Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
Human Intelligence in the AI Era: The Future of Recruitment and Leadership
The talent crisis in heavy equipment has reached a critical point. In this eye-opening conversation, recruiting veteran Jay Lucas reveals why technicians remain the industry's Achilles heel and how leadership failures are exacerbating the problem.
Drawing from 30 years of experience and thousands of candidate interviews, Lucas offers a rare glimpse into why people leave equipment dealerships and what separates thriving organizations from struggling ones. His unique position as both industry insider and talent specialist allows him to identify blind spots that most executives miss.
"AI will never turn a wrench," Lucas asserts, highlighting that while artificial intelligence threatens some white-collar positions, the demand for skilled technicians continues to outstrip supply. Yet dealerships continue operating as they did decades ago – forcing technicians to waste valuable time standing at parts counters rather than leveraging technology to order parts from their service bays.
The conversation shifts to leadership challenges, revealing how many executives reached their positions through technical prowess or sales success rather than management ability. Lucas makes a compelling case for outsourcing non-core functions like recruitment and HR administration while focusing internal resources on strategic talent management that aligns with business objectives.
Perhaps most provocatively, Lucas and host Rod Sutton discuss why employee engagement surveys often backfire when leadership fails to act on feedback, creating cynicism rather than improvement. They explore the parallels between Amazon's disruption of book retail and the opportunities for similar transformation in equipment distribution.
Whether you're a dealer principal, department manager, or aspiring leader in the equipment industry, this conversation provides actionable insights on balancing tactical operations with strategic thinking about your most valuable asset – your people.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. I'm really pleased today to be welcoming Jay Lucas from a number of companies. I'm going to let Jay describe for himself and we're going to do a parallel path to artificial intelligence having people in distribution channel focusing on their core competencies and outsourcing things that are not. So. With that as our intro, jay, the floor is your. Why don't you tell everybody who the heck you are and what you do and have?
Speaker 2:okay, yeah, sure uh, it's, let's see. I've been in recruiting for 30 years. I started back in 95, almost exactly 30 years ago Worked for a big national firm, mostly in technical recruiting and staffing specifically. So we did projects, so contract engineers in most cases. Anyway, after kind of running through the ranks there I left, decided that I would start my own firm. I really liked the search side of the business as opposed to the staffing side of the business, and so I started my own firm, really didn't know what I was doing. I knew how to recruit, but running a business and recruiting are two totally different things, and so I've basically been in self-employment since 2004.
Speaker 2:Along the way I was introduced to Bill Sitter. Bill is he's got a reputation that is well known in the heavy equipment industry, in the heavy equipment industry. When he retired from the heavy equipment industry he joined basically it was Joe Jordan who also had retired from heavy equipment and started this recruiting firm. They renamed the company Jordan Sitter Associates and Bill ran Jordan Sitter Associates for probably 15 or so years before he decided to retire a second time and sold the business to another heavy equipment executive that was wanting something to do in retirement. I then actually acquired the business from Jerry Randekker or Carol Randekker after Jerry's sudden passing in 2018.
Speaker 2:And so I've brought my recruiting skill set to the heavy equipment industry and really spent the last seven years learning the industry, the companies, the business models, what works around culture and talent and recruiting what doesn't. Best places in the industry to work, why they're the best places to work, worst places to work and why they're the worst places to work. Challenges in the industry that plague the industry from a talent perspective and then ultimately, downstream, affect strategy and execution. And so that's us. We've got a team of eight dedicated to recruiting and heavy equipment. Our recruiters are specialized, and so each one of them finds their own sweet spot one in sales and marketing, one in product and management and engineering, one in sales and marketing, one in product and management and engineering, one in manufacturing and supply chain and another in parts and service or product support. So those are kind of our four. You know, core competencies. I work largely with the manufacturers, and then Wade Massey, my right hand, works largely with the dealers. So that's about us largely with the dealers.
Speaker 1:So that's about us. So one of the things that I hope everybody heard is here's a man who has wandered through the halls of recruiting, of staffing, but he's done it with fresh eyes, recognizing that there are challenges in every step along the way, and the last minute or so of that explanation, I think, were the key. What works, what doesn't work, why does it work? What's the culture? All the rest, which is why Jay appeals to my mind so much Everything we do with our podcasts and blogs is with people that I call thought leaders, experienced executives or revolutionary reformers, and I think Jay fits all three. So here comes artificial intelligence. Let's take them in pieces. Sure, is that good news or bad news?
Speaker 2:It's probably a little bit of both.
Speaker 1:That's a wimpy answer.
Speaker 2:Okay. So I think it's like with anything, there's two sides to the coin. And artificial intelligence to me, I mean it doesn't exist without real intelligence. I mean it doesn't exist without real intelligence. And so if we want to proxy our intelligence to some computer, um, knowledge, you know, bloodying your knuckles and and banging your head on things, uh, scraping your knees, like that's really important you can't just rely on AI to do everything for you, um. So so I think, um, if you do rely heavily on AI to do your thinking for you, that that's not really good. Um, if, if you to be augmented initially, but ultimately, you know, at risk.
Speaker 2:My opinion, however, the Achilles heel of our industry is technicians. However, the Achilles heel of our industry is technicians, and AI will never turn a wrench. It's just not going to happen. It's not going to get in a truck and drive down the road and get out and open its toolbox and grab a wrench and walk over and start disassembling something or diagnosing a problem. It might diagnose, but it's not going to do that without an actual human being there to make that work. So is it possible that folks today who are pursuing knowledge, worker, you know, sort of white collar jobs, might be rerouted to the blue collar path. That seems to be the Achilles heel of the industry, because there's a supply and demand issue demand being high and supply being low. Um, yeah, I think that's very possible. Um, but right now I think it's a bit too early to tell.
