Some Thoughts About 2022
As is pretty normal at this time of year there are many “experts” and “analysts” who provide us with their thinking about the coming year. Interest Rates, Inflation, Unemployment, GDP, labor Participation Rates and so on. Several of these “white papers” have got my attention.
- Digital Transformation
More than at any previous time we need to move to the “contactless” shopping world. The internet. This is in part due to the ease of use that exists in internet-based shopping. It is simple and easy. How do you stack up against your competitors or the Retail Giants such as Amazon and Walmart? Did you know you can purchase OEM parts from Amazon?
What does your Parts Internet-Based Ordering System look like? What is the pricing policy for on line purchases? How will you handle returns?
- Fixed versus variable Costs
Following on to the Internet-Based business your price point should not be the same as either telephone or walk in business. Your costs to support the internet business as not as high. The customer becomes a “Co-producer” with you. The telephone selling function for the parts department can be done from home WFH. It can be done on a part time basis. It can be done by people who have retired. Something to think about, isn’t it?
Labor as a service is a becoming trend. Our work force is aging. Retirement at 65 seems to have become a wistful thought. More people are working into their 70’s than ever before. Our technicians are in scarce and very rare supply. There are job functions that can be performed by “labor on demand” staffing. Next week I need to perform one hundred and twenty-four 500-hour maintenance services. I can assign that work to a part time employee. Something to think about, isn’t it?
There are some studies (Ardent Partners) suggesting that “nearly half of the U.S. workforce will be comprised of non-employee and agile talent in 2021.
This changes your cost structure in a major way.
- Travel Costs are not going to return to Pre-Pandemic levels.
With technology allowing WFH through tools such as Microsoft Teams and Zoom and Skype and others we do not need to “drive” or “fly” to meet with each other. This will require us to re-examine communications. To maintain Company Culture means to be able to continue to be transparent to every employee no matter where they are working, either in a store or in their home. This will provoke a major reduction in costs.
- The Cost Structure of our Customers.
The pressure on our customers to make money will become more severe than ever before. It is estimated that the cost of operations for Contractors has gone up by 30% (Gary Bartecki in ConstructionPros). In the same article Gary notes that the Average Contactors we asked to provide bids on nonresidential projects. They came in at 13% higher. The contractors have not yet realized the serious nature of the change in their cost structure. This will be turning up in the relationship they have with their dealer suppliers.
This is true at the same time as new equipment is in seriously short supply. Simultaneously Used Equipment prices have increased dramatically at the same time as supply dwindles.
Dealers will be asked to assist their contractor customers at a time with a lot of risk for everyone. This is at a time of serious supply chain challenges, price inflation at its highest level in four decades and skilled labor in scarce supply. This is a tough one and simply the doorway to what is coming at us.
- Front Line – Customer Facing – Employee Retention
Since October 2021 we have been experiencing the highest level of job separations that we have seen in decades. Employees are changing jobs at a rate in excess of 3% of the workforce. How you work with your critical employees, the ones that I call your “heroes” will make a large difference. Do you truly value these customer facing employees? Do they know it and feel it and see it? Do you ask for their input on issues? Do you give them a voice that they feel is heard? Are they “empowered to make decisions on their own? Are they being compensated at the proper levels? Do you conduct performance reviews with your workers? Is there a career development, a career path, structure in place?
These Five items are but my selection from a much larger list. Each of them has merit. Each of them requires thought and then action. Do you have employees that are available to study these items who have to fit this work into their normal job or do you have employees who are tasked with keeping up with the market changes? We have fallen into a bad habit of expecting too much from each employee. We have overworked the talented people who give us everything they have on a daily basis. That in part is why the separation rate is as high as it is. The temptation to continue to do what you have always done, what Einstein called insanity, is high and very powerful. Most dealership are making more money than they ever have. Business during the Pandemic has actually been pretty good for most dealers. But please remember the old adage – Bulls and Bear make Money. Pigs get fattened and Hogs get slaughtered. Which animal most closely resembles you? Think about it.
The Time is Now.