Management by Exception (MBE) is a management philosophy and practice where manager intervention is primarily focused on the areas of organizational performance that need attention. In other words corrective management actions are driven by someone or something not performing as expected or an exception.
A good analogy of the theory might be a hospital ward with several patients. Each patient is hooked up to monitoring devices to measure heart rate. When there is an abnormal deviation in a particular patient’s heart rate the sirens and bells go off and the nurses come running to “Manage” the problem. This is a much more efficient means of managing the ward, as opposed to the days where they didn’t have such equipment and by the time the nurse realized the exception, it may have been too late.
Why CRM reporting tools have failed to serve the dealer
Most CRM and other sales support software applications have failed to deliver on their promise of improving sales results for a number of reasons, not the least of which is that they are often unable to provide dealership management with actionable information. Now one might say that “my software gives me every report I could ever dream of,” but herein lies the problem. Typical of software systems designed by software engineers, the amount of data provided by CRM software is usually quite vast (notice the emphasis on the word data),however, managers only need data or reports on a periodic basis. What managers need on a continual basis is information that is meaningful in making day-to-day decisions. This is what we refer to as Actionable Information.
To illustrate the difference between data and actionable information, let’s take, for instance, a standard Closing Ratio report that any CRM should contain. This report will tell you the percentage of deals closed in relation to the number of sales opportunities (leads) that each individual has had over a period of time. Great data to have, no doubt. Let’s say that your dealership group has 100 sales associates. Now you are looking at a report with a vast amount of data, but in order to get to the point where you can transform this data into actionable information takes both significant time and energy; both of which are already in high demand for managers.
In the real world, where managers are busy putting together car deals, putting out fires, dealing with customers, employees, vendors, and the myriad of other things they deal with on a daily basis, the exceptional effort required to transform the typical data coming out of a CRM means one thing: Reporting does not get looked at on a regular basis—if at all.
A CRM that utilizes Management by Exception helps overcome this problem. Before we move on, let’s look at two distinct categories of Exception Management for the dealership.
Process execution vs. results exceptions
Two of the most important things to dealerships, or any other business for that matter, are process execution and results. What are the results we want and what is the process we need to execute to achieve those results? In the sense of using a CRM to help manage your dealership, execution of process needs to be done in as close to “real time” as possible in order to facilitate course corrections. Without this ability, the only information your are receiving is far too old to take action upon and therefore is only useful for making future decisions (“next month we’ll do better…”) as opposed to being able to take immediate corrective action.
Let’s use a simple dealership example. Say you have a process that stipulates that any new internet lead should receive three phone calls within 24 hours until an appointment is set. If you have no means to track whether they are making these calls or not, then your results will be the only information you have, and by then it’s probably too late to save the deals that submitted a lead, but nobody ever bothered calling back.
Results Exceptions are generally easier to track because dealerships have been already measuring results as a normal course of business. Regardless of the gymnastics that managers have to go through to obtain valid results, which is an entirely different discussion, most managers have the ability to identify results that are not being achieved according to expectation. This, of course, becomes less manageable as organizations become larger, especially for centralized management structures.
Your CRM should create meaningful, real-time actionable information. The CRM technology should be able to take a measurement of the process critical tasks that have been assigned to each individual in the sales team. Each dealership should determine which tasks they want to include in the measurement. The dealership then can set a benchmark of completion (minimum score) that is acceptable. Once this benchmark is notated in the system, management needs only to look at locations that are "out of process", thereby focusing energy where it is needed.
Making the most of your data
Managing people, processes and organizations has always been challenging. With the advent of modern computing systems and customer databases, the shear amount of information available to management has become daunting. Having so much data has usually meant that someone has had to take the time to compile, present, and understand the data in order to get actionable information. This resulted most commonly in a situation where the data was ignored all together.
Management by Exception (MBE) is a concept that basically says “just give me the information that I need to take action on! I’ll review the rest if I need it.” Using this principle, your managers will be able to focus more time fixing, rather than determining what’s broken and who needs help.
Jock Schowalter is the president and founder of DealerPeak.com and WideStorm. For a free consultation on using Management by Exception in your Dealership email firstname.lastname@example.org.