DRIVELINE M I C H I G A N I ND E P E ND E N T AU T O D E A L E R S A S S O C I AT I O N
MAXIMIZING IMPACT AND FOCUS IN 2018
DESIGNING THE NEW YEAR FOR BETTER SUCCESS PAGE 08
HOW EFFECTIVE LEADERS HANDLE MISTAKES
STRATEGIES TO HELP YOU MASTER THIS IMPORTANT SKILL PAGE 03
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MANAGEMENT MATTERS | BY DAVE ANDERSON
HOW EFFECTIVE LEADERS HANDLE MISTAKES
Strategies to Help You Master this Important Skill I recently filmed a DVD program for my online training platform on the topic of handling mistakes, and the response was even more robust than normal. I believe that’s because handling mistakes – ours and others’ – is such an ongoing, realworld leadership responsibility that affects everyone, both at work and at home. How you handle mistakes also goes a long way in determining the level of trust, buy-in, connection, and positive impact you can have on your team. Here are some thoughts and strategies to help you master this important leadership skill.
HOW TO HANDLE YOUR OWN MISTAKES Admit a mistake as quickly as possible. Waiting to acknowledge a mistake gives the perception you’re either oblivious to what you’ve done, or you may be looking for a way out of taking responsibility. As a result, delayed confessions allow a hiccup to become a cover-up, and then a conspiracy. This perception will break trust and build disgust among the ranks. Don’t try talking yourself out of something you behaved yourself into. Own it. You don’t have to make a big deal out of it, just own it. The objective is to bring closure to a mistake quickly so you can focus on moving forward. As an aside, if you admit an error, don’t marginalize your effort by making an excuse for it. Own it. This models a positive leadership example your team will pick up on. Leaders with bloated egos or gross insecurities never manage to execute this first step. They wrongly believe admitting a mistake makes them look weak when the opposite is true. Admitting mistakes requires strength, and earns respect because others know how difficult it would be for them to do the same thing in your situation. Learn from the mistake, then don’t repeat it. This well-known quote sheds insight onto this point: “You can never make the same mistake twice because the second time you make it, it’s not a mistake, it’s a choice.” Coach Paul “Bear” Bryant offered sound advice along these lines when he said, “When you make a mistake admit it, learn from it, don’t repeat it.” The reality is anyone who tries new things, seizes the initiative, and makes decisions is going to make mistakes. We all do “stupid” things from time to time. But the key to growth is doing “new” stupid things, not the same old stupid things. Doing the same stupid things indicates you are unaware, unteachable, undisciplined, or worse. Doing new stupid things demonstrates you’ve left your comfort zone, tried something different, and now have an opportunity to learn what didn’t work so you can get it right next time. Teach others from your mistakes. This builds trust, connection, and bondedness with team members. John Maxwell put it well: “If you want to impress others, talk about your successes. But if you want to impact them, talk about your mistakes.” Get over it and move on. Continuing to rehearse, rehash, or blame yourself for the mistake is a mistake that compounds the original mistake. If you’ve admitted it, learned from it, and adjusted because of it, move on to gaining new ground.
HOW TO HANDLE THE MISTAKES OF OTHERS Don’t get personal. Focus on the issue without getting personal with the individual that caused the issue. There’s a big difference between calling an action idiotic and calling someone an idiot. Attack the performance. Coach the performer. Address a mistake in direct, professional terms, without unnecessary drama or exaggeration. Again, be direct and professional, but also be conversational. There’s no need to pile on by injecting unnecessary hype or drama with statements like, “I can’t believe you could do something so insipidly foolish and careless! If ignorance is bliss you must be the happiest man on earth!” Focus the person on solutions, not scapegoats. An employee mistake is an unparalleled coaching opportunity. Look at it as a teaching tool, not a battering ram. Help the person think for themselves and take ownership concerning what they could have done better and how they’ll improve next time. Asking questions like: “What should you have done better, or instead?”, “What do you recommend we do from here?”, and “What did you learn and how can you ensure you don’t repeat the error?”, are nonconfrontational, collaborative ways to help the person grow by causing them to think and commit to act. When confronting a mistake, don’t rattle off their rap sheet of past unrelated mistakes. Again, this is a coaching opportunity, not an indictment. You’re not proving a case in court – you’re addressing and correcting a behavior. Keep the main thing the main thing. Rehashing past, unrelated mistakes is debilitating and distracts from the matter at hand. Engaging in “rap sheet rehearsal” will also break trust and credibility if you do the same with family or friends. It’s a recipe for ending up miserable and alone in your life. Encourage the person to take another shot. Making mistakes can cause others to procrastinate, become passive and lose their killer instinct, especially when a mistake is handled improperly. It’s a shame when this happens, because mistakes are a part of the growth process. When someone stops trying, both they and the organization miss out and fail to cash in on the mistake’s benefits of learning from the errors, learning a better way, and growing as a person. In such cases all they, and we, pay is the price for the error and never get the payoff the price could have brought. Dave Anderson is president of LearnToLead.
