For many Parts Managers, including yours truly, March has always meant the end of the first quarter of any given year. The first parts inventory activity cycle of the year and the first opportunity to evaluate what I call the three most important management categories for a parts manager.
These three categories I am eluding to include personnel performance, sales and gross trends in the first quarter as well as the first inventory activity cycle of the year. All of which provide the Parts Manager an overall "performance rating" of the parts department in general compared to expected dealer goals and projections.
Over the next three months, starting with this issue of "Smart Parts", we will provide our readers a five step "blue print" in managing these three categories which include; Personnel Management, Financial Management and Inventory Management. In my opinion, managing each category plays a critical role throughout the year, but no more critical than in the first quarter of each year, our first indicator to what the rest of the year will bring.
The first of our three part series is titled; Inventory Management; "Five Steps To Developing An All Star Team". It takes an "All Star Team" with a Parts Manager with great leadership skills along with a "road map" to success that the overall team can achieve and believe in.
So, Let's Get Started With Part One and the "Five Steps To Developing An All Star Team!"
The first step in building our "All Star" Team is to determine the right staffing metrics, or in other words, the right number of people to be employed in the parts department. In addition to "how many", we need to know the positioning of these employees, or "staff members".
How many back counter people?....front counter?...shipping and receiving?...inventory clerks?...do I need an assistant? These are all questions that can answered very easily.
How many back counter people?....front counter?...shipping and receiving?...inventory clerks?...do I need an assistant? These are all questions that can answered very easily.
Determining the overall number of parts employees and their positioning requires research into industry guidelines and a little math. For example, NADA, (National Automobile Dealers Association) Guidelines indicate that the average "sales per parts employee" should be approximately $36,000 per employee and "gross per parts employee" at approximately $12,000 per employee. Some European franchises may be slightly higher in each category.
That pretty much sums up the total number of employees, buy what about the position of the parts employees? The answer to that question is also an industry guideline that many Parts Managers either don't know about, or never thought about it in the first place.
Much like in the service department, the guideline of having a 2:1 sales to support ratio, (productive vs. non-productive) needs to come into play. Based on the NADA statistics above, we have to take into consideration that not all parts employees are responsible for their portion of the "sales & gross per parts employee" category. Parts shipper/receivers, delivery drivers, inventory clerks and even some Parts Managers are not directly involved in the selling of parts.
This means that the "front and back" counter staff have to absorb these average sales & gross per employee numbers themselves at a 2:1 sales to support ratio. So, if we do the math, the overall number of parts employees is dictated by total sales and gross per employee number and the total number of "sales staff" versus "support staff" is determined by this 2:1 sales to support category.
An example of this, using NADA's "sales per parts employee" as a guideline, if I were running a parts department that averaged approximately $145,000 in monthly parts sales, then I would need four total staff members, with two of my four supporting my front and back counter sales positions, considering $36,000 per parts employee and a 2:1 sales to support ratio. Each would have to absorb approximately $72,000 in sales to cover the other two "non-productive" parts employees.
The other two "support" positions in the above example would usually be filled by the Parts Manager and a shipper/receiver that may also handle deliveries and stocking shelves. Often times, multi-tasking is utilized with the Parts Manager filling in at the counter, or supporting other positions.
One of the last two indicators in Step One that the Parts Manager has to consider in building this "All Star" Team is to know the Parts Departments role, or portion of total dealer expense, or "Absorption", which may range from 20% - 30%, depending the manufacturer and if the dealer has a collision center or not. The Parts Manager also has to maintain a total personnel "expense to gross" percentage, within industry and dealer guidelines.
Lastly, the Parts Manager has to provide a "true" Level Of Service over 90% to the dealer customer base while insuring annual Gross Turns eight times a year and annual True Turns five times a year, no matter what the overall inventory amounts are.
Step Two: Recruiting The Right People:
After determining the right number of parts employees and the positions required, now the Parts Manager has to have a recruiting process that will not set the dealer or the potential employee up for failure. In my opinion, dealers lose many employees because we either hired the wrong person in the first place, or the dealership didn't provide the proper training and/or career path for the employee.
It is not uncommon for any employer to be looking for experience as part of the recruiting process, but that can also sometimes lead to failure. Often times, training new employees without experience can prove more beneficial than hiring experienced employees as they have no bad habits. The training provided would be the only way they know as opposed to hiring someone that has, let's say twenty years experience, which could actually be defined as one year, twenty times.
