ROE – Return on Employee

ROE: Return on Employee, NOT return on equity…. I just made it up. But not on a whim, a lot of thought went into this and a lot of time too.

You see, a friend of mine had a lease come due and he went truck shopping. He was less than impressed. We were at a wedding and sat at the same table and he was telling me his recent car shopping horror story and I couldn’t believe my ears. He told me about his Mercedes G63 which was $2,500/mo and how he couldn’t get a Mercedes dealer to give him a straight answer, 3 different ones! So, he switched to Land Rover for a $135,000 Range Rover and sent web requests to 5 different dealers across 3 different states and called 4 different stores in two different states and more of the same…. Now, I know what everyone is thinking, so let me be clear with what I confirmed and saw with my own eyes, we have solid credit, solid income, the truck is a lease turn in which is also an equity positive trade in between 5k and 10k in true dollars, not his numbers and he’s looking at in stock vehicles, willing to pay sticker as he did on his 63 and just wants to get it over with as he’s a busy guy. Beyond legit, and by our standards!

As we’re friends and our wives are friends, I couldn’t say I didn’t believe him, but I honestly didn’t believe him. So, over the course of this wedding reception he let me read emails on his phone and I sat there in disbelief. I just sank deeper in my chair for 3 hours believing every single word he said. How could the industry I spent my entire career in have turned so wretched? Highline dealers asking MSRP for trucks really sending garbage to customers and the days of escalated autoresponders just meaningless without any thought or consideration to the individual situations, had the post pandemic business really started booming so much that you could justify treating people like this? MSRP paying customers? Any customers? Really?

I included “ROI” (Return on Investment – traditional) here because this is the one that always makes me laugh as a vendor. It’s as if dealers are conditioned to ask it and a vendor is conditioned to answer it but the reality is neither of us are really asking (or answering) the question behind the question, i.e. the real question. I’ll break the “vendor code” and give you the real question and the real answer: Any product is only as good as how you deploy it! No matter what it is! For example, I represent a great company that really does make a marked improvement for dealers and it’s sustainable long term. We drive results through focusing on the root cause. I tell dealers this about my product when they ask me this very question, “Our service is like a gym membership, just because you have it doesn’t mean you’ll see results…. You actually have to embrace it, use it and stick with it. The sooner you make the commitment the sooner you’ll see the results!”

With over 15 years on the retail side and just hitting my 6th year as a vendor we all have fallen into the habits of falling for and using cliché “buzzwords” which sound good rolling off the tongue but do they really mean anything at all, or are we so immersed in wanting to walk and talk like the rest that we lose sight of what’s truly effective? Or, equally as bad, we lose sight of what’s truly important? I opened with my friend’s experience that I honestly didn’t believe but a lot of us (most of us), just like me, have become so desensitized to these interactions that we don’t believe that “40 car Fred” could really be that terrible. Well, I’ve got some bad news for you, while we’re focused on the latest and greatest acronym or the latest and greatest make-believe thing that really doesn’t do much of anything, we’re doing what’s happened above. I also saw emails from the GSM, the GM and at one store all the way up to the owner. I find it hard to believe that everyone is so busy that they rely so much on automation for a stone-cold buyer. I took it upon myself to check the stock numbers he submitted his requests on for each web lead. I’m sure all their “stats” show they’re “blowing up” but after 6 weeks they’re all still in stock…. Weird? They had a buyer that just didn’t get handled properly. And, for those of you that are thinking it, I can assure you he didn’t get profiled away from his vehicle or out of a deal because they engaged him, they just couldn’t get out of their own way.

So, what is ROE and why is it important for every Dealer Principal, General Manager and check signer to learn this? It’s because of what it stands for. Return On Employee is critical as it’s the stopping and starting point for everything else. Every dollar is either invested or spent and it’s that employee that makes that difference. Whether you call yourselves “associates” or “team members” or “cast” or “partners” or what have you, at the end of the day a single thing stands between success and failure and it’s not software, it’s not hardware and it’s not money. It’s a person. If that person doesn’t feel confident, comfortable and capable then all is lost.

Even now, as we slowly climb out of the latest “crisis” our industry just faced, it‘s currently more important than ever to make sure the people are confident, comfortable and capable. I still remember hearing my managers when I was fresh selling Toyotas say “business is slow, call the newspaper and get more liners for the weekend” or “we need to make sure we have our oldest cars priced to sell with good pictures for Autotrader” and no I’m not talking about the website so our VDP’s increase, I’m talking about the old magazine that we used to see at the local gas station or convenient stores that, as a child, was my comic book. But enough of a trip down memory lane, anyone who wants to talk more about that we can “take that offline,” see what I did there and how smooth that buzzword worked?

To this day, I talk with dealers who feel this is the best way to sell more and make more money, vendors too. But damn if that wedding reception didn’t really hit me hard! We also now have those out there who preach “spend less and make more, buy our software and we’ll show you how we save you money by spending with us” but I have to ask: (Does that really work long term? Because I know a ton of people will jump on me and defend it but show me a 12-month trend based on bottom line manufacturer-audited statement savings.) Here’s the real question, the important one: How does that help our ROE and the answer is IT DOESN’T! There are so many things out there being sold to get the upper hand on the competition or have the latest and greatest technology when the real answer is simple, invest your dollars effectively, not on new products that don’t solve a customer issue but on those individuals you have working for you. Continuing education, coaching and training, personal development, things that really make it easier for your customer to make a purchase, solve the problem they’re really facing.

We all want better ROI, right? We won’t realize a better ROI until we first invest to realize a better ROE

June 19, 2020, originally posted on Dealer Refresh