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INSIDE
03..........................How Effective Leaders Handle Mistakes 06..........................................................Annual Awards Dinner 08................................ Maximizing Impact and Focus in 2018 10................................................. NIADA Government Report 12...................................Combating Dealer Margin Deadlines 14.....................................Annual Social Media Policy Review
WHAT’S NEW
NIADA ACQUIRES NABD
NIADA has acquired the National Alliance of Buy Here-Pay Here Dealers. The acquisition was finalized in December. Look for details in upcoming NIADA publications. See you at the NIADA/NABD convention June 18-21 in Orlando!
ADVERTISERS INDEX
ADESA.................................................................................... 5 Greater Kalamazoo AA.......................................................... 7 Lakeside Insurance..............................................................IBC Manheim ...............................................................................11 NextGear Capital ................................................................. 12 NIADA.tv................................................................................. 9 VAuto .....................................................................Back Cover
OFFICE
For information on how to become a member of MIADA please contact us at (248) 828-7010 or www.miada.us.
NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE
DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. Driveline is published by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006. Periodical postage is paid at Arlington TX, and at additional offices. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of the Michigan Independent Automobile Dealers Association or NIADA. Likewise, the appearance of advertisers, or their identification as members NIADA does not constitute an endorsement of the products or services featured. Copyright 2018 by NIADA Services, Inc.
STATE MAGAZINE MGR./SALES
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
Christy Haynes • christy@niada.com PRINTING
Nieman Printing
ASSOCIATION NEWS
| BY OTTO HAHNE
PRESIDENT’S LETTER Happy New Year and Thank You Happy New Year, everyone! Here we are at the beginning of another wonderful year for the used car industry! Next year our annual awards banquet will be held October 6, 2018, at the Henry Ford. Tickets will be on sale soon! I’d like to congratulate Terry Wolfgang of Wolfgang Performance Motors on being MIADA’s Dealer of the Year! He will be representing us at the 2018 NIADA Convention and Expo held in June in Orlando, Florida! We are all looking forward to attending this new venue. Be on the lookout for the upcoming release of the MIADA app! It will be a great communicative link between dealers and MIADA.
We are currently working on prelicensing for used car dealers. I’d like to thank Jeff Baker and Jerry Drouillard for serving with me on the legislative committee. More updates to come. I’d like to thank our board and our executive director Lisa Michael for their continued hard work. I’d also like to thank Joe Maltese for his dedication and support of the MIADA. If anyone has any questions or concerns, please feel free to reach out to the MIADA office or myself and we will be happy to assist you. Wishing all our MIADA members a prosperous 2018, Otto Hahne President
BOARD OF DIRECTORS CHAIRMAN OF THE BOARD Ray Campise Certified Motors 23509 Little Mack St Clair Shores, MI 48080 586-775-7000 sales.cmotors@gmail.com
DIRECTORS Rick Rynberg Rynberg’s Car Co. 3880 Holton Rd Muskegon, MI 49445 231-744-1441 rickandwendy1@verizon.net
PRESIDENT Otto Hahne City of Cars 1695 Stutz Dr Troy, MI 48084 248-458-1500 otto@cityofcars.com
Tony LoBretto Alamo Valley A/S 6100 West D Ave Kalamazoo, MI 49009 269-344-8250 alamovalley@gmail.com
VICE PRESIDENT Kelly Herb Tom Stehouwer Auto Sales 7000 Division Ave. S Grand Rapids, MI 49548 Phone: 616-455-7000 usedcarkelly@gmail.com TREASURER Joe Kuhta GWC Warranty 8865 Reese Rd Clarkston, MI 48348 248-670-1133 JKuhta@gwcwarranty.com SECRETARY Ed Ophoff Ophoff Motor Sales Inc. 2921 S Division Wyoming, MI 49548 616-452-7761 edwoph@aol.com
Darvin Mileski NextGear Capital 11799 N College Ave Carmel, IN 46032 Maurice VanCoillie Van’s Used Cars 23509 Little Mack St Clair Shores, MI 48080 586-773-0560 586-773-0660 Bob Vincent Automotive Dealer Services LLC PO Box 102 Milford, MI 48381 586-477-8282 robertvincent@live.com
Jeff Baker Muskegon Car Credit Inc. 1515 28th St SW Wyoming, MI 49509 616-249-2000 Nicole Renee Rite On, Inc. 4680 W Jefferson Ave Ecorse, MI 48229 313-649-7308 nicole.riteon@gmail.com Ted Cooper Genesys Systems Inc 360 E Maple Rd Troy, MI 48083 248-597-1003 ted@gensystem.com EXECUTIVE DIRECTOR Lisa Michael 5119 Highland Rd PMB 393 Waterford, MI 48327 248-828-7010 lisamichaelmiada@gmail.com
Jerry Drouillard Autohaus of Royal Oak 4411 Delemere Royal Oak, MI 48073 248-549-3636 gdro999@hotmail.com
MISSION STATEMENT
The Michigan Independent Automobile Dealers Association is committed to promoting growth and preserving the vitality and integrity of the independent motor vehicle industry through education and legislation as advocates for consumers and dealers.
