If you were in the military you know what the "chain of command" means. Even if you weren’t in the military I’m thinking you have a pretty good idea of what it’s all about. The chain of command is critical to success in the military, sports or business.

In a radio appearance this past week on ESPN’s Mike and Mike in the morning, former Orioles pitching coach Leo Mazzone had some interesting comments about his tenure with the club when asked about the current turmoil surrounding the Boston Red Sox.

If you’re not familiar with what’s been going on, the Red Sox new manager, Bobby Valentine, has had a very tenuous year in dealing with some of the players. He has been faulted for their extremely poor performance this year and in large part that may very well be true. Recently during a road trip to play the Yankees, a number of the players had a private meeting at the hotel with the top brass and owners of the team.

Mazzone compared his time with the Atlanta Braves (where he helped the team to 14 consecutive division titles and five World Series appearances including one championship) to his two years with the Orioles.

"It all starts at the top. It’s called the chain of command. With the chain of command, I have experience with both ends of it," Mazzone said in the interview. "When I was with the Atlanta Braves, there was a chain of command that was in place that was never broken. It was never broken by the players. It started with ownership, with Ted Turner. Then it started with the general manager, John Schuerholz, the manager, Bobby Cox, and the coaching staff and the players. So you had a chain of command that was never broken.

"Then I go to Baltimore and find out why they’re losing," Mazzone continued. "The chain of command was always broken, where players got to voice their displeasure to the front office, which took away the power from the manager and nobody really knew who was running what. Basically, what it was, was a bunch of players finding excuses for losing. This is what’s going on in Boston right now."

So, how often does the chain of command get broken in your dealership? It’s not unusual for the Dealer, GM or owner operator to have a special relationship with those who answer to others in the store. A breakdown of the chain of command and discipline occurs when they are allowed to do an end run on management.

How many times have you seen upper management allow the sales people to run off a good manager for no reason other than they don’t like the systems, processes and disciplines that manager is attempting to bring to the table? Upper management allows this to happen due to some special bond created over a long period of time with certain sales people or favorite employees.

That’s not to say that some of these managers shouldn’t have been shown the door in the first place, but to allow it to be done based on the tail wagging the dog is totally wrong. It is insanity to allow the inmates to run the asylum. A good friend of mine who referees in the NBA often uses that term to describe how the players run the league.

If you’re in upper management and aren’t going to support your management team, then why hire them in the first place? Everyone performs better when there is a solid chain of command. The management team needs to be allowed to succeed or fail on their own merit, not based on the likes and dislikes of those who answer to them.

That doesn’t mean you can’t have an open door policy. You can, but be smart enough to know when to say you need to go speak with your supervisor about that issue.

I learned this valuable lesson back in 1980 when I became a partner in my first dealership. All I really had was a little ownership on paper with the majority of the stock and ownership belonging to Ashton Lewis. All the employees more or less knew the deal. I will never forget the day when one of the managers approached Ashton to ask him a policy question. He pointed to me and said "That’s who you need to be talking to." End of story. End of people doing an end around. End of anyone circumventing the system.

You cannot run a successful business when people are allowed to break the chain of command. The reality is the chain of command is actually broken by those in command. And that’s the end of this story and all I’m gonna say, Tommy Gibbs

Ok, everybody stomp your feet. Clap your hands. Drum roll, louder drum roll…here comes the answer…PRESS YOUR COST DOWN.!!!

If you’ve ever heard me speak, and most of you have, and if you haven’t you should, you know this is my favorite subject. It’s so simple, yet so very powerful when it comes to improving your used car and new car business for that matter. I’ve included new in that statement because the stronger you get in used, the more new cars you will sell.

This may be the simplest and easiest way to get out of the NEWSCAR business and into the used car business. Most new car dealers are not in the used car business. Most are in the NEWSCAR business. That’s when the average cost per unit in your inventory keeps creeping up and up and before you know it you are too close in price points to your new car inventory.

If you don’t believe what I’m saying is true I have an easy experiment for you to do. Take out your financial statement and go to the used car page. To do this correctly you will need to chart out each month for the entire year. On that page you will see a column that has used car sales dollars in it. Simply put, that’s as if you sold one car for $10,000 and one for $20,000, thus you had $30,000 in Sales Dollars. 

That in and of itself doesn’t mean much to you. Now, subtract your total gross profit from that sales dollar number for each month. That will give you your cost of sales. Divide the cost of sales by the number of units each month. That will give you the average cost per unit sold for each of the twelve months. I know, I know, pretty simple stuff. Hang on…

When we do this little experiment here is what we generally find: the month in which you had your greatest retail sales is the month in which your average cost per unit sold was the lowest for the entire year. And, the month in which you had your worst retail sales, your cost per unit sold was the highest for the entire year. 

So, the bottom line is the more you press your average cost down, the more used you will sell and the better off you will be. You end up getting in the used car business and out of the NEWSCAR business. You end up selling more units with fewer dollars tied up. Oddly enough most of your problem cars go away. Your ability to get on a 45 to 60 day aged inventory goes way up.

