You could feel the winds of change from NADA all the way to the east coast, ... and not just for the manufactures.  Today’s automotive retailer has to deal with new technologies that are not only available for their dealerships but automotive shopping and buying technologies that are available directly to the consumer.  There are so many different systems and processes being pitched for eCommerce, BDC, showroom, sales desk; ... for both new and used vehicles.  Great tactical solutions that are necessary to carry out your strategy.  If you have the right strategy?

What’s your Strategy?

With so many options it can be challenging to decide which is best; exactly what and how to change.  There is no one best answer.  The important question is which plan is best for your store, your market, your team and your consumers.

Here’s just a few things to consider:

Staffing & Compensation Structure – Margin compression has made compensation an ever increasing challenging issue for dealers.  Low comp on the Sales Associate side is contributing to a dangerous increase in turnover and high comp on the F&I side simply is not sustainable.  What’s the solution that can level out your comp, increase productivity, lower turnover and keep your store growing in today’s changing marketplace?

• One-Person Selling?
• Two-Person: Product Specialist with Sales/Finance Manager?
• Two-Person: Professional Salesperson who desk their own deals plus a Finance Manager?
• Traditional three-person; Sales Associate; Desk Manager & F&I manager?

Compensation Plans and their Impact on Talent and Results – Our traditional compensation plans make managing human capital extremely challenging.  The best quality millennials don’t want to work for 100% commission.  The elephant in the room is the huge impact disproportionate F&I comp has on our business; the average comp differential between sales managers and F&I managers creates all kinds of negative unintended consequences.  It’s true that comp drives behavior, the question is what kind of behavior do you want to drive?  How can you leverage comp structure to improve your overall human capital ROI?

• Traditional 100% Commission?
• 45% Salary / 55% Variable?
• Focused on volume or gross or both evenly?
• Behavior and/or Activity based variable components?
• Non-commissioned; primarily salary based?

New Vehicle Pricing – I’m not talking about just your eCommerce pricing, but your overall plan?  How should your team handle pricing for walk-in, phone, service, repeat/referral customers?   The same way that we always have?  Do the best they can with each customer?  Is that really a strategy; leave it up to the desk manager?  It’s certainly what we’ve done for generations, then again today’s consumer has unprecedented access to transparency in pricing.  What is the best strategy for the long-term profitability of your store?

• One Price?
• Market-Based pricing with limited negotiation?
• Traditional MSRP based negotiations?

These are just a few of the tough decisions dealers have to make in this changing environment.  What’s best for one store is not necessarily good for another. 

Most of us have observed the volume/gross pendulum swinging far and wide during our careers.  Often wreaking havoc in its path leaving both managers and associates wondering; “What are we supposed to be going for this month? or even this week?”  …… “Oh yeah, both!”

I worked with a great leader once who was always exhorting us to “take share profitably.”  Easier said than done, apparently.  One year, after an exhaustive analysis of over 200 dealerships we found less than 20% able to achieve that feat for a modest 6 months in a row.  You might say “so what, who cares?”  “We’ll go for volume until the PVRs get too low then we’ll swing over to a gross mindset until we lose too many sales.”  Back and forth we go.  It’s an all too common reality in too many stores.

What are the consequences, both real and perceived, both intended and unintended?  Here’s just a few:

• People: Frustration, confusion, conflict.  Fighting against each other without even knowing it; because one manager is focused on gross while the other focused on volume.  You may think this is a good balance; they do not.
• Product: When you ordered what you have in stock now and in your pipeline you were thinking volume but now you’re going for gross and you need differently configured inventory. Or worse yet, you didn’t order with either specifically in mind.
• Process: You teach a high-touch relationship building sales process that is slow and not conducive to high productivity, speed and efficiency you need for high volume or vice versa.

Can’t we have both? – You can, if you and your team are in the top 20% of all dealerships and you have the right franchise and inventory pipeline.  Even then the questions should be;

• “Do we have the right people and culture established?”
• “Are we ordering inventory strategically to achieve both?”
• “Do we have the right flexibility in our process to achieve both consistently?”

Let’s face reality.  Not everyone is in the top 20%.  In fact, 80% of us are not.  For the rest of us, you would be better served primarily sticking with one or the other most of the time. 

Patrick Lencioni says; “If you can get everyone in an organization rowing in the same direction at the same time, you can dominate any industry, in any market, at any time.”  So pick one and stick to it.

• Volume-orientation
• Gross-orientation

Which is better?  There's no right or wrong answer.  Each one can produce highly profitable dealerships.  But each one takes an entirely different approach to maximize opportunities and optimizing results.  You may already think of your dealership as a volume-based store or a gross-based store.  But there are almost certainly things that are holding you back from executing that strategy to its greatest profitability.

