I recently spoke at the 2024 NADA SHOW Dealer Learning Lab. Here is what I told the crowd of over 250 dealers on February 2, 2024:
I’d like to tell you about THE QUEEN OF MEAN. The Queen is quite a mysterious creature whom I had both the good and horrible fortune to work with for the better part of 5 years, separated only by a thin wall of sheet rock between my operations office and her F&I office. Just a thin wall muffling the sounds of happy customers, her irate phone calls to lenders, joyous laughter with the dealer principal and horrifying and vicious verbal attacks on mostly innocent and unsuspecting salespeople.
The Queen you see, shared with me that she didn’t have it easy early in life, acting as the mother of her siblings as a child of only 13 years old. This made her street-smart and hardened early in life. But God also gave the Queen a big heart. In her late 20’s she adopted 2 children of her drug-addicted brother and took on an unofficial role as foster parent for a neglected child who lived down the street, buying him his school clothes, feeding him dinner most nights, and making sure he did his homework.
The Queen also happens to be a very solid finance manager. Incredibly consistent in her process and the resulting numbers. Reliable in making sure the whole system works from the sales desk to the billing office.
Despite the drama, it all worked, that is, until one of the best car salesmen in 3 counties entered the scene. We’ll call him Chris. Chris is talented, charming, driven, needy and self-absorbed when it comes to his profession. All traits of a top salesperson, right? Chris was the top volume guy on the floor his very first month with us and only lost the title once in over 2 years.
Here is where I join this story as operations director/referee. You see, I worked with automotive dealers for decades as a vendor, mainly in advertising so I thought I knew the business. Boy was I wrong! Over a decade ago, one of my dealer clients recruited me to join him full-time. THIS is when my eyes were first opened to the inner workings and daily life in a dealership – how most decisions were made, and the folly of some of these decisions.
My dealership world really got interesting when I later became operations director and HR liaison. We once fired a salesperson and a title clerk for apparent substance abuse on the same day. The title clerk fell asleep at her desk 3 days in a row and the salesperson, who forgot he was fired, returned to work the next morning completely oblivious to having been terminated 12 hours earlier.
We also had this salesman who always tried to work his way around the system. Simply refused to follow any rules. It was the first or second day of our showroom being shut down during Covid and we kept a few key people for remote deliveries, etc. In New York State, we were operating under the threat of complete shutdowns including our service department and potential fines if we interacted with any customer on the lot. Even the sight of non-essential employees on the lot was a risk in those early days. I had gone out on a ride with the dealer principal just to get some sanity and when we returned, there he was on the lot wearing a florescent orange puffy coat and talking to a customer right on the front steps of the showroom. I won't even tell you the story about the walkie talkies. The boss fired him on the spot.
While these seem to most people to be sound decisions, and they were, I have also seen far too many decisions driven by EMOTION or GUT. Indeed, I am guilty of making some. Now anyone who has spent any time in a dealership knows it’s an emotion-fueled setting. In some ways, there are incredibly positive emotions – a happy customer excited over their new vehicle purchase or the excitement that engulfs a sales meeting to begin the day. We all know the last day of the month is a day filled with hope, frustration, and sometimes a feeling of being completely overwhelmed. So, it makes sense that many decisions have to be made in the heat of battle. Unfortunately, sometimes the wrong decisions are made when emotions are involved. Sometimes it is just a gut feeling and sometimes simply ill-informed and lazy.
So, today I will speak with you about the importance of using accurate data to make informed and more profitable business decisions within your dealerships.
And... it all starts with actionable data. Actionable is practical and easily acted on. Who here today uses data to make decisions as part of their routine processes?
There is so much data available to us these days that it can be difficult to know what is important and what is just noise. I’m going to exclude financial and accounting information from today’s conversation because that is the reason these departments exist. We have CRM data which includes lead sources, inbound and outbound sales efforts, customer behavior, etc. There are tools to look at pricing data for vehicles in our particular market. The manufacturers dump data all over us telling how many vehicles we should be selling (MSR). And of course, we have the notorious and abominable DMS.
As humans, we often see patterns and have suspicions. We form opinions and biases. For example, in the service department it may appear that a dispatcher passing out work to techs who are the easiest to deal with, or they’re bowling buddies. That makes his life easier. Are these technicians the most efficient and profitable or are they getting the most profitable work?