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ASSOCIATION NEWS
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ANNUAL AWARDS DINNER Highlights
We had Secretary of State Ruth Johnson at the GM Heritage Center on October 7, 2017, for our annual awards dinner. We also had scholarship winners. Pictured are Lindsay Foy on the left, who won the Daryl Devries Scholarship, and Katlyn Koetsier on the right, who won the Ray Ketelhut Scholarship. Picture courtesy of Used Car News. Thank you to our sponsors: • Chief Financial • NextGear Capital • ADESA Lansing • AFC • Ally • AutoZone • Carfax • Fast Lane Auto Exchange • Freedom Warranty • Greater Kalamazoo AA • GWC Warranty • Lakeside Insurance • Manheim Detroit • Nationwide Congratulations to our 2017 Quality Dealer: Terry Wolfgang of Wolfgang Performance Motorsports in Holland, Michigan. Terry graduated high school in Grand Blanc, Michigan. Terry then went to GMI and Bakers Business College. Terry’s career started at the age of 10 at his father’s Mobil Gas Station in Grand Blanc. He helped clean and repair the vehicles. In 1976 Terry started working for Glenn Wilson Buick Olds GMC in Fenton, Michigan. Terry was number two in sales in two months. Terry opened his current location in 2015. Terry has two children – Jeff and Tim – along with six grandchildren and one great grandson. Terry has been a member of the MIADA since 1998. He serves as a chaplain for chapel services at the Meadows of Vista Springs and Royal Park Place retirement villages. Congratulations on becoming Quality Dealer of the Year!
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h Board Members with Secretary of State
Ruth Johnson
Scholarship Winners used Car news
h T erry Wolfgang (center) with Joe
Kuhta and Otto Hahne
h Secretary of State Speaking
h Darvin and Otto
h Quality Dealer Terry Wolfgang
ASSOCIATION NEWS |
| ASSOCIATION NEWS |
RAFFLE WINNERS Congratulations to our raffle winners! AUCTION NEWS
| BY USED CAR NEWS
NAAA HONORS BRASHER AS PIONEER Auction Veteran Recognized The National Auto Auction Association has named auto auction veteran Larry F. Brasher a pioneer of the industry for his achievements and contributions to the remarketing profession. The honor was presented to the former owner and chief executive officer of West Coast Auto Auctions during NAAA’s 69th annual convention. This Industry Pioneer Award, given to those who have worked in the wholesale motor vehicle industry and/or NAAA, recognizes an individual who has innovated or enhanced methods of improving services to remarketers through NAAA member auctions, has championed NAAA member auctions as providing services for motor vehicle remarketers unavailable from any other source, and has consistently followed the standards of the NAAA Code of Ethics. The NAAA represents more than 340 auction members and 100 associate members in North America.
$5,000 winner: Tim Ralya $500: City of Cars $250: Angela Anderson
WELCOME
NEW MEMBERS THANK YOU
Ann Street Auto Walker, MI Car City Lansing, MI Garage 20924 LLC Redford, MI Get A Car LLC Farmington Hills, MI One Stop Motors Pontiac, MI Trevor Merren Auto Ionia, MI
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| BY JUSTIN M. OSBURN
MAXIMIZING IMPACT AND FOCUS IN 2018 Designing the New Year for Better Success
No matter what position you hold in your operation, the nature of an auto dealership, especially Buy Here-Pay Here, can cause daily chaos in every department. In sales, an unexpected visit by an unhappy customer over a service; in collections, a vehicle that has gone off the radar; in accounting, attempting to cover an immediate cash flow crisis can quickly take your day off the intended course. Before you know it, you look at the calendar and another year has passed and many of the building blocks you intended to design are still sitting on the shelf. There are a few easy steps you can master to assist in maintaining control of your time and priorities while designing the new year to result in a better organization than you started with. Step one: Spend a few minutes to reflect on the areas of the business in which you make the most productive difference. Production means selling cars, collecting dollars, and/or controlling expenses. What skills and talents do you possess that offer the greatest impact on the ability to affect these areas? Once you identify a few primary contributions you offer that make a big impact, begin to set daily priorities focusing time to exploit these gifts and skills. Step two: Take your monkey with you. Dave Ramsey wrote in his book EntreLeadership he imagines everyone who comes to him throughout the day has a monkey (or problem) on their back. Their goal is to take that monkey (or problem) off and put it right on your desk for you to deal with, most of the time unintentionally. He suggests we encourage that team member to take their monkey with them. If there is a challenge that arises during the day, do your best to allow your team to solve it within their capabilities. Have them take their monkey with them and come back with solutions to the problem. This will eliminate many distractions from your day and allow you to oversee their solutions while nurturing their ability to solve problems. Step three: Recognize priorities in your operation and dedicate time to those priorities. In The 7 Habits of Highly Effective People, Stephen Covey outlines four quadrants people spend time in throughout their day. The quadrants are: Urgent/Unimportant, Urgent/Important, Not Urgent/Unimportant, and Not Urgent/ Important.
