September 8, 2025 • 63 mins
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.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Aloha and welcome to another Candid Conversation.
I'm really pleased today to bewelcoming Jay Lucas from a
number of companies.
I'm going to let Jay describefor himself and we're going to
do a parallel path to artificialintelligence having people in
distribution channel focusing ontheir core competencies and
(00:25):
outsourcing things that are not.
So.
With that as our intro, jay,the floor is your.
Why don't you tell everybodywho the heck you are and what
you do and have?
Speaker 2 (00:36):
okay, yeah, sure uh, it's, let's see.
I've been in recruiting for 30years.
I started back in 95, almostexactly 30 years ago Worked for
a big national firm, mostly intechnical recruiting and
staffing specifically.
(00:56):
So we did projects, so contractengineers in most cases.
Anyway, after kind of runningthrough the ranks there I left,
decided that I would start myown firm.
I really liked the search sideof the business as opposed to
the staffing side of thebusiness, and so I started my
(01:17):
own firm, really didn't knowwhat I was doing.
I knew how to recruit, butrunning a business and
recruiting are two totallydifferent things, and so I've
basically been inself-employment since 2004.
Along the way I was introducedto Bill Sitter.
Bill is he's got a reputationthat is well known in the heavy
(01:41):
equipment industry, in the heavyequipment industry.
When he retired from the heavyequipment industry he joined
basically it was Joe Jordan whoalso had retired from heavy
equipment and started thisrecruiting firm.
They renamed the company JordanSitter Associates and Bill ran
(02:04):
Jordan Sitter Associates forprobably 15 or so years before
he decided to retire a secondtime and sold the business to
another heavy equipmentexecutive that was wanting
something to do in retirement.
I then actually acquired thebusiness from Jerry Randekker or
Carol Randekker after Jerry'ssudden passing in 2018.
(02:28):
And so I've brought myrecruiting skill set to the
heavy equipment industry andreally spent the last seven
years learning the industry, thecompanies, the business models,
what works around culture andtalent and recruiting what
(02:48):
doesn't.
Best places in the industry towork, why they're the best
places to work, worst places towork and why they're the worst
places to work.
Challenges in the industry thatplague the industry from a
talent perspective and thenultimately, downstream, affect
(03:08):
strategy and execution.
And so that's us.
We've got a team of eightdedicated to recruiting and
heavy equipment.
Our recruiters are specialized,and so each one of them finds
their own sweet spot one insales and marketing, one in
product and management andengineering, one in sales and
marketing, one in product andmanagement and engineering, one
in manufacturing and supplychain and another in parts and
(03:29):
service or product support.
So those are kind of our four.
You know, core competencies.
I work largely with themanufacturers, and then Wade
Massey, my right hand, workslargely with the dealers.
So that's about us largely withthe dealers.
Speaker 1 (03:45):
So that's about us.
So one of the things that Ihope everybody heard is here's a
man who has wandered throughthe halls of recruiting, of
staffing, but he's done it withfresh eyes, recognizing that
there are challenges in everystep along the way, and the last
(04:07):
minute or so of thatexplanation, 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 Jayappeals to my mind so much
Everything we do with ourpodcasts and blogs is with
people that I call thoughtleaders, experienced executives
(04:28):
or revolutionary reformers, andI think Jay fits all three.
So here comes artificialintelligence.
Let's take them in pieces.
Sure, is that good news or badnews?
Speaker 2 (04:43):
It's probably a little bit of both.
Speaker 1 (04:47):
That's a wimpy answer .
Speaker 2 (04:49):
Okay.
So I think it's like withanything, there's two sides to
the coin.
And artificial intelligence tome, I mean it doesn't exist
without real intelligence.
I mean it doesn't exist withoutreal intelligence.
And so if we want to proxy ourintelligence to some computer,
(05:12):
um, knowledge, you know,bloodying your knuckles and and
(05:34):
banging your head on things, uh,scraping your knees, like
that's really important youcan't just rely on AI to do
everything for you, um.
So so I think, um, if you dorely heavily on AI to do your
thinking for you, that that'snot really good.
Um, if, if you to be augmentedinitially, but ultimately, you
(06:16):
know, at risk.
My opinion, however, theAchilles heel of our industry is
technicians.
However, the Achilles heel ofour industry is technicians, and
AI will never turn a wrench.
It's just not going to happen.
It's not going to get in atruck and drive down the road
and get out and open its toolboxand grab a wrench and walk over
(06:38):
and start disassemblingsomething or diagnosing a
problem.
It might diagnose, but it's notgoing to do that without an
actual human being there to makethat work.
So is it possible that folkstoday who are pursuing knowledge
, worker, you know, sort ofwhite collar jobs, might be
(06:59):
rerouted to the blue collar path.
That seems to be the Achillesheel of the industry, because
there's a supply and demandissue demand being high and
supply being low.
Um, yeah, I think that's verypossible.
Um, but right now I think it'sa bit too early to tell.
But I like, I like AI, um, forefficiency.
(07:32):
I like AI for taking work thatis important work, but somewhat
tactical and administrative.
I like that it could be a bitof a cam on an engine, meaning
that if you want to augment whatyou know and gain additional
insights or perspective throughusing AI, one of the smartest
things that I've heard somebodyrecently talk about is, instead
of using AI to like, hey, writethis email for me and use this
(07:55):
tone and this language.
Like that's great, but whatabout when you ask AI?
I want you to be a board memberand we're faced with this
particular challenge, and I wantyou to ask me questions that
help diagnose what some of theroot problems to our goal
(08:16):
achievement you know, to ourgoals, like what's what and then
how do we get around that?
Now, all of a sudden, you'reusing AI as a consultant instead
of just an administrativeassistant, and it can provoke a
discussion digitally.
That helps you begin to peelback layers and see things and
(08:38):
shift paradigms, and so I thinkinitially we're probably under
utilizing it, and I think,eventually, when we begin to see
that, it can be used as areally strategic resource,
because it would almost be likehaving the most impressive board
of directors to lean on,because its depths of access to
(09:03):
information is limitless.
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 researchingother podcasts in in heavy
equipment and trying to figureout okay, well, do I want to go
this route or that route orwhatever.
(09:24):
And I was looking for I justasked it to produce a list of of
shows, like a hundred showsthat had a certain number of
followers and an average ratingof like 4.5 stars.
And it produced this list, um,and, and then I asked it to do
it again and it was a completelydifferent list.
So I think you have to becautious.
(09:47):
Which, again, the crossroads ofreal intelligence and
artificial intelligence.
That's where the sweet spot is.
Speaker 1 (10:08):
Yeah, I think you're right and that's an interesting
characterization of it.
One of the things that I wouldsay artificial intelligence has
enabled is a customer to be ableto order their own parts, and
the tools are there.
Electronic catalogs have beenaround for 10, 15 years.
You can get this about everybrand.
It's no longer proprietary.
You can find replacement partsmore easily today than you could
(10:31):
when I started out.
For sure, you've got sensorseverywhere 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 weneed.
Yet less than 10% of the partsbusiness that dealers in the
equipment world are processedthrough the internet.
(10:51):
So one of the things that thattriggered in my little pea brain
and it bothered the heck out ofme.
And it's actually lower thanthat.
Since Caterpillar got out ofthe truck engine business, every
single mechanic orders parts Atraditional dealer.
They walk to the back counterand they engage in a discussion
(11:12):
with a parts guy.
And if it's Monday morningafter a football game, there's a
lineup at seven o'clock in themorning at the counter and
everybody's talking aboutfootball by one guy is being
served by the one guy in parts.
Why the heck do they leavetheir bay?
Why don't they pick up a phone?
Why don't they have a laptop?
Why don't they order it on theinternet?
90% of the dealers could savehow much time of their
(11:36):
technicians.
And, as you say, blue collar isthe least available skill that
we have.
Something that's interestingsince 1990, 50% of the technical
schools in America blue-collarschools for this industry shut
down for lack of attendance.
Imagine that.
(11:57):
And then the other thing thatstrikes me with your
characterization of AI is thequality of the information.
We started databases, probablyback in the 60s, and we never
assigned an owner to a dataelement.
We never said that thiscustomer name, as an example,
(12:22):
was only going to be changeableby one person, and as a result
of that, we got a name and acustomer profile four or five
times for the same damn company.
So we got dirty informationthat we're going to have to cull
our way through.
But then the thing that bothersme most is let's assume, at
night independent contractors.
(12:43):
They're out there working allday long.
They get home at night, they dotheir paperwork, they get on
the computer, they order theirparts for tomorrow, they set up
the schedule, all that stuff.
So a customer comes in, he looksat your catalog, he looks at
your inventory, checks the price, checks your availability and
he doesn't order anything.
Tomorrow morning I wantsomebody from the dealership to
(13:04):
call that customer.
Tomorrow morning I wantsomebody from the dealership to
call that customer, say I noticeyou're looking at ABC part.
You check the availability yeah, we got it.
You check the price and wethink our price is pretty fair,
but you didn't order it.
Have you ordered it yet?
Nobody does that Because we'restill operating the job the way
we did 50 years ago.
Customer calls, I'll answer thephone, I'll give them
(13:29):
information, I'll take down thequantity and part number that
they want.
I don't sell related parts.
We got to reorder the wholedarn business and artificial
intelligence gives us awonderful excuse to do it.
But, jay, I don't see peopledoing it.
Speaker 2 (13:41):
Well, okay, so this goes back to leadership.
Yep, and I think, with nodisrespect to the sort of
existing leadership within theindustry, whether that's a
manufacturer or that's a dealerthey're not thinking about these
(14:06):
things.
So what I would say is is um,you know, what gets measured
gets done.
If, if you start tracking thescenario that you just laid out
and you were going to bonussomeone based on their
conversion of a site visit to anorder, it'll get done.
(14:32):
I can assure you of that,because now you're counting it,
you're looking at it, you'remeasuring it and then you're
rewarding someone for thatperformance.
But a lot of the guys in theindustry aren't technologically
advanced, they're not what Icall tech forward, and so they
rely on just a sort of trustthat you're going to apply a
(14:58):
certain level of strategicthinking to solve this problem.
And there are some people inthe industry who do that.
They're just the rare exception.
So how do you promote a way ofthinking amongst people that
need that agitation, and youhave to align your compensation
(15:25):
and your performance strategieswith that.
Then how do you do it?
What's the technology that weuse to do that?
Can we actually measure who'sbeen on our site, who's put a
part in a basket online andabandoned that order.
Do we have those insights?
Is there somebody in marketingthat knows that?
(15:47):
How do we get that informationfrom that person to someone else
who can then convert that tosome behavior that then turns
that into actual order, whichthen hits your top line revenue
for parts and ultimately someportion of that, hopefully, to
your bottom line.
That's the disconnect.
Speaker 1 (16:09):
Yeah, you bring up a beautiful example Jeff Bezos,
amazon bookstores.
He disrupted that wholeindustry.
He offered books that werecheaper, such that even with
freight, they were below thebookstore price.
I read books I used to buy frombookstores.
(16:30):
They never had the books Iwanted.
I had to wait to get it in.
So Amazon recognized that littlehole, just like you're talking
about, and look what he did.
He became for a short while hewas the largest retailer in the
world.
He made that a marketingcompany company so that if you
(16:52):
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 wenoticed a little and would you
like me to add it to your shop?
They make it easy.
And then let's go the other way,sam Walton.
When he became the low-costprovider, he recognized the hole
.
