“The Decision”
“I’ll be taking my talents to South Beach”….oh, sorry, wrong decision [Clevelander joke]
The way many dealerships make the decision when to bring on more salespeople and how many or replace under-performing salespeople has always baffled me. I have seen countless “formulas, statistical data, seasonal hiring decisions, you name it. We have had managers tell us they need 4 salespeople, we ask them why 4?” That’s how many desk we have open” Really, hiring due to number of desks? New manager starts at store and brings his “team” with him. This one is very exact “Salesperson can properly “wait on” 2.25 clients per day x 6 day work week =13.5 clients a week X 4.2 weeks per month = 56.7 clients per month, so we are “logging” 425 clients a month which would mean we need 7.49 salespeople on our floor??? “It’s the first of the year, in with the new, out with the old” I know none of you make your decisions these ways, but you know what I’m saying.
Law of Diminishing Return
The reasoning behind The Law of Diminishing Returns from a Dealers point-of-view in terms of hiring employees can be simplified into three stages:
- In the first stage, the addition of more salespeople allows for specialization of job responsibilities and increased production efficiency. The result is a larger output return for each additional unit of input.
- The second stage is where inputs equal outputs. Each new salesperson added will continue to increase production, but only at the same rate as the increased input of labor.
- The third stage is when additional salespeople will start to decrease production efficiency because the work environment is fixed in the short-run. This results in returns that are less than the labor input.
- Imagine this situation. You have hired a teenager to tend to your garden. He plants 4 saplings in an area of 10 square feet in 4 hours. The next day, he brings another friend along and you decide to hire him as well. The time and the area don’t increase, but the number of saplings planted increases to 8. Another boy comes along and is hired by you. Again the area and the time limit is the same. But the number of boys is now 3. And the number of total saplings planted is now 9. If you hire another boy and maintain the same condition, you will notice that the number of saplings planted may increase overall, but the number of saplings planted by each boy will reduce, until eventually it will be 0. The above explained situation is a classic law of diminishing returns example.
My question is, do we have any idea where that third stage is? We are in the car business, our outcome should be to have as many people as possible buy our products and services at the highest possible profit margins we can with 100% customer satisfaction. We can’t do that unless we have pushed the envelope with a quantity of quality, properly recruited, screened, interviewed and trained salespeople.
“I don’t want to flood my floor”
That’s admiral and I applaud your moral judgment in trying to make sure your salespeople all make a good living, but how many times have you invested in having a special sale or event, or your product is super hot and huge new incentives came out or you invested millions in your facility and you look around and several of your salespeople decided to come in late, stay home or move on to the next “Hot Store?”
The law of diminishing return is a bit different in our business. How many hours are your salespeople currently scheduled to be at the dealership? Wouldn’t an additional sift or shifts or teams allow them to work less hours, be more affective and in turn more productive and actually have lives outside of work as well? Couldn’t that also help the talented person at your store that has “Manageritis” and if you don’t move him or her up, make them a team captain, they are going to leave you?
How much real time do your salespeople have to actually truly prospect, develop their own client base, properly handle all the internet leads, take vehicles to people’s homes or business’s ,be involved in the community to create more business when they are at the dealership bell to bell?
Simple question did you or did you not sell more cars when you had more salespeople? Why are some dealers that are in the middle of nowhere selling 5 to 10 times the number of cars dealers in major metro areas selling? Marketing, proper use of the internet for sure, but remember in this point in time in our industry our property goes well beyond the amount of acreage you own, take advantage of that opportunity and dominate your competition .To do that, you need better recruited and trained people. Now of course at some point to many really is to many and moral goes down and productivity would suffer, but I’ll bet very few if any have ever come close to that point that are reading this.
Judy B. Margolis, writes:
“Employees who grow too comfortable and complacent lose their edge. The more they know, or think they know about how their particular slice of the business world works, the less likely they are to challenge their old tried-and-true methodologies and to innovate. The same holds true for companies that fail to embrace change and, instead, have it foisted upon them, often when it is too late.”
Something has to give. Change is mandatory in our industry, reinvention a must! Every day I see what people are posting about dealerships all over the web. Let’s face it, as a whole people hate us. Strong words I know but just look at how our customers are treated. It’s not that they are being treated bad in most cases, but indifferently. It’s as if we’re saying, thanks for the money, I could care less if you come back.
Let me share with you my experience, as a customer, intent to purchase a new 2012 vehicle. My name is Ernie Kasprowicz, General Manager and Partner of AutoMax Recruiting and Training, LLC. We are a company focused on staffing auto dealers with quality people within all departments and provide enhanced job skills training programs. We have conducted over 11,000 salesperson recruiting programs over the course of 13 years. My background is from retail auto, starting as a green pea salesperson through F&I, sales, general sales and general management responsibility. I have now worked for AutoMax for the better part of 13 years. I have seen a lot. What I have experienced recently in my pursuit to purchase a new vehicle for my personal use is both shocking and disturbing to me.
I was at a Dealership the other day that had laid-off the receptionist. She was also the person that managed The Traffic Log. So I asked the Sales Manager, “who is taking care of the traffic log ? ”… “I am”, he said. …. “Well, when you step out, who manages the log?” … “The salesmen”, was his answer.
No kidding. Seriously, so what can be done? To be sure, there are many strategies to employ, different schools of thought and much to present at a later date. For now, let’s explore one possible solution. To gain a different perspective, it may be helpful to start at the end, at the moment a quality salesperson tenders their resignation. How did it get to this point?
When asked this question, I default to my American Honda Kaizen Continuous Improvement training to give the answer. It is not a simple answer. It is an answer based on a philosophy and new way of thinking. When I became a Dealer, my GSM once said to me, “you don’t act or think like most Dealers.” I guess he is correct, because as a former Kaizen Trainer … “I think it, therefore I am one with the philosophy”. 
Why does all this work at Suzuki of Wichita ? They started with hiring personnel with no previous car sales experience and no bad habits. In addition, the Dealer and Managers are hands-on, with continuous training provided a few minutes every day.
This is a very interesting question and one that I will answer with scientific fact, but first let’s look at the two different sides of this debate. When you look outside of sales at the likes of Lance Armstrong, Muhammad Ali, Jerry Rice and even Tiger Woods (pre scandal) you see performances that are so far beyond their competition you can’t help but think they were born with the right DNA. This is how most corporation hire, they hire for talent. They look for the best and the brightest using a predetermined formula from past hires. Afterwards, little or no training is offered.
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