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If you think about it, we spend a great part of our day in the Urgent/Unimportant area putting out fires as they arise. Making a decision to focus more resources on the Urgent/Important and Not Urgent/ Important quadrants will lead to more impact in the operation over time. Step four: Build a financial forecast for 2018. If you have never built a financial forecast for a year, I offer some simple tips to make it less intimidating. Simply export your 2017 monthly profit and loss statement to an Excel spreadsheet. Look over the areas of income and expense you would like to improve in 2018. Add columns between each month for 2018 and type in these targets. Then, each month, add the actual numbers and see how you did.
SPEND A FEW MINUTES WITH THE MANAGERS AND REVIEW T H E I R A C T U A L S . H AV E T H E M C O M M U N I C AT E T H E I R R E S U LT S – WHY THEY MISSED THE AREAS THEY FELL SHORT IN A N D W H AT W O R K E D . H AV E THEM DO THE SAME WITH THEIR RESPECTIVE TEAMS. This can also be done by managers in their departments, and front-line team members on their individual production. Brief meetings with each team member and their supervisor to look over the forecast can create opportunities to enhance the forecast as well as align each forecast to support the overall goal. For example, if the owner increases the sales income for 2018, do the sales professionals’ projections support hitting that increase? Step five: Recap and review each month. Much of this is a waste of time if there is no review. The point of these actions is to invest your time in areas that make an impact and stay focused on the targets for your business in 2018. Go grab some coffee and come in the office late or go into the office early one morning each month and review how the operation did that month compared to your goals. Spend a few minutes with the managers and review their actuals. Have them communicate their results – why they missed the areas they fell short in and what worked. Have them do the same with their respective teams. These very simple actions will assist your operation in growth and foster focused review by the entire team. These are activities common in a 20 Group, with the benefit of having other dealers share their financials and goals, which you can compare. If you would like more information on a 20 Group or if you would like me to send you a sample forecast, email me at justin@niada.com. Justin Osburn is a moderator, consultant and trainer for NIADA Dealer 20 Groups, offering more than a decade of experience in retail and Buy Here-Pay Here executive management. He can be reached at justin@niada.com.
MAXIMIZING IMPACT AND FOCUS IN 2018
RETAIL READY
MARKET WATCH | BY AUTO REMARKETING STAFF
AUCTION NEWS
HONDA NAMED MOST RELIABLE CAR BRAND Data from Real-World Vehicle Repairs
Honda currently outpaces all brands when it comes to reliability, according to a new analysis based on real-world vehicle repairs. Three of Honda’s most popular models – the CR-V, Civic and Accord – are among the top 10 most reliable cars on RepairPal.com’s recently introduced Reliability Rating that is based on vehicle repair orders from the company’s network of over 2,000 shops. “We wanted to take a fresh, datadriven approach to reliability,” RepairPal chief executive Art Shaw said. “While other studies are based on subjective surveys, we are in a unique position with our nationwide network of shops to use actual repair data. The best way we can help consumers is by
providing research tools that enable them to make the most informed decisions about their cars.” The Reliability Rating scores are derived from vehicle repair orders on model years 2010 through 2017. Scores range from zero to 5.0. Fourpoint-five is considered excellent, 4 good, and 3 average. Asian automakers Honda, Lexus, Hyundai, Mazda, Kia, Toyota and Acura have an excellent rating of 4.5. Excellent ratings on its ES, IS and RX models earned Lexus the title of second-most reliable brand and highest-ranked luxury brand. Additionally, the Toyota Yaris, the only model to score 5.0 out of 5.0, has been named the overall most reliable car due in part to its low cost of ownership. Behind the top Asian brands, Chrysler and Buick received the highest scores for domestic brands, and Volkswagen took home the top reliability ranking among European automakers. Each vehicle reliability score is based on the cost, frequency and severity of repairs.
