Management Article – July 2006 Part Three of Three
Tools You Must Consider to Control Profits in 2006 – And Beyond
This is a three-part article. Check the last two-month’s issues for parts one and two, or visit our web site. Last month we talked about Purchasing and Performance Pay. This month we will talk about Employees and Financial Metrics.
Employees – Average your last three months net sales and divide that amount by $20,000. This is the total number of employees your revenue justifies. Your job is to organize your yard with systems to get all the work done with that number of employees. If your yard has been in business for ten or more years and you have no debt, you may be able to get by with as little as $15,000 per employee. If you have been in business less than ten years or have debt, you will need $20,000 per employee. Any yard with less than $15,000 per month in revenue per employee probably has a negative cash flow and either is in trouble or soon will be. Start with a blank sheet of paper. Draw an organization chart with a box for each employee you are allowed. Next, list all your employees by name on the right side of the paper. Determine which employee is best suited and qualified for each position. Cross off their name on the right and place it in a box. Those employees’ names left without a box must go. Write down all the work performed by the employees without a box and assign that work to an employee in a box. Finally, design a pay for performance system that will insure all the work will get done.
Financial Metrics – Metrics are monthly data points gathered on a spreadsheet. They are the pulse points of your business. They include things like- the number of vehicles purchased, amounts of projected sales, number of invoices written, parts pulled, deliveries made, phone calls received, etc. You need metrics to compare with other yards, but more importantly, you need them to measure against yourself. Have regular monthly meetings with your employees, set achievable goals, and assign each data point to an employee. Hold employees responsible to achieve the goals and compensate them accordingly.
Remember, only you can make BUSINESS GREAT!
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Remember, only you can make BUSINESS GREAT
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