Full transparency incites competition, accountability
Sam Dantzler, Columnist
July 10, 2013
Filed under Columns
For years 20-Club members have debated what should and should not be in a 20-Club composite. At the point where you include everything in the composite, it has become nothing more than a P&L. A composite is not a P&L. A composite is a manager’s report. The beauty of keeping uncontrollables such as rent, insurance, facility expenses, etc., out of the departmental data is that managers begin to own the results. They realize that everything in their department’s composite data is theirs … they can affect a change on all of it. Translation: seeing the data = ownership.
Don’t stop with managers. Give all of your staff the information. Some of you are knotted up right now at the thought of sharing your financials with your staff, but keep reading. You see, we (humans) are emotionally vested in the score of the game. Think about your favorite sporting event, and about how dull the game would be if nobody kept score. When you make work a game, people will want to win. To win, you must keep (and share) the score.
The next step in the process involves education. Just because I can see a number doesn’t mean that I know if it’s good or bad. Is 1:0.75 ratio of techs to non-techs good or bad? Why? What are the benefits of being at 1:1? What if my advertising is 4 percent of total store sales? Is that effective, or simply wasteful? Education must be a part of your staff’s growth. Doing it because “You said so” vs. doing it because “I understand why it’s beneficial” will yield radically different results. Thirty percent of the employee’s job should be getting an education on the numbers, and how/what makes those numbers move. Did I mention you should show them the books?
From there, benchmarks must be set for staff to aspire to attain. Others must be set at averages or “norms,” as nobody gets excited to be “average.” Payroll percentages, staffing guidelines, employee ratios, gross profit benchmarks, F&I per-unit comparisons, transactions:greet ratios, finance penetration and tire penetration percentages all tell different stories about what’s going on with the store. Setting benchmarks allows employees to know whether they are doing a good job or not.
Where can your employee thump his chest, and where does he need massive attention and coaching? His F&I PUS may be great, but his product penetration may be lousy. So he’s making all the money on reserve, which would have me look closely at his chargebacks. It doesn’t matter that you know where to look. It matters that he knows where to look, how to assess the problem and how to correct it.
Keeping score allows you to ask the question, “How are you going to pay for that raise?” If the employee is aware of a payroll percentage guideline that a department must follow, then it is up to the employee to come up with the solution of how a raise (for herself, her staff, etc.) is going to fall inside of that percentage. She comes up with the plan. She is responsible for the outcome. Not you. Let her earn her own pay raise through justifying it with the data.
Take away the emotion
Having open-book management allows the emotion to be stripped away from conversations, which becomes hugely beneficial. The conversations between managers and staff then become tactical and strategic, as opposed to emotional and baby-sitting. The numbers don’t lie, no matter how much you may like the employee. Transparency allows the managers to actually manage the employee and the systems through data, not what their gut tells them.
I’m amazed at how resistant owners are to opening the books to employees. At the end of last year, the average non-Harley dealer made around 4 percent Operating Gross Profit (before taxes). So a store generating $10 million in sales is netting around $400,000, yet still has Uncle Sam to pay. The staff thinks you’re making millions already, so what have you got to lose by showing the actual data? Operating with full transparency is a win-win between employer and employee. Competition breeds emotion and excitement, and you should always celebrate the wins. Management gets to actually manage through empirical data, which allows them to make decisions quickly and correctly. Numbers help everyone play the same game, and help the employee take ownership of his job or department. Full transparency educates all employees, which also has another side benefit.
When you raise the bottom, the top rises as well.
• Step One: Keep Score
• Step Two: Open your books and educate your staff
• Step Three: Incite competition and hold staff accountable
Sam Dantzler is the founder of Sam’s Powersports Garage, a membership website dedicated to best practices and all-staff training. He can be reached at email@example.com.