"The Decision"...When and How Many to Hire?
“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 underperforming 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.
Replies to This Discussion
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Permalink Reply by Craig Lockerd on
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Permalink Reply by Ernie Kasprowicz on
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Craig, as you know, I talk to car guys and gals every day in the pursuit of helping them staff their stores. You have shared the decision making that occurs when they figure out whether or not to hire more salespeople. The big thing I see repeatedly is a reaction to hiring, rather than a proactive approach. The heart of what you are suggesting, as I see it, is to hire more people, and to do it now. Build a sales team of more people than you think is necessary and you will see a competitive team that produces far more than you imagined. The dealership will also be in a much better position overall to maximize their business opportunities.
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Permalink Reply by Richard Emmons on
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People may disagree with this however I believe there is a way to increase your sales and salespeople without flooding the floor. {Features and benefits}
1) Desk partners.
Allows two people at each desk.
Makes a team system per desk where if one is off the other may assist and be responsible for the customers that the desk partner may have.
Lets managers have the ability to adjust schedule of all salespeople to have proper coverage durning busy hrs & days.
2) Split shift.
Allows adjustments for time off for them to have a life without sacfricing floor coverage.
Less turnover and burnout.
More time for prospecting.
Always have coverage when someone needs to be off or illness.
3) Sales events.
During a big ad campaign there will be adequate coverage whenever needed.
Salespeople can be assigned to phone coverage outside coverage and walk-in floor traffic.
Less missed deals.
4) Teams and team leaders.
Teams always are better and stronger than individuals.
Top salespeople become team leaders to oversee several salespeople.
Healthy competition with in the dealership.
More sales people will always produce more sales.
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Permalink Reply by Abe Hopper on
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Do you remember when salespeople were with their kids at ball games and community events ? They were talking to people ... our new customers !
When I first bought a Dealership in "Hometown" USA from a retiring Dealer I changed nothing, until I got a pulse on the business in that town. One Friday night, I said, "where is everyone tonight ?... there is not a car on the street". The salesmen looked at me like I was from outer space and said, "it's Friday night ... everyone is at the High School Football game." I thought for a second and replied, "Then that is where we should be ... get your business cards and let's go ... the store is closed tonight." From that night on ... we closed early Friday Nights. The only rule was that the sales team was to be at the games ... prospecting ... wearing "Team Chevrolet" shirts.
So the moral of the story is hire more ... utilize shifts and take advantage of community events ... you should have enough salepeople to be visable at these events. What is happening in the area ? High School event ? Two or three salespeople should be there ... that is thier assignment for the shift ... wearing your company logo and talking to potential customers.
Make old school ... new school thinking !
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Permalink Reply by Craig Lockerd on
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Correct!...The tail has to stop wagging the dog.
Ernie Kasprowicz said:Craig, as you know, I talk to car guys and gals every day in the pursuit of helping them staff their stores. You have shared the decision making that occurs when they figure out whether or not to hire more salespeople. The big thing I see repeatedly is a reaction to hiring, rather than a proactive approach. The heart of what you are suggesting, as I see it, is to hire more people, and to do it now. Build a sales team of more people than you think is necessary and you will see a competitive team that produces far more than you imagined. The dealership will also be in a much better position overall to maximize their business opportunities.
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Permalink Reply by Craig Lockerd on
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I'm all about teams and split shifts,less hours,better coverage,every deal gets T.O'd and WAY more training takes place at the start of each shift,each day!
Richard Emmons said:People may disagree with this however I believe there is a way to increase your sales and salespeople without flooding the floor. {Features and benefits}
1) Desk partners.
Allows two people at each desk.
Makes a team system per desk where if one is off the other may assist and be responsible for the customers that the desk partner may have.
Lets managers have the ability to adjust schedule of all salespeople to have proper coverage durning busy hrs & days.
2) Split shift.
Allows adjustments for time off for them to have a life without sacfricing floor coverage.
Less turnover and burnout.
More time for prospecting.
Always have coverage when someone needs to be off or illness.
3) Sales events.
During a big ad campaign there will be adequate coverage whenever needed.
Salespeople can be assigned to phone coverage outside coverage and walk-in floor traffic.
Less missed deals.
4) Teams and team leaders.
Teams always are better and stronger than individuals.
Top salespeople become team leaders to oversee several salespeople.
Healthy competition with in the dealership.
More sales people will always produce more sales.
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Permalink Reply by Craig Lockerd on
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I couldn't agree with you more Abe.....if your thirsty and live in the desert....move to where the water is!