Speaker 2:But I like, I like AI, um, for efficiency. I like AI for taking work that is important work, but somewhat tactical and administrative. I like that it could be a bit of a cam on an engine, meaning that if you want to augment what you know and gain additional insights or perspective through using AI, one of the smartest things that I've heard somebody recently talk about is, instead of using AI to like, hey, write this email for me and use this tone and this language. Like that's great, but what about when you ask AI? I want you to be a board member and we're faced with this particular challenge, and I want you to ask me questions that help diagnose what some of the root problems to our goal achievement you know, to our goals, like what's what and then how do we get around that? Now, all of a sudden, you're using AI as a consultant instead of just an administrative assistant, and it can provoke a discussion digitally. That helps you begin to peel back layers and see things and shift paradigms, and so I think initially we're probably under utilizing it, and I think, eventually, when we begin to see that, it can be used as a really strategic resource, because it would almost be like having the most impressive board of directors to lean on, because its depths of access to information is limitless.
Speaker 2:Now, how it processes that, okay, that's that that still needs some improvement. I mean, I it's funny, I was, uh, we're looking at starting a podcast and I was researching other podcasts in in heavy equipment and trying to figure out okay, well, do I want to go this route or that route or whatever. And I was looking for I just asked it to produce a list of of shows, like a hundred shows that had a certain number of followers and an average rating of like 4.5 stars. And it produced this list, um, and, and then I asked it to do it again and it was a completely different list. So I think you have to be cautious. Which, again, the crossroads of real intelligence and artificial intelligence. That's where the sweet spot is.
Speaker 1:Yeah, I think you're right and that's an interesting characterization of it. One of the things that I would say artificial intelligence has enabled is a customer to be able to order their own parts, and the tools are there. Electronic catalogs have been around for 10, 15 years. You can get this about every brand. It's no longer proprietary. You can find replacement parts more easily today than you could when I started out. For sure, you've got sensors everywhere in a machine to indicate health of the machine, of the componentry, of certain aspects. We've got all the triggers. We need certain aspects. We've got all the triggers we need.
Speaker 1:Yet less than 10% of the parts business that dealers in the equipment world are processed through the internet. So one of the things that that triggered in my little pea brain and it bothered the heck out of me. And it's actually lower than that. Since Caterpillar got out of the truck engine business, every single mechanic orders parts A traditional dealer. They walk to the back counter and they engage in a discussion with a parts guy. And if it's Monday morning after a football game, there's a lineup at seven o'clock in the morning at the counter and everybody's talking about football by one guy is being served by the one guy in parts. Why the heck do they leave their bay? Why don't they pick up a phone? Why don't they have a laptop? Why don't they order it on the internet? 90% of the dealers could save how much time of their technicians. And, as you say, blue collar is the least available skill that we have. Something that's interesting since 1990, 50% of the technical schools in America blue-collar schools for this industry shut down for lack of attendance. Imagine that.
Speaker 1:And then the other thing that strikes me with your characterization of AI is the quality of the information. We started databases, probably back in the 60s, and we never assigned an owner to a data element. We never said that this customer name, as an example, was only going to be changeable by one person, and as a result of that, we got a name and a customer profile four or five times for the same damn company. So we got dirty information that we're going to have to cull our way through. But then the thing that bothers me most is let's assume, at night independent contractors. They're out there working all day long. They get home at night, they do their paperwork, they get on the computer, they order their parts for tomorrow, they set up the schedule, all that stuff.
Speaker 1:So a customer comes in, he looks at your catalog, he looks at your inventory, checks the price, checks your availability and he doesn't order anything. Tomorrow morning I want somebody from the dealership to call that customer. Tomorrow morning I want somebody from the dealership to call that customer, say I notice you're looking at ABC part. You check the availability yeah, we got it. You check the price and we think our price is pretty fair, but you didn't order it. Have you ordered it yet? Nobody does that Because we're still operating the job the way we did 50 years ago. Customer calls, I'll answer the phone, I'll give them information, I'll take down the quantity and part number that they want. I don't sell related parts. We got to reorder the whole darn business and artificial intelligence gives us a wonderful excuse to do it. But, jay, I don't see people doing it.
Speaker 2:Well, okay, so this goes back to leadership. Yep, and I think, with no disrespect to the sort of existing leadership within the industry, whether that's a manufacturer or that's a dealer they're not thinking about these things. So what I would say is is um, you know, what gets measured gets done. If, if you start tracking the scenario that you just laid out and you were going to bonus someone based on their conversion of a site visit to an order, it'll get done. I can assure you of that, because now you're counting it, you're looking at it, you're measuring it and then you're rewarding someone for that performance.
Speaker 2:But a lot of the guys in the industry aren't technologically advanced, they're not what I call tech forward, and so they rely on just a sort of trust that you're going to apply a certain level of strategic thinking to solve this problem. And there are some people in the industry who do that. They're just the rare exception. So how do you promote a way of thinking amongst people that need that agitation, and you have to align your compensation and your performance strategies with that. Then how do you do it? What's the technology that we use to do that? Can we actually measure who's been on our site, who's put a part in a basket online and abandoned that order. Do we have those insights? Is there somebody in marketing that knows that? How do we get that information from that person to someone else who can then convert that to some behavior that then turns that into actual order, which then hits your top line revenue for parts and ultimately some portion of that, hopefully, to your bottom line. That's the disconnect.
