Management in the Vehicle Recycling Industry – GET IT WRONG AT YOUR PERIL
Michael Manners, Founder Director of Limelight Learning UK Ltd, a consultancy company focussing on performance improvement in the SME market, Management Development and Sales Training looks at what needs to be done, in terms of management to achieve the successful running of a vehicle recycling business.
Automotive recycling is a great and important industry turning over hundreds of millions of pounds per annum which creates employment for the many, great wealth for the few and provides a genuine service to the public and the planet.
All the players have the same access to vehicles, they can sell through the same channels, their processes will be very similar to each other and they are all subject to the same laws, rules and regulations. So what distinguishes one from another, what makes one more successful than another and what makes one a market leader for the rest to follow? The answer is the blend of skills, attributes, experience and intellect of the person at the top and those senior managers/directors who report directly to that function.
The most useful definition of ‘management’ is: “management is the achievement of results through the efforts of others”.
Management at the top is the key that unlocks all doors so the CEO and the Board of Directors or the Senior Management Team (SMT) are critical to success. They are critical because they are the movers and shakers that not only make things happen but also make the right things happen and at the right time to yield the greatest cost/benefit.
If you look back over the last 5 years your businesses may look very different now and they will probably look very different in 5 years’ time. Increasing competition from across the pond, mergers and acquisitions, the developing interest in Green Parts now in sharp focus because of the impact of the coronavirus on the supply of original equipment, more legislation against petroleum and its derivatives and the drive towards eco-friendly electric vehicles will all have an accelerating impact on future operations. Artificial Intelligence, increased mechanisation and the use of robots may also play their part.
You may not be clear about how different your business will be 5 years from now but what you can guarantee is that change is a constant and you need to be fleet of foot to foresee the pitfalls and have processes, policies and the cash reserves in place to deal with them.
A typical senior management team (SMT) will comprise a CEO – the person through whom all the reins of the business pass who typically does not have a department to run (often in this industry an owner/manager). In an ideal world, the CEO is someone who manages through their direct reports i.e. the Board/SMT. Operations, Sales & Marketing, IT, Transport, Finance and HR are key areas critical for success. Senior Managers/Directors should not only be required to run their specific departments effectively, but should also be capable of contributing to the forward direction and growth of the organisation; if they cannot then serious consideration needs to be given to their suitability for the role.
Too many CEO’s have egos the size of planets with very poor listening skills and a belief that their views are the only ones that count.
So, what are the attributes of a good CEO and of a poor CEO?
Characteristics of good CEO’s 2 4 6 8
- They are easy to talk to even when under pressure
- They see merit in other people’s ideas
- They explain organisational objectives
- They give people the information they want rather than need
- They encourage creativity and experimentation
- They accept mistakes as a learning opportunity
- They try to correct mistakes and prevent them from recurring
- They have consistently high expectations
- They expect superior performance and give credit for it
Characteristics of poor CEO’s 2 4 6 8
- They choose when to talk
- They assume their ideas are the best
- They let people figure out the organisation’s objectives
- Information is given out on a ‘need to know’ basis
- They try to overprotect people from risks – no empowerment
- They allow little room for others to make mistakes
- They have inconsistent and changeable expectations
- They expect ‘adequate’ performance with little reaction unless something goes wrong
If you are a CEO reading this appraise yourself or if you are a senior manager then appraise your CEO and use the 2 4 6 8 method of assessment:
- 2 = Well Below Acceptable
- 4 = Just Below Acceptable
- 6 = Just Above Acceptable
- 8 = Well Above Acceptable
The point is there is no ‘5’, no middle ground, no sitting on the fence – you have to make up your mind whether the person fits one side of the line or the other and to what degree that is. Then add up the scores – too many 2’s and 4’s = big problems. If you are less than honest when assessing yourself the only loser is you. This method of assessment is useful across many applications.
Quite often using a 360º process can be quite revealing but as with all things it is only of value if it leads to behavioural change for the better. Running any survey that does not lead to improvement is a waste of everyone’s time and money.
