printiing money and the currency continues to be debased. We have to reinvent our businesses again. We have to repair balance sheets and we have seen that happening. For everyone BUT the goverenments, all governments. Don’t forget I live in California and we make Greece look good.
We have seen encouraging signs in the equipment world. Equipment sales have been up dramatically – 30%+ to 40%+ for two years in a row. But we still have a big hill to climb to get back to the previous peak. This is not going to change for a long, long time – that is the new reality. You will survive and perhaps thrive IF your focus is on Parts and Service and for some of you Rentals. If you don’t have that focus….there is a significant risk to you. The time is now.
The Pursuit of Performance – Change
Last week on the airplane catching up on my reading I was struck by a quote from Jeff Bezos, the founder and creator of Amazon. “Social cohesion at the expense of truth” This took my mind to the world we live in and change.
Do you remember when Jack Welsh said “when the world around you is changing at a rate that is faster than yours…. the end is near.” Do you remember that? Many of you know that I believe we are in an era of change equally as significant as the Industrial Revolution. And most people resist the changes in their lives either at work or at home.
Joel Barker, the famous futurist, calls it “rocking the boat” using the image of a canoe with three paddlers where one of them uses a kayak double blade paddle – rocking the boat. The double blade paddle is clearly more efficient and effective but it sure rocked the boat with the other two paddlers.
The thing I liked about Mr. Bezos’ comment is how it points out that we are hiding from the truth or hiding the truth in our stubborn determination not to change. In my professional life I have been calling these times the times of the “New Reality.” This not to say that the PIMCO “New Normal” isn’t also an apt phrase to describe the times but I like the “New Reality” better. We have to face the truth not hide it. We have to embrace change not resist it. We have to be open to new ideas not shut them down. There is only one way forward and that is being like the turtle – sticking your neck out. The time is now.