Finding Hidden Profits in Unusual Places in Your Organization

There are many messages landing in your inbox these days. The vast bulk (beside the amazing “pharmaceuticals”) pertain to running your core business and “how to”…Build Successful Internet Sales; Increase Service Revenues; Avoid the Top 10 Sales Killers; Re-make F&I Menus for Fun and Profit; (and the always interesting) Increase Body Shop Profitability Because You are Doing it Wrong.

You are bombarded with so many messages that you need to ask yourself: “how many things can a store really do to increase sales?” The answer is the same as that to the age old question, “How many licks does it take to get the center of a tootsie roll tootsie pop?” Three, then crunch! Walk with me and I will show you what I mean…
Improving aspects of your store (it really doesn’t matter what they are…) requires attention, specifically management attention. Your extremely busy GM, Sales and/or Managers of any kind are where the rubber meets the road when it comes to implementing business process improvements. Establishing new ways of doing something is a learning process that requires:
1) A curriculum to study or at least copy
2) A set of trainings with assessments to show how to do something and measure how much your people understand what is expected of them
3) And lastly, it requires that your managers/supervisors spend time overseeing the outcomes of each of these steps in the learning process. CRUNCH!

The first two are easy…content for improving sales across departments is readily available and probably sitting in 3-ring binders on your shelves as I write this, as are the training videos/DVDs from two years ago, or perhaps recent subscriptions to online sales trainings. All unused from past improvement initiatives that went fallow as soon as it got busy again, or the manager pushing the effort walked across the street…and there’s the rub. All of this takes time, supervision, and management monitoring of progress. This is the CRUNCH time necessary to improve anything at a store.

As we know, stores don’t have layers of management waiting for the opportunity to “show their stuff.” Most managers are multi-taskers with several responsibilities on their shoulders. There is little time for new process improvements, but technology can create the “slack in the system,” or the time necessary for ongoing improvements.

Time is Money, Don’t Waste Time
In the average store, management attention to monitoring and tracking all of these activities tends to be implemented as a paper-based process. In fact, you will probably find paper as the common format on which nearly all your present business processes rely. When it comes to improvements or new processes, you generate information and data on paper about a person’s activities related to their role, the store’s goals for sales improvement, compliance with new ADA and FMLA rules, the FTC’s Red Flags, Adverse Action, OFAC, or any one of a dozen sales and employment practices related legal issues.

What all this paper pushing represents is managerial time spent checking off the tasks as they are completed and reporting progress of established goals back to the exec team or the dealer. But the real value of a manager is the time and experience in the trenches that can be shared with their direct reports. It is not in the time-consuming supervisory process that requires marking a sheet of paper so as to document that so-and-so in the Finance & Insurance dept took the new Red Flags course, or some other mundane task.

Available and proven technology can automate the logistics of process improvement for valuable gains in management time. By automating the basic blocking and tackling of any kind of improvement a store can increase sales and save a huge sum of money. When managers don’t have to waste valuable time checking to make sure their direct reports are doing what they are supposed to do, or becoming experts in legal mandates, more time can be spent selling and managing.

In the present environment wasting time is a costly sin. Saving time and money improves the bottom line in more ways than one… Check out this automotive example…how much do you have to sell to make the same amount you save?:
Equivalent New Car Sales Necessary to Return Same Revenue from Automated Logistics
Average Store Profitability (2007 NADA Data) 1.50%
Annual Savings for the "Average Dealer" Using Our Compliance Management System (DCMS) $ 27,281.90
Estimated Sales Necessary to Equal Savings from DCMS $ 1,818,793.33
Average Price per New Vehicle Sold (NADA Data - 2006) $ 28,500.00
Estimated # of Vehicles Sold to Equal Savings from DCMS 64

Improving sales is a worthy goal, but with the right technology in place, saving money is easier and more “profitable” than increasing the sales capability of your personnel. Let’s take a look at some the hidden areas of potential savings in a store.

Paper Wastes Time
Paper is money out the door. There have been dozens of research studies about the cost of paper-based document management. PriceWaterhouseCoopers research suggests the simple act of printing, copying, storing, and making a single document retrievable is $20. That is just for one piece of paper. Imagine the cost and time consumed for a single training, or a vacation request form, or a special order part request, or any process that requires a manager’s approval...I think you can see my point.
There are a lot of workflow/business processes that require not only paper but TIME; specifically, costly management time. We have clients that in a year and half have generated over 200,000 content items including documents, trainings and forms with the associated workflow and oversight …Do the math ($20 X 200k) - they cannot afford to do this with paper anymore. Their managers would revolt.

Supervising Compliance Wastes Time
The average cost of compliance related activities at a store, which includes communications to new hires and existing personnel, audits of all shapes and sizes, IRS 8300 forms, Incident Reports, etc, is a combination of paper and executive or even General Counsel time, which is sky high these days. This includes costly supervisor time spent tracking personnel activities, monitoring their compliance, and reporting their level of compliance. Chances are all of these exist as paper documents, which studies have shown are prone to being misfiled or even lost, and are very costly to recreate. These same studies also show that highly paid managers spend a significant amount of time looking for these documents...or worse, spending time recreating these documents because they can’t find them…Ouch!

