As Dealer Manager, you may be in charge of a Dealer Revenue Center.
Dealer Revenue Center Management has been the pivotal dealer Best Practice for over four decades. Yet, why are so many dealers still floundering in specific areas of their business? I think it has to do with Bus Drivers, Controls, Maps, and Tools.
It takes a Bus Driver (Revenue Center Manager) to get you where you want to go in each Revenue Center: New Machinery Sales, Used Machinery Sales, Rentals/Hire, Parts or Service. They are the ones who must organize the resources and make it happen. Yet, many seem lost, out of control, and uncertain about how to fix problems or overcome obstacles along the way. Here’s why:
1. Inadequate quantitative performance objectives.
If, as Lord Kelvin implied, if we cannot attach numbers to our performance and performance goals, our knowledge of those activities is meager and unsatisfactory. In our dealer management publications, we examine what we call Critical Profit Variables (CPVs) in each Revenue Center. What are the essential metrics your Bus Drivers must establish, measure, monitor, and control for their Revenue Center to become profitable and achieve long-term objectives?
What are the high-profit quantitative scores your Bus Drivers should drive toward? These long-term performance targets are not to indicate your current operations are good or bad, but, rather help your management team establish and pursue stretch goals. (Which I hope you make more difficult to achieve each year, to continuously challenge your management team.)
2. Unawareness of Best Practices in each Revenue Center.
Best Practices are those qualitative policies, processes, and procedures best-in-class dealers employ to foster profitable growth, delight customers and produce harmony and discipline in the dealership. Reviewing the 450 Best Practices across the five dealer Revenue Centers, is an excellent first step in improving sales, operations and customer service performance. For example, dealers who can maintain strong “team play” gain a lasting and significant competitive advantage. This was clearly demonstrated by several Volvo heavy-duty truck dealers I visited. Service and parts must collaborate to deliver competitive dealer support.
3. Inadequate dealer information systems.
We recommend manufacturers endorse a specific information systems vendor for their dealer organization. OEMs should work toward developing standard formats and useful
dashboard analytics to highlight and leverage the dealers’ treasure trove of hidden customer transaction data.
4. Poorly used dashboard summary controls.
Dealer Principals, as well as Bus Drivers, need a “Daily Flash Report.” We need to be able to make adjustments to our game performance before the end of the day. If you are experiencing a significant problem, you need to be able to spot it NOW and fix it NOW with the right tools. Waiting for end-of-month financials is far too late. The inning or first half is over. And, we’re still thinking about “who’s on first” or “why did we get that penalty.” A good example is a drop in labor productivity that happened yesterday. Why? What caused it? Are you sure? How can you fix it NOW before the game is lost today?
5. Bus Drivers may have difficulty determining the route.
There are so many distractions. What are the key leverage points? What are the Critical Profit Variables for my Revenue Center? Which will really get me where I want and need to go? How do I focus on the most important issues that significantly impact my business? How do I determine the financial value of alternate management actions? Where should we invest our scarce and costly resources: time, budget, knowledge, and skills? How do we set proper milestones and track our progress to make certain we are on the right track? Rest easy. We have resources that will help.
6. Bus Drivers may lack the skillful use of needed tools.
One of the fundamental distinguishing features of the human species is our ability to make and use tools. The appearance of stone tools began about 3.3 million years ago and marks the critical first step in human cultural development. Tools enabled early hominids then living near Lake Turkana in Kenya, to widen the range of food available to them. Then, about 1.5 million years ago, significant improvements in stone implement technology yielded such marvels as sharp-pointed hand axes and cleavers. By working both sides of a lava flake, a very sharp instrument could be made. These new tools enabled early humans to move from scavenging to active hunting, providing defensive as well as offensive weapons against predators and enemies.
Then, by about 120,000 years ago, many aspects of human behavior were in existence, including hunting and gathering as a successful way of life, the use of fire, and simple, but effective technology in both stone and wood tools. Our earliest ancestors skillfully employed tools and managed to acquire the food, clothing, and shelter essential to their survival.
Modern dealer business is similar in many ways. It is the skillful use of management tools that enables an equipment dealership to survive and prosper, outwit predatory competition, and achieve financial objectives. The management tools, Critical Profit Variables (CPVs), discussed in this book are not complicated, but sometimes require training for skillful deployment and application.
Your employees may be your greatest asset, but they must be trained in the proficient use of tools, or, your dealership’s survival in a very hostile environment could be at risk. Dealers can look at the whole aspect of bus driver performance through their ability to provide management and leadership in the proper application of these tools. Therefore, you must keep your management training current and ongoing.
The First Step is to improve your transaction data environment, to have consistently useful and quality data for decision making. However, if management is “data allergic,” preferring to make decisions by guess or intuition, the use of analytics may be limited.
High-performance dealers design effective decision-making into their processes, to ensure analytical insights get translated into action and ultimately enhance business performance.
You must have a clear strategy to know which data to focus on, how to allocate resources, and what you are trying to accomplish. To have a significant impact on business performance as an analytical competitor, you must continually strive to quantify and improve insight into performance drivers (Critical Profit Variables). These are the causal factors that drive cost, profitability, cash flow, growth, and enterprise value.
You are welcome to contact Walter at Walt@mcdonaldgorupinc.com.