Management for All – Metrics

METRICS

Having spent over two decades in the Auto Industry, I have had a great vantage point to watch it mature.  Our understanding of the prospective clients walking in, methods of marketing, social media, and inventory management have changed, for the better, more in the last decade, than the hundred years of auto sales before it.

One key element has stayed the same, how we measure who to hire, and who to keep.  Managers talk about looking for talent, but we do not have any method for looking for it, or knowing if we found it.  The answer is metrics.

Metrics are documented indicators of how well a process is followed.  This is the third post in my management series, that all center around the idea that the process most Dealers follow to sell a client a vehicle is sound, and we now need to work on ensuring it happens properly the greatest percentage of time.  The last two management keys were transparency, and accountability.

Baseball has followed a similar arc as the Auto Industry.  Starting out as managing by art and will, working off self-limited talent pools, and running a strong current keeping all the teams operating the same way.  Integration, and Moneyball revolutionized the entire landscape of baseball and created a science of success.  We are on that same doorstep.

Let’s see how management through metrics can work for Self, Team Leader Managers, and Executive Leaders.

Self:

What are your clear goals?  You walk into work each day with what plan?  This is how you can create your own personal metrics to help govern your business in the Dealership.  The first and most obvious metric is total traffic.  Nothing else happens until you have a client in front of you, so getting your fair share of who walks in to the Dealership is first order of every day.  The question is what is the best way to measure success in gaining traffic?  Simplest is a straight number of people met, but this doesn’t tell the whole story.  We need a number that not only gauges how many we meet, but gives us a context for how successful we are.  The best indicator is percentage of total Dealership traffic.  Very easy to calculate, just divide the number of people you have met, by the total traffic that has visited the store.  Multiply by 100, and you will have your traffic percentage.  Now for some context, divide 1 by the number of Sales Consultants in the store and multiple by 100.  Ideally these percentages should be close in number.

Here is an example:

I meet 50 people in a month, and the store has 600 total traffic –> 50/600 = .08 x 100 = 8%

The total number of Sales Consultants is 12 —> 1/12 = .08 x 100 = 8%

In this example the percentages match so I am getting an average share of traffic.

Team Leader Managers:

As a Team Leader you have a 2-sided need for metrics, hiring & improving.  Does every new Sales Consultant know what you want from them?  How do you measure a successful Sales Consultant?  What is the bar that you staff has to meet?

Let’s start at the beginning, the hiring.  Most of the poor performing Sales Consultants on your floor were a product of a bad hiring.  You meet them for 15 minutes while you are working a deal, ask a few questions, and then rely on your gut.  What if there was an actual scientific way to ask questions that mattered for your business?

Start your interview with a job description, written around your key metrics for success.  The metric above for Self (percentage of overall traffic) is a great indicator of motivation and aggressiveness.  It should be a direct part of a job description and might read like, “Each Sales Consultant is required to log a minimum of 8% of the total traffic entered into our CRM (customer relations management tool).  Any Consultant below this percentage must meet with a Manager to investigate improving, such as additional hours, seating change, or 30 days direct supervision.  60 days below standard requires re-interviewing for your position with Executive Management.  This is also a very easy metric to quantify coming from other industries.  If you are interviewing a waiter ask, “What is the average number of meals you serve per shift, and how many plates does your restaurant serve per shift?”  Same for an insurance agent, number of clients spoken to per month, against the number in your office.

This is an example of how we can use one metric to not only monitor and enforce policy and performance, but find new help that fits the mold, and comes into our organization with the right skills.  In the above case motivation, and aggressiveness.  Other key metrics can be the percentage of contracts in transit & DMV holds against the number of Delivered Units, or percentage of logged traffic that is given a full appraisal of their trade-in.

Simply appraising talent based on a number of units sold can be a large mistake.  Who really finishes sales, isn’t it really the Management?  Wouldn’t every Dealer sign up for a Sales Consultant that is motivated to speak to traffic, organized with paperwork, presents product well, and is willing to ask clients to commit?  These are the things we need to measure.

Executive Management:

Executive Managers, and Dealers use many metrics right now to measure, advertising, inventory, and sales though almost none measure the most valuable asset of all time.  What is the most expensive asset you have with the greatest ROI, your people!  Aren’t we buying their time?  Aren’t we really looking for a return on the hours we give?  Easy task with an hourly or flat rate employee, x hours produced y profit or results.  How about commission staff?

The metric to use here is value time.  We need to track the productive hours, and remove any and all wasted time.  We are paying heavily for the wasted time.  Over population of the Sales floor leads to lack of motivation, intimidation of clients, turn-over, and lost sales.  We need our people to work less hours to gain more profit!  What happens when a Sales Consultant comes in and sees 9 Consultants on the floor on an average day when you sell 4 cars?  3 are in on their day off to get traffic.  A large section of the group simply packs it in before the first prospective client ever walks through the door.  How about clients coming in, what does it say to them when 8 or 9 Sales Consultants are sitting around, or are grouped at the door?  This place doesn’t sell cars!  Worse yet the group at the door intimidates an incoming prospect and they leave or don’t even park.

We still need to have enough staff to handle the busy times, we just need to be better at having them here when we need them.  There are a couple of metrics to use, first is true ad source documentation including grassroots.  In order to know the staffing hours we need we have to know the true walk in traffic to be helped.  Every Sales Consultant needs to be responsible for grassroots advertising in service, family, friends, previous clients, and other outside contacts.  Separate these out so we can find the total amount of “free” floor time needed.

Free floor time is the number of hours the staff needs to be scheduled to handle true walk-ins.  Use a base of 2 hours per walk in, take the total, divide it by 4 and this will give you the floor coverage needed to staff for a week.  Sold is a poor number to base Sales Staff time around, the real number to watch is traffic.  So if your store has 500 walk in clients, that is 125 per week, and 250 hours to cover.

So if you have 10 Consultants, they each must take 25 hours of floor coverage time.  On top of that each must take additional 15 hours of schedule to handle appointments, follow-up, and required grassroots marketing.  As Consultants grow towards appointment business, they get moved off the floor coverage schedule and you hire to add, instead of hiring to divide.  Every hour in your business is producing money.

The next Management post is Protecting against waste.

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