So what are the key areas that all CEO’s need to concentrate on?
There are 6 of them and they are in addition to the most fundamental one of all which is to ensure continuous profitable growth:
- To recruit and/or develop high-calibre direct reports who are capable of making a positive difference
- To create the atmosphere in which they can thrive cutting out ‘office politics’, malicious gossip, back-stabbing and grandstanding and give the leadership necessary to encourage them to pull together as a team sharing common objectives as agreed between you
- To determine ‘policy’ in conjunction with and by discussion with the SMT. The best CEO’s seek the views, opinions and experiences of all the others before expressing their own. ‘Policy’ in this context is to be widely interpreted to include strategy, tactics, direction, growth, profitability, cash management, products, services, pricing, markets, channels of distribution, policies, processes, procedures, investment, acquisitions, divestments, training and strategic alliances.
- To create individual performance-related incentives that spur the Board/SMT to go the extra mile and overachieve against budgeted standards
- To ensure that all policies and procedures are correctly communicated and are understood and implemented as intended
- To check and confirm that all policies and procedures are achieving their intended objectives and amend them fast when necessary
All CEO’s, Directors and Senior Managers need to grasp the fundamentals of their duties as managers and some of the key ones are:
- To face tough decisions early so they have no time to fester. By way of example, this may include the dismissal of ‘nice’ or long-serving but ineffective personnel
- To accept responsibility for their actions and be fully accountable for their departments
- To demonstrate leadership and personal integrity in order to be a role model which will include speech, dress, communication skills and probity
- To deal with all personnel matters fairly and impartially but not shrink from unpleasant confrontation if that is in the best interests of the business
- To continue their own personal development and encourage it throughout their departments
- To give praise in public and take all matters relating to discipline behind closed doors
- To demand high and exacting standards from themselves and all others – mediocrity is not enough
- To have a clear understanding of the impact on profit and cash flow of every key decision that they take
- To ensure that all activities conform to the law and good governance principles
Companies exist to make a profit in order to generate dividends for shareholders, to survive in difficult market conditions and to grow. Profit and cash are not the same thing although they are causally related – there can be a time lag between the two.
Depreciation, which is a non-cash item, will have an impact because accountants are bound by law to apply a strict set of ‘rules’ to arrive at ‘profit’. That said there are only 4 things that management teams can do to increase profits and they are:
- to increase sales (beware, this often requires an increase in working capital to fund stock for instance)
- to reduce costs (this should be a constant for all managers)
- to adjust prices (up and/or down as dictated by market conditions and stock levels)
- any combination of the 3 factors above
In this industry scrap is a global commodity with sharp and often unpredictable fluctuations in price. Therefore a ‘balanced’ approach across whole car sales, parts sales through eBay, telesales and over the counter sales is probably the least worst long-term strategy. Over-dependence on any one area can lead to grief. All systems, processes, procedures and policies need to be dedicated to maximising the return on every vehicle. This means examining in minute detail every operation and process and determining best practice – then implementing it through competent managers who know their stuff who have the strength of personality to demand and enforce high standards. It’s a bit like a jigsaw puzzle – every piece needs to fit exactly in place to complete the picture. The speed at which you can convert metal into money is critical – increasing racking is not always the answer but ensuring that for every 100 vehicles received 105 go out usually is. You need jam today, jam today and jam today!
Sunday opening is of questionable value because it puts considerable strain on personnel and makes it difficult to attract calibre employees whilst at the same time being of doubtful commercial value. Likewise, with self-service, there is a trend away from this very traditional facility and there are probably better ways of servicing the needs of this sector by having a ‘club’ of professional customers with 2-tier pricing, one for them and a higher one for the general public.
Peter Drucker, an eminent US management guru, once wrote that there are 3 types of organisation:
- Those that make things happen
- Those that watch things happen
- Those that wondered what happened
You decide which applies to you!
In the next article, we shall look into how we can achieve the successful running of a vehicle recycling business through good management practices.