For this reason, I am a big fan of utilizing a personality profile index when considering new hires. As mentioned earlier, often times we set up our new employees for failure when we hire them for a position that doesn't suit their personality and behavior patterns. Even though utilizing a personality profile index cannot be the ultimate reason for hire, it's still a great tool in hiring employees for positions they are more likely to succeed in.
Another key element, in my opinion to getting the right people is to have compensation plans with comprehensive incentives to encourage employee growth and development. It's hard to evaluate personnel performance without incentives as salaries and hourly wages only reveal the employee 's timeliness, not their performance. It's just human nature that people work their pay plans, so why not have a pay plan that rewards both parties.
Lastly, where to find, or look for the right parts employee has always had it's traditional path. Placing help wanted ads, posting a sign in front of the dealership, checking local parts stores and "word of mouth" have been some of the primary resources used to find applicants and candidates.
With social media and the internet, our resource base has grown tremendously over recent years, giving the Parts Manager a greater source for hiring the right people. It also can't go understated that each potential hire needs to follow dealer background tests along with "cross interviewing" between dealer managers to get a different views. Sometimes the best potential hires slip between our fingers because we tend to want to hire an image of ourselves instead of what the position requires.
Step Three: Orientation - Employee Success Starts Here!
I am a true believer that the success of all new hires is determined by how we greet them into our dealership, our "culture" and how we provide a career path for them. Unfortunately, many dealers do not have a "Dealer Orientation Process" to begin with and often times, great employee opportunities are wasted because we hire them and throw them into the position, expecting results immediately.
The first part of the Orientation Process should be between the Parts Manager and the employee to review the employee's job description, pay plan as well as what expectations both the Parts Manager and the employee intend to accomplish in this "learning period". This will give the Parts Manager ample time to observe and evaluate how the new employee interacts with other employees.
The first part of the Orientation Process should be between the Parts Manager and the employee to review the employee's job description, pay plan as well as what expectations both the Parts Manager and the employee intend to accomplish in this "learning period". This will give the Parts Manager ample time to observe and evaluate how the new employee interacts with other employees.
In my opinion, a new parts employee, or any employee for that matter needs at least 2 - 4 weeks of dealer orientation before actively taking on any position. The new employee has to learn company policy & procedures, inter-departmental training with time spent in other departments, manufacturer certification & training, employee "shadowing", etc.
In addition, all new employees should receive the dealers' "Employee Handbook" along with a complete explanation of benefits with all their options including health care, 401K's or other retirement programs, disability insurance, vacations, employee functions, group organizations, etc. These are just a few of the orientation priorities I believe need to be addressed before entering any position 100%.
Step Four: Employee Goals & Guidelines
Once the employee has completed the Orientation Process, it's time to get started. An initial meeting between the Parts Manager and the new employee needs to take place to review the Parts Manager's guidelines and expectations as well as the new employee's individual goals. It's important "right out of the gate" to get the employee's individual expectations of goal achievement.
I didn't invent the term, but I learned a long time ago that every employee needs to have individual goals, and these goals had to be S.M.A.R.T. Simply put, the goal had to be Specific, Measurable, Attainable, Reasonable and Time Focused. Lastly, the goals need to be written down and signed by the employee. It's been proven over and over again that individuals that have clear, "written goals" succeed far more often than "unwritten goals".
As mentioned earlier, it is critical to provide a career path for all employees, creating an expectation that most of these goals are based on. In my opinion, it's the responsibility of the Parts Manager, and all managers for that matter, to always be developing their employees. Providing a career path that includes on-going training, semi annual and annual reviews, pay plan and incentive potential, position advancement potential, timely critique with positive reinforcement can only lead to "predictable results" for both the manager and the employee.
Perhaps most importantly, achieving personal goals while following company guidelines cannot happen without accountability, both personal and by the Parts Manager. Developing personal accountability in our employees can be considered a skill by some, but I've always found that if I give the employee more responsibility, they will become more accountable to themselves.
In my opinion, personnel development is one of our biggest duties and responsibilities as managers. I've always felt that it was my job to "train myself out of the job", not only for my own career advancement, but also for those following in my footsteps. We all had to start somewhere and we have all had someone that took us under their wing.