The easiest way to manage this from the Dealer’s standpoint is to drive your used car manager nuts about what their average cost per unit is in stock each day. Surely you have some way of pulling what your average cost is per unit every day? There is no set of circumstances you can lay out that negates this concept. 

So, if you were to say any of the following, you would be wrong:

1. We do a great job with highline cars. (Irrelevant.)
2. We do a great job with high dollar pick-up trucks (Irrelevant.)
3. We do a great job with high dollar SUVs (Irrelevant.)
4. We don’t have software that can separate our inventory by Cars, Trucks, SUVs and Wholesale Pieces (Irrelevant.)

You should require your used car manager to print the report every morning, and circle today’s average cost, put his/her initials inside the circle and lay it on your desk. I have found it very effective to take this page and tape it and the previous day’s page to the wall in my office. What happens is anytime someone walks in my office they all look at the number to see where we are today. 

It creates peer pressure and accountability of the used car department and especially the used car manager.

Every time I see the used car manager in the hallway I will ask him/her "What’s your average cost?" The more you aggravate your used car manager about this number the better off you will be. For me in the past it’s gotten to the point where all I had to do was just wink at them and they would spit it out.

So, what’s the magic number to get to? There is no magic number. Every dealer’s number will be different. If you are at $14,500 today your mindset should be how do I get to $14,000, then $13,500, then $13,000 and so on. The more you press your average cost down the better off you will be. I find it interesting that when I’m speaking to a group, they think they are hearing me say go out and buy cheaper cars. 

No, that’s not what I’m saying. I fully realize how hard it is to buy cheap cars. But, what I am saying is it’s not so much about what you buy, but what you don’t buy. If you are buying a high dollar car you have to buy it with great caution. You need to either have it sold, or have data to back up that it’s going to move fast.

One of the most important things you can do is to quit letting "Bubba and the gang" have your cheaper cars. There is absolutely no reason not to retail any vehicle that has a piece of life left in it. You can present all the excuses you want, and they are just like the rear anatomy that we all have. Don’t say well, we don’t want to be in that business because it creates customer issues. That’s all a bunch of bull. Don’t say it’s because we spend too much money on them in service. That’s a bunch of bull. If you have a service issue, then fix it. If you’re the dealer, owner or general manager then you can fix it if you want to.

There is no question that if you just pay closer attention to what you are buying and what you are keeping to retail that your average cost will go down and nothing but good things end up happening. As you monitor your average cost it is going to bump up from time to time. 

There are two reasons for this. First, it’s because you traded in some high dollar stuff, which you will naturally have to do and second it’s because you got goofy and went to the auction and bought some high dollar cars. In both cases it’s a matter of paying attention to it daily and getting back on track.

I’m often asked two questions:

1. What should my target goal be? There is no target, just try to get it lower than the day before.
2. Can I press my average cost too low. The answer is no. 

Don’t be concerned with that. If you do a good job with $25,000 SUVs, you will still sell $25,000 SUVs, but by pressing your average cost down it just makes you that much better.

Pressing your average cost down is a no brainer. That’s all I’m gonna say, Tommy Gibbs

Last week’s article was titled "Could It Be George W. Bush’s Fault?" In the article I listed 22 reasons why some dealers’ grosses might be going a bit south. (ARTICLE)

The point I was making is we should always have a mindset of re-examining how we do things and seek to improve whatever we are doing. The list was meant to be a checkup of what you are doing and what you can do better.

I’ve now been writing these articles for over 10 years. I’ve received thousands of positive responses and only one negative. (ARTICLE)

That’s not to say that everyone always agrees with everything I write. We often have friendly debates and I always win. (Little humor here.) But to have received only one negative response is pretty darn amazing.

Last week’s article created my second negative response. I want to share the complaint, my response back to the person and a point by point explanation.

Here in the writer’s words is what he said:

1. You begin to blame things on incompetence like it exists in every dealership.
2. You assume that nobody executes the basics anymore.
3. You assume that most dealers are simply dumbasses.

My email to him:

"Sorry you read it that way. That was not my intent. What I know to be true is how hard it is to do all the fundamentals day in and day out regardless of how disciplined a dealership or dealer might be.

The evaporation factor is always in play. I don’t think dealers are dumbasses. I do think we all need to be reminded of what’s important when it gets to basics. With all the things a typical dealer has coming at him/her each day it’s almost impossible for some things not to slip.

I speak from experience. My stores have always been well disciplined, but yet it was not all that unusual for me to have this sort of conversation with the management team:  "what the heck happened to that process? Why aren’t we doing a save-a-deal meeting every day? No, twice a week is not good enough. Whose idea was it to change it?"

The one thing I know about the automobile business is we never "get it right." When you get one department squared away, something else needs attention. Sorry, if I offended you in any way. Please accept my apology."

