HOW METRICS CAN MESS WITH DEALERSHIP SUCCESS
Not to sound overly dramatic but…
Numbers can lie. People can lie. People controlling numbers can, well, you know.
There are a few principles about running your dealership when it comes to metrics.
One. If you can’t measure it you can’t manage it. Excellent advice. 100% true. Otherwise we hope every month is a good month. And that rainbows spew Skittles.
Two. Good data drives good decision making. Yeah it does. That’s why we care about how data is input and kept up to date. Just a single customer record input inaccurately can mean an opportunity loss of thousands of dollars in service, parts and F&I products, plus missing out on selling your customer their next vehicle.
Three. Timing is everything. This is more relevant today than ever before. Competitors, technologies and consumer behavioural changes are accelerating at such a fast rate that surprises await us every week. Dealerships can no longer successfully run on reporting that only provides history when the future is right up in your face.
As a Dealer or General Manager, take a moment to reflect on how many times you’ve been frustrated reviewing reports and debating, somewhat loudly in meetings, why the numbers say one thing and the people in the room are telling you something different.
Numbers alone don’t tell the story.
Ideally, a good set of metrics point you in the right direction to find the real story.
This holds true for any business and has particular significance for dealers because you’re running five different businesses under one rooftop. Not many business leaders from other industries can say the same. It exponentially increases the complexity of establishing solid metrics and making truly informed decisions.
What’s a smart operator to do?
We want to get everyone on the same page, following a single-minded vision, reporting accurately and taking pre-emptive action based on accurate information. That requires more than taking numbers at face value. We have to understand the source of the numbers, the limitations that the data may have, and the implications of those metrics on our people, processes and customers.
For example, having an Internet Salesperson follow up on online leads is a standard today. Compensating them based on conversion from lead to appointment generally works. Each month the numbers looks pretty good. Why question it?
In one case we observed, the Internet Salesperson, who is compensated on conversion from lead to appointment, diligently vetted incoming leads to select only those they felt were most likely to close based on intuition instead of data. That person’s conversion numbers were consistently decent. As long as you don’t factor in the opportunity loss, as we did when we calculated the leads that would have closed if they were followed up in a timely manner.
This isn’t an employee with malicious intent. They weren’t defrauding the dealership. They were simply preparing the metrics according to their job description, as defined by their comp plan.
That’s the story behind the numbers. And that’s what leaders need to look for when it comes to using metrics for decision making.
Technicians rushing repairs or service checks in order to achieve the desired time on hoist, versus measuring that activity against CSI, RO gross and return visit revenue. F&I Managers foregoing extended warranty sale opportunities that come up every month for existing customers because it’s all about delivering numbers expected from new purchasers.
In every department at your dealership you may find instances where the metrics are misaligned with your business objectives. Situations where the right data isn’t being captured or the proper care isn’t being taken to ensure accuracy. Reports that only tell you what happened last month, instead of real time insights that create the opportunity to take effective action today.
Numbers alone don’t tell the story.
According Jerry Z. Muller, author of The Tyranny of Metrics, “Measurement is not an alternative to judgement: measurement demands judgement.”
All metrics, regardless of what they say and how they are prepared for your consumption, requires your brainpower, your experience and ultimately, your good business judgement.