He went to every one of hissuppliers and said I'm going to
make you my sole supplier.
(17:13):
You'll be the only one thatsells your product in my stores,
but you can never run out onthe 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 longtime and everywhere along the
(17:35):
line we've seen these disruptorsBezos, probably, bookstores how
long have they been around?
He's destroyed them.
Walton, low cost provider he'sstill the largest.
He's back to being the largestretailer in the world with the
highest customer service, andour business seems to be putting
profit ahead of people.
(17:55):
So the characterization I giveyou is this Every 20 years, for
the last 40 years, the number ofdealers competing in the
marketplace has reduced by half.
So if we had 185, we had 50.
In 2005, we got 25 today andeverybody complains about oh,
(18:16):
customer loyalty, is it's gone?
Well, I think we've workedawfully hard to kick it out,
because we cut down the numberof people who went to voicemail.
I know dealers that had peoplego to voicemail because they
wanted to put a promotionalmessage up before they answered
the phone.
I don't think and youcharacterize it as leadership, I
(18:38):
characterize it that way too,but with curiosity a lot of the
leaders are afraid like hell tochange anything because they
don't know how they got to bethis successful in the first
place.
Speaker 2 (18:48):
Well, yeah, so my, my , what I've witnessed is that I
think there's a general tendencyfor people to assume that
because you own a business, thatthat means you're the smartest
guy there, and and that isdefinitely not the truth you got
the mic, maybe that's allExactly.
(19:10):
I was going to say it that anda risk tolerance.
And so what happens is you getguys you know their relationship
this industry is a relationshipindustry and so you get guys
who strike deals because of whothey know and and this you know
sort of ability to be in thefield and understand what's,
(19:32):
what's the problem the customeris trying to solve.
And then how do I apply amachine to solve that particular
problem that I can sell to you?
That's a different skill setthan thinking about business
problems, and so their defaultsort of tendency is to want to.
(19:52):
I mean, most of these guys grewup on a farm or in a
construction business.
They've been around thisequipment their entire life, if
they're not generational,meaning that their dad or
somebody in their family workedfor CAD or a CAD dealer or John
Deere, fill in the blank.
Their default is to want to beclose to the customer.
(20:15):
And so you know these guysthey're not thinking about.
They don't get passionate aboutfiguring out how to leverage
technology to improve a processto solve a business problem.
They love the thrill of thehunt, the kill, you know, the
ability to close a deal.
So many of them, in fact, thatthey sacrifice product support
(20:40):
over machine sales, which isreally a very backwards way of
thinking about business, becauseyour best margins are parts and
service and your returncustomers come either come or
don't because of the after salessupport that they get.
(21:01):
I mean, I have a friend of minehad 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 forweeks at a time she's not had
another bmw because theycouldn't.
Just the service department wasterrible.
I had a Porsche Cayenne, adiesel Porsche Cayenne.
(21:23):
I loved that car.
I hated the service department,not the service department, the
advisors, they just they werearrogant.
They didn't follow up with you,they didn't call you back.
They made you feel like youwere an inconvenience to bring
your car in.
You know, um, it just there wasjust I don't know like.
(21:44):
So I'll never buy a Porsche inSan Antonio again because I
don't want to deal with theirservice department.
They got a one-star review forme, and so these are the things
that I feel like executives inthat run dealerships in
particular.
Um, you know they're, they'renot.
They're not thinking about someof these things, some of the
most basic things.
(22:04):
You know, how do I, how do Ialign business strategy with
this balanced scorecard approachcustomer satisfaction, employee
satisfaction, financialperformance and operational
performance satisfaction,financial performance and
operational performanceOperations could be.
You know, you can tie safety,quality, etc.
Right.
(22:25):
And how do I build strategiesorganizationally that make sure
that I don't steal from one bypulling too hard on the lever of
another one?
Because if I wanted to drivebottom line value, why don't I
just fire my most expensiveemployees?
Well, what if that's your bestperforming sales rep?
That'll add a lot of bottomline value for just a minute,
(22:48):
and then you're going to sufferthe consequences of that
decision.
And so you have to balancepeople strategy and financial
strategy, and customer strategyand operational strategy, and a
lot of these guys don't have thebusiness experience to think
about their business from thatbalance scorecard perspective.
(23:08):
And technology and AI is just acontributor to that.
Speaker 1 (23:12):
Yeah, exactly right, and it's interesting, balance
scorecards started at Harvard inthe accounting department, so
those four elementscard startedat Harvard in the accounting
department.
So those four elements, theystart at Harvard.
They say, well, what?
What's the financialimplication of this?
I start the other way around.
What does the customer need andwant?
That drives operationalexcellence, 100 percent Driven
by employee satisfaction andloyalty, then I don't care, the
(23:34):
results will come of their own.
Yes, it's a byproduct.
Yeah, and again it comes backto you mentioned.
The machine is the importantone I used to.
I've always been a parts andservice guy and I was lucky to
meet Bill Blackie, who was thechairman of Caterpillar, who
created the absorption method,and I offered to work for him
(23:56):
for 150 bucks a month.
That's how low the wages were.
But you know he said I don'tthink 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 waspeople are forgetting.
It's not just about the profitof the parts and service
department, it's constrainingexpenses in sales,
(24:17):
administration and interest.
And our bugaboo in thisindustry is we got inventory
coming out the wazoo in everyaspect.
Probably 50% of the partsinventories in this industry
haven't sold in the last 12months.
Why do we still have them?
Speaker 2 (24:42):
then, well, and and what?
What was the?
What was the process supportingthe 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, atraining issue?
Is this a?
Your model is broken.
You do you not know how todemand plan Um?
Is it like?
What is the root to thatproblem?
And then you begin to figureout how do we solve that.
(25:04):
You know the, the, the obsoleteinventory, or the slow, you
know, moving inventory.
That's just a tell.
Speaker 1 (25:12):
That's not the root problem, that's right, that's
exactly right.
And and the problem with theroot problem.
That's right, that's exactlyright.
And the problem with the rootproblem.
If I can be that silly, if Iask people what the rule is that
they're following, and justparts people, warehouse office
sales, everybody I bet you Iwouldn't get 10% of them.
(25:32):
That would give me an answerand the answer is two and six
months, three and 12.
And that's a card X rule.
It's been around a hundredyears and you know it it it
never worked for me.
Caterpillar I started withCaterpillar dealers and I've
worked for two of them in Quebecand in British Columbia, both
very good companies.
But we used to get a price tapefrom Caterpillar and I think
(25:59):
somebody made a mistake becausethey put on that price tape a
code to indicate activity.
So 280 something, thousand partnumbers I knew which ones sold
12 times a year in the world ormore, they told me that Meaning
individual counts or turned.
Speaker 2 (26:17):
They told me that Meaning individual counts or
turned.
Speaker 1 (26:18):
Individual part numbers that would count 12
times a year in the world, ormore Anything.
11 and down didn't show.
Speaker 2 (26:26):
Yeah, that's still got to be a lot, holy cow.
That doesn't narrow things downat all.
Speaker 1 (26:32):
Well, be careful.
It's 15,000.
Part numbers out just under outof 286,000.
When I first did 70 and I go tothe guy who runs parts at
Caterpillar.
His name was Bob Kirk, awonderful guy, been around
forever, very smart, veryknowledgeable, very organized,
which you have to be in theparts business.
I said, bob, I'm not going tocarry anything that's less than
(26:55):
12, but I'm going to give 100%of anything that's 12 and higher
.
I'm going to give it to themfor free.
If I don't have it, what do youthink?
He says not bad, what are yougoing to do with the 11, 10, 9?
I said, well, we'll sit down asa group and we'll say, okay, I
sell that part 10 times.
How many do you want to have onthe shelf?
And we'd argue about it, one ortwo.
(27:15):
So we ended up 11 and down withone and two.
And I said, well, wait a second, I don't want to carry anything
that sells three times, twotimes, one time or not.
I'm not going to have any.
And we did that and ourturnover went to five and six,
from one and a half to two.
And the metrics you mentionedmeasures.
(27:36):
If you measure it, one of themeasures that's critical to me
is return on capital employed.
So if I invest a milliondollars in inventory and I turn
it five times and I make a grossprofit of 30%.
I'm making 150% return on thatone million.
I'm getting back a million anda half versus 30% of two is 60.
(27:57):
It's costing me money to carrythat damn thing.
So here comes the salesdepartment.
They wanted me to give them adiscount.
You got to support me becauseyou know, if I don't get the
machine out there, you don't getany parts.
I said that's fine, and everymonth I would ask them what
their gross profit was, and thenI would put that up against the
discount discount I gave themin parts and said well, when are
(28:18):
you guys going to start makingmoney other than what I give you
and other than beingembarrassed?
It never changed anything, ityou know.
So affecting change we've madeway too much money for too long
in this industry, which is whyit's more difficult to change
than most.
But here comes the internet,here comes sensors, here comes
(28:40):
artificial intelligence, herecomes 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 dealercontract.
You do not have any inventoryof vehicles.
Speaker 2 (28:58):
I would say that the the distinction that appears to
be the distinction anywaybetween automotive and heavy
equipment is the number of uhindependent mechanics in
automotive is significantcompared to independent
mechanics and heavy equipment.
Speaker 1 (29:24):
So there's free frame there.
For a second, if I look atmaintenance, what percentage of
the maintenance work onconstruction equipment?
Speaker 2 (29:31):
do you think surveys tell us the dealers get of just
preventive maintenance like oilchanges and filters and that
kind of thing?
Yep, jeez, I have no idea.
I mean so it probably dependson the customer.
If you have your own fleet andyou have a service department
within your fleet maintenance,then probably zero.
(29:52):
You know because you're doingit in-house.
You know because you're doingit in-house.
If you own your own machine andyou don't have a service
department, because you don'thave enough of a fleet to
justify having a fleet managerwho manages the maintenance of
your equipment, well then theyshould get 100% of it.
But that's like asking how manypeople actually go to the
(30:13):
dentist once a year for a teethcleaning.
Probably not a very highpercentage.
Speaker 1 (30:19):
Yeah, and the other part of maintenance is he who
does the maintenance gets therepair.
So the number you're lookingfor is less than 5% is done at
the dealer level.
Wow, wow.
And there's a double barrelquestion in there.
What if the dealer offered atthe same price?
The problem with maintenancefor a dealer is they charge
journeyman rate instead of amaintenance technician rate.
(30:43):
So I was in the industry in 69when we basically moved away
from tractors and loaders andbroadened the product line, and
at that time the dealerscouldn't keep up with warranty
work so they let maintenance go.
And the customers that wereconscious of the fact that if I
maintain it properly, myoperating cost per hour is going
(31:05):
to be lower, they startedhiring people from the dealers
and down came the spiral.
The cause-effect thing is allthe way around, and one of the
things that I'd like the peoplelistening to this reflect on.
Jay is talking about theoperations of our business.
He's recruiting, he hirespeople, he evaluates people, he
(31:28):
staffs companies.
How come he knows the businessbetter than you guys do?
And I'm not trying to be smart,I think that's a pretty fair
characterization.
Speaker 2 (31:40):
Yeah, I can answer that question.
I think it might be interestingfor your audience just to
understand.
I interview people all day.
Every day I get to hear thegripes and complaints and issues
that result in people leavingone job for another.
(32:01):
And when you do that in scaleover a long period, and so you,
you, it, just a lot of thisstuff just begins to paint a
(32:23):
very clear picture of what whatyou know begins to be somewhat
fuzzy and and hard to discernand large volumes begins to be a
very clear picture.
