Driving operational success through business management practices and data

A shift in consumer expectations is forcing retailers to reinvent their operational processes and adopt new business management strategies. 

In our latest podcast, Bastien Fusberti, Business Management Lead at MSX International, is joined by Chris Beukes, VW Audi franchise executive at Hatfield Motor Group in South Africa; Julie Ann Gutierrez, Dealer Network Development Manager at Nissan, Philippines; and Tim Daly, Ford Academy IMG Business Management Head. 

Together, they discuss how dealers and OEMs are leveraging data to address these challenges and drive performance. 

Transcript

B: Hello and welcome to our MSX International podcast. Today, we'll be talking about business management and particularly discuss how car dealers and OEMs are leveraging business management information to drive performance. 

We all know that business management is playing a critical role in dealership financial health. Having good business management discipline is obviously important as it helps dealers and OEMs to take quick and driven decisions. As we've seen, the COVID-19 pandemic put huge pressures on dealer’s profitability, but also demonstrated that dealers with good data and good BM practices were able to better navigate through the storm.

My guests today are all using business management information to drive their dealership’s performance, or to drive their network strategy, and they will be sharing with us how they are leveraging business management data to thrive or address business challenges. 

My name is Bastien Fusberti and I am the MSX Business Management Lead. Joining me today are Chris Beukes, a successful VW Audi Franchise Executive at Hatfield Ford Motor Group in South Africa, Julie Ann Gutierrez, Dealer Network Development Manager at Nissan, Philippines, and Tim Daly, Ford Academy IMG Business Management Head.

Chris, I was looking at your dealership that is reserved before getting into this podcast and the performance of the dealership is just stunning. You manage 2020 extremely well. How did you manage this level of performance, despite all the challenges the market has been facing? Can you tell us a bit more about your group and how you operate to achieve this kind of result? 

C: Thank you, Bastien, and thank you for the opportunity. And hello, Julie and Tim. So yeah, just a little bit about our group. The Hatfield Motor Group is an independently owned motor group in its 23rd year of existence. It was started way back in 1998 as a single Volkswagen site in Pretoria, which is the capital of South Africa.

The group currently owns 12 motor dealerships in and around the Johannesburg and Pretoria regions, in the Gauteng province, which is the main business hub in South Africa and represents approximately 45% of the vehicle volumes in the country.

The group has six Volkswagen passenger dealerships, two Volkswagen van centers, three Audi dealerships and one MAN track business, and employs around 800 staff members.  The group sells a total of 900 vehicles, new and used, a month and holds approximate 12% market share in the Volkswagen and Audi brands nationally.

You're 100% right. Post the pandemic we have seen really fantastic performance from our group. And what we did is we really took a deep dive post pandemic into our own numbers. And we're really critical of the way we address business management in our group. And the business management for us is really a roadmap to success. The more we learn and understand the relationship between the different areas of our business, the better we can align towards the business strategy and objectives. So, we've had, to put it into a better perspective, we've had about a 45% increase in profitability over the last nine months.

B: So that's quite an impressive growth in your business. How do you achieve this? Is there any specific actions you've been taking a post the pandemic? As you said, you've been doing a deep dive in the numbers, but obviously for this, you need to have good data at first to take these kinds of actions. How do you work with your group on those kinds of business management activities? 

C: Like I mentioned business management, we really see it more as a science. And for us, it's a layered approach. I think the traditional approach, and where you have to start at any business, is to look at the top-line business management information that we all know - the revenue, the gross profit percentage, the return on sale, the return assets - those kinds of numbers. But that really is only the start.

The true power in business management is going deeper into the layers. So, you have to design the business. So what is your objective? How do you design the business around the objectives? And how do you then mobilize the objectives and the design?

And you really do that by creating activity, and that activity in different departments in a motor dealership is slightly different, but it really is ‘how do I activate marketing in order to extract lead activity and customer activity into our business?’ So, basically what we did is we looked at what do we want to, you know, what's the objective and the strategy that we want to achieve? How did we determine that? We use benchmarks to determine that, to say what is the return that we expect out of a certain dealership, a certain business, and then layered into a department. And then layered into being at the staff, the resources, the equipment, and then layered into the activity.

