It’s Just Good Business
As this is being written, the 2020 World Series champion has been crowned. As with most championship teams, the question is always, “Can they repeat next year?”
Seldom is a team the same the following year. During winter, a few draft picks will be in camp for spring training, other players will be released, traded, or retire.
Most draft picks will be assigned to the minors because they do not have the skillsets for the world stage. Their skills may have got them through in past years, but as others honed their abilities, what worked before is just not good enough.
For the equipment industry, 2020 was mostly a blessing. Spring sales had many dealerships selling out of under 60-HP tractors and lawn/garden equipment. The biggest issue was finding acreage equipment for summer and fall sales. We hear the OEMs are struggling to fill the 2021 restocking orders.
Production agriculture equipment retails started slow in 2020, but picked up. Retails and commodity prices were strong through the second half of the year. Many dealerships reduced their inventories of wholegoods. These dealerships took advantage of an opportunity to move iron.
Unfortunately, a few dealerships did not jump on the flurry of customer buying activity. Some dealerships are still full of aging new and used equipment. On the other hand, their competitors’ (who had empty lots) retail options were preselling 2021 orders and marketing the subsequent trades. Going into 2021, we will have reactive selling by some dealerships and proactive selling by others.
This leads to a simple question. Why? How does one dealership recognize an active market while another doesn’t? Whether your equipment is aged or not, every dealership had equipment to sell.
This question leads to a bigger question. Is your management team to the same level as your competitor’s management team? In many circles, the discussion of their managers’ abilities is always a hot topic. Who is running the dealership? As we look around the industry, how many owners or managers will be retiring in two, five or 10 years? Who are the replacements?
A must exercise for dealers is measuring their dealership’s management skill sets and estimating their competitor’s management skill sets.
Exercise 1
On a scale of 1-6, rank each manager on their ability in financial understanding, leadership and operational strategies. Have others above and below rank the managers on their abilities in these areas. Do this anonymously. Tally up the rankings and average the results.
The results will provide a clear picture of your dealership’s management strength. Is training needed or is a replacement an option? If replacement is in your plan, where will you find a replacement with skill sets greater than those of the current manager’s skill sets.
Discussions seem to circle around to the same question, “Where are we going to get the next generation of managers?” Can we steal automotive or construction industry managers? Most of these managers are perceived as being well trained.
While the poaching strategy has worked in a few instances, many dealerships have discovered the agriculture industry has enough differences that an automotive or construction manager does not work out as expected. Another issue is trying to convince an individual and their family to move to a rural community.
Why do we believe automotive and construction industry managers are better skilled? They are the same type of individuals we hired for our management roles. Do other industries put more emphasis on an individual’s training and development path to a management career?
Without question, there are currently a number of agriculture dealerships using the automotive industries management training strategies when grooming their next wave of managers.
Unfortunately, many dealerships are not prepared to spend the time or resources on management development. This leads to a potential A-1 manager leaving an organization to join a dealership interested in building bench strength.
This scenario creates a further divide between well-managed dealerships and struggling organizations. “Weeding out the weak” is a phrase used often. The management skill sets that held a dealership together in the past will not be enough to hold it together in the future. The latest example being the organizations that did not jump on the active 2020 retail market. These organizations are struggling without a clear path or plan to get ahead of their inventory and cash flow issues.
Exercise 2
In both your competitors’ dealerships and yours, chart the number of years until managers retire. Knowing your competitors’ managers, who they are grooming to become managers, and what their skill sets are could be clues to your organization’s future.
If competitors have a management team that becomes more skilled than your own, it could lead to struggles, not only withholding customers but also attracting good people. We all know a great dealership or department that fell from grace due to an under-skilled manager.
As your managers begin to retire or speak of retirement, the positions will need to be filled. Attracting a competitor’s skilled people is often our best hiring option. A dealership, virtually any business, with top-drawer management will attract good people in all areas of an organization.
In a recent discussion with a dealership’s general manager, who is also a partial owner, I was told that “financial accuracy is not too important if the bottom-line number is still the same.” Quite frankly, in our opinion, any manager who does not get a high from improving financial metrics is not a manager.
This organization will have a difficult time hiring great managers. The best they can hope for is a department “babysitter.” Babysitter managers are those who see the day-to-day activities completed, but forward-thinking, planning and implementation of new ideas should not be expected.
Whether your dealership is made up of one or 30 locations, management skills will be the defining factor in your organization’s ability to thrive versus survive. An annual in-depth analysis of your managers’ skills allows owners to know where their greatest strengths and weaknesses are…. and it’s just good business.
Article Written By Trent Hummel
TRENT HUMMEL is a lead management consultant and trainer for the Western Equipment Dealers Association’s Dealer Institute. He provides onsite dealership training and conducts courses to improve inventory management and business operations.
Hummel’s strategies about inventory turns, aging, and margin have resulted in rejuvenating struggling wholegoods’ departments. His commitment to operational excellence in the management of wholegoods has earned him a reputation as one of the industry’s foremost experts on sales growth and inventory control. Hummel may be reached by writing to trenthummel@yahoo.ca.
