Right size me

We live in an increasingly health-conscious society today in terms of our bodies and our businesses. Fit and trim is the universal ideal for both.

The economic downturn has made meeting this ideal increasingly dire for many businesses, and this urgency is perhaps even more pronounced in the marine industry. Boat dealerships nationwide are scrambling to stay afloat, and in order to succeed, they’re facing a harsh reality: It’s time to put their businesses on a diet. In tough times, there’s no room (or money) for extras, so dealerships hoping to weather this economic storm are busting out their scalpels and trimming their expenses down to the must-haves. The trick is in how you define the essentials.
The three dealerships profiled in this article know this process well. Some adopted “lean” strategies years ago and are now reaping the benefits of those efficiencies. Others just recently began slimming down, but are already noticing the difference. Either way, all three have come to understand the importance of cutting costs without sacrificing the things they value most: customer service, employee morale and market share.

The process can, at times, be difficult. But those that keep their eye on the prize will not only survive, but also bounce back stronger than ever when the economy rebounds. By the time that day dawns, they’ll have learned the discipline and commitment required to keep up the good work. Less can definitely be more.

Creating incentives
Running a tight ship has its advantages in good times and bad. Just ask Phil Miklo and Todd Krieger, principals and business partners at Oak Hill Marina in Okoboji, Iowa. Miklo focuses on the service side of the business, while Krieger primarily handles sales at the 16-year-old dealership.

Both agree there isn’t necessarily a single factor that helps keep things running lean and smooth at Oak Hill. But one area the dealership does seem to have down cold is its philosophy on employees: Incentivizing your people can help increase efficiencies throughout your business, keep costs and wasted time to a minimum, and make employees feel valued and encouraged to do their jobs.
“Everyone in the dealership is in some type of incentivized pay program,” explains Krieger. “If we don’t make money, they don’t make money. We’re all salespeople.”

Service technicians, sales associates, just about everyone except the dealership’s accountant has financial motivation to perform well. And the success of one is that of the entire group. “When employees take ownership in the company, they’re no longer just employees,” says Miklo.

He and Krieger have regular staff meetings with the entire dealership, which employs 12 people, the most recent of which was hired more than two years ago. Oak Hill has little turnover and holds onto its good people, its principals say. “We let our employees know the score; they’ve definitely got some skin in the game,” Miklo points out. “A lot of principals don’t want to share certain information with their employees. We’re not that big [of a dealership], and there’s not one person here that doesn’t feel they’re part of this company.”

When employees are incentivized to do a good job, they’re no longer simply watching the clock. Krieger likens clock-punching to “having an IV in your arm. Employees punch in, take coffee and cigarette breaks, and what happens? They realize they’re going to get paid for not working,” he explains. “They’re costing you money the whole time.”
As an added bonus, Oak Hill’s incentive program helps “weed out the slugs in the bunch,” says Miklo. “They won’t last long around here.”

One stat Oak Hill monitors closely is its available operating income per employee, the figure that indicates how much money you’re making from every individual you employ. People are the No. 1 cost at Oak Hill, and both Miklo and Krieger agree they don’t want to ask employees to work for less money, even in trying economic times. The dealership imposes a cap on hourly wages, and anything over and above that has to be earned through incentives. Both principals work one-on-one with dealership employees to help them get to the salary level they desire.

Take, for example, Oak Hill’s parts manager. If he can maintain a certain margin, then he’s eligible to earn a percentage of those parts sales. “It forces him to research more when he makes the parts buy,” says Miklo. “Instead of just getting on the phone with a distributor, he has to think about where he can get the best deal on, say, a starter.”

The end result, Miklo explains, is that his parts manager becomes a better-educated, savvy buyer while earning the extra cash he desires for doing a good job.

Similar bonuses are given to the dealership technicians, service writer and yard manager. If they reach a certain percentage each month, they earn an extra percentage of cash at the end of the year.

Last year, “Everyone got $500 or $600 checks, which is not a huge deal, but it’s separate and on top of their salaries,” Miklo says. “No one wants to be the low man on the totem pole. People want to pull their own weight.”