So, the activity, and maybe to just simplify that, if I talk to someone in the sales department, that activity, what I'm referring to is real-time activity, like leads coming into the business, the quotations that are done, the finance applications that are coming through. And we do it real-time, we've got a real-time system. So anytime of the day I can actually go and have a look real-time, what is coming into every business. And then how do we act on that detail? If I need to do a certain number of volume - vehicle volume, I need a certain amount of activity in order to drive that volume. So I can design the business towards.

So, we basically sat with every business, we went through every department and decided on a model from a top-down, bottom-up approach - what return would we like out of the business? What profitability would we like? And then drove it upwards and then double checked it by going downwards back to profitability to ensure that in our design, there's synergy between our top line design and our bottom-line design.

B: So basically, you've been reversing engineering, your performance, right? Starting from the end results you’re expecting to where the business needs to be from an operational point of view, on a regular basis, right? 

C: Yes. And the power for me of business management, and I really have a love for business management, is that you can, it's not only on a piece of paper top-down, bottom-up, it's really how you design it. But it really is a 360 project we’re following that you can really swing it around. You don't only have to look from a top-down, bottom-up, you can actually swing it around too, because it links into every department, there's links between the areas, there’s links between new and used service, new and service parts and new. So, it's really a 360 approach.

And how do these departments and this business link Into each other. Personally, I call it the activation model for a dealership. How do I activate all parts of the business? And I use business management principles. And for me, and maybe just to simplify business management principles, the way I look at it is relationships. What is the relationships between different numbers, activities, inputs, outcomes? So, it's identifying those key numbers. But it does start with the top, it does start with understanding what you want to achieve, and that definitely is your revenue that you’re driving, your gross profit percentage, your expense to income ratios, your return on sales ratios, your return on asset ratios, your asset activity - it really starts there. But then you can really deep-dive and you can go into a really deep-dived, layered approach in order to ensure that the outcome you're getting syncs with your objective. And what we've done, I think really well, is the activity side of that. We've really added that layer, in which we've got, at any time in a moment, a business manager of a business or a dealer principal, or a general manager can have a look at these dates and say, okay, where am I not aligned to my objective from activity point of view. And that's very powerful because if I know that I want to achieve a certain volume, a certain profitability, and I get a daily report that tells me, here you’re out of line, here you’re out of line. And then you can act daily, you can act hourly in order to ensure that you rectify daily. Our objective is to make sure that we want to be able to project the outcome and what the profitability was for every business. 

B: You mentioned about this relationship, I think, between KPIs and probably between finance and operations, I believe you mean, as well.  Very often, business management is seen as a financial health only, with limited connections to operations, but essentially, it's really this integration of finance and operational metrics that bring the business to life. So how do you - getting this link between finance and operation is sometimes complicated and I can see that many dealers are often struggling with that. They’ve got this financial view and they’ve got some KPIs, operational or personal KPIs available, but it's somehow difficult to link all those dots for them.

How did you put this in place in your business? Is that a something that you've been working on for quite some time? Do you have some specific system helping you to drive this kind of integrations? Or how did you get to that level of information were actually in the middle of the month you can already start to predict what's going to happen at the end and take the right level of actions if you are not on track with your objectives?

C: Yeah. I think you have to have a business intelligence system in place, and it can be as simple as an Excel spreadsheet driving that. We are actually in the process of implementing a business intelligence process or program, but before we were doing it Excel based and it was driven by certain systems.

So yes, there was a little bit of manual input in there because, I think, one of the problems I always refer to is i've got a list of usernames and passwords, I think it's about 80 different systems that I use. And how do you actually sync those together? But, basically we had a general Excel based sheet and loaded in the financial information, our staff information, lease information, finance information, our workshop information, and that gives you an activity pipeline, if you want to call it that, which in real-time helps you predict your profitability outcome. 

B: Julie, I've been working with you for quite some time as well, and obviously I've been working in the Asian region for quite some time. What Chris is describing is obviously very good business management practices. What are your observations from an OEM point of view on this? I've seen so far that dealers are not always equal in the way they're using business management, and very often, there is some dealers that have very good practices and systems in place, and sometimes I could see it's a lot harder for others. But like from an OEM perspective, like how things have been actually working on your side?

