Article

The ROI For The People Rich Dealership

September 2006, Auto Dealer Today - WebXclusive

by Richard Libin - Also by this author

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Dealers are not money broke today; they are “people broke”.

This essential distinction has a tremendous influence on the success and growth of car dealerships today. Dealers spend hundreds of thousands of dollars yearly in advertising and promotions to drive prospects into their stores only to realize – too late – that they don’t have the salespeople or sales managers in place to serve these potential customers as they arrive. Being “people broke” is a critical limiting factor for growth as dealers look to expand and acquire additional stores. As many mega-dealers have learned, it takes a significant amount of time and investment in personnel to get new stores up and running profitably. For many, it is quite surprising to learn how much hand-holding this process actually takes.

So, how do dealerships overcome being “people broke” so they can focus on growth and expansion? The solution can be broken down into three areas:

1. Develop people from within
2. Offer a career path to every employee
3. Equip employees with the tools they need to succeed
Develop People From Within
When Dealers look externally to fill Sales or Manager positions, they typically recruit from a pool of professionals employed at other dealerships in the general vicinity. When this happens, the new recruits bring the methods and habits of their former dealership to their new position, whether or not they match the established processes and culture of their new employer.

In essence, it’s a double-edged sword. The new manager is hired to run the organization based on their past successes, yet they are expected to do so within the structure and parameters of an established structure which they don’t understand. In reality, what happens is that the new manager changes the structure. This may result in a temporary increase in performance; however, since the rest of the team is not trained in the new structure, the long-term impact is a drop in performance and an increase in turn-over. We call this the “Flash In The Pan” – the new managers come in and throw some fuel on the fire resulting in a big flash which then burns out quickly.

Conversely, when dealers hire – or promote – someone from within, the process becomes much simpler offering better results. For example, when someone is promoted from a sales position into a sales manager position, the individual already knows the structure; the way the dealership does business and the processes used; the values of the organization; what the dealership stands for; and everything else about the way the dealership does business. When promoted from within, the new manager is not intent on changing things. He/she is ready to take the next step in established structure, using processes that are familiar to the entire team, to continue to drive growth and performance.

A good analogy is any business software program. The program is structured to help improve business operations and includes processes that simplify and improve performance. When you buy the program, you don’t try to change the structure and processes, you conform to them to move forward in a positive, profitable manner. When a manager is promoted from within, they understand what they need to do – all they need to have learned is how to be a good manager and coach.

Offer a Career Path to Every Employee

Within an established structure with clearly defined processes, it is essential to provide teams with a clear career path. Employees should start their career with the dealership in the position of greeter. From there, they can move to sales, to F&I, to sales manager to general sales manager and so on. Having a career path not only clearly demonstrates the opportunities he/she has with the dealership, but also creates a team environment where everyone shares a common culture and goals. To complement a career path, dealerships must offer an attractive employment package – a longevity plan that serves as an incentive for employees to stay at the dealership. This can include health insurance, life insurance, spousal benefits and the opportunity for substantial financial gain regardless of the position an employee holds.

For example, most greeters are paid an hourly wage and typically see their role as static in terms of their ability to control and advance their income. If however, a greeter is offered an incentive for every customer he/she greets and generates a card on, then his/her perspective, motivation and energy change dramatically. This arrangement gives him/her direct control and responsibility for his/her own performance. The same holds true as he/she moves into new positions. For example, if a dealer sets aside $25 for every car delivered by each salesperson to be used as an end-of-the-year bonus or as a contribution to a 401K, it creates an enormous feeling of empowerment and motivates all the salespeople to perform at their peek levels.

Equip Employees with The Tools To Succeed

Having a career path is only part of the route to longevity and retention. It is essential that dealers help their people develop. To do so, dealers must provide mandatory training in the skills needed for every job function for every employee. Training programs cannot be selective for several reasons:

  1. Training builds an understanding that part of each person’s job is to nurture and develop people below them – and training gives them the skills to do so.
  2. Training gives every employee the same opportunity to embrace new skills and apply them in new ways on an even playing field.
  3. A star performer may emerge only after he/she receives the training and tools needed for success.
  4. Conversely, a “superstar” in his/her current role may not have the mindset or ability to embrace the skills needed to advance, a fact that will become clear as training is provided.

Training programs don’t have to be complex, but they should be comprehensive and include motivational, organizational, managerial, sales, service and leadership skills. A host of programs are readily available from auto manufacturers, as well as specialized training organizations like Ken Blanchard or Franklin Covey.

The ROI of Being “People Rich”

Most dealerships embrace what we call the Totem Pole perspective – dealer at the top, managers in the middle, and salespeople at the bottom. This perspective is typical in dealerships where there is little training, no clear-cut path for advancement, and high turn-over rates. The Totem Pole philosophy can add up to an incredible expense: hiring a salesperson who leaves within the first 90 days costs Dealers an average of $25,000 to $30,000; hiring a sales manager with the same result costs an average of $80,000 to $100,000. It’s no secret that retention is crucial in this business.

Building longevity – not simply retaining employees – requires a different mindset beginning at the highest level, one we call the Funnel. In this model, salespeople are at the top. They are the ones who put everything into the funnel. Managers are in the middle, controlling what passes through to the bottom, and dealers are at the bottom reaping the rewards of a well-structured environment that follows effective business processes. In this model, employees are viewed as an asset, not an expense. Training, career paths and longevity programs are seen as investments with the potential for high returns – profits and growth. Using this model, dealers can create an environment that makes them “people rich” and that leads to high financial returns.

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