Digital Dealer - February 2018 - 12

DEALERSHIP MANAGEMENT

Continued from pg. 11

MANAGERS WITHOUT STRETCH OBJECTIVES,
PROPER OVERSIGHT AND MANAGEMENT ATTENTION
CAN TURN INTO 'CARETAKERS' JUST GOING
THROUGH THE MOTIONS..."
people doing the same
task and/or occupying a
space that is physically
too small for them.
 STAFF INEFFICIENCIES- It is easy to
reason that additional
staff and management
will be required to staff
and support duplicative
functions.
 LACK PURCHASING LEVERAGE- Decentralized purchasing
functions generate smaller purchases with more
suppliers, sub-optimizing
their leverage, realizing
higher costs than are
necessary and creating
more work for payables
staff to pay more suppliers.
 LACK OF SPECIALIZATION- Many executives view their managers
as "utility players" who
can learn and play any
position such as Human
Resources, Purchasing,
Information Technology, Safety and more.
Managers who receive
no formal training and
little operational direction
in their newly-assumed
responsibilities may have
good intentions but can't
generate results locally
that an experienced resource could achieve in a
centralized environment.
"Utility players" lack the
data, the process experience and most often the
time required to generate
solid results.
 FACILITY
DUPLICATION - A large
12

FEBRUARY 2018

group might operate with
18 Accounts Payable
offices which is inherently
less efficient than one
central accounts payable
location...using more
space and labor than is
required to pay suppliers,
not to mention technology
costs and other
miscellaneous expenses.
 LACK OF ACTIONABLE INFORMATION-

(tactical vs. strategic),
weak or non-existent
purchasing processes,
will all guarantee poor
pricing, increased costs,
inefficient processes,
unfavorable business
terms and new risk.
This is an all too
common occurrence in
decentralized purchasing
environments.

OTHER ISSUES THAT

'UTILITY PLAYERS'
LACK THE DATA, THE
PROCESS EXPERIENCE
AND MOST OFTEN
THE TIME REQUIRED
TO GENERATE SOLID
RESULTS."
While data has potential
value, greater volumes
of data doesn't add value
if not mined, utilized or
applied to the appropriate
management challenges.
As an example, if your
centralized corporate
office does not know how
much they spend in a
given expense category
annually across an organization or know who the
suppliers are in a given
expense category, you
are not using your data
effectively and wasting a
valuable opportunity to
leverage your spend.
 COST INCREASES-
Poor specifications and
requirements, too many
suppliers, the wrong
purchasing philosophy
D I G I TA L D E A L E R . C O M

CAN CREATE DISECONOMIES OF SCALE

Some of the other issues that acquisitions and
growth provide can add
to overall diseconomies
of scale:
 COMPLEXITY- Too
many locations, too little
management control and
too many products purchased or sold can add
complexity and waste.
 BUREAUCRACY-
When an organization
becomes so big, so
bureaucratic that
management decisionmaking is continually
delayed, or not made
at all, inefficiencies are
created and become
institutionalized in time.
 BROAD SPAN OF

CONTROL- Management
spans of control can
increase to the point that
leaders can't effectively
manage or control
anything. Managers
without stretch objectives,
proper oversight and
management attention
can turn into "caretakers"
just going through the
motions, never improving
performance to any large
degree.
 INSECURITY- Acquisitions and mergers
tend to cause uncertainty
among the remaining staff,
which can breed insecurity
and the desire by those
who "made the cut" to play
it safe and not rock the
boat.
 MANAGEMENT
INEFFECTIVENESS-

Some managers just
refuse to lead and manage
- others are "too busy" to
act, their plates are too full
to address obvious problems, which frequently becomes an excuse for doing
nothing. Doing nothing will
often lead to institutionalized inefficiencies that are
hard to reverse later.

DISECONOMIES
OF SCALE - THE COST
IS HUGE!

Independent research
firms such as Aberdeen
and Gartner have numerous studies concerning the
inefficiencies created by
a decentralized management approach to purchasing and other functional
disciplines. The problems
they cite are only multi-
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