Intellectual Capital

Intellectual Capital

In this week’s Lifelong Learning post, Founder and Managing Member Ron Slee continues to look at employees as assets. Read on to learn about Intellectual Capital.

In an earlier post on Lifelong Learning, I posed a question to you – “Are your employee’s assets or expenses?” I hope every one of you said they are assets. Today I am wanting to look at your employees from a different perspective. I want to look at your employees as an “Asset on your Balance Sheet.” Imagine if you took all of the knowledge, skills and experiences of your employees and were able to put it into a container?

Look at the skills required to operate your business.

Selling. Leading. Buying. Repairing. Maintaining. Data Storage. Warehousing. Shipping. Receiving. Transportation. Ordering. Purchasing. Stocking. Paying Bills. Payroll. And there are many more.

On top of that you have the specific skills within each discipline. Take selling as an example. The function requires Research, Goal Setting, Asking Questions, Overcoming Objections, Explaining Benefits, and Closing the Sale. Each job function can be dissected into the differing skills required to perform it. That is one of the byproducts of our Job Function Skills Assessments. Most of us view a job simply as that. I would ask that you look at it in a different manner. Each job is a composite of a lot of different items. Let me go in a different direction for a moment. Let’s look at the job of a surgeon. What is it? Is it simply using a scalpel and cutting. Or are the years of training given to the surgeon expecting that they will see with trained eyes and identify problems inside our body and then knowing what to do about it? Of course, it is the latter, isn’t it?

So, when people take our assessments, they are taken aback at some of the questions. A typical comment coming back to us after the employee completes their assessment is that I wasn’t aware that was part of my job. If we look at the telephone and counter selling job function, most of the employees have done it for a long time. They typically are on autopilot. However, they are often extremely busy. They don’t have time for many niceties. That is a shame. That is a result of not having enough people to do the job properly. That is the negative result of sales per employee. (Too many “bosses” think that a high sales per employee is a good thing. That is totally wrong. Completely wrong) Customer retention. Customer loyalty. They are critical measures of your success as a business. Market share is another.

Well in the parts business over the past forty years market share in parts and service has dropped by more than 50%. Many of you will argue with me as a result of your sales revenue continuing to go up. Perhaps many of you will point to the proliferation of competitors as the cause of this reduction. I will respectfully disagree. This drop in market share is a direct result of too few people serving customers doing too much work. 

Look at your service department as a good example. Surveys done by industry associations point out that 15% of the customers who purchase labor from an equipment dealer “defect” each year. Let me express that another way for you to better make my point. 15% of your service customers STOP buying labor from you on an annual basis. That means that you lose 50% of your customers over a five-year period. Don’t believe me? Check it out. Get a report in name sequence. Alphabetically. Compare the list from five years ago in a calendar year to the current year. In our case today compare 2021 to 2016. That is a gap of five years. Get the total number of customers in 2016 and compare that to 2021. In many cases the number will be very close to the same. Now go through and compare the two lists side by side. Name by name. How many names purchased labor in 2016 that did not purchase in 2021. I suspect you will find the number to be a very sobering illustration of the point I am trying to make with you.

In parts it is not as stark a defection rate but it is equally as disturbing.

Your employees are assets for your business. They are the people that create the glue, that bond your customers to your business. Too many of you view, these employees, your heroes, simply as tools in a toolbox. Nothing could be further from the truth. The sales per employee metric is given lip service. It is not the trigger that it should be used to hire people. In the 1980’s the sales per employee number, widely accepted in the industry was $600,000/parts employee/year. That number did not include the Parts Management nor the Product Support Sales team. For many of the dealers with which I have worked over the past five years that sales per employee number exceeds $1,000,000/employee. That means that the people working on your counters and telephones serving your customers are overworked. From the 1980 metric 5 people were required to do $3,000,000 per year. That job today it is being done by 3 people. How can this be allowed to happen? 

There is a very old expression. “You reap what you sow” The market share reduction is a direct result of this excessive sales per employee. It is a result of the employee NOT being viewed as an asset but as simply a tool to be used. This is wrong. It needs to change.

The time is now.     

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