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People

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People

Nothing is possible in the parts and service business without people. We closed our last post with the fact that we have standards of operations that address the people subject. These are “traditional” standards which are based on traditional operational methods and systems and processes.

But our operations need to be tuned up. 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 increased sales and market share we discussed last time? I submit to you that it will never be achieved if all you do is continue to do what you have always done.

The Industry started in the late 1970s and early 1980s to look at sales per employee as the holy grail of headcount. However, most companies looked at those standards and said to the operational people that they needed to operate at higher and higher sales per employee levels. That the higher the number the better it was.

WRONG.

The truth is that if you do not have enough people to do the job properly the people will decide what is important that needs to get done. What that is to them is satisfying the customer that the yare dealing with at the moment. If there is no time for anything else – such as calling back on backorders or calling out to customers who have not been seen or contacted for some time, or anything else to protect or grow your market share – so be it.

That is exactly what we have today with most parts businesses worldwide.

Is it any wonder that the authorized equipment dealer has a parts market share is in a range of 20% to 40%? Quite frankly they don’t deserve even that much.

Let’s go back to the fundamentals of the numbers of people to employ. Let’s look at financial standards based on the compensation packages offered to employees. This compensation package covers all payroll expenses, sales, wages, commissions, as well as all benefits such as medical, vacation, paid time off, etc.

The following are standards that are normally what I see in best practice dealers.

 Parts < 7%
 Service < 15%

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. If you are lower then you are unable to satisfy the customer needs and need to hire more people. It is that simple.

The Time is NOW.

Innovation and the Challenge

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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.