Inspect What You Expect

“Inspect what you expect,” goes the saying. But how do we actually measure performance?

First, we must determine the performance measurements we need to monitor monthly.

Obviously, we want to track our new- and used- vehicle sales personnel performance.

But what other personnel do we measure? And how do we go about measuring them?

First, who are the personnel we need to track monthly? Let's begin with the key measurement, which is gross per employee. To measure that, take the month's total dealership gross and divide it by the actual employee count at month end, excluding the dealer.

This same exercise then is performed for individual departments. Here's how:

Department employee counts may include partial workers due to split responsibilities and allocations. The key here is to track these numbers monthly with an eye towards improvements.

If a department's performance isn't tracking at the desired level, there can only be two reasons: lack of gross or too many persons.

Once you've determined the month's departmental gross per employee, drill down.

Identify the productive personnel (those who sell and produce gross) and divide the total departmental gross by the productive personnel count to determine a dollar average per productive person.

Once this is done, enter the productive person's actual gross alongside the average gross per productive employee.

Using charts is an effective method of sending a message to your staff that this measurement is important. None of us want to be below average compared to our peers. Put the monthly performance results into an Excel spreadsheet and create charts identifying each departmental productive employee. Post the charts in a visible area in the department, for all to see.

This isn't meant to embarrass anyone, but instead it is to send a message that you are serious. It shows performance is being measured and those who fail to meet your standard are being identified (singled out or recognized, without a single word being uttered).

This action then allows your department managers the opportunity to meet individually with under-performers to identify what is keeping them down and to establish a plan for improvement. Where performance is measured, performance improves.

So, what areas do we measure, other than dealership gross per employee and departmental gross per employee?

Let's start with the variable operation. Obviously, we want to monitor retail unit sales per salesperson, retail gross (per new- and used-vehicle retailed), finance and insurance penetration per salesperson and any other areas you want to focus on.

In the F&I department, we want to measure and track the individual F&I person's net income per new and used retail and their product penetrations.

In the fixed operations, track service advisor performance as it relates to labor and parts sales per repair order, as well as advisors' effective rate and any other measurement you feel is necessary to improve departmental performance.

You want to chart technician efficiency, labor gross and hours. Some dealers also measure serviced-vehicle come backs by technician.

In the body shop, in addition to technician measures, you may want to measure your estimator's closing rate, such as actual work received as a percentage of individual estimates written.

In the parts department, sales-personnel measurements include sales and gross per individual counter or wholesale sales person.

If we truly want to maximize our gross profit, we need to drill down to ensure that all persons responsible for producing gross are doing just that.

By devoting a small amount of effort producing these monthly reports, you will begin to realize in dollars the benefits of measuring your expectations.

Good selling!

Tony Noland is the president and CEO of NCM Associates Inc. He is at [email protected].