TRANSFORMATION: ENABLE PEOPLE TO DRIVE CHANGE

Today’s customers want a convenient way to buy a car, either physically and/or digitally. This omnichannel approach should be transparent and include co-ordinated activities from both OEMs and their dealer networks. This is forcing businesses to examine their ways of working and subsequently their franchise agreements. The only certainty is that there will be no perfect solution and whichever approach is chosen, dealers will have to be ‘individually’ supported through any transition to the new business model.

The current Franchised Dealership model has been in place for 100 years. It has developed to the point where both the manufacturer and dealerships understand their roles and responsibilities. Both are structured and resourced appropriately for delivering a good customer experience, today. The challenge is that customer expectations have evolved and today’s good experience will not be tomorrow’s. Any co-ordinated response to a digital customer journey is hampered by weaknesses that have developed in the manufacturer, dealer, and customer relationship over time. These weaknesses include: 

• A lack of customer transparency due to OEMs and Dealers operating their own technology with siloed data 

• Margin-driven price wars between dealers of the same brand lead to difficult-to-understand pricing for the customer 

• Current sales processes cannot support a cohesive customer journey 

The solution is to investigate the business arrangement between the manufacturer and dealer. There are a few options to consider which can be split across four key approaches, although in reality, this is a spectrum of choices. 

1. Genuine Agency 
   The dealer or ‘agent’ receives a commission for each sale, but no longer owns stock and cannot set prices or discounts. This frees the agent from stock management risks. They also do not have to worry about associated administrative tasks such as billing and payment. Even responsibility for aspects of branding and marketing will go to the manufacturer. Agency sales would apply to all vehicles

2. Genuine Agency, specific-channel 
   A genuine agency model must be applied to the whole business or distinctly separate channels within the business for legal purposes. This ensures fair treatment across any ‘boundaries’. Battery Electric Vehicles (BEVs) can be seen as distinct from internal combustion engine vehicles, including hybrids. As such many manufacturers have taken the opportunity to implement BEVs through an agency arrangement. An alternative example channel might be corporate sales. 

3. Non-Genuine Agency – A compromise 
   Dealers can still grant small discounts. However, this means that the dealer cannot be exempt from all commercial risks. The balance is that, subsequently, the manufacturer’s liabilities are smaller. 

4. Franchise Arrangement 
   This pursues the current model, though it may include modifications that allow for the sharing of pertinent data to coordinate the customer journey better.

The trouble is that agency models are relatively untested, aside from small pilots, niche manufacturers, and new market entrants. Any new business model will leave stakeholders uncertain, with unclear structures and responsibilities. In contrast, the current franchise agreement and ways of working are a known quantity, even if they might make meeting the customers’ needs more difficult. 

Typically, a dealer business has five main channels: 

1. New Car Business  

2. Used Car Business 

3. Service Sales 

4. Parts Sales (Accessories) 

5. Bodyshop / Repair / Vehicle Rental

The primary challenge for the manufacturers and their dealer networks that are pursuing the agency model is to unpick the complexities of these business areas. For instance, does the agency model extend to used cars? How will subscription-based service, maintenance, and repair be applied to an agency sales model? What is an appropriate commission for the agents?  

The next challenge is implementation. For the manufacturer this includes right-sizing the network to better suit the identified market, potentially pursuing a ‘hub-and-spoke’ model. From the Dealer Group’s perspective, rather than a broadly similar strategy across their different brand franchises, they may end up with a highly fragmented approach. 

All of this requires clarity in the communications between stakeholders so that workable solutions at a business level can be identified. 