Speaker 1:Yeah, you bring up a beautiful example Jeff Bezos, amazon bookstores. He disrupted that whole industry. He offered books that were cheaper, such that even with freight, they were below the bookstore price. I read books I used to buy from bookstores. They never had the books I wanted. I had to wait to get it in.
Speaker 1:So Amazon recognized that little hole, just like you're talking about, and look what he did. He became for a short while he was the largest retailer in the world. He made that a marketing company company so that if you looked, it came back well, yeah, we noticed, you looked, we got this and this and this I get. Alexa comes back and he said we noticed a little and would you like me to add it to your shop? They make it easy.
Speaker 1:And then let's go the other way, sam Walton. When he became the low-cost provider, he recognized the hole. He went to every one of his suppliers and said I'm going to make you my sole supplier. You'll be the only one that sells your product in my stores, but you can never run out on the shelf and I will pay you after I sell it. So he had no carrying cost, absolutely the lowest cost provider. And he rode that for a long time and everywhere along the line we've seen these disruptors Bezos, probably, bookstores how long have they been around? He's destroyed them.
Speaker 1:Walton, low cost provider he's still the largest. He's back to being the largest retailer in the world with the highest customer service, and our business seems to be putting profit ahead of people. So the characterization I give you is this Every 20 years, for the last 40 years, the number of dealers competing in the marketplace has reduced by half. So if we had 185, we had 50. In 2005, we got 25 today and everybody complains about oh, customer loyalty, is it's gone? Well, I think we've worked awfully hard to kick it out, because we cut down the number of people who went to voicemail. I know dealers that had people go to voicemail because they wanted to put a promotional message up before they answered the phone. I don't think and you characterize it as leadership, I characterize it that way too, but with curiosity a lot of the leaders are afraid like hell to change anything because they don't know how they got to be this successful in the first place.
Speaker 2:Well, yeah, so my, my, what I've witnessed is that I think there's a general tendency for people to assume that because you own a business, that that means you're the smartest guy there, and and that is definitely not the truth you got the mic, maybe that's all Exactly. I was going to say it that and a risk tolerance. And so what happens is you get guys you know their relationship this industry is a relationship industry and so you get guys who strike deals because of who they know and and this you know sort of ability to be in the field and understand what's, what's the problem the customer is trying to solve. And then how do I apply a machine to solve that particular problem that I can sell to you? That's a different skill set than thinking about business problems, and so their default sort of tendency is to want to. I mean, most of these guys grew up on a farm or in a construction business. They've been around this equipment their entire life, if they're not generational, meaning that their dad or somebody in their family worked for CAD or a CAD dealer or John Deere, fill in the blank. Their default is to want to be close to the customer. And so you know these guys they're not thinking about. They don't get passionate about figuring out how to leverage technology to improve a process to solve a business problem. They love the thrill of the hunt, the kill, you know, the ability to close a deal. So many of them, in fact, that they sacrifice product support over machine sales, which is really a very backwards way of thinking about business, because your best margins are parts and service and your return customers come either come or don't because of the after sales support that they get.
Speaker 2:I mean, I have a friend of mine had a bmw. I don't, I'm not a fan of bmw, but she had a bmw and she thing was always in a shop and for weeks at a time she's not had another bmw because they couldn't. Just the service department was terrible. I had a Porsche Cayenne, a diesel Porsche Cayenne. I loved that car. I hated the service department, not the service department, the advisors, they just they were arrogant. They didn't follow up with you, they didn't call you back. They made you feel like you were an inconvenience to bring your car in. You know, um, it just there was just I don't know like. So I'll never buy a Porsche in San Antonio again because I don't want to deal with their service department.
Speaker 2:They got a one-star review for me, and so these are the things that I feel like executives in that run dealerships in particular. Um, you know they're, they're not. They're not thinking about some of these things, some of the most basic things. You know, how do I, how do I align business strategy with this balanced scorecard approach customer satisfaction, employee satisfaction, financial performance and operational performance satisfaction, financial performance and operational performance Operations could be. You know, you can tie safety, quality, etc. Right.
Speaker 2:And how do I build strategies organizationally that make sure that I don't steal from one by pulling too hard on the lever of another one? Because if I wanted to drive bottom line value, why don't I just fire my most expensive employees? Well, what if that's your best performing sales rep? That'll add a lot of bottom line value for just a minute, and then you're going to suffer the consequences of that decision. And so you have to balance people strategy and financial strategy, and customer strategy and operational strategy, and a lot of these guys don't have the business experience to think about their business from that balance scorecard perspective. And technology and AI is just a contributor to that.
Speaker 1:Yeah, exactly right, and it's interesting, balance scorecards started at Harvard in the accounting department, so those four elementscard started at Harvard in the accounting department. So those four elements, they start at Harvard. They say, well, what? What's the financial implication of this? I start the other way around. What does the customer need and want?
