The Leadership Lessons theme for 2023 is how to build stable and sustainable dealerships that adapt to accelerating change. The advisors at Machinery Advisors Consortium (MAC) think it vital for dealership leaders to prepare for times of turbulence. Our industry has been through turbulent times recently with COVID-19, supply chain and labor issues. Good leaders will prepare their organizations for even more turbulence and seek to create stability and sustainability as the pace of change accelerates.
Charles Darwin said it well. “It is not the fastest or the strongest of the species that survive but those that are most adaptable to change.”
Compare your responsibility to prepare for change to that of a pilot who we trust to prepare for and successfully fly us safely and securely to our destination. What pilots do will help you think about what you should do.
Pilots must consider the distance, the fuel required, the weather en route and the passenger load in flight planning. They also factor in the plane’s capabilities, the crew’s status and the potential for delays.
During the flight, the pilot must adjust as the flight progresses, be prepared for emergencies and communicate regularly with many people, including the ground crew, the tower, air traffic controllers, crew and passengers.
These are things that pilots must consider and, as a leader, the analogy for you.
Pilot: Fuel load required to get to the destination with a safety reserve.
Leader: Recurring revenue that will continue to ‘fuel’ the business in a down cycle.
Fuel is necessary to power the engines from startup to landing and is sufficient to handle unexpected delays or changes. Recurring revenue is required to power your dealership’s ‘engine’ no matter the turbulence or change in sales. MAC recommends that 66% of gross profits is from recurring revenue (service, parts, precision, rental).
Pilot: Weather expected, including the Jet Stream.
Leader: The anticipated demand for machines and services — will sales increase or decrease?
Pilots and leaders must look ahead to plan their route. If they see problems, make plans to avoid them or mitigate their effects.
Pilot: Passenger load.
Leader: The expected cash and net profit that my other investors and I expect.
A pilot prepares to deliver that number of passengers and plans the flight to do so safely and positively. A dealer leader must prepare the organization to deliver the expected profits and to create and retain customers.
Pilot: Crew trained, briefed and available for the flight.
Is your ‘crew’ ready and in sufficient numbers to help you manage (your co-pilot and engineer = managers) and serve customers (flight attendants = customer-facing revenue producers)?
Flying the Plane
Pilot: Discipline of checklists.
Leader: Discipline of financial metrics and process control.
Discipline is vital to fly one of the most complex machines ever built with a responsibility to passengers and crew in a changing weather and traffic environment. Pilots get close to the plane in their pre-flight ground checks, and the cockpit team constantly reviews checklists to ensure success.
Discipline is vital to business, especially in times of turbulence. Does every employee know the definition of success for their position? Are the financial and productivity metrics measured and reviewed to adjust? Regarding absorption, the best dealers know expense control is the most critical factor, not gross profit from service and parts.
After you board the plane, you’ll hear a voice and feel the presence of the pilot —calm, comforting and ensuring you know the flight destination.
How do your ‘crew’ and customers hear your voice, especially during times of stress? The crew is helpful, but the voice of the leader is essential.
When there is a delay to take-off, and you’re sitting on the runway in stress, the best pilots stay in contact even if they have no news or no good news. Think about when your crew and customers are stressed and your communication’s importance.
Pilot: Prepare for unexpected events.
Leader: The same.
Delays on the runway are a nuisance, but delays and emergencies in the air can be life-threatening and may require extraordinary measures. In our business, the unexpected events of COVID or supply chain were disruptive, but ransomware and cyber-attacks can shut down a dealership.
During 2023, we’ll expand into each of these topics — recurring revenue, planning, communications and discipline.
We’ll also help you think beyond the pilot’s perspective and to the plane designers. As a leader, in addition to planning and operating your business, we’ll help you think about how you design and create a stable and sustainable business for times of turbulence.