Dispersion & Dilution Lead to Poor Leadership in Strong Markets

As published in RVBusiness, May/June 2019

by David Spader

Times are good. Most markets are strong. Many top performing dealers are enjoying nets of 7-8% of sales or even more. How about you?

In most markets the fundamentals are still good – low interest rates, a growing customer base, and generally favorable economic trends. If your profitability has started to drift, or not attained the level of these high performers, it may time to look in the mirror.  There is nothing easier in good economic times than putting the operation in cruise control so that you can enjoy the fruits of your hard labor. Or worse, believing that the above average profits are because of your leadership and not in spite of it.

A look under the hood of an under-performing business in a good market often reveals that there are more leadership and management issues than market issues.  Meaning, maybe it isn’t the weather, the economy, gas prices, the internet, or the “low-baller” down the street that is keeping you from achieving the profitability you desire. It may be a lack of internal leadership that is preventing you from realizing your true profit potential. There are numerous reasons this could occur. We will focus on two of the most common reasons why leadership often weakens in good markets.

Leadership Killer #1: Attention Dispersion

As dealerships increase in profitability, leadership teams often take credit for that performance improvement and believe it was primarily because of their efforts. Unfortunately, they are often just riding the wave of a good market. We’ve seen this pattern over and over again. As confidence increases these dealers decide to take on more lines, build new facilities, start another business, build a vacation home or start one of many other distractions. Inventory turns slide. Margins erode. Volume covers all sins.

The result is that their focus is dispersed! Instead of the hyper-focus that comes during tougher markets, they get loose with the checkbook. Expenses increase. They don’t provide as much direction to their staff. They coach less. Often, the fundamentals of business operations receive less focus and attention.

Ironically, even though both dealers and their employees are “winning” more, the sense of purpose that comes with survival is replaced with a sense of complacency and even burnout.

It is critical to fight attention dispersion with the same level of focus and intensity that got you through the last economic crisis. However, the type of focus and intensity needs to change. The problem is that employees understood why you had to fight for every dollar in the meltdown. There was meaning in the fight for survival. However, now that survival is almost guaranteed, you need to replace that focused purpose with something beyond just making money. This is when real leadership occurs. Do you have a clear business purpose and vision that is creating engaged, passionate and driven followers? Or, do you have employees who are there for a paycheck?

The reality is most dealership lie somewhere between those two extremes. So, what are you doing to change type of focus in your dealership? If you can’t instantly answer these questions you are probably under-performing your leadership potential:

  1. What is your company’s purpose (beyond making money)?
  2. Do you have employees or passionate followers?
  3. What are your one to three strategic actions that create super-focused managers and employees?

Leadership Killer #2: Culture Dilution

Our second cause of poor performance and leadership in strong markets is the dilution of your culture. This is often caused by numerous new employees, additional locations or another layer of management. Or, it is caused by leaders not changing the type of purpose mentioned above.

Either way, if you are not setting the tone in your business, and establishing the fundamental way people in the dealership think about and interact with each other and customers, someone else is. Leading the culture of a larger dealership must change as markets change. Here are a few questions to ask to determine if your culture is becoming diluted:

  1. Can you define your company’s desired culture?
  2. Are you tuned in to the dominant culture in your business? How could you prove it?
  3. Are you the primary author? Or has your influence started to recede as these good times have dulled the edge of your leadership blades?

The solution to many of the leadership challenges faced in good times is found in the three phase Managing By Values® process. First, clarify what you want your culture to be. This is about avoiding dispersion by determining the critical few leadership and culture priorities. Next, fight dilution by communicating those on a constant basis. Lastly, align the behavior of ALL employees to those culture expectations. Consider a client that dramatically changed their culture around teamwork. They started with only 30.1% of employees reporting strong teamwork and had raised that to 84.6% just a few months later. That is a leader who has adapted effectively to the changing leadership needs of the business. Will you?