One thing to look at closely is how well your technician and service advisor teams are partnered up and operating profitably. Here is a common example: As a service director you know a technician who always does a thorough MPI. A great exercise is to look at which service advisors are selling their work effectively and of course, which are not. Is this a training opportunity? A personality conflict? A trust factor? The point is most of us would assume it was the fault of the advisor for not doing their job. Most people want to do their job and be successful, but something gets in their way. It is our job as managers and directors to uncover these roadblocks and lead our team to success. Much of this depends upon reliable data.
In an operation of any substantial size, there are easily thousands of dollars per month being left on the table with the work you already have coming through the drive. I’ve always argued that most of the tens of thousands of dollars we spend on advertising to drive more traffic to our stores involves a discount or coupon to gain new business. With just a small fraction of our budgets, we should be investing in technology that maximizes the opportunities already in front of us. Yes – a tool that increases our profitability rather than racing to the bottom. The additional benefits, of course, are the retention of satisfied customers.
Additional examples of emotion-based decisions are related to hiring and firing.
Hiring: As managers, we often hire on our first impression of the candidate, putting trust in their stated experience without checking references – which admittedly is getting more difficult to do these days. What can we do better here? Gather more information. Get a second and third opinion from fellow managers who may have to work with this person in a different capacity than you. Find out what they liked the most and least with their previous employer. Are their greatest dislikes things that are prominent in your dealership that they are sure to experience? Or perhaps what they like the most is also your organization’s greatest strength!
Firing: Now back to the Queen and salesman Chris. When it comes to our producers – salespeople, sales managers, F&I managers; there can be some strong personalities involved. We’ve all had our top producers who are so singularly focused on their own success that they develop contentious relationships with their teammates. As I mentioned, Chris was #1 month in month out (I'll get to what I mean by “top salesperson” in a minute). I told of how he would grate at the Queen because he always had the most deals and wanted his customers to come first, but he had this edgy personality where he didn’t know when to back off.
Finally, after two consecutive record volume months for this store, they both came to leadership and said "there ain’t room here for the both of us.” Boy, this was a tough one. We tried to talk them through it and create some mutual understanding and respect once everyone cooled down but it became apparent things were going to flare up again. So, the discussion among leadership quickly went to who everyone liked better. Now, among our top producers, whichever decision we made was going to hurt. On the one hand, The Queen of Mean was a workhorse who produced very consistent numbers. Chris was the top volume guy virtually every month. He was always working the phone and had very good customer reviews, with a ton of repeat business. But boy did the world evolve around him.
So, what did we do? We dove into the profitability of both individuals and how they stacked up to their peers in F&I and sales, respectively. The F&I manager had a PVR only $150 higher than our other manager although everyone’s perception was that she was much stronger. Salesman Chris, however, had an average sales gross of $800 higher than anyone else on the floor. F&I PVR on his deals were also $200 higher than the store average. Though unpleasant, the data made the decision clear. Chris kept doing his thing and the backup-turned-ace F&I manager’s PVR went up nearly $400.
You see, once we removed all personal feelings about the individuals, we drew logical conclusions based solely on the data at hand. We quickly concluded that not only was Chris’ consistent sales volume and average gross profit important to our success, but his impact on the F&I department’s PVR was significant enough that he would lift the back-up F&I manager’s numbers to at least match The Queen’s numbers.
Since my time in the dealerships, we have built out a very dynamic DMS-integrated platform that helps hundreds of dealers across North America perform these types of exercises daily in both variable and fixed operations, resulting in millions of dollars in additional gross profit each month. Utilizing reporting and analytics to make data-driven decisions should be part of a daily process to stop profit leaks and identify training opportunities. In our experience, even some of the sharpest dealer operators only consider reporting to be a month-end exercise to calculate payroll, looking back at least 30 days on issues that could have been addressed in real-time.
Think about it – we look at our inventory aging and CITs every day. Of course, we should be looking at performance metrics every day as well. Once it becomes a habit, making sound business decisions becomes much simpler and agile.
One final story about the dispatcher and his technician bowling buddies... It was my personal suspicion that the number of hours the tech turned in any given week was in direct proportion to his bowling league score. While I don’t have any empirical evidence to back this – sometimes you just have to trust your gut.
To learn more, contact:
Pete Carusone
518-670-2671
pete@visionAST.com