Outside Consultants Waste Time
My research of 50 auto dealers with more than three rooftops shows that the average cost of onsite Environmental, Health & Safety consulting runs approximately $5,200.00 (a rooftop) on a quarterly basis. Many stores are avoiding this expense by bringing the Fixed Ops quarterly safety audits in-house and automating the documentation process and the timing of distribution to the right personnel, in the right department, at the right time schedule. They then fill out the appropriate forms or take the recurring trainings in advance of the scheduled safety meeting. The latest technology tracks those who have done what they are supposed to do so the manager newly tasked with running the safety meeting must only address EXCEPTIONS rather than each step of the process. This approach removes the consulting expense from your P&L and reduces the time spent coordinating the meeting and gathering the required paperwork, which is now all electronic and leaves you more compliant.

New Laws Waste Time
When calculating the cost of Legal changes that require new compliance programs, such as Red Flags, Adverse Action, OFAC, GLBA, etc., my research suggests that for each new legal mandate an average dealership (52 employees and 1.6 rooftops – Source: NADA Data 2007) spends about $7,000.00. What did your 2 hour California Supervisor Training cost you last year, per store? You see my point I think.
Each year, experience shows that stores face an average two new legal compliance programs per year. 2008 saw the new Adverse Action and Red Flags. Next year expect the new ADA Amendments and new FMLA requirements…and that is in January! In short, stores must stop what they are doing and implement new compliance programs. This is time consuming in a number of ways:
1) Developing the legal policy necessary to comply with the new rules
     a. This requires costly lawyer “golden time.”
2) Distribution, Training, Assessing, Monitoring, Tracking of Compliance
     a. Management TIME
     b. Personnel TIME
     c. Outside/In-house Counsel TIME

Having the right technology and legal content is critical to reducing the time associated with these costly but mandated efforts every year.

Hiring People Wastes Time
When calculating the cost of New Hire Orientation and Continuing Employee Training on such areas as EH&S, F&I, Red Flags, etc., think about the thickness of the new hire paperwork and all of the storage necessary to keep that on site and available for auditing (think I-9s and ICE).

The Society of HR Management suggests the cost of such an effort averages 25% of that person’s annual salary. Now multiply what you believe is a reasonable cost by your turnover rate to see the time spent doing it over and over again, and the reality of that expense to your store. Even if the orientation is $2500, reducing that cost by just a few hundred dollars can mean a big pop to your bottom line, not to mention getting your new people up to speed and productive, while your existing personnel are re-trained and back to work in record time.
Automating the orientation process and the ongoing compliance and role related training can significantly reduce management time and actual paper expenses. Take a look at your orientation package; how many pages can be turned into electronic documents? Or better yet, what if someone gave electronic versions to you when you bought the technology to reduce your overhead expenses? How much time and money could you save then?

Getting Hurt Workers Back to Work Wastes Time
When calculating insurance cost savings you need to look at critical areas of liability. This includes your Workers Compensation program because your annual costs per person probably exceed $400.00 or more; your “Garage-keepers” and EPLI. Because the insurance business is cyclical, premiums head up and down based on the frequency and severity of your losses, as well as how well insurance companies are doing with all of that cash they need to invest. That said, and in light of recent market experience, you can expect a review of premiums soon so insurers can raise them...unless you can prove to them how you are addressing the liabilities they insure you against.

Insurers find it hard to deny a premium review and eventual reduction for a store with the right technology and legal content built around a “good faith” compliance management system that automatically distributes, tracks, monitors, alerts and provides clear exception reporting. And on the Workers Compensation side, automating the safety trainings, “back to work” programs and monitoring progress with periodic distribution of progress report forms, helps remind people that it is better safe than sorry (and costly) and can save literally 100s of 1000s of dollars. All of which relieves managers of the time consuming burden of oversight…all they have to do to make decisions is read exception reports as to who hasn’t done what they need to do…easy.

Terminal Velocity
Implementing any new business process improvement, be it in the sales organization, the customer service department or the retail shop, requires management focus and time. There is no getting around the need for basic management supervision of employee development and oversight. But there are applications out there that can pick up the burden of supervision so managers can do what they do best, strategically manage the business for greater profitability.

You can’t manage strategically and focus on the minutiae of new program implementation. There is technology combined with legal content out there that automates the low value activity of supervision but also provides the necessary content and logistics automation that can take daily chores off of your plate. By removing time from a variety of undocumented, yet inevitable expenses, managers control the operational destiny of their store and uncover the hidden money in their midst.

Time is money. Don’t waste time.



James E. Lawrence has extensive experience in building cutting edge software in the fixed operations and front end of stores and is involved in developing and managing partnerships and marketing at Compli. He has an MBA from Case Western Reserve University in Cleveland. For more information on this article or any other compliance management needs, call 503-294-2020 x121 or visit www.compli.com or e-mail Jim at jim@compli.com.