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Process And Performance
General Motor's approach to fixed-operations analysis
For an organization to ensure that business results are meeting targeted goals, it must track activities, discover and communicate problems and coordinate solutions. To effectively use information, all workers internal and external operating in organizational processes must have greater visibility into the results of their activities and how those activities impact results. Building a 'sense and respond' capability in a process context is critical to realizing continued improvement in business performance.1The practices of performance management, by which organizations establish strategic goals and specify operational metrics to measure progress, have gained momentum across the public and private sectors. Providing relevant feedback to decision-makers at near real (or right) time can improve the quality of these decisions. A significant number of companies are giving high priority to IT investments that measure business performance and operational business dependencies.2 Colin White, president of research consultancy BI Research, often talks about "three Ps," performance data, people and plan, that these types of investments should embody. (See October 2006 BI Review, Channel Synergy sidebar-ed)
GM'S Fixed-Operations Analysis
The world's largest automaker, General Motors Corporation works with more than 6,900 dealers in the United States alone. As with all auto manufacturers, service and parts businesses have a significant impact on total sales. Because General Motors must manage operations over so many dealerships, GM has implemented a fixed operations analysis (FOA) process for its dealers. This process relies on a performance-based business intelligence tool and helps dealerships improve operations that impact business results. Dealers that participate in FOA can historically expect a 4 to 6 percent increase in profitability. Since the FOA process incorporates all three of the P's, a discussion of FOA practices can provide a concrete reference for measuring performance in a process context.
Performance Data
The FOA application measures financial and operational data for dealerships. The analysis provides a detailed summary of KPIs for a dealership's fixed operations business, which includes its mechanical/service, body and parts departments. The FOA application generates an 18-page report that covers seven subject areas. From applications like the FOA tool, organizations can identify low and high performers by their bottom line results, but gaining insight to why dealers perform as they do and increasing their performance is more difficult.
Plan
A complete performance management process should rely on more than efficient, timely and comprehensive reporting of performance data. It must operate in the context of a process that helps stakeholders develop a comprehensive performance improvement plan. The key process variables that affect performance must be identified and embedded in both the process and the application.
The FOA focuses on select operational performance metrics and relies on a database of outcomes for standard best practices and practical knowledge. These best practices are based on the most successful retail methods and procedures in the automotive industry. The Web-based tool assists GM and dealer managers in exploring what-if scenarios and available incentives that can improve performance.
For example, if return visits for a vehicle repair are high, the GM field manager may recommend that a dealer's service technicians attend a training class. The field manager can select a training action activity from the FOA application, which can then project the performance improvement the dealer can anticipate. After recommending additional activities that can positively impact return visits and other low-performing metrics, the dealer will have a usable performance improvement plan.
If an organization has not collected a bank of best practices like GM's, it is still possible to apply statistical techniques to link activities to metrics. For an organization that wants to apply such techniques, historical data provides a good starting point to identify which activities or programs have the greatest impact on different operational metrics and performance.
People
The National Automobile Dealer's Association (NADA) hosts the largest annual automotive industry event, representing more than 19,700 new car and truck dealers. Each year at NADA, GM field managers meet with dealership stakeholders individually and perform an interview-based fixed operations analysis (FOA) for dealers to evaluate the dealer's service and parts operations and identify areas of improvement.
The "people" part of White's three P's reflect a collaborative effort that should occur if an underperforming stakeholder cannot make a correction on their own. The interview process at NADA provides this collaborative dimension for GM and its dealers. Individual dealerships receive guidance from a GM expert with a comprehensive understanding of and familiarity with the different best practices that can be implemented, and which practices are best applied to improve a specific underperforming metric.
Sense And Respond
Prior to 2007, FOAs were limited to the annual NADA interview. Dick Block, Manager, GM Service Development, worked with two outside consultancies, Latitude Consulting Group and MCM Learning, to enhance the FOA application and process in two areas that provided greater sense-and-respond capability. These were: migrating the application to a Web-based platform; and providing users with access to historical data.
With the Web-based application, field managers are no longer limited to the annual interview at NADA. With the collection of monthly and quarterly data, a FOA can be performed more frequently, allowing dealers to make operational changes in a timelier manner. With access to historical data they did not have before, GM field managers could demonstrate trends to help dealers see where progress has been made.
"The new enhancements resulted in an improved dealer evaluation tool," says Tom Merritt, a Latitude project manager that worked with Dick Block and GM. "The additional functionality provided GM with a capability that allows dealerships to get performance data at the right time and ensure that performance improvement plans stay on track."
Conclusion
Organizations perform a series of activities whose ultimate purpose is to sell products and services to customers. These organizations face many challenges when evaluating and optimizing the performance of their sales and distribution channels. This is particularly true for a franchise-based sales channel the company does not own. An organization lacks direct visibility into the day-to-day activities to a greater degree and cannot apply the same management controls used to improve the performance of corporate operations.
By incorporating performance data, plan, and people, a performance management process like GM's Fixed Operations Analysis can help identify specific operational corrections that can improve performance. The people element in particular can help foster cooperation and mutual success in franchise-based sales channels where tension can arise between the franchisor and franchisee. The plan element becomes much more powerful with a sense-and-respond capability that delivers performance data and corresponding corrective actions in real or 'right time'.
- Improving Business Performance through Process Visibility. Morris, Vassett, Fleming. IDC. Analyze the Future, May 2007.
- Ibid.
Jeff Walter is president of Latitude Consulting Group, and can be reached at mailto:jeff.walter@%20atitudecg.com.
Jeff Walter is the president of Latitude Consulting Group, an e-business and technology consulting firm based in Saline, Mich., helping clients use IT to increase productivity and reduce costs. Latitude's expertise is rooted in a twenty-five year operating history of designing and building large-scale business partner portals for Fortune 100 companies.
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