As dealer groups grow in store count and acquire a diverse range of operational processes, cultures and technologies, store individuality must adapt to group-wide Key Performance Indicator (KPI) standards.
Just as each store monitors and measures its financial performance according to generally accepted accounting principles shared upward in the organization, so must processes, performance monitoring and reporting.
Stores can resist submitting to group-mandated operational decisions and practices, but the writing is on the wall.
There is no other way — than through process and practice KPI standardization among stores and top-down decisioning — that large public and private operations will achieve the return on investment (ROI) or earnings per share (EPS) from their acquired stores to meet shareholder expectations.
• Using the same responsibility and accuracy yardstick throughout the organization.
• Insisting on applying this yardstick throughout variable and fixed, including reconditioning, a primary driver of used car department profitability.
• A standardized recon yardstick among all stores within a group (of any size) will ensure apples-to-apples performance measurement and reporting from store to store and group-wide.
Every month, we see a few dealerships trying other yardsticks, failing to understand that vehicle reconditioning is more than counting cars faster. The risk here is opting for ease over thoroughness that dismisses the opportunity to build a consistent culture of continuous process improvement.
The CarMax model proves this continuous improvement mantra. CarMax organized a spectacularly successful business model by standardizing stocking, pricing, merchandising and sales to which each location commits.
For C-level executives with today’s private and public groups, only standardization of inputs and how they are reported can make honest and manageable performance comparisons equal among stores and across the enterprise.
I’m not coming at this from the dugout. I’ve been in the game for years. My Silicon Valley background with the computer and the semiconductor industries — and my direct work with OEMs like GM, Ford, BMW, Mercedes-Benz and Fiat — taught me the value of management by KPIs, standardization and continuous improvement. But even in many of the dealerships we work with, ingrained inefficiencies between fixed, variable, parts and F&I continue to put their businesses at long-term risk.
How will stores not operated and managed by standardization to KPIs accurately compare critical metrics such as vehicle workflow tracking and reporting, recon time-to-line speed, sale-ready volumes, turn and aging? Where stores are allowed to operate essential functions — as reconditioning is today for your dealership — an apples-to-oranges comparison dichotomy exists. This gulf in standardization is costly.
Too much efficiency variance and money linger unnoticed in dealerships where different and unequal practices from one store within to the next are permitted. Leaks become part of group dynamics that put ROI and EPS goals at risk.
Without clarity into the practices, processes and personnel performance metrics of newly acquired dealerships — and what will continue to plague group dynamics if not addressed — are these:
• Efficiencies will lag, running up holding costs and tripping up responsiveness to market demand.
• Costs will escalate where responsive systems are not present to provide real-time cost and deficiency reporting to users and management.
• Lack of accountability for who does what next — and a time-stamp for accountability — will permit time leaks to erode speed-to-sale speed, margins and sales volume.
• Lead conversion and sales retention will remain slippery without customer-facing transparency and trust-building tools that boost the ROI of online vehicle marketing investments.
You can continue to tolerate stores resisting any loosening of their autonomy, but the writing is on the wall.
There is no other way than through store-by-store and group-wide KPI standardization and top-down decisioning that public and private operations will sustain the return on investment or earnings per share projections to justify their acquisition.