In 2008, Miklo worked directly with Oak Hill’s service writer/manager and built the service budget together. The two set goals for each month, and if the service manager hit those goals, he had an opportunity to earn up to an extra $10,000 that year. Krieger follows a similar formula with the Oak Hill sales staff. “We enjoy seeing them succeed, buy homes, raise families,” Miklo says.

Most of their success running the dealership, Miklo says, is attributable to involvement in Spader 20 Groups. Many of the business philosophies Miklo and Krieger employ related to managing and retaining employees, as well as most other dealership cost cutting and saving measures, are the result of years spent in a 20 Group and learning from other dealerships across the country.

“Without processes and procedures, you can’t have an incentive pay program,” Miklo says. “The 20 Group gave us the necessary discipline.”

Turning to your employees
Like many other dealers, Rob Soucy at Port Harbor Marine saw the economic tide turning and knew he had to respond swiftly. He turned to his management staff for help.

The 40-plus-year-old dealership, headquartered in South Portland, Maine, is run by Soucy and his two brothers, Marc and Mike, and is the largest dealership in the state, with five different locations.

In January, Soucy gathered all Port Harbor directors and store managers together for its annual strategic planning meeting. This brainstorming session was intended to review 2008 results and develop a plan moving forward in 2009. Soucy and his team recognized the immediate need to trim expenses, and he asked management to compile a list of costs the dealership could quickly eliminate. The one caveat: Proposed cuts could not negatively impact either the employee or customer experience at the dealership.
“I don’t want to compromise our crew or customer experience,” Soucy explains. “Those are the two most important things. We don’t want to cut to the point that it hurts our Port Harbor Marine brand.”
At the end of the meeting, members of Soucy’s team wrote three to five ideas on Post-it notes and passed them around the table for review. The exercise yielded some interesting suggestions, several of which Soucy decided to implement. The dealership has already realized significant cost savings as a direct result, he says.

One cost-saving suggestion: Eliminate the Styrofoam cups Port Harbor offered in its showroom and service department for coffee, tea and hot chocolate. The original idea was to discard this unlimited, free beverage service altogether, but Soucy refused. That, he says, would clearly dampen the employee and customer experience. An alternate suggestion was proposed to keep the beverages but eliminate the cups, encouraging employees to be more environmentally and fiscally responsible by supplying their own. The end result: A cleaner, tidier dealership with extra money in its pockets.

“If those cups cost us $50 a month, that’s $600 we’re saving each year,” Soucy points out.
Another cash saving suggestion put forth: Alter the dealership’s practice on the thank-you gifts it sends customers. Each time Port Harbor closes a deal on a boat, it sends a Harry & David fruit basket to the customer. Traditionally, the more expensive the boat, the bigger, more elaborate (and expensive) the fruit basket. If, for example, a customer spent up to $25,000 on a boat, he or she would receive a $50 fruit basket. Spend between $25,000 and $75,000, and the basket doubled to $100, and so on.

An employee recommended doing away with the baskets, but again Soucy refused. It’s part of the customer experience, he says, and therefore off the table. But the employee was onto something, and the idea was refined to a more workable approach. The boat-purchase-amount to gift-basket-cost ratio was adjusted, and the result was significant.

It may not sound like much, Soucy says, but the little things definitely make a big difference. “We were spending $25,000 to $30,000 a year on fruit,” he says. “It added up.”

At the end of the meeting, Soucy left the table with a list of more than 30 well-thought out, immediately implementable ideas capable of saving or generating tens of thousands of dollars in “found” money.

The value of including this cost-cutting exercise in the dealership’s strategic planning meeting was clear, says Soucy: It put Port Harbor in a better position to take advantage of eventual economic recovery once it arrives. “When this thing turns, we’ll have some systems in place that we should’ve had before,” Soucy admits.

He did, however, issue a note of caution when it comes to cost cutting. Don’t lose sight of the importance of making money – not just trying to save it.

“Dealers often focus too heavily on cost cutting measures and forget how to generate cash,” Soucy explains. “It’s almost a self-fulfilling prophecy; they actually cut themselves out of business.”