• People
  • What are their core beliefs? Are you a volume store with a manager who thinks gross is the better way to go? Do you have the right or wrong people to help you execute your strategy?
  • What are their capabilities? Do you have mostly new hires with high turnover? Are you providing any advanced selling skills and influence training to your existing staff?

• Product
  • Are you ordering specifically to support one strategy or the other. To maximize either takes a completely different inventory model/trim/style/option/color mix.
  • Is your franchise pipeline enabling you to execute the strategy you prefer? How about the OEM brand image?  Or the way they do incentives?  Are you fighting an uphill battle trying to be a gross-oriented store while the OEM only cares about volume?

• Process
  • Volume-orientation;  does it focus on ... ?
    • Speed and efficiency
    • Eliminate time wasters
    • Flexible and responsive
  • Gross-orientation; is it ... ?
    • High-touch
    • Customizable
    • Relationship and Reputation-based
• Performance - The other sales departments have a profound impact on both which model is best for your store and on making that model successful.
• • F&I - How is the performance of your F&I department? Can the team support a high volume, low front-end gross flow?  How engaged are they with the sales desk?  What are the back-end PVRS currently?  How is their service contract and maintenance penetration?  Are there long delays during peak times?
  • Used Vehicles - What is your new: used ratio? Trade evaluation win percentage?  Retail price to transaction gap?  Do your appraisers try to “steal” trades when they can?  How often do your managers have to ask for trade bumps?
  • Fixed Operations - What is your current service absorption?  What about sales to service conversion? … and Service to Sales

Most of us have fairly well-defined processes; their execution usually can always be improved, but really how effective are they?  Are they delivering the results they should? … and compared to what?

Focusing on the right measures

In The Four Disciplines of Execution, Covey indicates you should focus on two or three leading measures that are activity or behavior based, predictive of ultimate performance success and highly influencable.  What they are may surprise you.  Once, after doing some exhaustive analysis, we discovered we had been focusing on the wrong measures.  What our leadership was pushing us to get done was not very indicative to producing great results compared to a couple of measure we had previously been ignoring.  Simply changing our focus to the right activities or behaviors immediately produced improved results.

Speaking of behaviors

Many of the activities that produce the real performance lift in process execution are not measured and can’t be seen on a report.

• Management team engagement
• Having the right leader accountable for that part of the business
• The quality of the team doing the work
• Quality added-value communication between the team and the Customer and each other

Assessing their effectiveness takes objective observation, time to dig around in the CRM and knowing specifically what to look for.

In-Store Assessment

If you had 4 uninterrupted hours, a reasonably good job aid and could remain objective you can do a pretty good deep dive of one of your sales processes like Ecommerce.  Those are some pretty big ifs, especially the uninterrupted 4 hours.  My experience has been, sometimes when you’re pulling back the covers it’s hard not to get defensive about some things that are revealed.  Having an impartial 3rd party do the assessment certainly has some value; especially if they’ve done it before in many different stores.

Action Plan – Getting to the Root Cause

Why is it that most action plans either never get completed or don’t produce the results that were intended?  Most action plans only address the future and not the past.  That’s a mistake.  If opportunities are revealed and you don’t address what caused them in the first place (the root cause), and ensure you remove those obstacles and/or roadblocks as part of your action plan, they are destined to reappear and bring you back to the place you find yourself in today.  The best predictor of future behavior is past behavior; if something wasn’t getting done, just saying “we’re going to do it going forward” is NOT an effective action plan.  There’s a reason it wasn’t getting done, and you need to find out (the REAL reason), then fix that, and you have a chance of successful implementation.

Of course the action plan also needs to include the specific steps of “how” we will change or start or improve and sustain as well as WHO.  Who will do it, who is responsible and accountable and who will check or inspect?  Then WHEN.  When will be the communication and/or training needed, the setting of expectations, the actual activity occur?  When is the due or completion date?

Implementation amidst the day-today operations

Certainly a specific detailed action plan has a much better chance of implementation than not; however, life often gets in the way of our best intentions.  Improving your Ecommerce performance results, for example, is just one of many priorities for your store.  Not to mention new crisis that seem to pop up at the most inopportune time.  It’s altogether too easy for your plan to get derailed or delayed meaning lost opportunities for profits, sales, customers and associates.   The very best players still need coaches to help keep them focused and on track. 

Follow-up and accountability are the key to realizing the performance improvement results you expect as quickly as possible.  A frequent cadence over the next three weeks to help establish new habits is necessary.