Speaker 1:That drives operational excellence, 100 percent Driven by employee satisfaction and loyalty, then I don't care, the results will come of their own. Yes, it's a byproduct. Yeah, and again it comes back to you mentioned. The machine is the important one I used to. I've always been a parts and service guy and I was lucky to meet Bill Blackie, who was the chairman of Caterpillar, who created the absorption method, and I offered to work for him for 150 bucks a month. That's how low the wages were. But you know he said I don't think I can teach you much, but isn't 150 bucks a lot of money? You know pain in the ass. But what he said to me was people are forgetting. It's not just about the profit of the parts and service department, it's constraining expenses in sales, administration and interest. And our bugaboo in this industry is we got inventory coming out the wazoo in every aspect. Probably 50% of the parts inventories in this industry haven't sold in the last 12 months. Why do we still have them?
Speaker 2:then, well, and and what? What was the? What was the process supporting the decision to buy that part in the first place? Like, where does it be? What's the root problem here? Is this is this a um? Is this a people issue, a training issue? Is this a? Your model is broken. You do you not know how to demand plan Um? Is it like? What is the root to that problem? And then you begin to figure out how do we solve that. You know the, the, the obsolete inventory, or the slow, you know, moving inventory. That's just a tell.
Speaker 1:That's not the root problem, that's right, that's exactly right. And and the problem with the root problem. That's right, that's exactly right. And the problem with the root problem. If I can be that silly, if I ask people what the rule is that they're following, and just parts people, warehouse office sales, everybody I bet you I wouldn't get 10% of them. That would give me an answer and the answer is two and six months, three and 12. And that's a card X rule. It's been around a hundred years and you know it it it never worked for me. Caterpillar I started with Caterpillar dealers and I've worked for two of them in Quebec and in British Columbia, both very good companies. But we used to get a price tape from Caterpillar and I think somebody made a mistake because they put on that price tape a code to indicate activity. So 280 something, thousand part numbers I knew which ones sold 12 times a year in the world or more, they told me that Meaning individual counts or turned.
Speaker 2:They told me that Meaning individual counts or turned.
Speaker 1:Individual part numbers that would count 12 times a year in the world, or more Anything. 11 and down didn't show.
Speaker 2:Yeah, that's still got to be a lot, holy cow. That doesn't narrow things down at all.
Speaker 1:Well, be careful. It's 15,000. Part numbers out just under out of 286,000.
Speaker 1:When I first did 70 and I go to the guy who runs parts at Caterpillar. His name was Bob Kirk, a wonderful guy, been around forever, very smart, very knowledgeable, very organized, which you have to be in the parts business. I said, bob, I'm not going to carry anything that's less than 12, but I'm going to give 100% of anything that's 12 and higher. I'm going to give it to them for free. If I don't have it, what do you think? He says not bad, what are you going to do with the 11, 10, 9? I said, well, we'll sit down as a group and we'll say, okay, I sell that part 10 times. How many do you want to have on the shelf? And we'd argue about it, one or two. So we ended up 11 and down with one and two. And I said, well, wait a second, I don't want to carry anything that sells three times, two times, one time or not. I'm not going to have any. And we did that and our turnover went to five and six, from one and a half to two.
Speaker 1:And the metrics you mentioned measures. If you measure it, one of the measures that's critical to me is return on capital employed. So if I invest a million dollars in inventory and I turn it five times and I make a gross profit of 30%. I'm making 150% return on that one million. I'm getting back a million and a half versus 30% of two is 60. It's costing me money to carry that damn thing.
Speaker 1:So here comes the sales department. They wanted me to give them a discount. You got to support me because you know, if I don't get the machine out there, you don't get any parts. I said that's fine, and every month I would ask them what their gross profit was, and then I would put that up against the discount discount I gave them in parts and said well, when are you guys going to start making money other than what I give you and other than being embarrassed? It never changed anything, it you know. So affecting change we've made way too much money for too long in this industry, which is why it's more difficult to change than most. But here comes the internet, here comes sensors, here comes artificial intelligence, here comes data analytics, here comes all this stuff. I don't need a dealer anymore. If I'm an OEM, I can ship. What they're doing with Ford, that's what they're doing with the electric cars and the dealer contract. You do not have any inventory of vehicles.
Speaker 2:I would say that the the distinction that appears to be the distinction anyway between automotive and heavy equipment is the number of uh independent mechanics in automotive is significant compared to independent mechanics and heavy equipment.
Speaker 1:So there's free frame there. For a second, if I look at maintenance, what percentage of the maintenance work on construction equipment?
Speaker 2:do you think surveys tell us the dealers get of just preventive maintenance like oil changes and filters and that kind of thing? Yep, jeez, I have no idea. I mean so it probably depends on the customer. If you have your own fleet and you have a service department within your fleet maintenance, then probably zero. You know because you're doing it in-house. You know because you're doing it in-house. If you own your own machine and you don't have a service department, because you don't have enough of a fleet to justify having a fleet manager who manages the maintenance of your equipment, well then they should get 100% of it. But that's like asking how many people actually go to the dentist once a year for a teeth cleaning. Probably not a very high percentage.
Speaker 1:Yeah, and the other part of maintenance is he who does the maintenance gets the repair. So the number you're looking for is less than 5% is done at the dealer level. Wow, wow. And there's a double barrel question in there. What if the dealer offered at the same price? The problem with maintenance for a dealer is they charge journeyman rate instead of a maintenance technician rate.
Speaker 1:So I was in the industry in 69 when we basically moved away from tractors and loaders and broadened the product line, and at that time the dealers couldn't keep up with warranty work so they let maintenance go. And the customers that were conscious of the fact that if I maintain it properly, my operating cost per hour is going to be lower, they started hiring people from the dealers and down came the spiral. The cause-effect thing is all the way around, and one of the things that I'd like the people listening to this reflect on. Jay is talking about the operations of our business. He's recruiting, he hires people, he evaluates people, he staffs companies. How come he knows the business better than you guys do? And I'm not trying to be smart, I think that's a pretty fair characterization.