Upgrading your service
Rob Youker is somewhat of an anomaly in this economic climate. While many dealers are struggling to make ends meet, Youker’s dealership, The Sportsman in San Benito, Texas, had a record-breaking year in 2008.
While his sales didn’t suffer as a result of the recent downturn, Youker says it did open his eyes to the real possibility of trouble ahead. “It made me very aware that at any time, the other shoe could drop off,” he explains. “It made us focused.”

Youker started thinking about what would happen if his dealership’s sales suddenly dropped in 2009. If sales for the year were halved, for instance, how would he make up the difference? After careful examination, Youker realized the dealership could increase revenue by improving efficiencies in its service department. In January, The Sportsman implemented a labor tracking system that, in just a matter of weeks, more than doubled service department efficiency.

“In the first two weeks, our billable efficiency went from 38 percent to 77 percent,” Youker says. “We’ve already seen an increase in serving customer needs. They’re being better taken care of, and the techs are making more money.”

Youker, also a long-time Spader 20 Group member, says he knew he needed to make major changes to the service department because it wasn’t up to par. “I knew my efficiency sucked,” he admits. “Our techs billed the customers what they thought they needed to be billed. But for a long time, it wasn’t an issue because we were making it up in sales.”

That philosophy changed when the harsh reality of the current economy finally hit. “You have to really want to do it to change,” he says. “I knew I’d better light a fire under myself and make it happen.”

The dealership first established a list of goals outlining what it wanted to accomplish in the service department before deciding on a course of action, Youker explains. It settled on four main objectives: increase revenue to offset potential sales declines; ensure job confidence among employees; retain good service personnel; and decrease customer turn-around time from two to three weeks to just two or three days.
Those lofty goals that were all successfully addressed, Youker says, through implementation of the labor tracking system.

Its system is fairly simple. Each service tech has a time ticket, which is coded for a variety of tasks he would routinely perform in a day, including collection (retail labor, warranty, rigging, etc.) and non-collection (moving boats on lot, new boat delivery, etc.) jobs. Every time a tech starts a job, he punches in for that specific task; and every time he completes the task and moves onto the next, he goes back to the clock and punches in again. And so on.

“If you’re cleaning your tools, or cleaning the shop, we know about it,” Youker says.

The techs’ numbers are fed into a spreadsheet nightly, so employees can review their previous day’s performance first thing the following morning. The system’s immediacy allows The Sportsman to constantly measure its employees’ efficiency, determine where and how they spend their billable hours, and make adjustments accordingly. Techs earn additional money by completing jobs in less time. “If you work ‘head down, butt up,’ you get paid for that,” Youker says.

In addition to increasing productivity and efficiency, the tracking system also allowed The Sportsman to raise its retail labor rate by $10 per hour. The price increase puts greater responsibility on the dealership to deliver even better value for the money, Youker says. For that additional $10, each tech now performs a complimentary, post-service analysis on each boat/motor/trailer after his specifically assigned task is complete. This has proven equally successful at uncovering fixable problems about 95 percent of the time, making the customers feel more satisfied with their service experience and putting more money in the dealerships’ pockets.

“Bottom line: Everybody wins – the employee, the company and the customer,” explains Youker. “You always have to ask yourself that question: Does everybody win in a particular situation? If it winds up that somebody’s on the losing end, you got the wrong answer.”

From a process standpoint, Youker says getting the new labor tracking system up and running was easy. From a personnel standpoint, however, he says the idea took some getting used to.

“It went over like a lead balloon with the techs when we first did it,” Youker admits. “We had a few ‘come to Jesus’ meetings over it. They were scared we were watching their every move.”

But when he explained that greater accountability could lead to increased earning potential, Youker says his service techs quickly jumped on the bandwagon and became the labor tracking system’s biggest cheerleaders.

“There’s been a 180-degree turn-around,” he says. “The techs are moving more quickly, their demeanor is different; they’re starting to feel a real sense of accomplishment in what they’re doing. They know they’re contributing to the success of the company.”

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