My Comments:

1. On incompetence-nothing could be further from the truth. In my opinion, the competence level of the management teams in dealerships has never been greater. The education and training of today’s managers and dealers is tenfold what it was 20 or even 10 years ago. Today’s dealers realize they cannot do it the old fashioned way and seek to employ higher quality people who are smart, competent and who are committed to a high standard.

2. On basics-never in the industry’s history have dealers executed basics any better than they do today. Most dealers are process driven. Processes promote good basics. Dealers, GMs and owner/operators have come to understand that their number one responsibility is to guard the processes, which in essence guards the basics.

3. On dumbasses-I’m sure there are some dumbasses out there, but I’ve not actually run into any. Most of the people I meet are either in 20 groups, attend conventions or are clients of mine. Dumbasses don’t run in those circles.

My Zinger Newsletter is designed to do several things:  

1. To share ideas and tips that will enhance the profitability of a dealer’s used car department.  

2. To share solid processes that are proven performers and easy to implement.  

3. To help you and your team avoid the "evaporation factor" by keeping what’s important in front of you on a frequent basis.  

4. To share with you what’s "hot" and what’s "not" in the quickly changing automobile world.  

5. To get in your face once in a while on issues that dealers need to pay attention to but so often forget.  

6. To promote my training and workshops. I don’t do a lot of this, but heck it’s the business I’m in and I’d be an idiot not to let dealers know what I do and how I can make them a lot of money.  

I would not expect you to agree with everything I write in my newsletters. Part of my mission is to stir you up a bit…get you to think about some things you might not normally take the time to consider.

I want to help you push the envelope. We all need a little push once in a while and I can help you do that. I will tell it like it is, and then you have to decide if it’s a fit for you and your team. 

"The Pain of Discipline or the Pain of Regret." That’s all I’m gonna say, Tommy Gibbs

I hear dealers often complaining that Dale Pollak’s "Velocity" concept has killed their grosses. I beg to differ with that thinking. The reason your grosses have gone south is because of George W. Bush. He messed them up when he was President; Obama didn’t realize how big the problem was and thus hasn’t been able to fix it. Really?

Have you ever noticed in life we always want to blame someone or something else for our woes?

Could It Be:

1. Could it be that the consumer is using the Internet for the majority of their purchases and therefore is pushing you into a pricing war you would rather not be in?

2. Could it be that you are not managing your pricing correctly? Are you coming out of the gate based on a bucket concept and pricing everything at X amount under market? Are you failing to shoot the moon on a few select units for x number of days before you drop your pants?

3. Could it be that because you wait so long in the life cycle to reduce your pricing that when you get to about 50 days you have to give all the gross away rather than giving a little away over a period of time?

4. Could it be the inventory you have is not the inventory that people are willing to pay the price for? If there are 300 Nissan Altimas in the market and you stock lots of Altimas, do you really think you’re gonna make any money when the market is over saturated?

5. Could it be the stuff you are buying is like an impossible dream? Are you buying 2011’s with 25,000 to 35,000 miles on them? Really? The only way you’re gonna sell them is to give them away, eroding more average gross profit.

6. Could it be that you and/or your team really don’t understand "Life Cycle Management," and the powerful impact it has on gross and volume?

7. Could it be that the team doesn’t get "Return on Investment" and what it does to the bottom line?

8. Could it be that you are stocking cars that are way too expensive, so you end up competing with your new car business and selling them at little or no gross just to make them go away?

9. Could it be you are not tracking "GAP," which stands for "Give Away Profit." GAP is the difference between the Internet asking price and the transaction price? If you aren’t tracking GAP then how are you to know who’s selling your cars and trucks for less than what you have them priced on the Internet.

10. Could it be you’ve done a lousy job of teaching the sales team to sell the value of your product and your store?

11. Could it be your used cars spend the best days of their shelf life tied up in service and recon?

12. Could it be your presence on Auto Trader and your website is just so, so? Very few pictures, lousy pictures or no pictures.

13. Could it be your management team is living in the past and waiting for the good old days to return?

14. Could it be your management team isn’t really a team?

15. Could it be you haven’t done a "lot walk" since Hector was a pup?

16. Could it be you have gotten too smart to do a "save-a deal" meeting every morning and gross is impacted negatively because F&I takes the easy route of cutting the deal?

17. Could it be your purchase strategy is called "buy that late model stuff cause it’s easy?"

18. Could it be you let a lot of nice trades get away from you because either (A.) your managers won’t step up or (B) they wholesale them because they feel the service department is ripping them off?

19. Could it be you have aged units and when you dump them they kill your overall gross?

20. Could it be the deal is screwed up before it ever gets a chance to be turned over to a manager and/or the managers just aren’t taking TOs?

21. Could it be you need to get your mind in a place to think about what it could really be?

22. Could it be you need to go look in the mirror? Nah, it’s George W. Bush’s fault. That’s all I’m gonna say, Tommy Gibbs