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STATE LINE AUTO AUCTION SELLS THE “LAST OLDSMOBILES” Special Sale State Line Auto Auction, in Waverly, NY, was chosen by General Motors and General Motors Financial to sell, by auction, the last Oldsmobile ever built. The car is a 2004 Oldsmobile Alero. After rolling off the assembly line in Lansing, Michigan, it spent some time at the R.E. Olds Transportation Museum in Lansing. Eventually, it went to the GM Heritage Center. The vehicle was “signed” by the Oldsmobile assembly line workers who built it. The car was offered with its original Oldsmobile MSO. Additionally, the last Oldsmobile Cutlass went for sale at State Line Auto Auction. It is a 1999 model, also on its original Oldsmobile MSO. Another vehicle, a 1996 Oldsmobile Cierra, was also sold. All three Oldsmobiles have been at the GM heritage center, have their original MSO statements of ownership, and are extremely low mileage. These three special vehicles were offered for sale on Friday, December 15, in an open sale environment, open to all dealers. State Line Auto Auction is a dealer-only wholesale auction open to registered motor vehicle dealers only. State Line Auto Auction is independently owned, a charter member of ServNet and has been a General Motors sponsored auction since 1990.
watch. listen. learn.
Like. Totally. Tubular. Dude! In January
watch. listen. learn.
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WASHINGTON UPDATE | BY SHAUN PETERSEN
NIADA GOVERNMENT UPDATE
Latest Government Issues and Activity
NIADA IS YOUR VOICE IN WASHINGTON D.C., ADVOCATING FOR INDEPENDENT DEALERS, THE USED VEHICLE INDUSTRY AND SMALL BUSINESS. HERE’S A LOOK AT THE LATEST NEWS AND NIADA EFFORTS REGARDING LEGISLATIVE, REGULATORY, PAC AND GRASS ROOTS ACTIVITIES.
LEGISLATIVE The future of the Consumer Financial Protection Bureau’s controversial indirect auto lending guidance could now be in the hands of Congress. On Dec. 5, the Government Accountability Office, responding to a request from Sen. Pat Toomey (R-Pa.), issued an opinion that defined the guidance document as a CFPB rule for the purposes of the Congressional Review Act. That ruling opens the door for the guidance to be overturned by a simple majority vote of both houses of Congress. According to the CRA, all federal agencies must submit their rules to Congress and the Comptroller General before they can take effect. Congress can then repeal the rule with a vote of disapproval – as it did last year when it voted to overturn the CFPB’s Arbitration Rule. The indirect auto finance guidance, issued in March 2013, claimed dealer discretion on interest rates creates a “significant risk” of unintentional disparate impact discrimination and spelled out the bureau’s intention to pursue enforcement actions on that basis. Its critics have pointed out that the CFPB’s theory is based on shaky methodology for determining disparate impact and that the guidance was put in place without comments from stakeholders, public hearings or studies of its impact on the cost of credit to consumers.
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REGULATORY The Federal Trade Commission ended the year with a flurry of enforcement actions. Last month the FTC reached a consent agreement with Cowboy Toyota in Dallas over charges of deceptive advertising of loan and lease terms in a Spanishlanguage newspaper. The FTC said Cowboy Toyota ran full-page ads in Spanish that highlighted favorable terms for buying or leasing a vehicle. But the limitations for those terms ran in English fine print at the bottom of the ads. In addition, the FTC said the ads did not clearly and conspicuously disclose required credit or lease terms, violating the Truth in Lending Act and the Consumer Leasing Act. The complaint also accused the dealership of violating the FTC Act by misrepresenting various claims – among them that no down payment was required and that certain new 2016 models were available for purchase when they weren’t. A month earlier, the FTC reached a $1.4 million settlement with the Los Angelesbased Norm Reeves dealership group for allegedly violating a 2014 FTC administrative order banning it from misrepresenting the cost to finance or lease a vehicle in its ads. The FTC said the group ran deceptive ads that claimed customers could pay nothing up front to lease a vehicle but did not mention large fees and other costs. www.miada.us
GRASS ROOTS Michigan IADA has begun a push for legislation to require pre-licensing education for the state’s independent auto dealers. While a bill has not yet been introduced in the state legislature, MIADA president Otto Hahne said the association has been busy paving the way, hiring a lobbyist and setting up a state PAC fund to raise money for the effort. “We’re building up our soldiers to get out there and get it done,” he said. “We’ve already got support from people in legislative areas, so hopefully, we’ll be able to pull it off.” MIADA is modeling its proposed education program on the one already in place in Ohio, working with OIADA and executive director Wendy Rinehart on designing the program. “They’ve already got the curriculum and various things that will save us a lot of time and money,” Hahne said. “They’ve laid the groundwork for us. We’ve already been down there to see what they do. Wendy has been absolutely awesome to work with.” Hahne said the plan is for MIADA to conduct the classes, and he said the association is hoping to implement an idea that came up at a recent state presidents meeting. “What we want is for the bill to establish MIADA as the stateapproved provider of pre-licensing education,” he explained. “That will ensure the program is done right.”
