Retail

Challenge Employees Who Show Growth Potential

How To Break the Peter Principle

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The Peter Principle states that every employee in an organization tends to rise to his or her level of incompetence. In other words, if you are good at your job, you will get promoted until you reach a position that you are not good at.

This happens regularly at tire dealerships and other automotive facilities. A general service or auto repair technician is promoted to doing alignments before getting any sound training or the best salesperson gets to be the new store manager.

The store manager scenario is the best example of the Peter Principle that I can provide. A very good salesperson is motivated through personal goals, such as having the most sales, selling the most tires or whatever metric the company’s owner is focused on. 

And often, the best salesperson is driven by personal glory — and the accolades awarded for doing the best job by yourself.

Now let’s look at the competencies of a successful store manager. Sure, personal selling goals are still on the table. But overall store performance is more important. Who cares if the store manager is number one in sales, but the store is down 10% from last year? 

Other competencies also carry forward, like a focus on customer service. 

But does a salesperson really care about the mix of sales or making sure controllable expenses are kept in line? 

Let’s take a look at some core competencies necessary for a good or great store manager:

Leadership (“look at me versus follow me”). A good store manager doesn’t just do well in sales and then tells others, “You need to do this, too.” A good store manager builds a team and supplies knowledge and tools so that everyone has a chance at success. A good store manager figures out what motivates each employee and aligns that motivation with company goals and results. Successful managers inspire others to do things their way — not just any way.

Operational discipline. Effective managers understand what the company is good at and what it is not and guides employees to make sound, reasonable decisions that make the customer happy, the employee happy and the company happy. 

The trick is in balancing all three and not sacrificing one for the other.  Operational discipline also covers a fundamental understanding of business and how profits are made. Managers must understand concepts like every dollar in expense is a dollar taken from profit, yet only 10% to 15% of all sales dollars reach the bottom line. They don’t have to have an MBA, but they need to be able to read a P&L and understand how it works.

A focus on results. Managers must monitor the process by which results are achieved and provide a path for employees to get there and not just set goals. Store managers must convey this path in simple terms so that everyone can be on the same page. For example, “Team, we need to improve our alignment sales, so need to sell more alignments this month” is not a strategy.

How do you know which employees have those skills? If an employee reaches his sales goals regularly, have a conversation and see if he is interested in taking on more responsibility. Not everyone wants to get promoted. But if the answer is yes, start assigning simple tasks a few times and observe the employee’s performance doing something out of his comfort zone.

Ask him to conduct part of a store meeting or ask him to look at some expenses and see if he can come up with a plan to reduce those costs.. Ask him to plan a tire sales event. 

You could also sit down with him once a month and review your dealership’s P&L, one-on-one. Explain how it works and what the metrics are. 

If he asks intelligent questions or participates enthusiastically, there’s a good chance there is room for growth.

Not all great salespeople make great managers and not all great managers started as the best salesperson.

The qualities that make up a store manager are very different from those of someone who is applying personal goals to themselves.

 If you have an employee with growth potential, start challenging that person in small ways to begin the transformation.

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