Abe Hopper said:Do you remember when salespeople were with their kids at ball games and community events ? They were talking to people ... our new customers !
When I first bought a Dealership in "Hometown" USA from a retiring Dealer I changed nothing, until I got a pulse on the business in that town. One Friday night, I said, "where is everyone tonight ?... there is not a car on the street". The salesmen looked at me like I was from outer space and said, "it's Friday night ... everyone is at the High School Football game." I thought for a second and replied, "Then that is where we should be ... get your business cards and let's go ... the store is closed tonight." From that night on ... we closed early Friday Nights. The only rule was that the sales team was to be at the games ... prospecting ... wearing "Team Chevrolet" shirts.
So the moral of the story is hire more ... utilize shifts and take advantage of community events ... you should have enough salepeople to be visable at these events. What is happening in the area ? High School event ? Two or three salespeople should be there ... that is thier assignment for the shift ... wearing your company logo and talking to potential customers.
Make old school ... new school thinking !
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Permalink Reply by Ernie Kasprowicz on
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What a great idea, Abe. Sometimes the simplest things are the easiest and most enjoyable to implement.
Abe Hopper said:Do you remember when salespeople were with their kids at ball games and community events ? They were talking to people ... our new customers !
When I first bought a Dealership in "Hometown" USA from a retiring Dealer I changed nothing, until I got a pulse on the business in that town. One Friday night, I said, "where is everyone tonight ?... there is not a car on the street". The salesmen looked at me like I was from outer space and said, "it's Friday night ... everyone is at the High School Football game." I thought for a second and replied, "Then that is where we should be ... get your business cards and let's go ... the store is closed tonight." From that night on ... we closed early Friday Nights. The only rule was that the sales team was to be at the games ... prospecting ... wearing "Team Chevrolet" shirts.
So the moral of the story is hire more ... utilize shifts and take advantage of community events ... you should have enough salepeople to be visable at these events. What is happening in the area ? High School event ? Two or three salespeople should be there ... that is thier assignment for the shift ... wearing your company logo and talking to potential customers.
Make old school ... new school thinking !
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Permalink Reply by Craig Lockerd on
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"Make old school ... new school thinking !" Love that Abe,when the heck did we stop doing what worked?....Oh I remember now,it's when banks would buy anyone and we didn't need to actually sell and prospect and engage with people in out community
Ernie Kasprowicz said:What a great idea, Abe. Sometimes the simplest things are the easiest and most enjoyable to implement.
Abe Hopper said:Do you remember when salespeople were with their kids at ball games and community events ? They were talking to people ... our new customers !
When I first bought a Dealership in "Hometown" USA from a retiring Dealer I changed nothing, until I got a pulse on the business in that town. One Friday night, I said, "where is everyone tonight ?... there is not a car on the street". The salesmen looked at me like I was from outer space and said, "it's Friday night ... everyone is at the High School Football game." I thought for a second and replied, "Then that is where we should be ... get your business cards and let's go ... the store is closed tonight." From that night on ... we closed early Friday Nights. The only rule was that the sales team was to be at the games ... prospecting ... wearing "Team Chevrolet" shirts.
So the moral of the story is hire more ... utilize shifts and take advantage of community events ... you should have enough salepeople to be visable at these events. What is happening in the area ? High School event ? Two or three salespeople should be there ... that is thier assignment for the shift ... wearing your company logo and talking to potential customers.
Make old school ... new school thinking !
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Permalink Reply by Bob Gaber on
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Any businessperson will tell you, if you can make a profit then you do it. Why would anyone limit their success? BUT I don't have the room is the rejoinder. Really??? make the room. You can either lead, follow or get out of the way. I have seen dealers mismanage their sales force because they listen to the wrong people. The best time to improve your sales force is NOW. And there is never a breaking point in taking productive people.... Unless of course you are adverse to making money.
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Permalink Reply by Matt Page on
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Do what many nurses do, work 3 straight days, then have 3 straight off! The one area we have overlooked is networking events! They can go to these on their off days and be compensated to a certain degree!
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Permalink Reply by Craig Lockerd on
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Right you are Dave,when we hear" That's what we normally run with" or "Got 3 open desks" when we attempt to help find that full potential,it truly blows our minds. Got to move out of that comfort zone.Thanks for your comment,Dave
Dave Anderson said:Great insights Craig. Sadly, many dealers have stayed in their hiring box so long that it's turned into a casket--killing the opportunity to grow to their fullest potential.
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