Speaker 2:Yeah, I can answer that question. I think it might be interesting for your audience just to understand. I interview people all day. Every day I get to hear the gripes and complaints and issues that result in people leaving one job for another. And when you do that in scale over a long period, and so you, you, it, just a lot of this stuff just begins to paint a very clear picture of what what you know begins to be somewhat fuzzy and and hard to discern and large volumes begins to be a very clear picture. And so I, I, you know, begins to be a very clear picture. And so I, you know, put me in a service department. No, you wouldn't want to do that, you know, I do want to Let me interrupt you for a minute.
Speaker 1:I was a parts manager. My best man was a service manager. We were not happy with the relationship with the parts and service department so we decided we'd swap jobs. So I went to the shop, he came to parts, I put on overalls, I went to the floor. After a couple of weeks the guy said take them off, get in the office. You're hurting us down here. So, in response to you, at least I understood.
Speaker 1:But one of the things I did relative to your interviewing regularly I had three questions what do I do that you like that I do and you want me to continue. What do I do that you don't like that I do and you want me to stop? And what do I do that doesn't really matter to you. And I asked that either every three months or six months, depending on how long I'd been in the business or in the department or whatever. And boy, does that ever tell you something? Just like you interviewing people. What, what, what gets under your skin? What drives you crazy? So, as a new employee, how many bosses do you think go back after three or six months? Says, okay, you've been here three or six months now you've got fresh eyes. What is it we do that drives you nuts, that we think we're crazy, that you'd like to change Nobody that?
Speaker 2:or, yeah, it's very few do, yeah, no, it's, it's, it's rare and I think it, you know it's um, a lot of it has to do with with. Steven covey talks about first things first. That's the second habit of a highly effective person. Yep, and he actually has a book just about first things first. That's the second habit of a highly effective person. And he actually has a book just about first things first. And he talks about things in these four quadrants.
Speaker 2:And urgent and important is where a lot of people in the industry spend their time and the reason why they're stuck in urgent and important when they really, stephen Covey would argue, should be in the not urgent but important. That is, you're actually spending time solving future problems, that you're addressing things that don't need you to put a fire out today, but you're doing fire avoidance. You know, and so I feel like a lot of times what happens if I take parts or service. I mean your service managers swamped. You know, if systems and processes aren't tight, you don't have the right people, you don't have good training. It's like what comes first the chicken or the egg and so they get bogged down, so it leaves them no time to want to sit down and think about how are my people doing?
Speaker 2:And I wonder how Jimmy, who started here a month ago, I wonder how his first month is going. Maybe I should go talk to him, but because they're bogged down in the administrivia of running a service department that isn't well-oiled, ironic or not ironic, but forgive the pun, you know it's like. Well, that's where the problem is. And so how do you begin to solve? Or, you know, do fire prevention or problem prevention, without letting the urgent and important issue of today just explode, turn into a raging inferno? And that's tough, you know it takes good leadership. A raging inferno, and that's tough, you know it takes good leadership. Uh, it's heavy lifting at first, but once you do it and you get past that, that, uh, you know, tipping point, um, you can tell in talking to the dealers and and the departments, which ones have made that transition successfully, you know yeah.
Speaker 1:So another thing that's interesting is my boss at hewitt was a man by the name of rod wallow. He was a bush pilot, a mechanic. He fired me five times once I got home. Very passionate guy he required this is. He started in 52 with the dealership. I started in 69. When was there? We had a service manager who was a technical guy. We had an assistant service manager who was a business guy. So today in leadership, I'm going to want all of my leaders to be skilled people leaders. I want them to be business thinkers and I want them to be change six sigma, continuous improvement. Whatever drivers, if they don't understand the discipline over which they're the leader, I don't care. I can hire people to do that. I can't find good leaders with those qualities that I'm talking about and I bet you you see that every damn day.
Speaker 2:And what I see, uh, in addition to that, are companies that think that somebody who doesn't have the technical discipline can't actually lead people who are technical. It's utter nonsense.
Speaker 1:Yeah.
Speaker 2:In fact, you know, take sales, take technician, you promote into a service manager your highest performing sales guy, put him in a sales management job, coin toss.
Speaker 1:My best example on that is which superstar athlete has been a good manager or coach.
Speaker 2:Yeah.
Speaker 1:And to me there's been one, Bill Russell, I can't think of anybody else, or the opposite of that.
Speaker 2:Can you name a coach that's never played but was a brilliant coach?
Speaker 1:Greg Popovich was a good example of that Precisely, scotty Bowman was another, because he had a problem with his eye. Yeah, and you know that's again. I think that's making the point. So let me open another door. I don't think human relations, I don't think recruiting, I don't think salary administration, I don't think performance reviews are part of the core competence of anybody in the distribution channel. What do you think of that? I wouldn't have them. I'd subcontract it out.
Speaker 2:I wouldn't have them, I'd subcontract it out. Yeah, wow, okay. So that's a radical change. Yeah, right, okay. So I'm going to. I break HR down into. I'm going to call it two buckets, but it's really three.
Speaker 2:A lot of people think that recruiting and HR are the same thing. They are absolutely not Right. And a lot of people think of HR strictly from the tactical perspective. And I say a lot of people, a lot of people in our industry. You know HR is in 90%, if not more, of the companies, the heavy equipment companies, dealer, manufacturer, doesn't matter, doesn't matter.
