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» The 21st Century General Manager
Close your eyes and pause for a moment. Think about
some of the qualities you believe would characterize the perfect
general manager — the person you want running your dealership.
We asked several dealers, consultants and trainers what they
thought would be the important characteristics of the general
manager as the industry settles into the 21st century.
Some of the answers are interesting; perhaps none more intriguing
than the one from John Hawkins, the current chairman of the
American International Automobile Dealers Assn. His response? “A
guy that runs a pizza store.” More on that later.
Answers reveal a common theme, and convincingly make the case
that the role of general manager is changing quickly and drastically.
It is an important question. Your choice of general manager
could determine whether your store survives the next five years.
A radical shift is occurring in the dealership world, and dealers
who understand the change — and are able to staff for
it — will be in a much stronger position than stores
whose owners continue to plod along running stores using outdated
strategies and equipment.
For about the last 50 years, the automotive retail industry
has operated with what can be described as a “sales-first” mentality.
As long as the metal is being moved, profitability will take
care of itself.
For the most part, that strategy worked fine, and is still
working today, at least for large-volume dealers. But those
dealers are learning that sales alone no longer guarantee profitability,
or even survivability.
Following the World War II, many gas
station and independent repair shop owners began selling cars.
They'd hire a few
sales people and whoever sold the most cars got moved up
to management.
Factories ran at full speed pumping out as many vehicles
as possible, often faster than the dealers could sell them.
But overall, there was plenty to sell and demand was high.
If you were selling cars, you were making money, so it made
sense to have sales superstars managing the stores.
General managers often were passionate, hard charging, managing
by the gut and didn't have time to truly manage the business.
“
Car people have always thought of themselves as business
people,” says Ed Bozarth, a long time General Motors
dealer with stores in Kansas and Denver. “But this
really has been an easy business, as long as we were selling
cars.”
According to Mark Rikess, a veteran dealership consultant
in California, the general manager's job description was
and continues to be at many dealerships: “Hit your
numbers and stay out of jail.”
The years following the war were volatile. The marketplace
weeded out the glut of dealerships that sprang up immediately
after the war as several auto makers went out of business
or were acquired by stronger competitors.
Sales, though, continued to be “king.” And that
mentality did not change, even as the World War II crop of
dealers began to age and their sons started taking over the
businesses in the 1970s and 1980s.
According to one dealer's perspective, the kids kicked around
for a semester or two at college partying. Then they came
back to the store, worked for a few months in each department,
and were declared ready for management.
As crazy as it sounds the formula seemed to work. There were
some economic downturns, to be sure, and some dealerships
failed, but the majority survived and made money and lots
of it.
Because so much focus was on sales, other areas, such as
human resource management and inventory management received
scant attention. General managers continued stomping the
pedal to the floor, pushing sales people to sell as many
vehicles as possible, while ignoring other areas.
But the old ways are not working any more and now the proverbial
chickens are coming home to roost. High-pressure sales environments
have created high employee turnover, which hurts profitability.
“
Many dealers today are working in last century's business
model,” Rikess says. “That passionate, high-energy,
moving-the-metal mentality probably is more suited for the
sales manager today.”
Experts agree that in today's retail environment, the general
manager needs to be more concerned with profitability and
less with sales.
So what's changing?
For one, increased competition and more knowledgeable customers
created by the Internet have eroded profits on new vehicles.
According to the National Automobile Dealers Assn., net profits
from new-vehicle sales slipped below break-even levels for
the average dealership for the first time in years.
Net profit before taxes as a percentage of total sales for
new vehicles was 1.5% in 2006, down from 2% in 2001.
Selling more new vehicles likely won't stem the profitability
decline.
And that means dealerships are going to have to find new
ways to make money. It is not as simple as cutting costs
and people. Simply put, general managers have to be adept
at managing the business for profitability if the dealer
wants to be in business a few years from now.
“
It's not about the car anymore,” Michael Najdzin, vice
president of Park Avenue Dealer Group in New Jersey, says. “And
it's not just about selling as many cars as you can. The
general manager has to look at it as running a business and
making a profit.”
Another change is the growing influence of the public dealer
groups and the subsequent increase in consolidation.
“
That has been a major impact,” Charles Oglesby, president
and chief executive officer for the Asbury Automotive Group,
tells Ward's.
As private equity money and Wall Street investors entered
the market, they have forced the larger retailers to adopt
stronger business processes while training management to
be more professional.
The changing retail world begs the question: What will the
general manager of the 21st century look like?
“
In the past, the general manager position was about the individual,” Oglesby
says. “Today it is more professional. We're looking
for great leadership and try to build around that.”
