Employee ProductivityWritten By: Ron Slee
Article Date: 10-02-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Be careful in your irrational exuberance.
An increase in productivity is being reported in this industry and that's terrific news. But what tools and technology allowed us to make this leap in productivity. I haven't seen any breakthroughs in systems. The same suppliers are in place with the same processes. That doesn't seem to be the reason for the productivity increase. Nor have I seen an increase in training budgets to develop better skills for more people in parts and service. So what gives?
The reason may be as simple as: We don't have enough employees. Productivity is up because we haven't kept pace with the increases in business we're experiencing by increasing staff.
In this industry, the sales per employee measure is gospel. This has been true a long, long time but particularly true since the 1980's, when costs rose so dramatically as interest rates climbed above 20 percent. Imagine.
The cost pf personnel is clearly the highest cost in a dealership so lower the payroll and we can get through this problem. And the cycle continues.
There is a serious flaw to this thinking. I'm sure you know what it is. When we under-staff, our customer service gets so bad our market share on parts and service is terrible. But don't worry about it, we can't measure it effectively so no one will catch us. Right.
Our customers catch us. They catch us and then they leave us. Half of your customers leave every five years in service. But that's okay productivity went up.
It's true that sales per employee is a great metric. It's an important one as well. But it needs to be based on the wages and benefits paid in a department.
Take Parts. What is the average personnel expense in your parts department per employee? That's 7 percent of what sales per employee should be.
But that's only part of the story. We need a higher percentage of sales in the service department. This is the department that has the lowest sales per employee of the dealership. So the more successful we are at getting service business, the lower our productivity will be. Balderdash! That is just plain wrongheaded.
So be careful with measurements. Be careful when something goes up. Normally, something else is going down at the same time. The laws of physics don't just change.
Equipment sales as a percentage of the total dealership sales in 2005 might have gone up and that might in itself be the reason we can say productivity is up. But there are many competing issues at play in this business. If it was easy, it would already be done. Don't forget that.
Oh and one other thing: It's those wonderful people in parts and service who make your customers keep coming back to you. It's the relationship they have with the customers that is so important. Don't overwork them. Appreciate them. Train and develop them. Support them with the best tools and information possible. Support them with the best systems possible.
If you do all that and productivity goes up, I'll be right out front cheering with you.
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