Speaker 2:Hr is an administrative, tactical function. It's make sure people's paychecks are right, that you can. You know you're processing payroll, that you're making sure that they have benefits and that they're enrolled in the proper thing and the deductions are set up and they're doing employee relations. Maybe they're doing a little bit of okay, look, you didn't show up on time for two days, like what's going on. You know you're getting into a little bit of okay, look, you didn't show up on time for two days, like what's going on. You know you're getting into a little bit of that, but but it's tactical, it leaves, and it's legal compliance. You know it's making sure that your folders are all set up and that you don't have the, you know stuff commingled. That shouldn't be. It's it's it's tactical, it shouldn't be. It's it's it's tactical, it's necessary, but it's as necessary as plumbing and electricity at your house. You know, you got to have it, but when it doesn't work it's a real problem.
Speaker 2:You know, now the other side of HR is the strategic side. That's the, the organizational development piece. That's where you align business and talent strategy, where HR begins to become a right hand to the CEO or the leadership team and you begin to talk through well, what are the challenges employee engagement perspective, from a security or safety and operational perspective, equality perspective and then you back that down into people strategy. What are the people that we need? What is the training that they need? Do we have process in place to evaluate the performance of those people against those things? Are those yielding customer satisfaction and profitability, like we thought? If the answer is no, why? What would happen if our key person got run over by a bus or had a God forbid a heart attack or just suddenly quit? Do we have talent in our pipeline? Who are our next level performers, our high performance employees, hypos, and do we have a system in place for sort of determining that. And then there's recruitment.
Speaker 1:So stop there for a second, because what you just listed is wonderful. People will get into a discussion and they'll recognize everything there. They don't do it. Yeah, I know. So your problem avoidance I'm working tactically on things that are going to cause me problems six months, six years from now, so that they don't happen and it allows me to do my job properly. The hiring and firing I was a data processing manager once this guy put me in there because he wasn't happy with what they did and I had to run payroll checks. And one weekend, the computers. I had two computers. Everything was doubled up but they were both down and I couldn't run payroll checks. And here comes Monday morning and everybody wants their check or their direct deposit. Couldn't do it. The following week I had an outside company that did that for me. I never wanted to have that happen to me again, ever. So the same kind of thing. George just died. He had a stroke. He was critical to my operation. Who's next? Haven't got a depth chart at all?
Speaker 2:Number one number two or a map process that tells you here's how things operate and here's where our handoffs are, and you know, could somebody come in and and and get something from point A to point B where somebody can then pick it up and take it from B to C? You know, like just just actually having mapped processes, understanding what are our core processes? Like no, probably not.
Speaker 1:Yeah, sarah Hanks is one of our contributors, used to be, and she's a mechanical engineer. She was at general electric as a manager, a manager in manufacturing, very talented person, and everything she does is process flow charts, you know, and every now and again she'd get everybody together. Let's look at these things here's's. You know, this is a decision point. Who makes that decision? What's the? So let me take you to performance reviews. Who's trained the people in the company, in the dealerships, to do performance reviews on their employees? Whose job is it? Or who's?
Speaker 2:doing it.
Speaker 1:Do you think the managers in dealerships know how to do performance reviews?
Speaker 2:I mean not, not with any, any real consistency. Maybe maybe there's one manager who just gets it and maybe he's good at it or she's good at it, could you say, across the entire management team? Yeah, I mean it's. It's like I said, most organizations and I'll I'll I'll be specific about dealers, even larger dealers. Hr is a tactical the, the, the VP of HR, the leader of HR. 80% of their time, if not more, is spent in the tactical weeds.
Speaker 2:They're, they're not, they're not really getting into um, the, the, the strategy piece of it, the talent strategy component, which performance reviews, is an example of that. And what? What tool do we use to do that? And are they? You know are? Is this a person? Uh, because a lot of it's subjective, you know well, god. I think, like, how do you make somewhat subjective feeling about someone's performance objective? How do you turn that into something that you can actually go? Okay, if they check all these three boxes, then you can rate them five stars out of five you know or check these five things, then they can get three stars out of three.
Speaker 2:Whatever the case is, you know, and if they're missing one or two, and then your ability to then translate that into into some sort of training and development plan, like here's your weak spot, let's focus. And so now it's not a I'm going to club you over the head because you're not perfect. It's a we want to invest in you, we think you have great talent and here's an opportunity for you, and so we want to help you develop this skillset. This is an area where you're weak. Here's how that's manifested in the past. This is how I know it's a weakness because of this, and they'll go yeah, okay, I get that. That's fair, you know, and it's not fuzzy at all. Right, you know, and a lot of it's because you're not. You want to see these people perform at a high level. You're not there to catch them doing something wrong, but a lot of people, that's what they do, exactly, exactly. So what kind of how productive of a conversation is that, if you think you're?
Speaker 1:about to get in trouble. Yeah, when you think about that for a second, you see screw-ups all day long. You don't have to look for them, they happen right in front of your face. You really have to look for when somebody's doing a good job and, as a result of that, I don't look. So we have assessments, I think you know, from 90 questions to 180 questions for every job function, 90 to 95% of the labor hours, and we want the employee to fill out that assessment on themselves and we want their leader to fill out that assessment on the employee and then the two of them sit down and they compare.
Speaker 1:And boy does that ever change the dynamic.