On a smaller scale, it is understanding the impact any new model has on individual businesses. Existing dealerships are successful because they have responded to their local market; now their business model will have to adapt. For instance: 

• Large dealerships that achieve added margin from volume-based discounts may no longer get preferential terms 

• Dealerships in areas of less opportunity that used the intra-brand competition to drive their sales base wider may be restricted to their locality once more 

• Smaller dealerships with lower sales volumes may have to focus their profit centres on other channels such as used vehicles 

Importantly, the entrepreneurial attitude which has allowed dealerships to succeed needs to be retained and potentially driven to greater levels. As each business understands its requirements under a new business model, it will have to consider the resources, skills and people it requires, both during the transition and afterwards. 

Your People are Your Resource 

Clearly, any support delivered to dealers during the program rollout will need to take these business strategy differences into account. This is more critical as the people within the Dealership are considered. When looking at individual roles, dealers will have to consider what their new requirements are. Do their existing people then have transferable skills or even the desire to be re-tasked? If people leave, will the Dealer be able to find the appropriate skills, locally?

That is why any change to the franchise model should be considered as a people transformation programme; a programme whose objective is to keep as much of the current and relevant talent, knowledge, and skills as possible to support the business transition. It needs to consider that for individual employees, this business transition might take secondary precedence over their personal development, for instance: 

• Sales consultants could be repurposed as ‘customer advisors’, responsible for driving satisfaction rather than sales volume. This may see them moving from a heavily commission-based remuneration to a flatter monthly pay structure – their job focus changing from negotiating skills to product knowledge and customer service 

• With manufacturers taking greater central responsibility for marketing, local marketing resources may find themselves refocused on other channels 

• Fleet and business managers might transition from dealer to manufacturer employment 

• The growth in subscription services or local dealer initiatives will create new roles to support these important business streams 

• New starters and contractors without automotive dealership experience will need extra support during the transition to ensure they are integrated into the team 

Success will only be possible while maintaining the motivation of the people meeting today’s business needs while supporting tomorrow’s new ways of working.

Considerations for a People Transformation Programme

Change management and people development are vital to both co-ordinate rollout and bring stakeholders along on the journey. These activities and responsibilities will need to be co-ordinated between the manufacturer and dealers to ensure appropriate resources are allocated. 

Dealership Model Blueprint 

After any new business model has been agreed upon, the first step is to develop a blueprint to communicate it to the network. This is especially needed for a radical change to agency models. The overall goal of a model blueprint is to provide clarity, and a depth of detail, for the current network on how their ‘Dealership’ will transform under the new strategy. Dealer principals and heads of business will be able to use the blueprint to plan their dealer level transitions. 

Mindset and Skillset Transformation 

After the network model is agreed upon, the required job roles infrastructure and resources to support the new strategy need to be developed. Current roles and skills will then need to be mapped to the new requirements in liaison with the manufacturer and dealership stakeholders and remuneration will need consideration. Any approach by the manufacturer needs to be integrated with the Dealer Group’s own L&D plans to stop duplication or contradictory messages. A roadmap will then need to be developed to support the transition before advice, guidance, support, and recruitment are practically implemented to upskill and reskill the Dealer Group resources. 

Making the New Model Work 

There are two aspects of this; training in the new ways of working, and ongoing support that continues to drive the transition until it is embedded. Onboarding will be a key tool as new members of a business can help support the transition of culture. Relevant performance criteria will also need to be implemented and tracked so that appropriate development can be targeted. 

People Engagement and Communication 

Engaging key stakeholders in the network will be a key component of a successful implementation. The nature of transformation required is a genuine cultural shift in attitude and behaviour that requires a significant and prolonged programme of engagement to embed and this will need driving from the top down. 

At the same time, dealership staff need to be engaged and buy in to the process. This could be linked to efforts of developing the entrepreneurial spirit so that teams feel they are contributing to the transformation. 

This will require a communications plan that provides a concise and timely cascade of information, while also allowing levels of two-way communication that support feedback. 

Summary 

The above components are interconnected and support each other across a people transformation programme. However, to get the most out of them requires a strong relationship with – and understanding of – the dealer network and its people. Any change in the Dealership model must be completed while continuing to build customer satisfaction. This must be collaborative for all stakeholders.