Three guys pull into a small back-country motel late one night on their way to a hunting trip. There’s a note on the door of the office that says, "Pick a room, we’ll settle up in the morning." The hunters figure that the room can’t be more than $30, so each of them throws a ten dollar bill into an envelope, they write the room number on the outside, and slide it in under the office door.
In the morning, the motel owner opens the envelope and sees that he has been overpaid since the price of the room is only $25. So he breaks a $10 bill up, puts $2 in his pocket for his troubles, and gives each of the hunters back a dollar, so each of the hunters is now out $9, right? Not hardly!
Let’s do some basic math: three times $9 equals $27, plus the $2 in his pocket equals $29. So where did the other dollar go? E-mail me for the answer, but I’ll give you a hint now: If one of the factors you’re measuring doesn’t mean anything, you won’t figure it out. Think about it.
There are three dimensions of measurement (well, I know some salesmen who are from the fourth dimension, but that is another rant). Let’s go with what we know in terms of "new math" Note how the hard numbers in these equations become weird word problems like those high school geometry). Stick with me here, because you really can get there from here.
The first dimension of measurement equates to little more than managing your business with your checkbook. It’s purely focused on results. The only conclusion you can draw from results is that your math works. All you can really do with results, in the way of managing, is praise or punish … and that ain’t managing!
Example: If you divide the number of units you sold last year by the number of salespeople you employed, that equation still doesn’t tell you if you’re properly staffed. It only tells you how many units that many salespeople sold last year.
So how many salespeople at your competitor’s dealership sold how many units last year? That equation can only tell you how much more (or less) your competition may have spent on staff.
Even if you measure current results against past results, all it can tell you is if you did more or less. In other words … so what?
In a restaurant, for example, if you divide your total amount of receipts by your total number of chairs, it can only tell you the sum of the equation. Even if you use that equation to determine the "value of a chair" it certainly doesn’t prove that if you add 10% more chairs, you will do 10% more revenue. The value of a chair isn’t determined at all. It merely proves the equation. Worse yet, the equation won’t tell you what to do to increase the value or earning potential of a chair. It can only tell you that your math works.
Now let’s look at two dimensional measurement. You’ve got to measure results against something for them to mean anything. If dealer A sold 50 units in a month, and dealer B sold 60, the natural assumption is that dealers B did better, right? But what if Dealer A did it with 500 people walking through the door and dealer B had 1,000 opportunities? Then who actually did a more effective job of maximizing opportunities? That tilts the equation dramatically!
So the next phase of managing by the numbers would be to count opportunities, right? Count your floor traffic. (You will probably never hear me stop talking about that.) But even with the average traffic count factoring in, those opportunities measured against results will tell you a little more, but still won’t necessarily tell you what to do to make changes the kind of changes that will affect results. Then what you’re left with, even though you have more information, is "Now what?"
You must gain a three dimensional perspective if you’re ever gonna do anything to affect or change any results in your dealership. That equation requires that you look at three factors:
- Opportunities How many customers came in the store.
- Activities The efforts that produce a given set of results.
- Results Not just how many we sold, but the ones that didn’t sell as well.
For that, you’ll need to define what a proper customer encounter is. What do you expect to happen? What do you want to happen? Not in terms of results, but in terms of how you want customers to be treated what kind of an experience do want for your customers? You have to answer the question, "What does a proper customer encounter look like?", and you must define that in spite of the results. Only then can you begin to make adjustments to the "activities" portion of the equation activities being the controllable elements that result in additional sales per opportunity.
One dimensional perspective leaves you asking "So what?" Two dimensional perspective leaves you asking, "Now what?" a far cry better than "So what?" but not everything you need. Three dimensional perspective is the only one that’ll get you the "Aha!" you need to make adjustments. You can’t adjust results, and you can only measure opportunities, but the activities are coachable and thereby controllable.
Keep your measurements simple and accurate. More complex measurements don’t necessarily mean more accurate or even more pertinent information. If it did, then my second word problem would be solvable too. Ready? If a chicken and a half could lay an egg and a half in a day and a half, how long would it take a grasshopper with a wooden leg to kick all the seeds out of a dill pickle? E-mail me with your answers I dare you!