J: Thanks Bastien. Thanks Chris, also, for your story about your dealership in your area. That's very enlightening and encouraging actually to hear that there's really a dealer that is using and executing the processes in line with business management. 

As you mentioned, Bastien, you are right. We recognize that not all dealers and OEMs or markets have the same maturity and practices as Chris’s dealership in South Africa is doing. I'm actually impressed with his approach, the layering, the 360 approach, the swinging it around using the BM data and all that. I'm also interested about the business intelligence tool that he was mentioning. Those are really very impressive.

Bastien, in the Philippines, we are still at the very early stages in the implementation of business management, and that's actually a challenge right now that not all dealers are at the same level of understanding of business management, and in terms of implementation as well. In terms of the level of visibility of the managers’ data, it still varies from dealer to dealer. 

B: Chris, in your dealership, who’s got access to business management information? Cause I think Julie is raising a good point here. In many cases, business management data is available to dealer principals, general managers eventually, and obviously finance managers, But to be effective, most of the time you need to bring these to the middle manager, levels, sales and aftersales managers. How does that work in your business? Who gets access to information and to which extent? 

C: Julie, that's such a great point. And we actually had a meeting yesterday and while we’re implementing a new business intelligence system, we’ve got hundreds of systems, but to do people use it? So, Julie, you’re 100% right. 

So, what we do is we have daily reports going out to the dealer principals or the general managers and the managers of each department, and we highlight areas that are may be not on track, and then there is engagement from ourselves into those areas. 

But I think from a point of view of people going in every morning and logging into systems, that we have to be a little bit more proactive. So, basically every single morning my division gets you know, basically a point in time, or line-in-the-sand to say this is where we are at currently, these are the areas that we have to look at, not only as the dealership, but in every department. And then I will engage, the dealer principal will engage, to ensure that we get those back into line.

B: Julie, how does that work from a OEM point of view? How do you, does the OEM actually bridge the link between the different department at the dealership? As I said very often, we are operating a dealer principal level. What has been your experience so far working with business managements and dealers, and how do you actually bring this to the next level in the business?

J: As I mentioned earlier, we are seeing Nissan, Philippines are still at its early stage in BM implementation, and we recognize there's still a lot of things to do in terms of advancing it to the market. So, what we are currently doing as an OEM, we went back to basics focusing on three important things, so these are the things that we are currently focusing on.

First is the understanding of business management. As an OEM, we help our dealers and their teams develop at this point the basic knowledge about business management through targeted training. So, we are scheduling and conducting training so that they can focus on their specific roles, because understanding the processes, the metrics, and how these processes translate to the bottom line, we believe actually is key in understanding BM and eventually executing it.

Second is, we have them drive the performance in a sense that we are providing them support in analyzing the performance and the numbers. We have acquired services of the experts, MSX, we partnered with MSX to help us make our dealers embrace the BM framework so that they can leverage on these and drive the performance. And this one I believe Bastien mentioned about the benchmarks. We know that every dealer has its own standards when it comes to their financial performance, and some dealers are really just focusing on the financial metrics.

However, we also believe that these financial metrics are driven by performance and operations, of course. And we also recognize that the finance and accounting teams are not really able to relate the financial metrics to the performance drivers and operations. So, what we do is we provide the dealers benchmarks to give them an idea on where they are in terms of the performance for certain metrics, and we make them compare their performance against their peers, so they know, for example, benchmark, they know that there are dealers achieving this level of performance. Some dealers are being challenged by that and they would like to up their performance to that level. And in these consultations as well, we have them identify the issues and opportunities in comparison with their peers.

And to answer also, Bastien, your question about how are we linking the finance and the operations, we want them to be friends. Basically, in an organization, usually finance are the controllers, of course, they want to control costs. Operations, they want to spend. So, we are in the point wherein we are making the finance people understand that operations need to spend to achieve certain level of performance. Similarly, we are making the operations understand as well that finance is there to control the costs, not just to control it, but of course, just to make them realize, the operations realize, that we have this in the budget, we have to optimize it. So, right now I'm glad to see that they are starting to work together and realize the importance of the role of each side of the business.

B: It's a long journey, obviously. But yeah, I've seen the progress of the market and I think everything is heading in the right direction.

