Throughout my 30+ years in the automotive industry, I have watched hundreds of dealerships struggle to develop a company culture that drives the execution of strategies. These strategies are typically designed to increase profits through process improvements, and they're usually centered around driving revenue, decreasing expenses, improving CSI, increasing employee productivity, and improving training programs.
There are talented trainers for everything we would ever hope to improve in our dealerships. Businesses spend tremendous amounts of money on training salespeople, advisors, managers, etc. However, I still see a low percentage of dealerships achieving 25-30% net-to-gross profit. Why does one high-volume franchise in a major metropolitan area consistently deliver 35-40% net-to-gross while three more of the same franchise stores, in the same auto group, struggle to reach 20%?
The reality is that the retail automotive industry has an inherent weakness when it comes to building the culture needed to drive execution of a sound strategic plan. These separate dealerships may have different expense structures, facilities, or locations that affect their profits, but there is still that “one universal thing” that sets the top performers apart.
In their book, "Execution: The Discipline of Getting Things Done," Larry Bossidy and Ram Charan address three core processes that are the cornerstone of an execution culture: people, strategy, and operations. Managing and coaching around these core processes tends to expose many inefficient leaders in the retail automotive industry and allows you to make the necessary changes to improve. The first breakdown comes when they do not have a detailed daily plan that is recorded manually or electronically in a time management system. They also don’t take the time to involve their people in strategy sessions based on financial data reviews. Meetings that should lead to detailed, time-sensitive action plans that get assimilated into the daily operation of the store.
I have had the luxury of experiencing the culture and daily operations of top performers such as Van Tuyl, Penske, Group 1 Automotive, Auto Nation's highest performing stores, and many others during my tenure in the industry. Each operation works tirelessly to instill the basic building blocks of a top performing dealership. Once in place—and it is truly heavy lifting—the following key points drive these changes to create an execution culture:
- Create deeply researched budgets and forecasts that are achievable and attainable. General managers and department heads should be active contributors to the budgeting process.
- Employ accurate daily operating controls to inform all profit and loss decision makers and department heads of exactly where they are, daily, toward achievement of that budget forecast. This transparency allows them to call "back on track” meetings throughout the month, instead of on the 25th when the month has virtually disappeared.
- Based on monthly financial statement data, strategize opportunities and write detailed action plans to make changes in current processes on a weekly and monthly basis. These process improvement plans should be communicated to everyone. Processes and systems should be proven and continuously tweaked.
- Measure key performance indicators (KPIs) to drive net profit in all areas of sales, service, CSI, personnel productivity, and asset and expense controls.
- Work to increase accountability and decrease entitlement.
- Define and write processes for recruiting, interviewing, assessing, hiring, onboarding, and pipe-lining for success.
In addition to the above, an execution culture starts with a well thought out mission statement and set of core values that all leaders must become immersed in. Putting this all down on paper might seem easy, but creating, living, and breathing it is a whole different ballgame. If you would like to find out how to begin this journey, call or e-mail me. I have numerous references from dealerships with sales volumes of 100 units per month, all the way to operations that close 600+ units per month. Each of these stores take the time, bi-monthly and quarterly, to create their execution culture. Let’s create yours.