And so I, I, you know, beginsto be a very clear picture.
And so I, you know, put me in aservice department.
No, you wouldn't want to dothat, you know, I do want to Let
(32:45):
me interrupt you for a minute.
Speaker 1 (32:49):
I was a parts manager .
My best man was a servicemanager.
We were not happy with therelationship with the parts and
service department so we decidedwe'd swap jobs.
So I went to the shop, he cameto parts, I put on overalls, I
went to the floor.
After a couple of weeks the guysaid take them off, get in the
office.
You're hurting us down here.
So, in response to you, atleast I understood.
(33:12):
But one of the things I didrelative to your interviewing
regularly I had three questionswhat do I do that you like that
I do and you want me to continue.
What do I do that you don'tlike that I do and you want me
to stop?
And what do I do that doesn'treally matter to you.
And I asked that either everythree months or six months,
(33:32):
depending on how long I'd beenin the business or in the
department or whatever.
And boy, does that ever tellyou something?
Just like you interviewingpeople.
What, what, what gets underyour skin?
What drives you crazy?
So, as a new employee, how manybosses do you think go back
after three or six months?
Says, okay, you've been herethree or six months now you've
got fresh eyes.
What is it we do that drivesyou nuts, that we think we're
(33:54):
crazy, that you'd like to changeNobody that?
Speaker 2 (33:59):
or, yeah, it's very few do, yeah, no, it's, it's,
it's rare and I think it, youknow it's um, a lot of it has to
do with with.
Steven covey talks about firstthings first.
That's the second habit of ahighly effective person.
Yep, and he actually has a bookjust about first things first.
(34:19):
That's the second habit of ahighly effective person.
And he actually has a book justabout first things first.
And he talks about things inthese four quadrants.
And urgent and important iswhere a lot of people in the
industry spend their time andthe reason why they're stuck in
urgent and important when theyreally, stephen Covey would
argue, should be in the noturgent but important.
(34:42):
That is, you're actuallyspending time solving future
problems, that you're addressingthings that don't need you to
put a fire out today, but you'redoing fire avoidance.
You know, and so I feel like alot of times what happens if I
take parts or service.
I mean your service managersswamped.
You know, if systems andprocesses aren't tight, you
(35:04):
don't have the right people, youdon't have good training.
It's like what comes first thechicken or the egg and so they
get bogged down, so it leavesthem no time to want to sit down
and think about how are mypeople doing?
And I wonder how Jimmy, whostarted here a month ago, I
wonder how his first month isgoing.
Maybe I should go talk to him,but because they're bogged down
in the administrivia of runninga service department that isn't
(35:28):
well-oiled, ironic or not ironic, but forgive the pun, you know
it's like.
Well, that's where the problemis.
And so how do you begin tosolve?
Or, you know, do fireprevention or problem prevention
, without letting the urgent andimportant issue of today just
(35:51):
explode, turn into a raginginferno?
And that's tough, you know ittakes good leadership.
A raging inferno, and that'stough, 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 andand the departments, which ones
(36:12):
have made that transitionsuccessfully, you know yeah.
Speaker 1 (36:15):
So another thing that's interesting is my boss at
hewitt was a man by the name ofrod wallow.
He was a bush pilot, a mechanic.
He fired me five times once Igot home.
Very passionate guy he requiredthis is.
He started in 52 with thedealership.
I started in 69.
(36:35):
When was there?
We had a service manager whowas a technical guy.
We had an assistant servicemanager who was a business guy.
So today in leadership, I'mgoing to want all of my leaders
to be skilled people leaders.
I want them to be businessthinkers and I want them to be
(37:00):
change six sigma, continuousimprovement.
Whatever drivers, if they don'tunderstand the discipline over
which they're the leader, Idon't care.
I can hire people to do that.
I can't find good leaders withthose qualities that I'm talking
about and I bet you you seethat every damn day.
Speaker 2 (37:22):
And what I see, uh, in addition to that, are
companies that think thatsomebody who doesn't have the
technical discipline can'tactually lead people who are
technical.
It's utter nonsense.
Speaker 1 (37:33):
Yeah.
Speaker 2 (37:34):
In fact, you know, take sales, take technician, you
promote into a service manageryour highest performing sales
guy, put him in a salesmanagement job, coin toss.
Speaker 1 (37:47):
My best example on that is which superstar athlete
has been a good manager or coach.
Speaker 2 (37:55):
Yeah.
Speaker 1 (37:56):
And to me there's been one, Bill Russell, I can't
think of anybody else, or theopposite of that.
Speaker 2 (38:04):
Can you name a coach that's never played but was a
brilliant coach?
Speaker 1 (38:08):
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 salaryadministration, I don't think
performance reviews are part ofthe core competence of anybody
(38:29):
in the distribution channel.
What do you think of that?
I wouldn't have them.
I'd subcontract it out.
Speaker 2 (38:36):
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 twobuckets, but it's really three.
A lot of people think thatrecruiting and HR are the same
thing.
They are absolutely not Right.
And a lot of people think of HRstrictly from the tactical
(39:00):
perspective.
And I say a lot of people, alot of people in our industry.
You know HR is in 90%, if notmore, of the companies, the
heavy equipment companies,dealer, manufacturer, doesn't
matter, doesn't matter.
(39:21):
Hr is an administrative,tactical function.
It's make sure people'spaychecks are right, that you
can.
You know you're processingpayroll, that you're making sure
that they have benefits andthat they're enrolled in the
proper thing and the deductionsare set up and they're doing
employee relations.
Maybe they're doing a littlebit of okay, look, you didn't
show up on time for two days,like what's going on.
You know you're getting into alittle bit of okay, look, you
didn't show up on time for twodays, like what's going on.
You know you're getting into alittle bit of that, but but it's
(39:42):
tactical, it leaves, and it'slegal compliance.
You know it's making sure thatyour folders are all set up and
that you don't have the, youknow stuff commingled.
That shouldn't be.
It's it's it's tactical, itshouldn't be.
It's it's it's tactical, it'snecessary, but it's as necessary
as plumbing and electricity atyour house.
(40:03):
You know, you got to have it,but when it doesn't work it's a
real problem.
You know, now the other side ofHR is the strategic side.
That's the, the organizationaldevelopment piece.
That's where you align businessand talent strategy, where HR
begins to become a right hand tothe CEO or the leadership team
(40:25):
and you begin to talk throughwell, what are the challenges
employee engagement perspective,from a security or safety and
operational perspective,equality perspective and then
(40:46):
you back that down into peoplestrategy.
What are the people that weneed?
What is the training that theyneed?
Do we have process in place toevaluate the performance of
those people against thosethings?
Are those yielding customersatisfaction and profitability,
like we thought?
If the answer is no, why?
(41:07):
What would happen if our keyperson got run over by a bus or
had a God forbid a heart attackor just suddenly quit?
Do we have talent in ourpipeline?
Who are our next levelperformers, our high performance
employees, hypos, and do wehave a system in place for sort
(41:27):
of determining that.
And then there's recruitment.
Speaker 1 (41:31):
So stop there for a second, because what you just
listed is wonderful.
People will get into adiscussion and they'll recognize
everything there.
They don't do it.
Yeah, I know.
So your problem avoidance I'mworking tactically on things
(41:53):
that are going to cause meproblems six months, six years
from now, so that they don'thappen and it allows me to do my
job properly.
The hiring and firing I was adata processing manager once
this guy put me in there becausehe wasn't happy with what they
did and I had to run payrollchecks.
And one weekend, the computers.
(42:15):
I had two computers.
Everything was doubled up butthey were both down and I
couldn't run payroll checks.
And here comes Monday morningand everybody wants their check
or their direct deposit.
Couldn't do it.
The following week I had anoutside company that did that
for me.
I never wanted to have thathappen to me again, ever.
So the same kind of thing.
(42:36):
George just died.
He had a stroke.
He was critical to my operation.
Who's next?
Haven't got a depth chart atall?
Speaker 2 (42:45):
Number one number two or a map process that tells you
here's how things operate andhere's where our handoffs are,
and you know, could somebodycome in and and and get
something from point A to pointB where somebody can then pick
it up and take it from B to C?
You know, like just justactually having mapped processes
(43:10):
, understanding what are ourcore processes?
Like no, probably not.
Speaker 1 (43:15):
Yeah, sarah Hanks is one of our contributors, used to
be, and she's a mechanicalengineer.
She was at general electric asa manager, a manager in
manufacturing, very talentedperson, 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 thingshere's's.
(43:36):
You know, this is a decisionpoint.
Who makes that decision?
What's the?
So let me take you toperformance reviews.
Who's trained the people in thecompany, in the dealerships, to
do performance reviews on theiremployees?
Whose job is it?
Or who's?
Speaker 2 (43:52):
doing it.
Speaker 1 (43:53):
Do you think the managers in dealerships know how
to do performance reviews?
Speaker 2 (43:57):
I mean not, not with any, any real consistency.
Maybe maybe there's one managerwho 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, mostorganizations and I'll I'll I'll
be specific about dealers, evenlarger dealers.
(44:20):
Hr is a tactical the, the, theVP of HR, the leader of HR.
80% of their time, if not more,is spent in the tactical weeds.
They're, they're not, they'renot really getting into um, the,
the, the strategy piece of it,the talent strategy component,
(44:40):
which performance reviews, is anexample 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'ssubjective, you know well, god.
I think, like, how do you makesomewhat subjective feeling
about someone's performanceobjective?
(45:03):
How do you turn that intosomething that you can actually
go?
Okay, if they check all thesethree boxes, then you can rate
them five stars out of five youknow or check these five things,
then they can get three starsout of three.
Whatever the case is, you know,and if they're missing one or
two, and then your ability tothen translate that into into
(45:25):
some sort of training anddevelopment plan, like here's
your weak spot, let's focus.
And so now it's not a I'm goingto 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 foryou, and so we want to help you
develop this skillset.
This is an area where you'reweak.
Here's how that's manifested inthe past.
This is how I know it's aweakness because of this, and
(45:46):
they'll go yeah, okay, I getthat.
That's fair, you know, and it'snot fuzzy at all.
Right, you know, and a lot ofit's because you're not.
You want to see these peopleperform at a high level.
You're not there to catch themdoing something wrong, but a lot
of people, that's what they do,exactly, exactly.
So what kind of how productiveof a conversation is that, if
(46:10):
you think you're?
Speaker 1 (46:10):
about to get in trouble.
Yeah, when you think about thatfor 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 forwhen somebody's doing a good job
and, as a result of that, Idon't look.
So we have assessments, I thinkyou know, from 90 questions to
180 questions for every jobfunction, 90 to 95% of the labor
(46:34):
hours, and we want the employeeto fill out that assessment on
themselves and we want theirleader to fill out that
assessment on the employee andthen the two of them sit down
and they compare.
And boy does that ever changethe dynamic.
Speaker 2 (46:49):
Yeah, yeah, it's uh.
I went through a leadershipexercise.
Um, I don't know if you'refamiliar with Johari window.
Yep, Okay, it's uh.
I went through a leadershipexercise.
Um, I don't know if you'refamiliar with Johari window.
Speaker 1 (46:56):
Yep.
Speaker 2 (46:57):
Okay.
So, um, you have um, these fourquadrants, 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, whichis what I know about me but I
don't share with you.
You have blind, which is whatyou know about me that I don't
(47:20):
know about myself.