PAC As the campaign season begins for the 2018 mid-term congressional elections, NIADA-PAC is keeping a close eye on a number of key races. In particular, the focus will be on several seats that will be vacated by legislators who have announced they are not running for re-election, including some currently held by legislators who are supporters of independent dealers, the used vehicle industry and small business. Among those are three Republican House members from Texas: Rep. Jeb Hensarling, Rep. Joe Barton and Rep. Sam Johnson. Hensarling, chairman of the House Financial Services Committee, has been mentioned as a potential candidate to replace Richard Cordray as director of the CFPB. Barton is vice chairman of the House Energy and Commerce Committee. House Judiciary Committee chairman Bob Goodlatte (R-Va.) has also said he will not seek re-election, as have Sen. Jeff Flake (R-Ariz.) and Sen. Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee. NIADA-PAC will watch those races with interest, looking for candidates who will continue to fight for the interests of our industry and small business. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
MANAGEMENT MATTERS
| BY DALE POLLAK
COMBATING DEALER MARGIN DECLINES Selling and Servicing with Greater Efficiency
How many dealers figured they’d make up for ever-smaller margins in new and used vehicles by selling more cars in 2017? If you asked the question in a room full of dealers, I suspect most, if not all, hands would be in the air. “You make up your gross in volume” is the age-old rule of thumb in the car business. But what if the thumb is broken and the rule doesn’t fit anymore? That’s the situation in today’s retail automotive market. In June, the National Automobile Dealers Association reported dealers are seeing declines in two important places – on the gross and net profits they realize when they retail new and used vehicles, and in the overall number of vehicles they actually retail. Gross/net profits: NADA reported gross profit as a percentage of new vehicle selling price dropped to 5.9 percent in the first half of 2017 compared to the same period in 2016. For used vehicles, the gross as a percentage of the sales price dropped to 12 percent. Meanwhile, the net profit per new vehicle retailed fell 74 percent to minus-$396 and the net profit for each used vehicle retailed fell nearly 50 percent to $112. Retail sales: In the first half of 2017, dealers averaged 449 new vehicle retail sales, up just two vehicles from the same period a year prior. Used vehicles had a slight drop, averaging 358 retail sales, down from 362. Those dealership data points suggest dealers who believe they can retail their way to improved profits are probably kidding themselves in the current market. If that strategy worked, shouldn’t we see decidedly different numbers from NADA? The data amounts to a call to action. Dealers need a better way forward that doesn’t rely simply on selling more cars to make more money. Similarly, cutting expenses won’t provide dealers sufficient relief from the combined pressures of margin compression and a softer sales environment. The best way forward rests with increased operational efficiencies. Dealers simply have to find a way to sell and service customers with greater efficiency and lower costs. The good news here is that most dealers have three areas of longstanding inefficiency that, if addressed, can
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help them achieve the higher levels of operational efficiency, productivity and profitability they need to thrive in the years ahead. Human capital: Dealers continue to suffer from an average annual turnover of 67 percent in sales and 40 percent across their operations. Those figures suggest a high level of dissatisfaction. You can only wonder how many deals are lost or bad decisions made on any given day because the hearts and minds of dealership employees aren’t in the game. Dealers who have tackled this inefficiency have formalized their hiring processes around key personality traits and cultural fit and have moved away from the traditional practices of commissionbased pay and uncertain work hours. Inventory: I see signs of inventory inefficiency every day. If I had to summarize the problem, I think it’s fair to say up to a third of dealers’ vehicle inventory is effectively dead capital. Those are over-age vehicles that haven’t sold, and they’re preventing dealers from reinvesting that capital in more profitproductive units. Of course, there are a multitude of reasons behind such inventory inefficiencies but they all point to the same underlying need for more investmentminded inventory decisions. Dealers need to do a better job of assessing each vehicle’s retail prospects before they own it, then work more diligently to retail every unit more quickly, before its ROI and front-end gross effectively disappear. Technology: Dealers have invested sizable sums in technologies that should help their sales associates and service technicians work more productively and profitably. Yet sales associates still average about 10 retail sales per month and technicians about 40 hours per week – averages that haven’t changed in nearly 40 years. The statistics suggest solutions providers can and should do a better job of helping dealers achieve greater use of their tools, which would help dealers realize the promise of increased efficiency and profitability the technology and tools are intended to produce. Those three areas of opportunity don’t represent an end-all, be-all list. But they do offer starting points for dealers to push back against margin compression and a softer market, and gain back some of the profitability that seems to dissipate with each passing year. Dale Pollak is the founder of vAuto and an executive with Cox Automotive. This column originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.
