Article

Performance Improves When Measured

September 2011, Auto Dealer Today - WebXclusive

by Don Reed - Also by this author


If you are a baseball fan like I am, you have most likely watched a game or two on TV or gone to the ballpark to root for your favorite team, which is the St. Louis Cardinals for me. In doing so, you have undoubtedly noticed the constant display of player statistics. For each batter who comes to the plate, we see their batting average, RBIs (runs batted in), number of home runs and OBP (on base percentage). For pitchers, we see their ERA (earned run average), number of games won versus lost, number of starts, number of innings pitched, etc. We even see the speed of every single pitch.

Why? Maybe it’s because we as fans want to see and evaluate the performance of each player. Maybe it’s because the team’s coaches want to see and evaluate their individual players’ performances as well as that of the team. Maybe it’s because the opposing team’s coaches and players want to see and evaluate the other players’ performances. Or, just maybe it’s all of the above. When performance is measured, it improves.

Top performers are identified through constant, ongoing performance evaluations. If you can’t evaluate their performance, then how can you identify their status as a top performer? All of the players inducted into the National Baseball Hall of Fame do not have the same stats. They are all different, yet they all excelled in the sport of baseball and became the best players in the game.

As a dealer, general manager or department manager, you can learn a lot from this analogy because unless you have the stats on every individual on your team, you cannot possibly evaluate their performance. You can’t identify their strengths or weaknesses. You can’t measure improvement or failure accurately or fairly. You don’t know who needs training and what they need to be trained on.

Now, let’s take the concept of “You can’t manage what you don’t measure,” and look at it from the perspective of front end versus back end. The vast majority of dealers have processes in place to measure the performance of their sales teams daily so they can evaluate their performance. Here are some typical examples:

F&I Department
• Gross profit per retail unit (new and used)
• Finance penetration
• Extended service contract penetration
• GAP penetration
• Lease penetration
• Number of contracts pending loan approval
• Total F&I gross profit month-to-date

This is typically measured daily for each finance producer as well as the entire F&I department, so dealers can effectively identify the top performers and the underachievers and act accordingly.

New & Used Sales Departments
• Gross profit per retail unit
• Number of units sold
• Number of ups
• Number of demos
• Number of written proposals
• Closing ratio of ups to closed deals
• Number of appointments
• Number of turnovers
• Conduct a lot walk to view inventory additions/deletions
• Number of phone ups
• Wholesale profit/loss
• Internet sales leads
• Number of Internet sales leads closed
• Results from advertising campaigns
• Used vehicle reconditioning cost

Most of these measurements are calculated for each salesperson and each manager for the same reasons as listed above for the finance producers, and they are done daily. Most sales departments start their day with a brief sales meeting to review many of the items listed above. These are the typical 22 front-end processes that separate the average dealer from the top-performing dealer. How would you rate your sales department?

Okay, now let’s cross over the demarcation line to the back end of your dealership, take a look at the service and parts departments, and identify the typical processes for evaluating their performance daily.

Parts Department
• Wholesale parts sales
• Counter retail sales
• Repair order sales
• Gross profit margin
• Lost sales
• Fill rate

My experience has been that far too many dealers, GMs and parts managers measure all of the above for the department but too often fail to do the same for each parts employee. For example, do you run a daily exception report for each employee to identify unauthorized discounts? Do you review a performance report daily by employee to identify their performance on parts margin—wholesale, retail repair orders and retail counter? Do you compare their performance to the benchmarks in our industry? Do you measure dollar sales per employee? Do you measure transactions per employee? Remember, if you only measure the performance of the department, you can’t effectively distinguish the top performers from the underachievers. You can’t identify their individual strengths and weaknesses.

Service Department
• Technician’s flat rate hours produced
• Technician’s clock hours worked
• Hours per repair order by advisor
• Number of repair orders (retail, warranty and internal) by advisor
• Number of appointments scheduled
• Number of carryovers
• Shop productivity

It is difficult to find very many dealers, GMs, service directors/managers and parts managers who measure anything else. Those who do measure more invariably will produce more. Measure things like advisors’ unauthorized parts and labor discounts, policy adjustment, parts margin, labor margin, number of upsells, closing ratio of upsells, unsold hours per day, number of menu presentations, closing ratio on menus, and number of inspection presentations. For technicians, measure the number of completed inspections per day, additional repairs sold from inspections, comebacks, hours per repair order and ROs.

To sum it up, I see most dealers measuring about 22 stats per day in their sales departments and only about 13 stats per day in service and parts. If you follow my recommendations listed in the above paragraph, the number of stats measured per day in service and parts jumps to 28, and the good news is it costs you absolutely nothing! Now take a pen and check off all of the stats you measure daily in your sales departments and then check off all of the ones you measure daily in your service and parts departments. How did you score—top performer or underachiever? It’s all in the stats!

Vol. 8, Issue 8

Comment

  1. 1. Bob Silcox [ October 14, 2011 @ 09:57AM ]

    Good Morning Don;

    As usual you have het it dead on. it's the old saying you inspect what you expect. The moew you inspect the more prodcution you get. Hands on reviewing on a daily, weekly, monthly basis provides results. Thanks as always for your articles. Bob

 

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