Step Five: "Promoting From Within"
One of the best compliments that can be made to any manager is when they are able to "promote from within". It is the best testimony of all four steps prior to this one, and a sign of success that will continue in the on-going, overall success of any department. Promoting from within provides an opportunity for department growth, as well as an opportunity to delegate more responsibility. Lastly, an opportunity for employees to expand on new goals and expectations.
Employee goal accomplishment always leads to new goals and new heights of achievement for the whole department. Individual goals also lead to team goals and when the Parts Manager promotes from within, in most cases, the trust within the team also rises to a new level.
Promoting from within also projects a sense of security from others within the department as opposed to employees coming and going. This sense of security can also be felt by customers, especially repeat customers who like to see the same faces when they come into the dealership.
Promoting from within also saves the dealer money as the cost to hire and train employees goes beyond just the money spent as future revenue can be affected from lower customer retention numbers. Training costs alone could mean the difference of being profitable or not in any given month, depending on the size of the department and the overall cost of training, both internal and from the manufacturer.
Promoting from within encourages employees to engage more as a group and to provide positive input with individual ideas and recommendations. If the first four steps are followed correctly, more opportunities to promote from within materialize. Future advancement with the opportunity for financial growth is one of the most important items that dedicated employees are looking for today.
Lastly, there is a right way and a wrong way to promote from within. If we promote from within and follow the prior four steps to "Developing An All Star" Team, success is limitless and perpetual. If we promote from within just on the basis of tenure, or perhaps because "they are the next in line", without following the first four steps on building our "All Star Team", we would just be illustrating the definition of insanity, doing the same thing over and over and expecting different results.
I didn't invent the term, but I learned a long time ago that every employee needs to have individual goals, and these goals had to be S.M.A.R.T. Simply put, the goal had to be Specific, Measurable, Attainable, Reasonable and Time Focused. Lastly, the goals need to be written down and signed by the employee. It's been proven over and over again that individuals that have clear, "written goals" succeed far more often than "unwritten goals".
As mentioned earlier, it is critical to provide a career path for all employees, creating an expectation that most of these goals are based on. In my opinion, it's the responsibility of the Parts Manager, and all managers for that matter, to always be developing their employees. Providing a career path that includes on-going training, semi annual and annual reviews, pay plan and incentive potential, position advancement potential, timely critique with positive reinforcement can only lead to "predictable results" for both the manager and the employee.
Perhaps most importantly, achieving personal goals while following company guidelines cannot happen without accountability, both personal and by the Parts Manager. Developing personal accountability in our employees can be considered a skill by some, but I've always found that if I give the employee more responsibility, they will become more accountable to themselves.
In my opinion, personnel development is one of our biggest duties and responsibilities as managers. I've always felt that it was my job to "train myself out of the job", not only for my own career advancement, but also for those following in my footsteps. We all had to start somewhere and we have all had someone that took us under their wing.
Step Five: "Promoting From Within"
One of the best compliments that can be made to any manager is when they are able to "promote from within". It is the best testimony of all four steps prior to this one, and a sign of success that will continue in the on-going, overall success of any department. Promoting from within provides an opportunity for department growth, as well as an opportunity to delegate more responsibility. Lastly, an opportunity for employees to expand on new goals and expectations.
Employee goal accomplishment always leads to new goals and new heights of achievement for the whole department. Individual goals also lead to team goals and when the Parts Manager promotes from within, in most cases, the trust within the team also rises to a new level.
Promoting from within also projects a sense of security from others within the department as opposed to employees coming and going. This sense of security can also be felt by customers, especially repeat customers who like to see the same faces when they come into the dealership.
Promoting from within also saves the dealer money as the cost to hire and train employees goes beyond just the money spent as future revenue can be affected from lower customer retention numbers. Training costs alone could mean the difference of being profitable or not in any given month, depending on the size of the department and the overall cost of training, both internal and from the manufacturer.
Promoting from within encourages employees to engage more as a group and to provide positive input with individual ideas and recommendations. If the first four steps are followed correctly, more opportunities to promote from within materialize. Future advancement with the opportunity for financial growth is one of the most important items that dedicated employees are looking for today.
Lastly, there is a right way and a wrong way to promote from within. If we promote from within and follow the prior four steps to "Developing An All Star" Team, success is limitless and perpetual. If we promote from within just on the basis of tenure, or perhaps because "they are the next in line", without following the first four steps on building our "All Star Team", we would just be illustrating the definition of insanity, doing the same thing over and over and expecting different results.
Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world! Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com