Tim, this is pretty much something that you are doing on a day-to-day basis with both dealers and OEM, right? 

T: Thanks, Bastien. Thanks guys. Thanks for having me. Yeah, so I think it's worth contextualizing how business management fits into what we do when it comes to Ford Academy. So, Ford Academy is a team within MSX which works obviously with Ford Motor Company to provide retail network performance solutions. And we focus on what a lot of people refer to as the three paths, right? So, profit, people and process.

And traditionally, I suppose, the business management, or the data-side of things has focused on the profit side of things. I think if you look across what both Chris and Julie have been talking about, and what they're implementing in their respective markets and their respective businesses, certainly there is an effort and a move towards integrating all of these sorts of data-points across profit, across operational data, across understanding the impact that the competence of our people have on our businesses. And this is something that, that we're seeing across the region, and it's not something that is limited to only a few markets or a few businesses. It's certainly across the region and it's occurring to varying degrees. But I would venture to say that we're seeing at least the beginning steps of this happening across most stakeholders that we engage with.

What I will say is as much as I guess geography has a part to play in the maturity of markets or businesses, leadership is a big part of the equation as well. And I think we've seen that particularly with Chris - when you mentioned this a little bit earlier, Bastien, when you were asking him about how much of the information from business management is cascaded down to his team, and really what we've seen is the businesses and the markets that have very strong leadership when it comes to business management or following the data or understanding what the data is telling us, those are the organizations that seem to have had the most success through this relatively difficult period.

We've talked a lot about survive and thrive - that's been thrown out there a lot by many different people and organizations and parties both within the automotive industry and outside of the automotive industry. And we've seen a lot of different businesses survive through COVID.

But what we're seeing in terms of the backend, particularly markets obviously, I don't know if you can tell by my accent, but I'm based in Australia. Australia is in a relatively lucky position to have COVID under control at the moment. And what we're seeing in dealers coming out of that survival phase is businesses that are thriving because they have really strong and robust business management processes and principles in play. So not only getting through the hard times, but then being able to come out of the hard times and take big steps forward, because they've got the correct processes in place, they're looking at the data, they understand what the data's telling them, they make sure that their team members understand what the data's telling them, and then basically they're empowering the people to make the right decisions, in most cases.

So, yeah, that's certainly what we're seeing across the region from a position which is in between the dealer world and the OEM world.

B: I see. You mentioned about the Academy focusing on the three ‘P’s’, performance, process and people. Obviously, those provide a lot of data to users, and I think that also links with what Chris was referring to earlier, like linking the information, doing connection in the business. 

How do you think that business management will move in the future? Understanding that the financial result is really the output of the operational process, right, and what's happening from an operation point of view. But what is it that you are doing from an Academy perspective to actually help dealers to link those dots together and help them to improve their performance? 

C: That's a good question. Big data - that's the buzzword at the moment, right? A lot of people are throwing that around, i'm not sure if everyone knows what it means. But certainly, that's the direction we're heading - integrating as many data points and fields of data as possible to give us the most complete picture possible. Julie mentioned it a little bit earlier, where we have these finance teams and dealerships who operate in silos, they understand what's happening from a financial performance perspective, they see the end result of the operations that happen within the business, but they're not necessarily that connected to what the operations are. 

So, in terms of what we're trying to do from a Ford Academy perspective, like you mentioned, we have these three pillars in place which we refer to as the three ‘P’s’, and certainly, as I mentioned earlier, the profit pillar has been the focus of business management. And what we're realizing and what we're trying to drive at the moment is the fact that business management and data shouldn't be limited to profitability or finance only. There is so much data out there, operationally, that we can use to complete the picture - paint a more comprehensive picture - which then gives all stakeholders much more information to make better decisions. 

And to Julie's point, if we don't have that information, if the people who are sitting in the financial controller seat or the CFO seat doesn't understand the operations, doesn't understand what's driving that bottom line, that result, ultimately, it's going to be very difficult for them to drive change or improve performance. So yeah, this is certainly something that we're trying to drive at the moment within the Academy.

