There is a major problem that all business owners face whether they know it or not, and office system dealerships are not exempt. There is a belief and operating basis in our society that trains employees to think that they are trading hours for dollars. Most employees believe that if they show up at the office (or in the field in the case of technicians and sales reps) at 8:30 a.m. and stay in the office until 5 p.m. they are entitled to a paycheck. This thought goes further in that if the employee remains on board for a full year, he or she is now entitled to a raise. But how does this system tie in to the traditional dealership business model?
Let's first take a look at another model. In the civil service world, working for the government, this belief of trading time for money is sometimes taken to a whole new level. I'm sure you've heard the stories of tenured workers counseling new employees saying, "slow down you're making us look bad"? In effect they are saying take more time to get this job done. If we take more time to get the job done then we get paid more. Heck if we go slow enough we could earn some overtime and get paid even more. It sounds kind of crazy doesn't it? The more wide spread this is the more it costs the organization in payroll. For a government this is a fairly easy problem to solve. The answer is raise taxes. The government's revenue comes from the taxes levied on the people. If there isn't enough money to pay the employees and other bills then taxes go up. As a citizen (customer of the government) you have no choice but to pay the higher taxes.
How do we replicate this in our business model? The answer is simple, we can't. Could you imagine sending an invoice to each of your customers at the end of the year with the explanation that you don't have enough money so they need to pay more? It is unthinkable in the business world, yet regular practice in the government world.
So, how do we fix this problem? It starts with understanding your business model. In a successful office systems dealership we make money by selling products and service and managing the business in such a way that more money comes in than goes out. It is that simple. Typically, the business owners understand this but the employees often do not. This can be seen by looking at how many employees have credit card and other debt far above what they have the ability to pay. In this case one is operating more from the thought that "I need _____instead how will I pay for ______." This can happen in dealerships too. Spending, very often, has little or no relationship to income. If we need to spend more for bills and payroll than we have on hand we tap the credit line or use a credit card.
So, how do we turn the tide? The answer is to create a culture where the focus is on what is produced not on the time one puts in and on bringing in more money than we spend. The first step is to make sure that every employee knows what they are supposed to produce and what volume of production is needed. Every employee should have key production statistics outlined that make it clear how their production is measured. The statistic they have been using-time- needs to be de-emphasized and replaced with production-based statistics. For example, your accounts receivable clerk should understand that there are some key things that he or she must produce; collection calls made, dollars collected, accounts receivable aging over 60 days of less than 10%, etc. If the accounts receivable clerk worked 12 hours a day but made very few collection calls, had a low level of dollars collected and an aging that shows 30% of the A/R is over 60 days past due we'd have a problem. First, the employee would most likely be getting overtime payments but more importantly, we aren't getting the production or the cash flow needed.
Let's take one more example, the contracts coordinator. What are the key production statistics here? We typically focus on dollars billed, profitability of each contract and timely billing. It is not uncommon for service contract billing to be delayed in some dealerships because the contracts coordinator is "too busy" to get to the billing. In effect, he or she is saying, "I am putting in a lot of time but I'm not able to get to the most important part of my job." Late billing causes a host of issues from slowing cash flow to customers not paying bills because they didn't get them on a timely basis. The bottom line is this, it doesn't matter how many hours an employee puts in or how hard they think they're working, what matters is what results did they get.
The challenge is getting this understood by the employees. One effective method for raising the awareness level of your staff is to build incentive programs around the key statistics for each position. Employees can have a salary as well as an incentive plan. With this in place you have the ability to give employees the ability to earn more money by producing more. The old system of giving a raise every year can be replaced with incentive plans built for each employee. The beauty of using this type of system is that it allows for greater flexibility. The incentive plans can change based on the needs of the business.
If you can successfully get your team to focus on production rather than time you'll be amazed with the changes you'll see in the business. Many clients have told me that they couldn't believe the transformation in the business, going on to say, "the employees are thinking like owners now." When your employees think like and make decisions like owners the stress level on the business owner(s) is dramatically reduced. Give it a try and see if you experience the same. If you have questions don't hesitate to call or email me.
Jim Kahrs is the president and founder of Prosperity Plus Management Consulting, Inc. He may be reached at 631-382-7762 or at email@example.com