Because excellent sales experiences and high satisfaction levels are the basis for customer retention, it makes sense to hire, train and retain outstanding employees who deliver on your promises.
One sure way to overcome competition is to retain employees who are properly motivated to help you gain and keep customers. It pays to take particular care with employees, beginning with the hiring process.
Employee turnover is a very visible measure of whether or not your existing personnel policies are effective. Plus there are some significant costs related to turnover, such as:
* Loss of some customer relationships and retention
* Severance pay
* Advertising and hiring fees
* Orientation and training expenses
* Lower initial productivity of a new employee
* Risk of litigation for wrongful discharge
* Diversion of management time and attention
There are three essential elements that help strengthen employee relationships:
1. A detailed job description
Before hiring an individual, you need to determine what you want that person to do. The description of the job, prior to interviewing prospects, provides an objective basis for examining the fit between the job itself and any applicant. Conversely, the applicant needs to know what your job entails to check the fit with his or her skills and objectives.
A good job description should include the following elements:
* Job title and supervisor: Job titles can be important in attracting the right applicant with the desired skill set. You could attract a quality tire salesperson with a job title of tire specialist or commercial fleet representative, whereas the title of "sales" might net less qualified applicants.
Including the title of the supervisor places the job properly within the organization. A tire specialist may report to the store manager. A commercial fleet representative might report to the fleet manager who oversees fleet sales for several locations.
* Specific duties and responsibilities of the position: A position will have several specific duties and they all should be clearly stated. This is how an applicant will determine what is expected. For example, a commercial fleet representative would be responsible for gaining and retaining fleet tire and retreading business. The representative might also be responsible for terminal tire inspections, selling wheels and alignment services, developing monthly fleet reports, casing acquisition, and assisting with credit and collections.
* Accountability (performance measures): Management spells out how performance will be measured. There may be four to six different objective measures that, together, indicate the extent to which a person's overall performance meets expectations.
* Time utilization percentage model: It is helpful to indicate how the person's work time is best allocated. The ideal time model is based on prior company experience with similar jobs, or by best estimate.
2. Individual performance appraisals
Used correctly, performance appraisals establish mutually acceptable goals, based on the job description and accountabilities. Regular reports, available to both the management and the employee, allow each individual to know where he or she stands at all times.
Here are some helpful guidelines for setting up a positive performance appraisal process:
* At the minimum, do them once a year. The manager and employee mutually establish annual goals prior to the start of the new year. The goals reflect each individual situation. Goal levels vary between individuals with the same job title, based on opportunities available, length of time in the position, degree of training, etc.
It is vital that the employee agrees with the goals and expectations, rather than receiving some form of arbitrary quota from the manager without discussion or consent. It also must be clear that formal appraisals may be conducted more frequently if conditions change significantly or performance lags.
* Do not tie appraisal(s) to salary action. It is best to make all appraisals a calendar year or fiscal year activity. Salary action should be taken separately on an individual's hire date. Separating appraisals from raises helps maintain everyone's objectivity.
The use of individual performance appraisals is somewhat controversial. Some academics and psychologists advise against using periodic, written appraisals. They claim that coaching and feedback must be an on-going activity. They believe that management misuses individual appraisals to chastise employees and create fear.
My years of sales and management experience takes me in a different direction. Having received and given many individual appraisals, I strongly recommend them.
The difference in perspectives seems to come from disparate experiences. I will stipulate that some companies and managers probably use performance appraisals in an abusive manner. There is no shortage of incompetent managers.
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The lack of an appraisal system, however, invites litigation. Terminations may be contested at serious cost to the company when the employee claims wrongful discharge due to reasons other than poor job performance.
* Don't let the appraisal take the place of regular coaching. Frequent feedback and discussion is still a vital part of effective supervision. The formal appraisal is just one view of the overall picture. Management can and should verbally handle individual behaviors when they occur, good or bad. Employees need the immediate feedback, praise or suggestions. The coach can make a note of significant incidents in the employee's file to chelp support the next formal review.
It is important to celebrate the victories and reinforce right actions. Most people crave recognition and positive notes to the file help keep the formal reviews objective and more acceptable to the employee.
* A good appraisal system requires management time and attention. Formal appraisals help to set the stage for positive accomplishments that mesh with the company's strategy. Appraisals show respect for each individual's contribution to the team. Effective appraisals require advance goal setting, agreement on achievable goals, and objective measurements that are available to both the employee and the manager. Objective measures help avoid favoritism.
Avoid the "quick checklist" type of appraisal format. Checklists seldom contain objective measures of performance and allow a supervisor to rate performance on a subjective basis, with no input or acceptance by the employee. Quickie appraisals can do more harm than good.
* Another section of the written appraisal allows the supervisor to rate the employee on other, more subjective performance areas such as administration, relationships with other employees, team participation, job knowledge, etc. Such ratings should also be backed up by file notes and facts.
* Use the appraisal to develop an individual development program. Employees often look to the company for education and development for promotion to a higher level. An individual appraisal offers a good opportunity to discuss personal development and agree on actions that both the employee and the company will take to help the employee develop new skills, improve capabilities in the present position, or increase opportunities for advancement.
* Make room on the appraisal for the employee's signature and date of the review, including any comments the employee wishes to make. Signing the review does not necessarily indicate that the employee entirely agrees with the appraisal.
* Do more frequent appraisals, if necessary. Additional appraisals may be necessary during the year when goal achievement or personal performance is unsatisfactory, the development program needs updating or the employee or supervisor feels the need for a more formal discussion of goals.
- Compensation plans
The third essential element for strong employee relationships is the manner and level of compensation. Generally, employees will focus on doing the things they get paid to do. Companies need to establish compensation plans that reward based on the levels of accomplishment, tied to profitability and company strategies.
* Compensate for each duty area of job description. Often, there is a disconnect between the duties shown in a job description and the manner of actual compensation.
For example, a commercial fleet representative's primary duty is the generation of revenue from tire and retread sales. Other duties include terminal tire inspections, wheel sales, credit and collection support, etc. When the compensation plan simply pays based on tire and retread sales, the additional duties may receive little or no attention. It is folly to expect effort in five areas while paying based on only one or two.
Plan design
There are many ways to design superior compensation plans. Good plans balance salary, incentives, and other benefits against gross margins of various products and services, and longer-term company objectives. It is wcccccccccise to bring those affected by plan changes into the discussion and gain their input before making any changes to existing plans.
Weigh goal areas
Certain goal areas usually carry more weight than others, but a good system will include some compensation for each duty area. Set agreed goal levels based on individual circumstances and reward accomplishments tailored to overall company strategies.
Employees gain a clear understanding of expectations when setting mutually acceptable goals. As the company also supplies regular reports and measurements, both the individual and the supervisor know how results compare to goals at all times.
Conclusion
Happy employees help attract long-term, happy customers. Employees are the "face of the company" in the marketplace. It pays to invest both time and dollars in your employees and, together, set high expectations for customer retention and profitability.
"Coming together is a beginning; staying together is progress; working together is success." - Henry Ford
Dick Morgan is a Certified Management Consultant. He founded Morgan Marketing Solutions Inc. in early 1989. Morgan has more than 40 years of tire and retread industry experience, working with manufacturers, retreaders and tire dealers. He is the author of Marketing Facets, The Market-Focused Guide to Company Analysis, a practical resource for those involved in determining the current health of a company and gauging its future prospects. He also speaks on marketing and management topics at industry conferences and for state and local business organizations. Contact Morgan at (972) 931-7993 or [email protected].