And then you have this reallysubconscious thing that you
don't really know and otherpeople don't really know, but it
could be a thing.
Ultimately, you go okay, well,let's take that last category
out, let's pie chart.
What percentage of Jay do wethink is blind, meaning I know
(47:41):
about Jay that he doesn't knowabout himself, and what about
what percentage of that piechart is what Jay shares with me
but also knows about himself,et cetera.
And then you compare your chartand I compare my chart, what I
think about myself, and thatthat is the beginning of
figuring out.
How big of a gap do we have?
(48:03):
And that's kind of what you'retalking about is is this blind
spot that we all have, you know?
So the idea is, how do we closethe blind spot?
Speaker 1 (48:13):
And I think it gets even worse, jay.
You know Patrick Lencioni wrotea book called the Three Signs
of a Miserable Job.
The first sign is anonymity thecompany 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 irrelevancethey don't know where their job
(48:39):
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 theday.
They know what they got done.
Nobody else does.
Nobody has a sense ofsatisfaction because they don't
know how to measure theirperformance.
Nobody tells them that.
Right, and again that goes backto me the, the strategic piece
of HR.
I won't leave that in thecompany.
The tactical, I want to take itthe hell away.
(49:00):
Let somebody else do that.
Speaker 2 (49:03):
Yeah, and so and so.
Then there's recruiting, like Isaid, and and recruiting, um,
it kind of fits into theorganizational development.
It kind of fits into theorganizational development, the
strategic part of HR.
But I use this sort of metaphor, thinking about HR as a basket
of fruit and recruiting is thewatermelon in that basket.
Speaker 1 (49:28):
I don't like watermelon.
Speaker 2 (49:30):
It's big and bulky and heavy.
I'm playing, it's big and bulkyand heavy.
Uh, you've got.
You know, perhaps your applesand oranges are, are your
tactical, it's just like youknow your bananas, they're like
your common sort of fruits, um,and perhaps you know coconuts
and and Kiwis and raspberriesare the.
(49:54):
But the point is that becauserecruiting itself is such an
enormous task that um it, it's achallenge for for organizations
, so could you outsourcecomponents of it, like you're
saying?
Well, they out have beenoutsourcing payroll for years,
decades.
You know you can outsourcebenefits to a broker.
(50:16):
You know they can do plandesign, you know, and then and
then they can manage those toolstoday, technologies that can
manage your, your, you know,your benefit selection and and
your, your enroll, openenrollment process.
I mean the.
The stuff is available todaythrough technology to do some of
the administrative things.
(50:36):
Yeah, outsource as much of thatas possible.
The strategy piece is where Ifeel like could probably stay
inside.
What are the policies and thecompensation and what's our
culture?
What's the brand, ouremployment brand, what is going
to make somebody want to comejoin us?
How are we going to beattractive as we compete for the
(50:58):
talent, the resources, ietalent that's available in the
marketplace, you know, comparedto the guys just down the street
from us or even across thecountry.
That's important, you know.
You have to align talentstrategy or, excuse me people
and talent strategy withorganizational strategy.
That's really hard to outsource, in my opinion, if you're doing
(51:19):
it and then recruiting, whileit is a strategic component, it
is a lot of absolutely necessarytactical execution, which is
why it's so bulky and heavy andthat could absolutely be
outsourced.
We do that.
We outsource recruitment.
(51:41):
We are adjunct recruitingdepartment, either bolting onto
an existing HR team that doesn'thave recruiting acumen or
bandwidth, or for organizationsthat are decentralized and they
want their hiring managers justto be able to contact us and
process, you know, therecruitment process for them,
(52:01):
handle the recruitment processend to end for them, and so,
yeah, I think more and moreorganizations should look at
that.
They've been outsourcingrecruitment for I don't know,
probably a decade or more.
Now we're seeing recruitmentfor I don't know, probably a
decade or more now Varyinglevels of success.
I think where we're probablydifferent on that front is that
we are industry experts, wedon't just know recruiting.
(52:25):
So I think about well, whatdifferentiates us?
What differentiates us?
We know recruitment,recruitment process.
We're very skilled in that.
We know the heavy equipmentindustry and how it operates
Manufacturers, how they operate,what makes the money, how they
design equipment, how they buildit, how they get it out the
door, the dealer, the rental,like we understand the business
(52:51):
kind of at a high level.
Then we know the jobs withinthose organizations that make it
run, that make it tick, thatmake it possible for them to
actually, you know, sell theirwares and support them after the
sale or, in a manufacturer'scase, even engineer and design
it.
And then the last domainexpertise is the product itself,
(53:12):
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 andit is our industry knowledge
coupled with our recruitmentprocess knowledge that makes us
way more skilled at being ableto outsource for a heavy
equipment company theirrecruitment process than just
(53:34):
some generic recruiting firmthat sits in your backyard that
says, oh well, we're recruitersand we can do this for you.
Speaker 1 (53:41):
Yeah, I'm going to say at a dealer level, a lot of
the recruiting is done by themanager of the function himself.
Yes, I would agree, it onlygoes up into a more specialized
area with the task.
But let me flip it.
What percentage of a dealer'srevenue would you say recruiting
(54:04):
and employee development shouldbe?
Speaker 2 (54:13):
That is a great question.
I don't think I could.
I don't.
If I answered that question, itwould just be a total stab in
the dark.
I don't know the answer to that.
Like, for instance, if wetalked about um, um, oh,
somebody was, were you and Italking, uh, earlier today about
(54:37):
um, you know what percentage ofyour revenue should be set
aside for something, and it waslike 3%, I think, was the number
and so could you come up withthat and figure out okay, are we
actually spending enough?
Are we below or are we abovethat number?
(55:00):
I don't know, but I'm sure thatI could find that out.
In fact, I probably will ask AIto give me an answer to that at
some point.
Speaker 1 (55:08):
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 onesthat get training and that's a
requirement.
So if you look at the partsbusiness and the service
business technical communicators, inspectors, counter people,
(55:28):
warehouse people, et cetera,zero, et cetera, zero I'm asking
companies to set aside $500 ayear for every employee that
touches a customer, that managesassets or leads people.
I expect the employee to takefour classes, so they're going
(55:51):
to invest between 25 and 40hours of their time over the
year and two assessments theboss and me every year.
If the assessment after theclasses does not get better, we
have one discussion.
If it gets worse, we haveanother discussion.
If it gets better, we have athird discussion.
(56:12):
None of those things exist today.
There is not.
There is for data processing,there is for darn near every
other thing, but not foremployee development.
Sales training do a Google.
See how many people are outthere that provide equipment,
specific sales training.
Two or three companies, periodthe associations AED, amp.
Two or three companies, periodthe associations AED, aemp, aem,
(56:35):
nahida all of these guys.
They have training.
They outsource to an instructor.
Some associations are stillusing material I created in the
1990s.
I'm dealing with manufacturerswho have academies and they hire
people to come in and doclassroom training.
Dealers are saying to me Ican't have that guy leave me for
(56:58):
two days or three days or aweek.
And I say, even worse, afterthey get back, wait a week and
then ask them what they learnedbecause they've forgotten it all
.
Yeah, we have done a terriblejob, jay, in the human resources
aspect of our business, and ifwe don't have good people, we're
dead.
Speaker 2 (57:20):
So these are the kinds of discussions that should
be taking place.
That's a quadrant two activity.
Yep, that is not urgent butimportant.
Yep, that is not urgent butimportant, meaning your business
isn't going to implode orexplode if you don't solve that
problem today, which is why it'sgone unsolved Precisely.
(57:42):
But if you were to sit down andsay, okay, we know this to be
true, why is it this way?
And you get to some rootproblem there and then you begin
to make a change, drivingtowards continuous improvement.
And then you watch and see, isit any better?
(58:05):
And then you see that it'simproved, but still not enough.
And you go okay, why?
And you go, okay, well, what ifwe do this?
And eventually you iterate yourway through to a point where it
is improved, where it becomesingrained, where the problem
that existed previously doesn'texist anymore.
(58:28):
But now you're onto new problems.
You know, in Six Sigma you'reonto new problems.
You know, in Six Sigma it'sDMAIC, it's define, measure,
analyze, improve, control.
And yeah, exactly, it'scircular, exactly, and it is an
iterative, continuousimprovement process.
But you're always askingyourself those questions why?
(58:51):
Why is it like this?
And you know, if you tie itback to customer satisfaction,
which is very telling.
Or employee satisfaction orfinancial performance, those are
pretty good indicators.
So those are high levelindicators and then you go.
Why is it like this?
Speaker 1 (59:07):
What is a reasonable turnover rate for a business?
Speaker 2 (59:12):
You know it's funny.
I was looking yesterday at apost somebody put out and, and
and they were.
They were trying to, to, tosort of create a distinction, um
, between turnover and um, uh ofof various types.
So they had this little youknow four quadrants and I can't
(59:32):
remember what was in the bottomhalf, but you know you have on
the upper half.
Well, if these people leave andthere's nothing you can do
about it, you know they die,their spouse gets relocated, you
know they pursue a differentcareer.
Whatever happens, you know theyretire.
(59:54):
There's a lot of that actuallyin you know sort of facing the
industry.
And then there's all the otherpeople that leave and it's
generally a leadership issue.
I mean I don't know what a goodturnover is.
I mean I'm sure somebodyprobably McKinsey, probably has
some sort of slide deck on that.
I personally feel like it comesdown to employee engagement and
(01:00:17):
satisfaction.
And if you're not doing anemployee engagement survey every
year and looking at that dataand understanding what is the
cause for people's joy anddissatisfaction, 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
(01:00:41):
then say, okay, well, I'mhearing what you're having to
say, we can begin to make someadjustments.
Your people see you makingchanges.
They value and appreciate thatyou've heard what they've had to
say and you're doing somethingwith that information.
But the opposite is true If youdon't, cynicism will abound,
(01:01:01):
that you will have more turnover.
If you have an employee survey,engagement survey, and you do
nothing with the data.
Speaker 1 (01:01:09):
Just don't do it.
Yeah, shame on you.
Speaker 2 (01:01:11):
Yeah, just don't do it.
You'll create more cynicism andnegativity.
It will be, it will be.
You'll get the exact oppositeeffect, you know.
And so then then you can gookay.
Well, I guess the amount ofturnover that you can suffer
that would be acceptable is whatdoesn't affect customer
satisfaction or your culture oryour financial performance.
(01:01:34):
Is that the same for everysingle business?
No, not at all.
Speaker 1 (01:01:38):
Yeah, maybe not it might be close, one of the
things that's interesting.
I'm going to put a period onour discussion right there
because I think we could keep ongoing for hours and I think
that's very beneficial.
But the employee engagementsurvey, I believe, is one of the
critical elements.
That's my what do I do, thatyou like, et cetera, questions.
(01:02:01):
Everything's quadrants.
Employees today have beentaught to be obedient from the
time they're babies.
When we get them out into theworkforce, we want them not to
be obedient, we want them to becurious, we want them looking
over the wall.
What if we did this?
What if we did that?
And I'd like to address thatthe next time we have one.
Speaker 2 (01:02:20):
Yeah, sure, yeah.
Speaker 1 (01:02:21):
Yeah, that's fun.
Speaker 2 (01:02:23):
Yeah, that's fun.
Speaker 1 (01:02:24):
So thank you.
Thank you very much for this,jay, and everybody who's been
listening.
I hope you got something fromthis candid conversation and we
look forward to having you joinus again in the near future,
mahalo.