Speaker 2:Yeah, yeah, it's uh. I went through a leadership exercise. Um, I don't know if you're familiar with Johari window. Yep, Okay, it's uh. I went through a leadership exercise. Um, I don't know if you're familiar with Johari window.
Speaker 1:Yep.
Speaker 2:Okay. So, um, you have um, these four quadrants, and and ultimately you know you're looking at open, which is what you know about me and I know about myself. Um, you have um hidden, which is what I know about me but I don't share with you. You have blind, which is what you know about me that I don't know about myself. And then you have this really subconscious thing that you don't really know and other people don't really know, but it could be a thing.
Speaker 2:Ultimately, you go okay, well, let's take that last category out, let's pie chart. What percentage of Jay do we think is blind, meaning I know about Jay that he doesn't know about himself, and what about what percentage of that pie chart is what Jay shares with me but also knows about himself, et cetera. And then you compare your chart and I compare my chart, what I think about myself, and that that is the beginning of figuring out. How big of a gap do we have? And that's kind of what you're talking about is is this blind spot that we all have, you know? So the idea is, how do we close the blind spot?
Speaker 1:And I think it gets even worse, jay. You know Patrick Lencioni wrote a book called the Three Signs of a Miserable Job. The first sign is anonymity the company doesn't know anything about the employee. They don't know if he's married, has kids, is sick, he's got cancer, nothing. The next one is irrelevance they don't know where their job fits in the organization. The last one is immeasurability. So I go to the blue collar guys. I think they're lucky. They go home at the end of the day. They know what they got done. Nobody else does. Nobody has a sense of satisfaction because they don't know how to measure their performance. Nobody tells them that. Right, and again that goes back to me the, the strategic piece of HR. I won't leave that in the company. The tactical, I want to take it the hell away. Let somebody else do that.
Speaker 2:Yeah, and so and so. Then there's recruiting, like I said, and and recruiting, um, it kind of fits into the organizational development. It kind of fits into the organizational development, the strategic part of HR. But I use this sort of metaphor, thinking about HR as a basket of fruit and recruiting is the watermelon in that basket.
Speaker 1:I don't like watermelon.
Speaker 2:It's big and bulky and heavy. I'm playing, it's big and bulky and heavy. Uh, you've got. You know, perhaps your apples and oranges are, are your tactical, it's just like you know your bananas, they're like your common sort of fruits, um, and perhaps you know coconuts and and Kiwis and raspberries are the.
Speaker 2:But the point is that because recruiting itself is such an enormous task that um it, it's a challenge for for organizations, so could you outsource components of it, like you're saying? Well, they out have been outsourcing payroll for years, decades. You know you can outsource benefits to a broker. You know they can do plan design, you know, and then and then they can manage those tools today, technologies that can manage your, your, you know, your benefit selection and and your, your enroll, open enrollment process. I mean the. The stuff is available today through technology to do some of the administrative things. Yeah, outsource as much of that as possible.
Speaker 2:The strategy piece is where I feel like could probably stay inside. What are the policies and the compensation and what's our culture? What's the brand, our employment brand, what is going to make somebody want to come join us? How are we going to be attractive as we compete for the talent, the resources, ie talent that's available in the marketplace, you know, compared to the guys just down the street from us or even across the country. That's important, you know. You have to align talent strategy or, excuse me people and talent strategy with organizational strategy. That's really hard to outsource, in my opinion, if you're doing it and then recruiting, while it is a strategic component, it is a lot of absolutely necessary tactical execution, which is why it's so bulky and heavy and that could absolutely be outsourced. We do that. We outsource recruitment. We are adjunct recruiting department, either bolting onto an existing HR team that doesn't have recruiting acumen or bandwidth, or for organizations that are decentralized and they want their hiring managers just to be able to contact us and process, you know, the recruitment process for them, handle the recruitment process end to end for them, and so, yeah, I think more and more organizations should look at that. They've been outsourcing recruitment for I don't know, probably a decade or more. Now we're seeing recruitment for I don't know, probably a decade or more now Varying levels of success.
Speaker 2:I think where we're probably different on that front is that we are industry experts, we don't just know recruiting. So I think about well, what differentiates us? What differentiates us? We know recruitment, recruitment process. We're very skilled in that.
Speaker 2:We know the heavy equipment industry and how it operates Manufacturers, how they operate, what makes the money, how they design equipment, how they build it, how they get it out the door, the dealer, the rental, like we understand the business kind of at a high level. Then we know the jobs within those organizations that make it run, that make it tick, that make it possible for them to actually, you know, sell their wares and support them after the sale or, in a manufacturer's case, even engineer and design it. And then the last domain expertise is the product itself, its application. Is it forestry, Is it mining? Is it construction? Is it material handling? Is it power systems? Is it off-road, is it on-road? We know all of that stuff and it is our industry knowledge coupled with our recruitment process knowledge that makes us way more skilled at being able to outsource for a heavy equipment company their recruitment process than just some generic recruiting firm that sits in your backyard that says, oh well, we're recruiters and we can do this for you.
Speaker 1:Yeah, I'm going to say at a dealer level, a lot of the recruiting is done by the manager of the function himself. Yes, I would agree, it only goes up into a more specialized area with the task. But let me flip it. What percentage of a dealer's revenue would you say recruiting and employee development should be?
