understanding Archives - Learning Without Scars

Make It Visible.

We have written often about Goals and Objectives and Management Measures and Key Performance Indicators. And rightly so. It also ties into my management philosophy of Understanding, Acceptance and Commitment. We MUST have clarity, everyone has to Understand what it is we are trying to do, everyone has to ACCEPT that what we are trying to do and that leads to everyone being committed to getting it done. I call that UAK, from my friend Malcolm Phares, who felt it was more memorable that way.

I want to address now the reporting of the progress towards meeting or surpassing the goals, objectives, management measure and key performance indicators.

Some time ago I was on a board of a manufacturing company. They did fusion welding on cylinder heads and line boring and rebuilding of various components as well as resurfacing camshafts and crankshafts. It was a good business. The owner wanted me to see what we could do about improving throughput. We went about the project in the usual manner and had UAK. But what really made a difference was in how we presented the results of everyone’s efforts. We put up graphic and table results every day in the employee break room.

We had a quick team meeting in which we explained what we were going to do and how we were going to collect the data and how we were going to present it to them. I was a little surprised at the level of interest in this reporting approach. There was very little interest.

The first few days, we started at the beginning of a month, there was rather disappointing interest. It started picking up toward the end of the first week. By the time the second week was finished the employees had figured out how their efforts could influence the results. They started trying out different methods to achieve the results, some that worked and some that did not work. But they quickly figured out how to have the maximum results in how they approach their work.

No one told them what to do, they figured it out themselves. I have always said that the employees doing the job know how to do their job better than anyone else. It has always been rather easy for me to explain to employees what is needed and you will be surprised at what comes out of it. This is standard best practice management isn’t it? That sure happened in this example.
By the end of the first month the improved results were very obvious to everyone. No additional spending, no changed written procedures, and no-one standing above every employee pushing them. Just management and supervision helping the employees out when they wanted assistance.

By the end of the first quarter under this program the throughput nearly doubled, open work orders were down by more than 50% and as you can imagine profit increased. The customers had improved results as well. Lower invoices as the times to do the work went down and the invoices were produced within a day of the jobs being completed.
I believe it was simply the reporting of the results. Made the results visible, explain how you get the information and how you produce the results and then just let it go.

If you already are doing this you know what I am talking about. If you don’t what have you got to lose? Try it out you will be surprised by the results.

The Time is NOW.

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.

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