Aloha and welcome to another Candid Conversation.
I'm really pleased today to bewelcoming Jay Lucas from a
number of companies.
I'm going to let Jay describefor himself and we're going to
do a parallel path to artificialintelligence having people in
distribution channel focusing ontheir core competencies and
(00:25):
outsourcing things that are not.
So.
With that as our intro, jay,the floor is your.
Why don't you tell everybodywho the heck you are and what
you do and have?
Speaker 2 (00:36):
okay, yeah, sure uh, it's, let's see.
I've been in recruiting for 30years.
I started back in 95, almostexactly 30 years ago Worked for
a big national firm, mostly intechnical recruiting and
staffing specifically.
(00:56):
So we did projects, so contractengineers in most cases.
Anyway, after kind of runningthrough the ranks there I left,
decided that I would start myown firm.
I really liked the search sideof the business as opposed to
the staffing side of thebusiness, and so I started my
(01:17):
own firm, really didn't knowwhat I was doing.
I knew how to recruit, butrunning a business and
recruiting are two totallydifferent things, and so I've
basically been inself-employment since 2004.
Along the way I was introducedto Bill Sitter.
Bill is he's got a reputationthat is well known in the heavy
(01:41):
equipment industry, in the heavyequipment industry.
When he retired from the heavyequipment industry he joined
basically it was Joe Jordan whoalso had retired from heavy
equipment and started thisrecruiting firm.
They renamed the company JordanSitter Associates and Bill ran
(02:04):
Jordan Sitter Associates forprobably 15 or so years before
he decided to retire a secondtime and sold the business to
another heavy equipmentexecutive that was wanting
something to do in retirement.
I then actually acquired thebusiness from Jerry Randekker or
Carol Randekker after Jerry'ssudden passing in 2018.
(02:28):
And so I've brought myrecruiting skill set to the
heavy equipment industry andreally spent the last seven
years learning the industry, thecompanies, the business models,
what works around culture andtalent and recruiting what
(02:48):
doesn't.
Best places in the industry towork, why they're the best
places to work, worst places towork and why they're the worst
places to work.
Challenges in the industry thatplague the industry from a
talent perspective and thenultimately, downstream, affect
(03:08):
strategy and execution.
And so that's us.
We've got a team of eightdedicated to recruiting and
heavy equipment.
Our recruiters are specialized,and so each one of them finds
their own sweet spot one insales and marketing, one in
product and management andengineering, one in sales and
marketing, one in product andmanagement and engineering, one
in manufacturing and supplychain and another in parts and
(03:29):
service or product support.
So those are kind of our four.
You know, core competencies.
I work largely with themanufacturers, and then Wade
Massey, my right hand, workslargely with the dealers.
So that's about us largely withthe dealers.
Speaker 1 (03:45):
So that's about us.
So one of the things that Ihope everybody heard is here's a
man who has wandered throughthe halls of recruiting, of
staffing, but he's done it withfresh eyes, recognizing that
there are challenges in everystep along the way, and the last
(04:07):
minute or so of thatexplanation, 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 Jayappeals to my mind so much
Everything we do with ourpodcasts and blogs is with
people that I call thoughtleaders, experienced executives
(04:28):
or revolutionary reformers, andI think Jay fits all three.
So here comes artificialintelligence.
Let's take them in pieces.
Sure, is that good news or badnews?
Speaker 2 (04:43):
It's probably a little bit of both.
Speaker 1 (04:47):
That's a wimpy answer .
Speaker 2 (04:49):
Okay.
So I think it's like withanything, there's two sides to
the coin.
And artificial intelligence tome, I mean it doesn't exist
without real intelligence.
I mean it doesn't exist withoutreal intelligence.
And so if we want to proxy ourintelligence to some computer,
(05:12):
um, knowledge, you know,bloodying your knuckles and and
(05:34):
banging your head on things, uh,scraping your knees, like
that's really important youcan't just rely on AI to do
everything for you, um.
So so I think, um, if you dorely heavily on AI to do your
thinking for you, that that'snot really good.
Um, if, if you to be augmentedinitially, but ultimately, you
(06:16):
know, at risk.
My opinion, however, theAchilles heel of our industry is
technicians.
However, the Achilles heel ofour industry is technicians, and
AI will never turn a wrench.
It's just not going to happen.
It's not going to get in atruck and drive down the road
and get out and open its toolboxand grab a wrench and walk over
(06:38):
and start disassemblingsomething or diagnosing a
problem.
It might diagnose, but it's notgoing to do that without an
actual human being there to makethat work.
So is it possible that folkstoday who are pursuing knowledge
, worker, you know, sort ofwhite collar jobs, might be
(06:59):
rerouted to the blue collar path.
That seems to be the Achillesheel of the industry, because
there's a supply and demandissue demand being high and
supply being low.
Um, yeah, I think that's verypossible.
Um, but right now I think it'sa bit too early to tell.
But I like, I like AI, um, forefficiency.
(07:32):
I like AI for taking work thatis important work, but somewhat
tactical and administrative.
I like that it could be a bitof a cam on an engine, meaning
that if you want to augment whatyou know and gain additional
insights or perspective throughusing AI, one of the smartest
things that I've heard somebodyrecently talk about is, instead
of using AI to like, hey, writethis email for me and use this
(07:55):
tone and this language.
Like that's great, but whatabout when you ask AI?
I want you to be a board memberand we're faced with this
particular challenge, and I wantyou to ask me questions that
help diagnose what some of theroot problems to our goal
(08:16):
achievement you know, to ourgoals, like what's what and then
how do we get around that?
Now, all of a sudden, you'reusing AI as a consultant instead
of just an administrativeassistant, and it can provoke a
discussion digitally.
That helps you begin to peelback layers and see things and
(08:38):
shift paradigms, and so I thinkinitially we're probably under
utilizing it, and I think,eventually, when we begin to see
that, it can be used as areally strategic resource,
because it would almost be likehaving the most impressive board
of directors to lean on,because its depths of access to
(09:03):
information is limitless.
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 researchingother podcasts in in heavy
equipment and trying to figureout okay, well, do I want to go
this route or that route orwhatever.
(09:24):
And I was looking for I justasked it to produce a list of of
shows, like a hundred showsthat had a certain number of
followers and an average ratingof like 4.5 stars.
And it produced this list, um,and, and then I asked it to do
it again and it was a completelydifferent list.
So I think you have to becautious.
(09:47):
Which, again, the crossroads ofreal intelligence and
artificial intelligence.
That's where the sweet spot is.
Speaker 1 (10:08):
Yeah, I think you're right and that's an interesting
characterization of it.
One of the things that I wouldsay artificial intelligence has
enabled is a customer to be ableto order their own parts, and
the tools are there.
Electronic catalogs have beenaround for 10, 15 years.
You can get this about everybrand.
It's no longer proprietary.
You can find replacement partsmore easily today than you could
(10:31):
when I started out.
For sure, you've got sensorseverywhere 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 weneed.
Yet less than 10% of the partsbusiness that dealers in the
equipment world are processedthrough the internet.
(10:51):
So one of the things that thattriggered in my little pea brain
and it bothered the heck out ofme.
And it's actually lower thanthat.
Since Caterpillar got out ofthe truck engine business, every
single mechanic orders parts Atraditional dealer.
They walk to the back counterand they engage in a discussion
(11:12):
with a parts guy.
And if it's Monday morningafter a football game, there's a
lineup at seven o'clock in themorning at the counter and
everybody's talking aboutfootball by one guy is being
served by the one guy in parts.
Why the heck do they leavetheir bay?
Why don't they pick up a phone?
Why don't they have a laptop?
Why don't they order it on theinternet?
90% of the dealers could savehow much time of their
(11:36):
technicians.
And, as you say, blue collar isthe least available skill that
we have.
Something that's interestingsince 1990, 50% of the technical
schools in America blue-collarschools for this industry shut
down for lack of attendance.
Imagine that.
(11:57):
And then the other thing thatstrikes me with your
characterization of AI is thequality of the information.
We started databases, probablyback in the 60s, and we never
assigned an owner to a dataelement.
We never said that thiscustomer name, as an example,
(12:22):
was only going to be changeableby one person, and as a result
of that, we got a name and acustomer profile four or five
times for the same damn company.
So we got dirty informationthat we're going to have to cull
our way through.
But then the thing that bothersme most is let's assume, at
night independent contractors.
(12:43):
They're out there working allday long.
They get home at night, they dotheir paperwork, they get on
the computer, they order theirparts for tomorrow, they set up
the schedule, all that stuff.
So a customer comes in, he looksat your catalog, he looks at
your inventory, checks the price, checks your availability and
he doesn't order anything.
Tomorrow morning I wantsomebody from the dealership to
(13:04):
call that customer.
Tomorrow morning I wantsomebody from the dealership to
call that customer, say I noticeyou're looking at ABC part.
You check the availability yeah, we got it.
You check the price and wethink our price is pretty fair,
but you didn't order it.
Have you ordered it yet?
Nobody does that Because we'restill operating the job the way
we did 50 years ago.
Customer calls, I'll answer thephone, I'll give them
(13:29):
information, I'll take down thequantity and part number that
they want.
I don't sell related parts.
We got to reorder the wholedarn business and artificial
intelligence gives us awonderful excuse to do it.
But, jay, I don't see peopledoing it.
Speaker 2 (13:41):
Well, okay, so this goes back to leadership.
Yep, and I think, with nodisrespect to the sort of
existing leadership within theindustry, whether that's a
manufacturer or that's a dealerthey're not thinking about these
(14:06):
things.
So what I would say is is um,you know, what gets measured
gets done.
If, if you start tracking thescenario that you just laid out
and you were going to bonussomeone based on their
conversion of a site visit to anorder, it'll get done.
(14:32):
I can assure you of that,because now you're counting it,
you're looking at it, you'remeasuring it and then you're
rewarding someone for thatperformance.
But a lot of the guys in theindustry aren't technologically
advanced, they're not what Icall tech forward, and so they
rely on just a sort of trustthat you're going to apply a
(14:58):
certain level of strategicthinking to solve this problem.
And there are some people inthe industry who do that.
They're just the rare exception.
So how do you promote a way ofthinking amongst people that
need that agitation, and youhave to align your compensation
(15:25):
and your performance strategieswith that.
Then how do you do it?
What's the technology that weuse to do that?
Can we actually measure who'sbeen on our site, who's put a
part in a basket online andabandoned that order.
Do we have those insights?
Is there somebody in marketingthat knows that?
(15:47):
How do we get that informationfrom that person to someone else
who can then convert that tosome behavior that then turns
that into actual order, whichthen hits your top line revenue
for parts and ultimately someportion of that, hopefully, to
your bottom line.
That's the disconnect.
Speaker 1 (16:09):
Yeah, you bring up a beautiful example Jeff Bezos,
amazon bookstores.
He disrupted that wholeindustry.
He offered books that werecheaper, such that even with
freight, they were below thebookstore price.
I read books I used to buy frombookstores.
(16:30):
They never had the books Iwanted.
I had to wait to get it in.
So Amazon recognized that littlehole, just like you're talking
about, and look what he did.
He became for a short while hewas the largest retailer in the
world.
He made that a marketingcompany company so that if you
(16:52):
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 wenoticed a little and would you
like me to add it to your shop?
They make it easy.
And then let's go the other way,sam Walton.
When he became the low-costprovider, he recognized the hole
.
He went to every one of hissuppliers and said I'm going to
make you my sole supplier.