Speaker 2:That is a great question. I don't think I could. I don't. If I answered that question, it would just be a total stab in the dark. I don't know the answer to that. Like, for instance, if we talked about um, um, oh, somebody was, were you and I talking, uh, earlier today about um, you know what percentage of your revenue should be set aside for something, and it was like 3%, I think, was the number and so could you come up with that and figure out okay, are we actually spending enough? Are we below or are we above that number? I don't know, but I'm sure that I could find that out. In fact, I probably will ask AI to give me an answer to that at some point.
Speaker 1:Okay, and what I'm going to tell you in the parts and service business is that, other than some rarity, the technicians are the only ones that get training and that's a requirement. So if you look at the parts business and the service business technical communicators, inspectors, counter people, warehouse people, et cetera, zero, et cetera, zero I'm asking companies to set aside $500 a year for every employee that touches a customer, that manages assets or leads people. I expect the employee to take four classes, so they're going to invest between 25 and 40 hours of their time over the year and two assessments the boss and me every year. If the assessment after the classes does not get better, we have one discussion. If it gets worse, we have another discussion. If it gets better, we have a third discussion.
Speaker 1:None of those things exist today. There is not. There is for data processing, there is for darn near every other thing, but not for employee development. Sales training do a Google. See how many people are out there that provide equipment, specific sales training. Two or three companies, period the associations AED, amp. Two or three companies, period the associations AED, aemp, aem, nahida all of these guys. They have training. They outsource to an instructor. Some associations are still using material I created in the 1990s. I'm dealing with manufacturers who have academies and they hire people to come in and do classroom training. Dealers are saying to me I can't have that guy leave me for two days or three days or a week. And I say, even worse, after they get back, wait a week and then ask them what they learned because they've forgotten it all. Yeah, we have done a terrible job, jay, in the human resources aspect of our business, and if we don't have good people, we're dead.
Speaker 2:So these are the kinds of discussions that should be taking place. That's a quadrant two activity. Yep, that is not urgent but important. Yep, that is not urgent but important, meaning your business isn't going to implode or explode if you don't solve that problem today, which is why it's gone unsolved Precisely.
Speaker 2:But if you were to sit down and say, okay, we know this to be true, why is it this way? And you get to some root problem there and then you begin to make a change, driving towards continuous improvement. And then you watch and see, is it any better? And then you see that it's improved, but still not enough. And you go okay, why? And you go, okay, well, what if we do this? And eventually you iterate your way through to a point where it is improved, where it becomes ingrained, where the problem that existed previously doesn't exist anymore.
Speaker 2:But now you're onto new problems. You know, in Six Sigma you're onto new problems. You know, in Six Sigma it's DMAIC, it's define, measure, analyze, improve, control. And yeah, exactly, it's circular, exactly, and it is an iterative, continuous improvement process. But you're always asking yourself those questions why? Why is it like this? And you know, if you tie it back to customer satisfaction, which is very telling. Or employee satisfaction or financial performance, those are pretty good indicators. So those are high level indicators and then you go. Why is it like this?
Speaker 1:What is a reasonable turnover rate for a business?
Speaker 2:You know it's funny. I was looking yesterday at a post somebody put out and, and and they were. They were trying to, to, to sort of create a distinction, um, between turnover and um, uh of of various types. So they had this little you know four quadrants and I can't remember what was in the bottom half, but you know you have on the upper half. Well, if these people leave and there's nothing you can do about it, you know they die, their spouse gets relocated, you know they pursue a different career. Whatever happens, you know they retire.
Speaker 2:There's a lot of that actually in you know sort of facing the industry. And then there's all the other people that leave and it's generally a leadership issue. I mean I don't know what a good turnover is. I mean I'm sure somebody probably McKinsey, probably has some sort of slide deck on that. I personally feel like it comes down to employee engagement and satisfaction.
Speaker 2:And if you're not doing an employee engagement survey every year and looking at that data and understanding what is the cause for people's joy and dissatisfaction, what do we need to do more of? What do we need to do more of? What do we need to do less of, and then actually using that information. I think if that's the beginning, because at that point you can then say, okay, well, I'm hearing what you're having to say, we can begin to make some adjustments. Your people see you making changes. They value and appreciate that you've heard what they've had to say and you're doing something with that information. But the opposite is true If you don't, cynicism will abound, that you will have more turnover. If you have an employee survey, engagement survey, and you do nothing with the data.
Speaker 1:Just don't do it. Yeah, shame on you.
Speaker 2:Yeah, just don't do it. You'll create more cynicism and negativity. It will be, it will be. You'll get the exact opposite effect, you know. And so then then you can go okay. Well, I guess the amount of turnover that you can suffer that would be acceptable is what doesn't affect customer satisfaction or your culture or your financial performance. Is that the same for every single business? No, not at all.
Speaker 1:Yeah, maybe not it might be close, one of the things that's interesting. I'm going to put a period on our discussion right there because I think we could keep on going for hours and I think that's very beneficial. But the employee engagement survey, I believe, is one of the critical elements. That's my what do I do, that you like, et cetera, questions. Everything's quadrants. Employees today have been taught to be obedient from the time they're babies. When we get them out into the workforce, we want them not to be obedient, we want them to be curious, we want them looking over the wall. What if we did this? What if we did that? And I'd like to address that the next time we have one.
Speaker 2:Yeah, sure, yeah.
Speaker 1:Yeah, that's fun.
Speaker 2:Yeah, that's fun.
Speaker 1:So thank you. Thank you very much for this, jay, and everybody who's been listening. I hope you got something from this candid conversation and we look forward to having you join us again in the near future, mahalo.