Our business management system, Insight BM, is something that certainly has the capability to assist us in this field to not only limit ourselves to finance data only, but also all of the other nice and rich data that we have floating around throughout our other interactions outside of business management. So, consolidating and pulling this all together is certainly something that is exciting a lot of people, something that we think is going to be able to take us, and what we can offer, both our OEM clients and our dealer clients a lot more value. That's ultimately what we're trying to do,

B: We are reaching the end of this podcast, unfortunately. And I guess we could keep talking about business management and dealer's performance for quite some time. But before we close this discussion and close this meeting, is there any recommendation that you will give to dealers? And I here, I'm particularly looking at Chris, obviously you shared your best practices with us and obviously, as I said, like I was looking at your numbers and, once again, well done for the great performance you've done so far. But are there any recommendations you would give to dealers in terms of business management and how they can better where quiz their teams to improve their business?

C: So I'm going to loop back to what Julie and Tim both mentioned, they were talking about the link between finance and operations. And for one thing, business management is not about finance, and they both mentioned it, and I think sometimes people confuse the two subjects, the two sciences. Business management is really about the whole business. It's linking and syncing all the sciences in the business. And it supplies the tools, and the tools are already there. So, MSX and Sewells really give us benchmarks and averages, so if I have to design, operationally, a sales team or a sales department, I would have to look at units per sales executive, I have to look at productive versus non-productive, I would have to look at commissions per sales executive, I would have to look at net profit I want out of every head in the business. And so I can really design - that's all not finance, the little components I add to design that business. It gets back to what Tim said on the three ‘P's’, so the people - how does the people fit into the profit? And how does the process fit into the profit? 

And the one piece of advice I continuously keep reminding myself and keep reminding our teams is to integrate this information. What would you like to achieve and what do you need to get there? And that is not only about finance, that's about so much more. And the business management world is actually such a huge world, and the more information, and Tim alluded to the big data, the more information that you can extract an input into this business management 360 view, the more powerful your business will be.

B: Thanks Chris. Julie, Tim, anything on your side you could recommend to dealers and other users? 

J: From my end, I couldn't agree more with Chris. This is really - the business management report is actually very rich in terms of all the metrics, all the, well, indicators of the business that we can actually look into in order for us to really improve the operations. 

On the OEM side, it's best if OEM can support and can actually use this data to come up with some programs and support to the dealers in order for us to work hand-in-hand towards achieving a common goal, which is actually sustainability and of course, profitability of the dealers. So, I guess that's it from my end, Bastien.

B: Thanks, Julie. Tim, anything that's on your side?

T: I would say embrace it. Embrace business management. Embrace data. I think we've got two examples here. We've got Chris here who is representing the dealer world, so to speak, and Julie who's coming from an OEM background. That's one way of looking at it, but I think another way of looking at it is you've got an individual who has truly embraced business management and is reaping the benefits and the rewards now of all the hard work and the effort that's been put into it, like Chris. And you have someone like Julie who can see the power, right, in business management, and within her organization she is planting those seeds and trying to get this up and running. And I think, without doubt, given time Julie will be able to take her organization to the same level.

I think business management can seem a little bit scary to some people - people who don't necessarily see themselves as being great with numbers or data - but really the best way to look at it is the more you get involved, the more willing you are to embrace the practice, the easier your day-to-day job will be.

And I'm sure both Chris and Julie will speak to this - you're effectively simplifying your decision-making in your day-to-day business, because you've got such a rich source of data that does a lot of the work for you and basically tells you where you need to take your next decision and what that decision should be.

I would say embrace it and, yeah, i'm sure that you will reap the benefits and the rewards. 

C: Sorry, can I just come in there for a sec? Because I think Tim made a fabulous remark then. It becomes easy. Business becomes a lot easier when you implement these principles and you feel if your business has a model that you’re working towards and the model can self-adjust as the market changes or situation changes, then it's a win. And that's really what business management enables you to do. You can design the model, but you can also have the activity that self-corrects the model as business changes. And if you can get to that level, Tim is a hundred percent, business becomes easier. It'll never be easy, but it became easier. There's no doubt about that. 

Thanks Chris. Thanks Julie, Tim. Thanks a lot for your time today. It was extremely insightful. So, thanks a lot for sharing all those information with us. Thanks for listening to this podcast and stay tuned for more insights from MSX.