Innovation and the Challenge
Last week we talked about the challenge in the acquisition and retention of the talented people that you would need over the coming years. We also addressed the challenge of the new partnerships required between businesses and the education system. Through this partnership, we can fill the learning to employment chasm.
Now I would like to turn to where we have more direct control: Innovation.
This year we are seeing rapid and healthy capital spending by business across the country. This is the precursor to improvements in productivity in the workforce which will lead to higher wages. These are all good things.
However, what are YOU doing to innovate your way to higher productivity?
Let’s quickly review some high-performance benchmarks for parts and service.
Parts & Service Sales > 40% of Total Dealer Sales.
No matter what you think, you can achieve this level of sales IF you achieve higher market share numbers. BUT that will not be easy. It will not be achieved if all you do is continue to do what you have always done. You would do well to remember the definition of insanity here, as I reference it so often: continuing to do what you have always done, while expecting a different result.
Some key steps to achieving higher market share:
Obtain complete accurate machine ownership lists.
Segment your marketplace.
Establish a market coverage strategy.
Assign customers to external and internal sales teams; in the filed and on the telephone.
Train your market coverage personnel in territory management.
Establish specific objectives for purchases for each of your assigned customers.
THEN YOU NEED TO MAKE IT HAPPEN.
Operations need to be tuned up as well. Let’s start with productivity. Do you think that with your current structures and personnel levels you will be able to handle the business that will come with the above action steps? No matter what you think you can achieve this level of sales It will never be achieved if all you do is continue to do what you have always done.
We need to attack the structures. So, let’s go back to our fundamental question:
WHAT DOES IT LOOK LIKE WHEN IT IS RIGHT?
To start with all parts and service sales prices are at retail customer price for the following benchmarks. No, you don’t need to change how you price things, although that would be the right thing to do, you can simply do the arithmetic.
To operate at high levels of productivity requires the following benchmarks be achiever. Personnel Costs as a percentage of Sales Revenue.
Parts < 7%
Service < 15%
The above two measures will lead to sales per employee numbers. If you are higher than the above measures then you need to focus on innovation. Improve methods, processes, systems and everything you can to achieve the personnel numbers above. The only way you can achieve radical improvements in operational performance is if you get all of your employees involved in the process.
Remember: Understanding, Acceptance and then Commitment.
More on that next time.
The Time is NOW.