Strength in Numbers

Recent automotive sales and other key economic data suggest we're finally on a road to recovery. Granted, the auto industry will not experience an overnight recovery, but a sustained positive growth is a situation we can all live and work with. Consumer confidence is at its highest level in six months and, even though the national unemployment rate remains relatively high, jobs are being added, especially

Recent automotive sales and other key economic data suggest we're finally on a road to recovery.

Granted, the auto industry will not experience an overnight recovery, but a sustained positive growth is a situation we can all live and work with.

Consumer confidence is at its highest level in six months and, even though the national unemployment rate remains relatively high, jobs are being added, especially in the all-important private sector.

Now is the time for us organizationally to step it up a notch.

I'm often asked two questions by dealers.

  1. Which numbers would you recommend I monitor on a monthly basis?
  2. What is the benchmark/guide for that number?

I will list the areas I feel are critical and then offer suggestions on others areas or numbers you might want to track, both internally and externally.

Let's begin with the second question. There isn't a single number for any account, etc. that is carved in stone. There are references available from your manufacturers or 20 Group providers that help us compare our operational performance with other dealers. But remember these numbers are moving targets.

I suggest you and your senior management team identify a few key performance numbers (KPIs) you will want to monitor monthly to compare your actual performance to your target or goal and also to help you quickly identify any areas of concern.

I conducted an in-dealership management meeting for an excellent dealer who explained his theory on KPIs.

He said managers should focus on no more than five areas. If, individually, they could perform well in those areas, the dealership would be very profitable.

In his operation, managers have taken ownership of this process and assumed full responsibility for their department KPIs, which continues to result in a very high performance dealership.

Meet with your department managers individually and walk them through the process of choosing five areas they can influence. Explain that their monthly performance will be measured versus their KPIs and the results discussed during the monthly operation meetings.

From a departmental manager's perspective, the KPIs should focus on areas they can impact and also which will allow their performance to be optimized.

For example, variable managers would want to focus on their gross per vehicle retailed; the finance and insurance income per vehicle retailed; inventory days' supply; turn and aging; sales personnel unit/gross productivity; the number of guarantees, if any, paid and the departmental employee staffing level; and turnover.

In the fixed operation, management KPIs would include fixed coverage; measurements for technician productivity; any technician guarantees paid; service advisor and estimator productivity; parts counter sales personnel productivity; effective labor rates compared with retail; gross profit percentages; unsold hours and departmental employee turnover.

A dealer operator has a totally separate list of KPIs to monitor. Those include: dealership net profit as a percentage of gross; total expense as a percentage of gross; other income and deductions; employee productivity per employee in total and by department; employee turnover; asset management status versus preset standards; a cash flow statement; market share versus target and CSI.

During the monthly recap meetings, have each department manager present and discuss their individual results versus their KPIs. Following their reports, the dealer principal will cover the big picture KPIs he or she monitors.

By implementing this process, you will find it rewarding to witness not only an increase in your management's total dealership operation education level, but the level of their professionalism this process will add.

The real benefit of this process will be the increase in your bottom line.

Good selling!

Veteran auto dealership consultant Tony Noland is at [email protected].

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