Here’s the scene: you’re preparing for an annual review with one of your key people. You know the first thought in her mind is “How much of a raise am I going to get this year?” And you’re thinking, “I know she’s been with me for another year, but I can’t afford to keep giving raises just for anniversaries. My payroll costs keep going higher and higher each year.”
So, you lock yourself in your office and review the year in your mind. What did she do well, and where did she fall short of your expectations? Her main role with the company is dispatch, so you start there. “Well, she tends to come in late fairly often, the technicians complain about her a lot and she had that run in with the service manager. On the other hand, she does a great job following up on parts calls, and really bailed us out with our biggest account when a key system went down.” You’ve now spent an hour thinking this through and the answer isn’t any clearer than before. Does this sound familiar? Wish there was a better way?
Well there is, and you don’t have to have an MBA from Harvard to put a plan together. The solution involves measuring and managing production in all areas of the business, and tying the production to incentive plans. Production is what spells the difference between success and failure in any business, no matter how large or small. Many employees believe they are trading hours for a paycheck. “If I come into the office for eight hours a day, I am entitled to my salary.” Very often, the employee totally misses the fact that production is what makes a business operate. In fact, many truly believe that they are entitled to an annual raise even if their individual production has decreased.
The key to increasing production throughout your business is to measure it via production statistics, and then work to improve those statistics. There is a basic law in this universe—you get what you reward. If your system is designed to reward people for simply making it through another year, their attention becomes focused on time, not production. If you abandon the annual raise in favor of production-based incentives, the mindset of the employee shifts.
Let’s go back to the example of the dispatcher and review a plan. There is a series of steps that can be taken to drive the results. They outline an action plan for dispatch, but it can be easily modified for any position in the dealership.
Determine measurements of production that lead to success—You need to determine how success is measured. For starters, you could measure response time. The lower the response time, the better the dispatcher is at routing technicians and handling calls, so customers are happier. You could also measure the time technicians spend traveling. If the dispatcher is routing technicians properly, the time spent traveling decreases, leading to increased production. Another measure of production could be as simple as the volume of calls handled per day. The key here is to make sure that an increase or decrease in production in each area can be linked to the performance of the individual.
Convert production measures to statistics—Now take the actions that lead to success, and convert them into measurements that can be counted and reported. In the example above, you would take items like average response time in hours, hours or percentage of technician’s time spent traveling and number of calls handled per day. The key is to have a measurement that is easily counted. If the measurement can’t be translated to a quantifiable number, it won’t work. For example, a dispatcher is expected to create happy customers. But this would be very difficult—if not impossible—to measure since you don’t hear from the happy customers on a regular basis and would have no way to accurately count them. In this case, we measure the actions that lead to happy customers.
If you follow the steps outlined above and implement them with each member of your staff, the results will speak for themselves.
Capture and report the statistics—You must now determine how the statistics will be counted and reported. In the case of the dispatcher, this is fairly simple if you’re using an industry-based software system. The information can be taken from system-generated reports, which may show the dispatcher, for example, that for the week, the average response time was 5.3 hours, technicians spent 40% of their time traveling and there were 200 calls received.
Set production targets—Once you can generate accurate reports for the key statistics, you can determine what your baseline is. Then you need to determine what improvement can be expected. For example, if response time is currently averaging 5.3 hours, we can set a target of being less than four hours. If the techs spend 40% of their time traveling, we can target getting them to 30%. And if the total number of calls handled is currently 200, we could target this to be 230. Of course, we would expect the increase in total call volume to be based on an increase in the number of customers being serviced. If the dispatcher can handle more customers and more calls, her efficiency has increased.
Create an incentive plan—The final step is to tie incentives to the targets. This can be as simple as setting up a monthly or quarterly bonus program for the dispatcher. For example, if response time reaches five hours for the quarter, she gets a $150 bonus. If it gets to 4.5 hours, she gets $200 and if it goes below four hours, she gets $300. The same process is applied to tech travel time and total service calls handled. You set a target with tiers and tie the bonuses to the results.
Once you implement an incentive plan, the employee review process becomes much easier. In the above example, the dispatcher knows exactly what targets needed to be achieved in order to earn more money. If the targets were attained, she enjoyed the benefits of the bonuses. If they were not, you can work on a plan to help her achieve them in the coming months. Either way, you no longer need to have a vague discussion about an employee’s worth. You simply review the results and focus on improvement—the increase in compensation comes automatically.
If you follow the steps outlined above and implement them with each member of your staff, the results will speak for themselves. It’s not uncommon for clients of ours to more than double their profitability in less than a year. The best place to start is with the next employee up for a review. Make this process part of the review and planning for the coming year. Work out the production statistics and incentive plan for their department and start tracking and improving each one. If you do this, one by one with each employee, you’ll have the entire company driving production as a team within a year, and will reap the rewards for years to come.