(17:13):
You'll be the only one thatsells your product in my stores,
but you can never run out onthe 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 longtime and everywhere along the
(17:35):
line we've seen these disruptorsBezos, probably, bookstores how
long have they been around?
He's destroyed them.
Walton, low cost provider he'sstill the largest.
He's back to being the largestretailer in the world with the
highest customer service, andour business seems to be putting
profit ahead of people.
(17:55):
So the characterization I giveyou is this Every 20 years, for
the last 40 years, the number ofdealers competing in the
marketplace has reduced by half.
So if we had 185, we had 50.
In 2005, we got 25 today andeverybody complains about oh,
(18:16):
customer loyalty, is it's gone?
Well, I think we've workedawfully hard to kick it out,
because we cut down the numberof people who went to voicemail.
I know dealers that had peoplego to voicemail because they
wanted to put a promotionalmessage up before they answered
the phone.
I don't think and youcharacterize it as leadership, I
(18:38):
characterize it that way too,but with curiosity a lot of the
leaders are afraid like hell tochange anything because they
don't know how they got to bethis successful in the first
place.
Speaker 2 (18:48):
Well, yeah, so my, my , what I've witnessed is that I
think there's a general tendencyfor people to assume that
because you own a business, thatthat means you're the smartest
guy there, and and that isdefinitely not the truth you got
the mic, maybe that's allExactly.
(19:10):
I was going to say it that anda risk tolerance.
And so what happens is you getguys you know their relationship
this industry is a relationshipindustry and so you get guys
who strike deals because of whothey know and and this you know
sort of ability to be in thefield and understand what's,
(19:32):
what's the problem the customeris trying to solve.
And then how do I apply amachine to solve that particular
problem that I can sell to you?
That's a different skill setthan thinking about business
problems, and so their defaultsort of tendency is to want to.
(19:52):
I mean, most of these guys grewup on a farm or in a
construction business.
They've been around thisequipment their entire life, if
they're not generational,meaning that their dad or
somebody in their family workedfor CAD or a CAD dealer or John
Deere, fill in the blank.
Their default is to want to beclose to the customer.
(20:15):
And so you know these guysthey're not thinking about.
They don't get passionate aboutfiguring out how to leverage
technology to improve a processto solve a business problem.
They love the thrill of thehunt, the kill, you know, the
ability to close a deal.
So many of them, in fact, thatthey sacrifice product support
(20:40):
over machine sales, which isreally a very backwards way of
thinking about business, becauseyour best margins are parts and
service and your returncustomers come either come or
don't because of the after salessupport that they get.
(21:01):
I mean, I have a friend of minehad 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 forweeks at a time she's not had
another bmw because theycouldn't.
Just the service department wasterrible.
I had a Porsche Cayenne, adiesel Porsche Cayenne.
(21:23):
I loved that car.
I hated the service department,not the service department, the
advisors, they just they werearrogant.
They didn't follow up with you,they didn't call you back.
They made you feel like youwere an inconvenience to bring
your car in.
You know, um, it just there wasjust I don't know like.
(21:44):
So I'll never buy a Porsche inSan Antonio again because I
don't want to deal with theirservice department.
They got a one-star review forme, and so these are the things
that I feel like executives inthat run dealerships in
particular.
Um, you know they're, they'renot.
They're not thinking about someof these things, some of the
most basic things.
(22:04):
You know, how do I, how do Ialign business strategy with
this balanced scorecard approachcustomer satisfaction, employee
satisfaction, financialperformance and operational
performance satisfaction,financial performance and
operational performanceOperations could be.
You know, you can tie safety,quality, etc.
Right.
(22:25):
And how do I build strategiesorganizationally that make sure
that I don't steal from one bypulling too hard on the lever of
another one?
Because if I wanted to drivebottom line value, why don't I
just fire my most expensiveemployees?
Well, what if that's your bestperforming sales rep?
That'll add a lot of bottomline value for just a minute,
(22:48):
and then you're going to sufferthe consequences of that
decision.
And so you have to balancepeople strategy and financial
strategy, and customer strategyand operational strategy, and a
lot of these guys don't have thebusiness experience to think
about their business from thatbalance scorecard perspective.
(23:08):
And technology and AI is just acontributor to that.
Speaker 1 (23:12):
Yeah, exactly right, and it's interesting, balance
scorecards started at Harvard inthe accounting department, so
those four elementscard startedat Harvard in the accounting
department.
So those four elements, theystart at Harvard.
They say, well, what?
What's the financialimplication of this?
I start the other way around.
What does the customer need andwant?
That drives operationalexcellence, 100 percent Driven
by employee satisfaction andloyalty, then I don't care, the
(23:34):
results will come of their own.
Yes, it's a byproduct.
Yeah, and again it comes backto you mentioned.
The machine is the importantone I used to.
I've always been a parts andservice guy and I was lucky to
meet Bill Blackie, who was thechairman of Caterpillar, who
created the absorption method,and I offered to work for him
(23:56):
for 150 bucks a month.
That's how low the wages were.
But you know he said I don'tthink 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 waspeople are forgetting.
It's not just about the profitof the parts and service
department, it's constrainingexpenses in sales,
(24:17):
administration and interest.
And our bugaboo in thisindustry is we got inventory
coming out the wazoo in everyaspect.
Probably 50% of the partsinventories in this industry
haven't sold in the last 12months.
Why do we still have them?
Speaker 2 (24:42):
then, well, and and what?
What was the?
What was the process supportingthe 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, atraining issue?
Is this a?
Your model is broken.
You do you not know how todemand plan Um?
Is it like?
What is the root to thatproblem?
And then you begin to figureout how do we solve that.
(25:04):
You know the, the, the obsoleteinventory, or the slow, you
know, moving inventory.
That's just a tell.
Speaker 1 (25:12):
That's not the root problem, that's right, that's
exactly right.
And and the problem with theroot problem.
That's right, that's exactlyright.
And the problem with the rootproblem.
If I can be that silly, if Iask people what the rule is that
they're following, and justparts people, warehouse office
sales, everybody I bet you Iwouldn't get 10% of them.
(25:32):
That would give me an answerand the answer is two and six
months, three and 12.
And that's a card X rule.
It's been around a hundredyears and you know it it it
never worked for me.
Caterpillar I started withCaterpillar dealers and I've
worked for two of them in Quebecand in British Columbia, both
very good companies.
But we used to get a price tapefrom Caterpillar and I think
(25:59):
somebody made a mistake becausethey put on that price tape a
code to indicate activity.
So 280 something, thousand partnumbers I knew which ones sold
12 times a year in the world ormore, they told me that Meaning
individual counts or turned.
Speaker 2 (26:17):
They told me that Meaning individual counts or
turned.
Speaker 1 (26:18):
Individual part numbers that would count 12
times a year in the world, ormore Anything.
11 and down didn't show.
Speaker 2 (26:26):
Yeah, that's still got to be a lot, holy cow.
That doesn't narrow things downat all.
Speaker 1 (26:32):
Well, be careful.
It's 15,000.
Part numbers out just under outof 286,000.
When I first did 70 and I go tothe guy who runs parts at
Caterpillar.
His name was Bob Kirk, awonderful guy, been around
forever, very smart, veryknowledgeable, very organized,
which you have to be in theparts business.
I said, bob, I'm not going tocarry anything that's less than
(26:55):
12, but I'm going to give 100%of anything that's 12 and higher
.
I'm going to give it to themfor free.
If I don't have it, what do youthink?
He says not bad, what are yougoing to do with the 11, 10, 9?
I said, well, we'll sit down asa group and we'll say, okay, I
sell that part 10 times.
How many do you want to have onthe shelf?
And we'd argue about it, one ortwo.
(27:15):
So we ended up 11 and down withone and two.
And I said, well, wait a second, I don't want to carry anything
that sells three times, twotimes, one time or not.
I'm not going to have any.
And we did that and ourturnover went to five and six,
from one and a half to two.
And the metrics you mentionedmeasures.
(27:36):
If you measure it, one of themeasures that's critical to me
is return on capital employed.
So if I invest a milliondollars in inventory and I turn
it five times and I make a grossprofit of 30%.
I'm making 150% return on thatone million.
I'm getting back a million anda half versus 30% of two is 60.
(27:57):
It's costing me money to carrythat damn thing.
So here comes the salesdepartment.
They wanted me to give them adiscount.
You got to support me becauseyou know, if I don't get the
machine out there, you don't getany parts.
I said that's fine, and everymonth I would ask them what
their gross profit was, and thenI would put that up against the
discount discount I gave themin parts and said well, when are
(28:18):
you guys going to start makingmoney other than what I give you
and other than beingembarrassed?
It never changed anything, ityou know.
So affecting change we've madeway too much money for too long
in this industry, which is whyit's more difficult to change
than most.
But here comes the internet,here comes sensors, here comes
(28:40):
artificial intelligence, herecomes 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 dealercontract.
You do not have any inventoryof vehicles.
Speaker 2 (28:58):
I would say that the the distinction that appears to
be the distinction anywaybetween automotive and heavy
equipment is the number of uhindependent mechanics in
automotive is significantcompared to independent
mechanics and heavy equipment.
Speaker 1 (29:24):
So there's free frame there.
For a second, if I look atmaintenance, what percentage of
the maintenance work onconstruction equipment?
Speaker 2 (29:31):
do you think surveys tell us the dealers get of just
preventive maintenance like oilchanges and filters and that
kind of thing?
Yep, jeez, I have no idea.
I mean so it probably dependson the customer.
If you have your own fleet andyou have a service department
within your fleet maintenance,then probably zero.
(29:52):
You know because you're doingit in-house.
You know because you're doingit in-house.
If you own your own machine andyou don't have a service
department, because you don'thave enough of a fleet to
justify having a fleet managerwho manages the maintenance of
your equipment, well then theyshould get 100% of it.
But that's like asking how manypeople actually go to the
(30:13):
dentist once a year for a teethcleaning.
Probably not a very highpercentage.
Speaker 1 (30:19):
Yeah, and the other part of maintenance is he who
does the maintenance gets therepair.
So the number you're lookingfor is less than 5% is done at
the dealer level.
Wow, wow.
And there's a double barrelquestion in there.
What if the dealer offered atthe same price?
The problem with maintenancefor a dealer is they charge
journeyman rate instead of amaintenance technician rate.
(30:43):
So I was in the industry in 69when we basically moved away
from tractors and loaders andbroadened the product line, and
at that time the dealerscouldn't keep up with warranty
work so they let maintenance go.
And the customers that wereconscious of the fact that if I
maintain it properly, myoperating cost per hour is going
(31:05):
to be lower, they startedhiring people from the dealers
and down came the spiral.
The cause-effect thing is allthe way around, and one of the
things that I'd like the peoplelistening to this reflect on.
Jay is talking about theoperations of our business.
He's recruiting, he hirespeople, he evaluates people, he
(31:28):
staffs companies.
How come he knows the businessbetter than you guys do?
And I'm not trying to be smart,I think that's a pretty fair
characterization.
Speaker 2 (31:40):
Yeah, I can answer that question.
I think it might be interestingfor your audience just to
understand.
I interview people all day.
Every day I get to hear thegripes and complaints and issues
that result in people leavingone job for another.
(32:01):
And when you do that in scaleover a long period, and so you,
you, it, just a lot of thisstuff just begins to paint a
(32:23):
very clear picture of what whatyou know begins to be somewhat
fuzzy and and hard to discernand large volumes begins to be a
very clear picture.