MANAGEMENT GAMEPLAN | BY SCOTT BERGERON
BURNING TRACKS TO INSUFFICIENT SALES PERFORMANCE DATA How to Successfully Integrate a KPI Tracking System
As your flight prepares to take off, how would you feel if you knew the pilots were only handling some of the items on their pre-flight checklist? While not a literal matter of life and death as it could be on an airliner, dealerships crash and burn every year because they fail to track critical sales performance data on every salesperson. Many focus on the number of done deals without tracking how many sales may have been left on the table. Insufficient daily tracking of such key performance indicators as number of clients contacted, number of test drives, and number of callbacks can make a vast difference in a dealership’s annual revenues. KPIs are the critical information needed to maximize time and make course corrections before molehills turn into mountains. It also can make a major difference to someone’s career and a dealership’s employee retention. If not held to a high accountability protocol, a salesperson can fail to make the grade and move on. Much like a football team without high performance standards that are constantly reviewed and improved, an entire sales team can flounder. There’s nothing worse than getting to the end of the month and realizing someone isn’t getting a paycheck, or is getting one they can’t live on. It’s bad for the rep, management, and the dealership as a whole. You need to know right away when someone is missing their numbers. Despite all these reasons to develop comprehensive KPIs and require each sales team member to be accountable to them, it often doesn’t happen. Why not? Reasons – or excuses – include the following: • Lack of time. Most of us feel overwhelmed much of the time. “One more thing,” even if it can make the difference between dealer success and failure, can feel like too much. • Lack of willingness. Particularly in smaller, independent dealerships, “seat of the pants” is the prevailing sales philosophy. Freewheeling sales teams exhibiting typical instinctive entrepreneurial traits succeed or fail based mostly on personality, charm, and intuition. While these are all important strengths, it’s vital to complement them with reliable adherence to objective tracking standards. Using the football analogy again,
the greatest players possess a healthy dose of talent coupled with strict adherence to objective measurements and observations. Dealer sales reps are no different. • Lack of follow through. Sometimes a dealership – and its employees – will become enamored with a “shiny new technology toy” to set up and track KPIs that may be bundled into a CRM. However, much like a young child getting a new toy, after the initial glow fades so does the follow through. The KPI tracking system gets relegated to the shelf, where it gathers dust instead of valuable information. • Lack of decisiveness. In other cases, the problem is inability to decide what KPI system to use because there are so many choices that decision-makers have a “deer in the headlights” type reaction trying to assess the best solution for them. They default to making no decision at all. • Lack of patience. Some KPI systems can be unwieldy to set up and implement. They can disrupt normal routines, require a lot of handholding, and generally be a pain to use. This is not the recipe for success. • Lack of budget. This is often the biggest challenge. While some KPI solutions are extremely cost-effective, others – particularly the largest and most well-known – require a substantial money commitment. Often, it’s just easier to justify not using the system because of cost. What is the best way to find and integrate a KPI tracking system, and use it consistently? • Research options. Unlike some technologies that are very complex and costly, KPI tracking solutions can be very economical, easy to use, and simple to complete on a daily basis. This isn’t rocket science. Look for the key criteria you need, then marry those criteria to a system that meets your needs. • Make it a habit. High-producing leaders promote success by making sure everyone on the sales team knows what is expected of them. Regular inspection processes ensure the sales machine is firing on all cylinders. Tracking and reviewing everyone’s KPIs every day, then making changes as needed to improve numbers, must be a commitment made both by management and individual team members. • Use it as a teaching and coaching tool. With this objective data, sales managers can help individuals improve their performance. If a salesperson isn’t entering the data, a manager can go directly to the person and find out why, then provide direction to make sure it happens. It can be a case of forgetting, a cry for help, or even defiance of the whole system. Top performers especially may avoid completing their daily tracking because they believe they’re above it and the rules don’t apply to them. But they should. • Make it fun, as much as possible. KPI tracking can be done as salespeople go
T O P P E R F O R M E R S E S P E C I A L LY M AY AV O I D C O M P L E T I N G T H E I R D A I LY TRACKING BECAUSE THEY BELIEVE THEY’RE ABOVE IT AND THE RULES D O N ’ T A P P LY T O T H E M . B U T T H E Y SHOULD. through the day on their smartphones, tablets, laptops, or desktops, in real time. The entire process can take as few as five minutes to finish – so it’s not like completing mounds of paperwork for a homicide investigation. • Make it a regular monthly appointment. In addition to daily tracking and adjusting, schedule an end-of-month session to review KPI statistics, goals, and desired changes based on the results. To make it even more compelling for individuals to comply, sales managers can review each salesperson’s results with the entire team present. This “peer pressure” can help make sure everyone is accountable, and allows top achievers a showcase for their good work. Remember, it’s about way more than the number of done deals. Former dealer executive Scott Bergeron is the founder and principal at Daily Gameplan (www.dailygameplan.com), a sales team performance company. Daily Gameplan’s “Red Book,” cloud-based CRM, and direct consulting have been used in thousands of dealerships throughout the United States. Bergeron can be reached at 303.918.3169 or scott@dailygameplan.com. www.miada.us
WINTER 2018
DRIVELINE
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SOCIAL MEDIA
| BY KATHI KRUSE
ANNUAL SOCIAL MEDIA POLICY REVIEW Why It Is a Best Practice It’s 2018 and you know what that means – it’s time to assess and realign things for the new year. Do you have a social media policy in place for your dealership? If so, how often do you review it?
