What person wouldn’t love to hire a manager who runs a business like an owner rather than an employee? With a few changes in the way a manager's compensation plan is structured, and with an open-to-buy inventory budget system in place, business owners can turn managers into department owners and build a more profitable company that benefits the owner and the manager.
As a manufacturer's representative in the powersports industry since 1989, who has worked territories spanning across six states, I have witnessed quite a shift in the marketplace. Years ago, areas with a population of 50,000+ were peppered with four or five separate single franchised dealers. More often than not, these dealers incorporated the family name as part of the business — John's Honda or Fred's Yamaha were the norm. Often times, John and Fred were actually the men behind the counter, and manufacturer reps could walk in and talk to and deal with the owners directly. Typically, John’s wife and Fred’s children were there helping run the store. Thus, most dealings were with individuals who had a personal and vested interest in the dealership.
Today, many single franchise “mom and pop” shops have been consolidated into larger dealerships incorporating two or three franchises — or one large dealership with several lines of products. Regional chains have taken over many areas, and now some dealers not only have four or more franchises operating under one roof, but may also be a part of a five- or ten-store chain of dealerships. As this “one-stop shop” progression continues, the owner is often no longer directly involved in the daily operation of the business, or part of the decision making process of the manager. Things that would make sense to an owner may not be very important to an hourly employee or salaried manager. Profit margins and inventory turns can become less important than employee preference of a brand and the status quo.
There was an article a few decades ago that introduced the term "Intrapreneur." Simply put, this term refers to an individual who runs a part of a larger organization as if he was an entrepreneur and had ownership interest in his department. There are a few employees that naturally adopt this attitude — owners, do what you can to keep them. The question is - how do you instill this way of thinking in your employees? My recommendation would be to structure a pay plan around the one thing that you really want — profits!
A pay plan with a modest base that is incentivized toward profits will inevitably produce more profits. When an employee can see increases in sales and margins directly impacting his own paycheck, he starts to think more like an owner — and the business, the owner and the employee wins. When a dealership operates in this manner, the manufacturer’s rep recognizes the difference: The buyer shows a genuine interest in new products, asks questions about quality and margins, and is concerned with the bottom line – profitability. Manufacturer’s reps and customers alike feel more "energy" in the department, and these stores tend to be cleaner, better merchandised and the employees are more likely to sell up to more profitable products that may take a bit more effort to sell.
In my experience, the dealerships that experience the most turnover are usually the ones where the department manager is held accountable for results that he has no control over. Here's how: Set up some parameters based on profits and inventory levels, and then let your manager do what he or she was hired for — manage his or her department! Use last year's sales and put the department on an "open to buy" system. Based on five turns a year on parts, and three turns on accessories, you can take last year's sales and arrive at a budget for the department. It then becomes the job of the manager to rotate out old inventory, make seasonal adjustments and gives him or her the freedom to try new things when he or she is under budget. The manager gets to act more like an owner and buys into his or her own decisions.
Having seen that "new and improved" pay plans frequently do not work well when the employee does not have any input or control, it is important to implement changes like the ones discussed above with the employee and make sure that the new plan is in line with last year's numbers and income. Then, show the employee the potential and watch him or her take "ownership" of the department.
Scott Hochmuth is the owner of Real Performance Marketing, an Atlanta-based company representing ten different Powersports related product lines in the Alabama, Florida, Georgia, and Tennessee areas. He comes face-to-face with over 200 dealers every 8 weeks. He has been in sales since 1982 and started in the powersports industry in 1989 as a sales representative for a helmet manufacturer.
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