And so I, I, you know, beginsto be a very clear picture.
And so I, you know, put me in aservice department.
No, you wouldn't want to dothat, you know, I do want to Let
(32:45):
me interrupt you for a minute.
Speaker 1 (32:49):
I was a parts manager .
My best man was a servicemanager.
We were not happy with therelationship with the parts and
service department so we decidedwe'd swap jobs.
So I went to the shop, he cameto parts, I put on overalls, I
went to the floor.
After a couple of weeks the guysaid take them off, get in the
office.
You're hurting us down here.
So, in response to you, atleast I understood.
(33:12):
But one of the things I didrelative to your interviewing
regularly I had three questionswhat do I do that you like that
I do and you want me to continue.
What do I do that you don'tlike that I do and you want me
to stop?
And what do I do that doesn'treally matter to you.
And I asked that either everythree months or six months,
(33:32):
depending on how long I'd beenin the business or in the
department or whatever.
And boy, does that ever tellyou something?
Just like you interviewingpeople.
What, what, what gets underyour skin?
What drives you crazy?
So, as a new employee, how manybosses do you think go back
after three or six months?
Says, okay, you've been herethree or six months now you've
got fresh eyes.
What is it we do that drivesyou nuts, that we think we're
(33:54):
crazy, that you'd like to changeNobody that?
Speaker 2 (33:59):
or, yeah, it's very few do, yeah, no, it's, it's,
it's rare and I think it, youknow it's um, a lot of it has to
do with with.
Steven covey talks about firstthings first.
That's the second habit of ahighly effective person.
Yep, and he actually has a bookjust about first things first.
(34:19):
That's the second habit of ahighly effective person.
And he actually has a book justabout first things first.
And he talks about things inthese four quadrants.
And urgent and important iswhere a lot of people in the
industry spend their time andthe reason why they're stuck in
urgent and important when theyreally, stephen Covey would
argue, should be in the noturgent but important.
(34:42):
That is, you're actuallyspending time solving future
problems, that you're addressingthings that don't need you to
put a fire out today, but you'redoing fire avoidance.
You know, and so I feel like alot of times what happens if I
take parts or service.
I mean your service managersswamped.
You know, if systems andprocesses aren't tight, you
(35:04):
don't have the right people, youdon't have good training.
It's like what comes first thechicken or the egg and so they
get bogged down, so it leavesthem no time to want to sit down
and think about how are mypeople doing?
And I wonder how Jimmy, whostarted here a month ago, I
wonder how his first month isgoing.
Maybe I should go talk to him,but because they're bogged down
in the administrivia of runninga service department that isn't
(35:28):
well-oiled, ironic or not ironic, but forgive the pun, you know
it's like.
Well, that's where the problemis.
And so how do you begin tosolve?
Or, you know, do fireprevention or problem prevention
, without letting the urgent andimportant issue of today just
(35:51):
explode, turn into a raginginferno?
And that's tough, you know ittakes good leadership.
A raging inferno, and that'stough, 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 andand the departments, which ones
(36:12):
have made that transitionsuccessfully, you know yeah.
Speaker 1 (36:15):
So another thing that's interesting is my boss at
hewitt was a man by the name ofrod wallow.
He was a bush pilot, a mechanic.
He fired me five times once Igot home.
Very passionate guy he requiredthis is.
He started in 52 with thedealership.
I started in 69.
(36:35):
When was there?
We had a service manager whowas a technical guy.
We had an assistant servicemanager who was a business guy.
So today in leadership, I'mgoing to want all of my leaders
to be skilled people leaders.
I want them to be businessthinkers and I want them to be
(37:00):
change six sigma, continuousimprovement.
Whatever drivers, if they don'tunderstand the discipline over
which they're the leader, Idon't care.
I can hire people to do that.
I can't find good leaders withthose qualities that I'm talking
about and I bet you you seethat every damn day.
Speaker 2 (37:22):
And what I see, uh, in addition to that, are
companies that think thatsomebody who doesn't have the
technical discipline can'tactually lead people who are
technical.
It's utter nonsense.
Speaker 1 (37:33):
Yeah.
Speaker 2 (37:34):
In fact, you know, take sales, take technician, you
promote into a service manageryour highest performing sales
guy, put him in a salesmanagement job, coin toss.
Speaker 1 (37:47):
My best example on that is which superstar athlete
has been a good manager or coach.
Speaker 2 (37:55):
Yeah.
Speaker 1 (37:56):
And to me there's been one, Bill Russell, I can't
think of anybody else, or theopposite of that.
Speaker 2 (38:04):
Can you name a coach that's never played but was a
brilliant coach?
Speaker 1 (38:08):
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 salaryadministration, I don't think
performance reviews are part ofthe core competence of anybody
(38:29):
in the distribution channel.
What do you think of that?
I wouldn't have them.
I'd subcontract it out.
Speaker 2 (38:36):
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 twobuckets, but it's really three.
A lot of people think thatrecruiting and HR are the same
thing.
They are absolutely not Right.
And a lot of people think of HRstrictly from the tactical
(39:00):
perspective.
And I say a lot of people, alot of people in our industry.
You know HR is in 90%, if notmore, of the companies, the
heavy equipment companies,dealer, manufacturer, doesn't
matter, doesn't matter.
(39:21):
Hr is an administrative,tactical function.
It's make sure people'spaychecks are right, that you
can.
You know you're processingpayroll, that you're making sure
that they have benefits andthat they're enrolled in the
proper thing and the deductionsare set up and they're doing
employee relations.
Maybe they're doing a littlebit of okay, look, you didn't
show up on time for two days,like what's going on.
You know you're getting into alittle bit of okay, look, you
didn't show up on time for twodays, like what's going on.
You know you're getting into alittle bit of that, but but it's
(39:42):
tactical, it leaves, and it'slegal compliance.
You know it's making sure thatyour folders are all set up and
that you don't have the, youknow stuff commingled.
That shouldn't be.
It's it's it's tactical, itshouldn't be.
It's it's it's tactical, it'snecessary, but it's as necessary
as plumbing and electricity atyour house.
(40:03):
You know, you got to have it,but when it doesn't work it's a
real problem.
You know, now the other side ofHR is the strategic side.
That's the, the organizationaldevelopment piece.
That's where you align businessand talent strategy, where HR
begins to become a right hand tothe CEO or the leadership team
(40:25):
and you begin to talk throughwell, what are the challenges
employee engagement perspective,from a security or safety and
operational perspective,equality perspective and then
(40:46):
you back that down into peoplestrategy.
What are the people that weneed?
What is the training that theyneed?
Do we have process in place toevaluate the performance of
those people against thosethings?
Are those yielding customersatisfaction and profitability,
like we thought?
If the answer is no, why?
(41:07):
What would happen if our keyperson got run over by a bus or
had a God forbid a heart attackor just suddenly quit?
Do we have talent in ourpipeline?
Who are our next levelperformers, our high performance
employees, hypos, and do wehave a system in place for sort
(41:27):
of determining that.
And then there's recruitment.
Speaker 1 (41:31):
So stop there for a second, because what you just
listed is wonderful.
People will get into adiscussion and they'll recognize
everything there.
They don't do it.
Yeah, I know.
So your problem avoidance I'mworking tactically on things
(41:53):
that are going to cause meproblems six months, six years
from now, so that they don'thappen and it allows me to do my
job properly.
The hiring and firing I was adata processing manager once
this guy put me in there becausehe wasn't happy with what they
did and I had to run payrollchecks.
And one weekend, the computers.
(42:15):
I had two computers.
Everything was doubled up butthey were both down and I
couldn't run payroll checks.
And here comes Monday morningand everybody wants their check
or their direct deposit.
Couldn't do it.
The following week I had anoutside company that did that
for me.
I never wanted to have thathappen to me again, ever.
So the same kind of thing.
(42:36):
George just died.
He had a stroke.
He was critical to my operation.
Who's next?
Haven't got a depth chart atall?
Speaker 2 (42:45):
Number one number two or a map process that tells you
here's how things operate andhere's where our handoffs are,
and you know, could somebodycome in and and and get
something from point A to pointB where somebody can then pick
it up and take it from B to C?
You know, like just justactually having mapped processes
(43:10):
, understanding what are ourcore processes?
Like no, probably not.
Speaker 1 (43:15):
Yeah, sarah Hanks is one of our contributors, used to
be, and she's a mechanicalengineer.
She was at general electric asa manager, a manager in
manufacturing, very talentedperson, 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 thingshere's's.
(43:36):
You know, this is a decisionpoint.
Who makes that decision?
What's the?
So let me take you toperformance reviews.
Who's trained the people in thecompany, in the dealerships, to
do performance reviews on theiremployees?
Whose job is it?
Or who's?
Speaker 2 (43:52):
doing it.
Speaker 1 (43:53):
Do you think the managers in dealerships know how
to do performance reviews?
Speaker 2 (43:57):
I mean not, not with any, any real consistency.
Maybe maybe there's one managerwho 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, mostorganizations and I'll I'll I'll
be specific about dealers, evenlarger dealers.
(44:20):
Hr is a tactical the, the, theVP of HR, the leader of HR.
80% of their time, if not more,is spent in the tactical weeds.
They're, they're not, they'renot really getting into um, the,
the, the strategy piece of it,the talent strategy component,
(44:40):
which performance reviews, is anexample 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'ssubjective, you know well, god.
I think, like, how do you makesomewhat subjective feeling
about someone's performanceobjective?
(45:03):
How do you turn that intosomething that you can actually
go?
Okay, if they check all thesethree boxes, then you can rate
them five stars out of five youknow or check these five things,
then they can get three starsout of three.
Whatever the case is, you know,and if they're missing one or
two, and then your ability tothen translate that into into
(45:25):
some sort of training anddevelopment plan, like here's
your weak spot, let's focus.
And so now it's not a I'm goingto 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 foryou, and so we want to help you
develop this skillset.
This is an area where you'reweak.
Here's how that's manifested inthe past.
This is how I know it's aweakness because of this, and
(45:46):
they'll go yeah, okay, I getthat.
That's fair, you know, and it'snot fuzzy at all.
Right, you know, and a lot ofit's because you're not.
You want to see these peopleperform at a high level.
You're not there to catch themdoing something wrong, but a lot
of people, that's what they do,exactly, exactly.
So what kind of how productiveof a conversation is that, if
(46:10):
you think you're?
Speaker 1 (46:10):
about to get in trouble.
Yeah, when you think about thatfor 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 forwhen somebody's doing a good job
and, as a result of that, Idon't look.
So we have assessments, I thinkyou know, from 90 questions to
180 questions for every jobfunction, 90 to 95% of the labor
(46:34):
hours, and we want the employeeto fill out that assessment on
themselves and we want theirleader to fill out that
assessment on the employee andthen the two of them sit down
and they compare.
And boy does that ever changethe dynamic.
Speaker 2 (46:49):
Yeah, yeah, it's uh.
I went through a leadershipexercise.
Um, I don't know if you'refamiliar with Johari window.
Yep, Okay, it's uh.
I went through a leadershipexercise.
Um, I don't know if you'refamiliar with Johari window.
Speaker 1 (46:56):
Yep.
Speaker 2 (46:57):
Okay.
So, um, you have um, these fourquadrants, 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, whichis what I know about me but I
don't share with you.
You have blind, which is whatyou know about me that I don't
(47:20):
know about myself.
