The Well-Oiled Business Machine

November 2006, Auto Dealer Today - WebXclusive

by Greg Goebel - Also by this author

I don’t personally know Roger Penske, but I have met him a number of times. The same goes for Rick Hendrick. I have the utmost respect for both men, and I only mention them because most everyone in the industry recognizes them for their retailing prowess, as well extensive auto racing success. They are two highly skilled men that have developed well-oiled business machines.

The well-oiled business machine seems to operate at a high level of efficiency – almost effortlessly – with minimal direction. Notice I used the word “seems,” as people often mistake perception for reality. That mistake has caused many dealers countless frustrations as they fool themselves into believing endless growth is as simple as finding the store or location and having the capital to pull the trigger.

Let’s imagine a look inside United Auto Group, which Penske is founder and chairman. Without knowing him or their management team, I would opine that everyone in each store has a defined job description (for which they are trained to perform) and is held accountable. The culture of the organization is that there is one way to run the business: the UAG way. While Penske does not call the shots on daily operations, he requires regimen and discipline. If you vary from his expectations, you will be working at Down-the-Road Motors very quickly.

A common scenario I frequently see, and had to work through myself, is that sometimes success is too easy. A dealer grows a small operation to a medium sized one, or medium sized one to large. The dealer is usually active every day in the operation, and as it grows, the dealer is cognizant of the most important areas of the business. Their own skills can compensate for and hide key personnel inefficiencies so the store is very profitable and seems like a well-oiled machine.

With the first store, the dealer often operates at a transactional level rather than a managerial level. Their daily duties involve being part of many of the car deals plus the other profit centers rather than on developing a plan to lead a management team and helping management develop a team of employees.

Suddenly, with store number two (or three) the dealer can no longer be as involved. Either through rationalization or just over assessing existing personnel, the dealer feels similar successes can be duplicated easily. However, he or she must now rely on talented managers. Here is where lack of talent suddenly becomes apparent, and the machine no longer feels well-oiled. In reality, the end result is the dealer winds up working 16 to 18 hour days, six and seven days a week and is often frustrated the machine has outgrown personnel. Furthermore, it seems few employees, other than family, have the eye for executing the details.

Profits for store number one slide, and store number two never reaches expectations. I have even seen situations where dealers buy or build store number three after rationalizing what they need is a COO, justifying the expense because they have three stores. In the end the dealer finally admits that what they are really looking for is life to be like what he/she thought it was when they had just a single profitable store. (This is usually where my phone rings.)

Unfortunately, there’s no silver bullet. The dealer is looking for a quick fix to save their sanity (and capital). Generally they are looking to hire someone to get it running “right” again. The problem is it was never really running “right.” The company has no mission statement in place. It has few, if any, defined roles and fewer job descriptions. Tracking and accountability is a necessity, and the dealer knows that but can’t seem to find a way to accomplish it unless he or she personally does it. In essence, at one time they could do it all, but now, without basic business elements, it seems impossible. Most of the dealer’s time is in damage control rather than proactive planning.

The answer? First, realize the talents that first helped the dealer achieve success may now be the dealership’s demise as growth occurs. The ability to react quickly, multi-task and have your hands in everything doesn’t automatically foster leadership and delegation qualities. Dealer groups require corporate direction and should involve similar business methods and controls. A group requires regimens and discipline, which are often easier preached than done. Fast paced entrepreneurs often resist it, seeing root canals as more appealing. With the best intentions, they swear to change and might commit to the process for a week or two. Then, the pain of the structure becomes unbearable, and they revert to old habits.

Once you have grown to this point, your only answers are to find a way to structure the organization with philosophies and consistencies to conduct business or shrink it, and neither option may be particularly palatable. If you have always worked with a flexible agenda, the committing to a regimen can seem very restrictive. Every dealership, however, needs definition and structure so employees can consistently execute the game plan. It also allows you to better train and develop key personnel; the people that you must be able to rely on to reach full potential. Remember, the dealer serves as a role model. Dealers are seen as successful, and employees tend to emulate their actions…even a bigger problem if dealers lack organization and discipline.

Shrinking an organization can be painful to both egos and the bank account. Although not desirable, sometimes it is the only way to shore up talent that is stretched far too thin. The key is to resist temptation and control growth until you have the culture of the company well defined and human resources trained and in place.

In short, well-oiled business machines do not run themselves. They’re defined with clear direction and well trained people who are held accountable to job descriptions by ownership or executive management, and their culture includes regular regimens to ensure consistent execution. No one said operating a dealership was easy. It just looks easy when someone else is doing it. Just ask Roger Penske.

Until then, keep oiling!
Vol 3, Issue 9

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