Let's go back to Hawkins' declaration that he wants a pizza
shop manager running his dealerships. It may sound wacky,
but Hawkins is far from that.
He is passionate, but also is a sound businessman who owns
Metro Autogroup, a collection of eight dealerships in California.
Hawkins started thinking about the general management position
when an acquaintance, who was running a Pizza Hut, received
a call from a headhunter recruiting for used-vehicle retail
giant CarMax.
It proved to be a good hire for CarMax as Hawkins' friend
showed he was adept at managing the car business.
“
A guy that runs a pizza store goes around thinking in terms
of ounces of cheese and sauce and other measurements,” Hawkins
says. “He's a numbers guy looking at the minutia of
the business. He has to be disciplined, understand the financials
and know how to manage his materials.
“ Too many general managers don't know how to read a financial
statement.”
Knowing the numbers are important, but so is understanding
them, says Kent Bozarth, Ed Bozarth's son and vice president
of the Bozarth group.
“
Technology is doing a lot to change the general manager's
role,” says the younger Bozarth. “We have access
to real-time data today. General managers have to be able
to interpret that data and make good decisions on the fly.
It didn't make a difference before because the reports and
data were available a day or two later.”
Of course, that means the 21st century general manager needs
to be able to embrace technology, Najdzin says.
The curriculum at NADA's Dealer Academy has evolved to meet
the current needs of today's car dealer, says Allan Jones,
the academy's director.
“
We talk a lot about the metrics of running a successful dealership,” he
says. “Once you have the numbers, you have to be able
to understand them.”
General managers need to be quicker thinkers and strategize
in a faster manner, says Jim Schoonover, the academy's assistant
director.
“
We use to teach students to think methodically,” he
says. “But now, the dealership is much more intense
today. The key for our students is to help them understand
what they are measuring and what impacts those numbers. That
is a critical component.”
One example is the pay-plan structure at the dealership.
Is the general manager able to show how the pay plans are
helping to accomplish the dealer's vision — whether
it's high grosses or high volume?
Another area is inventory management, both for new and used
cars. Interpreting inventory data correctly, especially in
the used-vehicle department, and making sound decisions as
a result, can work miracles in driving profitability today.
In addition to being able to understand the numbers, general
managers also need great soft skills in managing dealership
personnel, says Jones.
Strong communication skills along with the ability to mediate
managers of the various departments are key.
“
The general manager has to convince the department managers
to look outside their own departments and work for the good
of the entire store,” Jones says. “And that starts
with a solid understanding of the business.”
According to Hawkins, the general manager must overcome the “that's-the-
way-we've-always-done it,” syndrome. “The one
thing that doesn't lie is the numbers,” Hawkins says.
What is happening is the general manager's job is changing
from a sales-oriented role, to more professional, business-management
position.
“
The general manager today absolutely is going to have to
be college educated,” Najdzin says.
Dealer principals have to recognize this change, Rikess says,
if they want to be profitable in the future. That may require
a change in culture.
General managers are not going to like this, but Rikess believes
the era of paying them $375,000 a year for high sales volumes
will be a thing of the past.
“
We're going to see dealers paying general managers who can
implement sound business processes $100,000,” he says.
But dealers also are going to have to create better work
environments for their employees if they are going to attract
more professional people, he says.
Better working hours; pay plans not based solely on commission;
and dealerships not plagued command/control issues are all
critical.
Some dealers already are ahead of the game. The Bozarth organization,
for example, recently was honored with the USA Today's Dealer
Innovation Award because of its aproach and success with
employee training, development and management initiatives.
Ed Bozarth also won the Ernst & Young Entrepreneur of
the Year award.
The dealer group, though, looks for job candidates with proven
track records. It does not have to be job-related, but the
Bozarths value people who have shown they can be successful
in certain areas.
According to Oglesby, finding the right people may be the
industry's biggest challenge.
For dealers who invest in and train their employees, the
rewards are significant.
According to a McKinsey & Co. study on how to build top-performing
stores, talent management is a critical area for dealerships.
The top stores in the study, whose turnover rates were 17%
lower than poor performing dealers, used standardized recruiting
practices that involved several interviews of job candidates
along with consistent training and incentive packages for
employees.
General managers have to be included in the hiring process
and have to be able to force the implementation of sound
business practices, according to Rikess.
Dealers not keeping up with the changes at the general manager
level are going to find themselves in “crisis mode” very
quickly, Rikess says. “We're starting to see turnover
at some dealerships get as high as 300%,” he says. “This
is where the large dealer groups are going to have an advantage.
They have the resources and processes to hire professional
general managers.”
At the very least, you now have an excuse to eat at Pizza
Hut.
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