According to the Webster's dictionary, a "benchmark" is defined as "a point of reference from which measurements of any sort may be made". In the automotive dealership environment the definition is most often used to refer to the comparison of a specific dealer's, or group of dealers' performance against some industry standard. Typically when dealers discuss benchmarking they are referring to high-level comparisons of their store(s) to group averages or OEM standards. In many cases they are provided with these comparisons directly from the OEM or their specific dealer group.
Is it still useful?
Does this suggest that benchmarking
should be tossed out as old news? Absolutely not! Benchmarking, if
done correctly, will be a critical component of a dealership's performance
improvement.
Benchmarking,
is not the end result, and does not replace other management processes or
dealer principal and management intuition. Rather it is the tool that will identify a dealership's strengths and
weaknesses, allow it to capitalize on opportunities and address and ward off
threats before they become too large to deal with. It will direct the focus of management to the
areas of the dealership that are most at risk and critically in need of
attention, or which can provide the greatest opportunities for growth and
improvement. The end result of the
benchmarking process will be to increase sales, reduce expenses and manage
risk.
During
the early stages of the process, benchmarking provides the dealer with a point
of reference from which to start the deeper probing. It identifies where a
store's results rank in comparison to:
(a) its competitors - whether by
brand, region, or geographical territory;
(b) its own past history;
(c) its specific OEM targets; or
(d) its self assigned budgets and
goals. Once the hit or miss results are known, the deeper probing can
begin.
In
order to fully analyze benchmarking results for a specific store or department,
the dealer principal must also understand the components that make up the
specific benchmark calculation. Is the data reliable and accurate? Is it consistent across the time measured? Is
it collected and reported on in a timely manner so that resulting action plans
will be relevant? By probing the data and analyzing each sub-component, the
validity of the results can be determined. If the data has errors, of fact or
omission, they can be corrected and the benchmarks recalculated. If the data is consistent and valid, then the
second stage of the process
can begin.
The second stage
The second stage of benchmarking is
to probe each component of the benchmark calculation and identify which
specific area being measured is in need of correction or adjustment and devise
an action plan to correct that component.
Consider
this example of how deeper probing can identify the real problem. When
reviewing the Hours-per-Repair-Order benchmark a dealership found that theirs
were well below the average, but their total labour hours sold were higher than
the average for an equivalent dealership. Upon further probing, it was determined that when a customer came in for
standard maintenance, and his/her vehicle was then found to be needing
additional repairs, the customer was issued two Repair Orders, rather than one.
Thus the calculation was correct, but the internal process needed to be revised
to record an accurate measure of Hours-per-RO.
When
developing internal benchmarks, a significant amount of time should be spent
determining what data should be collected for a given benchmark test. The more
specific, timely and relevant the data collected, the greater the likelihood
that the resulting analysis will lead to specific action plans that will take
the dealership in a positive direction. Conversely, collecting, reporting on
and analyzing benchmarking data, for which no reasonable action can be taken,
is time ill spent. Too often dealers
review and compare themselves to benchmark data that they receive from an
external source that is not relevant to their specific situation.
The list of items that can be analyzed and thus benchmarked in any enterprise is endless. Benchmarking can be done on overall dealership results, departmental results and sub departmental results. It can be done on traditional financial information as well as other non-financial tasks, processes and dealership activities.
Benchmarking
should not be confined to only probe sales, expenses and CSI or CRM data. Internal administrative processes should also
be benchmarked. As a general rule, any area, task or process within the
dealership that can affect sales, expenses, customer relations (both internal
and external) or could put the dealership at risk if the task or process is not carried out correctly should be
benchmarked.
The
list may seem daunting at first; the trick is to first benchmark, analyze and
create action plans for those items that have the greatest impact on the
dealership and can be most easily corrected. Said another way, the areas to
concentrate on are those with the greatest deficiency or highest risk. Over
time secondary and finally minor items can be tackled. The list of major,
secondary and minor items will vary as time passes and will also vary from
store to store.
As
action plans take effect, and benchmarking results verify their success, items
can be monitored less often and at a higher level until circumstances change
and a deeper probing is again required.
How often should benchmarking take
place?
Benchmarking should be an ongoing process
in the dealership. It already happens
all day long on an informal basis. Formal benchmarking needs to take place
daily, weekly, monthly or annually, depending on the area being analyzed.
For
example, vehicle sales traffic is monitored all day long, but usually reported
on daily. Technician efficiency is usually better measured over a longer period
of one or two weeks to remove fluctuations caused by technician schedules and
service traffic patterns. Some benchmarking, such as absorption and break-even,
requires financial results and can only be done once the financial statement is
completed. Lastly, some benchmarking needs a longer period to be valid, and can
be completed at the end of each month based on the last 12 months activity.
Staff turnover is best done over a longer period, in order to see trends, but
needs to be completed regularly, not just once a year. Each item to be
benchmarked should be measured and reported based on its own schedule as it
relates to the activity being measured.
Who should gather and prepare benchmarking data?
The collection and reporting of
benchmarking data should not be confined to OEMs, dealer principals and
department managers. Data should be collected by relevant staff members for the
department or area being benchmarked. Often errors in logic and consistency of data can be found at an early
stage, if the collector of data has an intimate knowledge of the data source
and dependencies.
A
note of caution, however; if data is collected by lower-level or front-line
staff who may have reason to adjust the data before it is analyzed, there must
also be a secondary step in the collection and reporting phase to ensure that
it is in fact valid and accurate. Secondly, if data is collected by lower-level or front-line staff, they
need to receive feedback on the data they collected (i.e. - why the specific
data is being collected, how it will be used, and who will be using it). This
will ensure that the data continues to be collected, and will likely increase
its accuracy and usefulness in the future.
Analysis
of benchmarking data is best done by dealer principals, department managers, or
in some cases administrative or finance staff. They are usually the drivers of
change and will need first-hand knowledge of the benchmarking results in order
to determine the action plans that will improve the particular benchmarking
results.
How should benchmarking be used?
To repeat an earlier statement,
benchmarking is a tool. In some cases it
will be a means for a dealer principal to confirm his or her hunches about a
specific area of the dealership. Knowing how far off a given benchmark a
dealership is, however, does not tell a dealer principal or department manager
how to correct the situation.
The
greatest benefit of benchmarking is behaviour change, both in dealership staff
and management. Once the process has
begun, the cycle from data gathering, to data verification, to action plans,
and finally to verification and communication of new and improved results will
drive staff to continue these new behaviours and processes and not fall back
into old habits.
At
this point, benchmarking results can take on secondary uses such as driving
compensation plans and gaining staff contributions to, and acceptance of, the
new methodology of constant improvement.
To
summarize, when using benchmarking at your dealership, know what you are trying
to measure and why you are measuring it. Validate your data inputs and subsequent reporting outputs. Create action plans to affect the components
of the benchmark data that will bring the most positive results to the
dealership. On a regular interval,
retest the benchmarks to ensure that there is no slippage of desired results. Communicate benchmark results to appropriate
staff and management regularly to drive or maintain changes in processes and
behaviour.
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