And then you have this reallysubconscious thing that you
don't really know and otherpeople don't really know, but it
could be a thing.
Ultimately, you go okay, well,let's take that last category
out, let's pie chart.
What percentage of Jay do wethink is blind, meaning I know
(47:41):
about Jay that he doesn't knowabout himself, and what about
what percentage of that piechart is what Jay shares with me
but also knows about himself,et cetera.
And then you compare your chartand I compare my chart, what I
think about myself, and thatthat is the beginning of
figuring out.
How big of a gap do we have?
(48:03):
And that's kind of what you'retalking about is is this blind
spot that we all have, you know?
So the idea is, how do we closethe blind spot?
Speaker 1 (48:13):
And I think it gets even worse, jay.
You know Patrick Lencioni wrotea book called the Three Signs
of a Miserable Job.
The first sign is anonymity thecompany 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 irrelevancethey don't know where their job
(48:39):
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 theday.
They know what they got done.
Nobody else does.
Nobody has a sense ofsatisfaction because they don't
know how to measure theirperformance.
Nobody tells them that.
Right, and again that goes backto me the, the strategic piece
of HR.
I won't leave that in thecompany.
The tactical, I want to take itthe hell away.
(49:00):
Let somebody else do that.
Speaker 2 (49:03):
Yeah, and so and so.
Then there's recruiting, like Isaid, and and recruiting, um,
it kind of fits into theorganizational development.
It kind of fits into theorganizational development, the
strategic part of HR.
But I use this sort of metaphor, thinking about HR as a basket
of fruit and recruiting is thewatermelon in that basket.
Speaker 1 (49:28):
I don't like watermelon.
Speaker 2 (49:30):
It's big and bulky and heavy.
I'm playing, it's big and bulkyand heavy.
Uh, you've got.
You know, perhaps your applesand oranges are, are your
tactical, it's just like youknow your bananas, they're like
your common sort of fruits, um,and perhaps you know coconuts
and and Kiwis and raspberriesare the.
(49:54):
But the point is that becauserecruiting itself is such an
enormous task that um it, it's achallenge for for organizations
, so could you outsourcecomponents of it, like you're
saying?
Well, they out have beenoutsourcing payroll for years,
decades.
You know you can outsourcebenefits to a broker.
(50:16):
You know they can do plandesign, you know, and then and
then they can manage those toolstoday, technologies that can
manage your, your, you know,your benefit selection and and
your, your enroll, openenrollment process.
I mean the.
The stuff is available todaythrough technology to do some of
the administrative things.
(50:36):
Yeah, outsource as much of thatas possible.
The strategy piece is where Ifeel like could probably stay
inside.
What are the policies and thecompensation and what's our
culture?
What's the brand, ouremployment brand, what is going
to make somebody want to comejoin us?
How are we going to beattractive as we compete for the
(50:58):
talent, the resources, ietalent that's available in the
marketplace, you know, comparedto the guys just down the street
from us or even across thecountry.
That's important, you know.
You have to align talentstrategy or, excuse me people
and talent strategy withorganizational strategy.
That's really hard to outsource, in my opinion, if you're doing
(51:19):
it and then recruiting, whileit is a strategic component, it
is a lot of absolutely necessarytactical execution, which is
why it's so bulky and heavy andthat could absolutely be
outsourced.
We do that.
We outsource recruitment.
(51:41):
We are adjunct recruitingdepartment, either bolting onto
an existing HR team that doesn'thave recruiting acumen or
bandwidth, or for organizationsthat are decentralized and they
want their hiring managers justto be able to contact us and
process, you know, therecruitment process for them,
(52:01):
handle the recruitment processend to end for them, and so,
yeah, I think more and moreorganizations should look at
that.
They've been outsourcingrecruitment for I don't know,
probably a decade or more.
Now we're seeing recruitmentfor I don't know, probably a
decade or more now Varyinglevels of success.
I think where we're probablydifferent on that front is that
we are industry experts, wedon't just know recruiting.
(52:25):
So I think about well, whatdifferentiates us?
What differentiates us?
We know recruitment,recruitment process.
We're very skilled in that.
We know the heavy equipmentindustry and how it operates
Manufacturers, how they operate,what makes the money, how they
design equipment, how they buildit, how they get it out the
door, the dealer, the rental,like we understand the business
(52:51):
kind of at a high level.
Then we know the jobs withinthose organizations that make it
run, that make it tick, thatmake it possible for them to
actually, you know, sell theirwares and support them after the
sale or, in a manufacturer'scase, even engineer and design
it.
And then the last domainexpertise is the product itself,
(53:12):
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 andit is our industry knowledge
coupled with our recruitmentprocess knowledge that makes us
way more skilled at being ableto outsource for a heavy
equipment company theirrecruitment process than just
(53:34):
some generic recruiting firmthat sits in your backyard that
says, oh well, we're recruitersand we can do this for you.
Speaker 1 (53:41):
Yeah, I'm going to say at a dealer level, a lot of
the recruiting is done by themanager of the function himself.
Yes, I would agree, it onlygoes up into a more specialized
area with the task.
But let me flip it.
What percentage of a dealer'srevenue would you say recruiting
(54:04):
and employee development shouldbe?
Speaker 2 (54:13):
That is a great question.
I don't think I could.
I don't.
If I answered that question, itwould just be a total stab in
the dark.
I don't know the answer to that.
Like, for instance, if wetalked about um, um, oh,
somebody was, were you and Italking, uh, earlier today about
(54:37):
um, you know what percentage ofyour revenue should be set
aside for something, and it waslike 3%, I think, was the number
and so could you come up withthat and figure out okay, are we
actually spending enough?
Are we below or are we abovethat number?
(55:00):
I don't know, but I'm sure thatI could find that out.
In fact, I probably will ask AIto give me an answer to that at
some point.
Speaker 1 (55:08):
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 onesthat get training and that's a
requirement.
So if you look at the partsbusiness and the service
business technical communicators, inspectors, counter people,
(55:28):
warehouse people, et cetera,zero, et cetera, zero I'm asking
companies to set aside $500 ayear for every employee that
touches a customer, that managesassets or leads people.
I expect the employee to takefour classes, so they're going
(55:51):
to invest between 25 and 40hours of their time over the
year and two assessments theboss and me every year.
If the assessment after theclasses does not get better, we
have one discussion.
If it gets worse, we haveanother discussion.
If it gets better, we have athird discussion.
(56:12):
None of those things exist today.
There is not.
There is for data processing,there is for darn near every
other thing, but not foremployee development.
Sales training do a Google.
See how many people are outthere that provide equipment,
specific sales training.
Two or three companies, periodthe associations AED, amp.
Two or three companies, periodthe associations AED, aemp, aem,
(56:35):
nahida all of these guys.
They have training.
They outsource to an instructor.
Some associations are stillusing material I created in the
1990s.
I'm dealing with manufacturerswho have academies and they hire
people to come in and doclassroom training.
Dealers are saying to me Ican't have that guy leave me for
(56:58):
two days or three days or aweek.
And I say, even worse, afterthey get back, wait a week and
then ask them what they learnedbecause they've forgotten it all
.
Yeah, we have done a terriblejob, jay, in the human resources
aspect of our business, and ifwe don't have good people, we're
dead.
Speaker 2 (57:20):
So these are the kinds of discussions that should
be taking place.
That's a quadrant two activity.
Yep, that is not urgent butimportant.
Yep, that is not urgent butimportant, meaning your business
isn't going to implode orexplode if you don't solve that
problem today, which is why it'sgone unsolved Precisely.
(57:42):
But if you were to sit down andsay, okay, we know this to be
true, why is it this way?
And you get to some rootproblem there and then you begin
to make a change, drivingtowards continuous improvement.
And then you watch and see, isit any better?
(58:05):
And then you see that it'simproved, but still not enough.
And you go okay, why?
And you go, okay, well, what ifwe do this?
And eventually you iterate yourway through to a point where it
is improved, where it becomesingrained, where the problem
that existed previously doesn'texist anymore.
(58:28):
But now you're onto new problems.
You know, in Six Sigma you'reonto new problems.
You know, in Six Sigma it'sDMAIC, it's define, measure,
analyze, improve, control.
And yeah, exactly, it'scircular, exactly, and it is an
iterative, continuousimprovement process.
But you're always askingyourself those questions why?
(58:51):
Why is it like this?
And you know, if you tie itback to customer satisfaction,
which is very telling.
Or employee satisfaction orfinancial performance, those are
pretty good indicators.
So those are high levelindicators and then you go.
Why is it like this?
Speaker 1 (59:07):
What is a reasonable turnover rate for a business?
Speaker 2 (59:12):
You know it's funny.
I was looking yesterday at apost somebody put out and, and
and they were.
They were trying to, to, tosort of create a distinction, um
, between turnover and um, uh ofof various types.
So they had this little youknow four quadrants and I can't
(59:32):
remember what was in the bottomhalf, but you know you have on
the upper half.
Well, if these people leave andthere's nothing you can do
about it, you know they die,their spouse gets relocated, you
know they pursue a differentcareer.
Whatever happens, you know theyretire.
(59:54):
There's a lot of that actuallyin you know sort of facing the
industry.
And then there's all the otherpeople that leave and it's
generally a leadership issue.
I mean I don't know what a goodturnover is.
I mean I'm sure somebodyprobably McKinsey, probably has
some sort of slide deck on that.
I personally feel like it comesdown to employee engagement and
(01:00:17):
satisfaction.
And if you're not doing anemployee engagement survey every
year and looking at that dataand understanding what is the
cause for people's joy anddissatisfaction, 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
(01:00:41):
then say, okay, well, I'mhearing what you're having to
say, we can begin to make someadjustments.
Your people see you makingchanges.
They value and appreciate thatyou've heard what they've had to
say and you're doing somethingwith that information.
But the opposite is true If youdon't, cynicism will abound,
(01:01:01):
that you will have more turnover.
If you have an employee survey,engagement survey, and you do
nothing with the data.
Speaker 1 (01:01:09):
Just don't do it.
Yeah, shame on you.
Speaker 2 (01:01:11):
Yeah, just don't do it.
You'll create more cynicism andnegativity.
It will be, it will be.
You'll get the exact oppositeeffect, you know.
And so then then you can gookay.
Well, I guess the amount ofturnover that you can suffer
that would be acceptable is whatdoesn't affect customer
satisfaction or your culture oryour financial performance.
(01:01:34):
Is that the same for everysingle business?
No, not at all.
Speaker 1 (01:01:38):
Yeah, maybe not it might be close, one of the
things that's interesting.
I'm going to put a period onour discussion right there
because I think we could keep ongoing for hours and I think
that's very beneficial.
But the employee engagementsurvey, I believe, is one of the
critical elements.
That's my what do I do, thatyou like, et cetera, questions.
(01:02:01):
Everything's quadrants.
Employees today have beentaught to be obedient from the
time they're babies.
When we get them out into theworkforce, we want them not to
be obedient, we want them to becurious, we want them looking
over the wall.
What if we did this?
What if we did that?
And I'd like to address thatthe next time we have one.
Speaker 2 (01:02:20):
Yeah, sure, yeah.
Speaker 1 (01:02:21):
Yeah, that's fun.
Speaker 2 (01:02:23):
Yeah, that's fun.
Speaker 1 (01:02:24):
So thank you.
Thank you very much for this,jay, and everybody who's been
listening.
I hope you got something fromthis candid conversation and we
look forward to having you joinus again in the near future,
mahalo.
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