PROTECTING COMPANY ASSETS It’s a good business practice to regularly assess company assets. Public or private, a dealership’s market value or equity is based directly on the assets it retains. Assets both tangible – such as cash, property and buildings – and intangible – such as your digital reputation, policies and procedures, and social media presence – are directly responsible for a store’s market value. Social media policy falls under the intangible asset category, and reviewing your policy on an annual basis is a best practice. Just as a regular review of expenses and operations results in many benefits, so does a social media policy review. WHY DO AN ANNUAL SOCIAL MEDIA POLICY REVIEW? There is often a lot of angst and fear around social media, and an annual review takes some of the sting out. You can’t control everything, but with a good policy in place and regular reviews, you’ll leave a lot less to chance. Reaffirm company guidelines for employee use of social media. When hired, each employee should have signed an acknowledgment of receipt of the company’s social media policy. A process to conduct annual reviews of company policy on everything is always a good idea but it’s crucial for social media. Why? Because social media changes often and a dealership’s social media policy should change along with it. It’s an insurance policy in the event of a social media crisis. We’ve seen enough social media debacles at Kruse Control in the past nine years to know it’s not a matter of if, but when it could happen.
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DRIVELINE
WINTER 2018
www.miada.us
Are you prepared should it happen to you? First, it should be determined and documented what a social media crisis is. Having a company-wide plan in place will empower you to act quickly and effectively when a crisis begins. Instead of wasting time debating how to handle things on social media, you’ll be prepared to take action and prevent the crisis from growing out of control. It helps avoid legal trouble and exposed liabilities. There’s a lot of pressure for dealers to communicate online today. It’s easy to overlook that social media brings certain responsibilities to mitigate liability. Some of the places a dealer could get into trouble are: • Using work without permission. • Defaming competitors. • Promises not kept. • User privacy. • Contest violations. Pro Tip: The use of social media increases the risk of accidentally committing libel, slander, copyright infringement and privacy invasion. All those tweets and posts can lead to lawsuits, but a general liability insurance policy can help. It includes protection for “advertising injury,” meaning claims from your competitors that you badmouthed them in an ad. It safeguards against accidental leaks of confidential information. Social media is a growing security risk as a source of data leaks and misinformation. Vigilance and training are crucial to minimizing risks for individuals and the company. Employees using personal electronic devices discuss all sorts of work-related topics on social media – both during and outside of work hours and locations. As a result, confidential data can leak directly. Another security concern about social media – which continues to make headlines – is criminals can exploit social media to rapidly disseminate “fake news” and other forms of misinformation. Such devious tricks impact more than just politics. They can be used to manipulate stock prices, harm personal or business reputations, or even cause people to take actions that harm innocent parties while helping criminals. In Kruse Control’s clients’ customtailored social media policies, we
spell out the consequences that come from accidental leaks of confidential information. We determine where risks lie and recommend actions to prevent them. It protects a company’s digital reputation. Businesses around the world ranked damage to their reputation or brand, magnified by social media, as their top risk management concern, according to Aon’s 2017 Global Risk Management Survey. Warren Buffet said, “It takes 20 years to build a reputation and five minutes to ruin it.” That is especially true today, as highprofile crises including cyber attacks, product recalls and damaging social media posts become more prevalent. In the current environment, protecting reputation and actively managing risk can take on strategic importance. Yet for many organizations, managing reputation presents challenges. Many dealers do not have a written process exclusively for reputation management. Truthfully, until social media showed up, you didn’t really need it. Reputation management was left to the marketing and PR people. Today, every employee is a marketer. A review of social media policy will support ongoing efforts to build and protect a company’s digital reputation by spotlighting internal practices and processes. It keeps HR in the loop on marketing. More and more, dealers are using social media as a recruiting tool. With the addition of “social selling” into the sales process, it’s easy to see that HR is fast becoming a necessary participant in the social media marketing process. There’s a trend toward hiring employees who already have a current social media following because they are influencers and are often seen as subject matter experts, especially if they’re in sales positions. A review of social media policies and procedures should include an update on how HR folds into social media and outlines its stake in decision-making around social media. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc., which coaches, trains and delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.