An acquisition strategy and a determination to improve performance across the business has seen a turnaround in Cambridge-based Marshall Motor Group that has taken it into the AM100’s top 10 for the first time.
Chief executive Daksh Gupta explains the
Single out an objective that you are working on.
It’s a clear and consistent aim of this company to be in the top 50 of the Great Place To Work survey.
Employee satisfaction is not a five-minute fix. Getting the culture right in this company will take five years.
At the heart of the Great Place To Work survey is the question: is this a great place to work?
To be a top 50 company you need an 80% score and we’re at 71% now on the back of a 14% improvement in two years.
The swing between a good and bad employee is a difference of 8% return on sales.
A poor employee will lose you 4% RoS and a superstar will get you an additional 4%.
For a £20 million business like ours, this equates to £800,000 profit.
What is the importance of the purchase from Pendragon of its north-west Mercedes territory?
Two years ago when I joined Marshalls I said we need to grow on a national scale.
Being so focused in East Anglia – and selling 35% of all new cars in Cambridge – means you will end up competing with yourself.
A move towards scalable territories means you have more to go at in terms of opportunities.
The Mercedes-Benz acquisition is another demonstration that we’re serious about being a national group.
It also balances our portfolio, bringing a German premium brand to the group.
There are only 32 Mercedes market areas in the UK, six owned by the manufacturer and 12 by plcs, which leaves only 14 available.
So the opportunity to partner with Mercedes is arguably one of the hardest to achieve.
It’s quite a big coup for us. Our leasing business buys around 100 Mercedes a year. We can now source those ourselves.
In the last two years we’ve taken on 22 new franchises, growing to 62 in total, but a lot of those have been bolted on to existing territories or by extending our regional boundaries.
When I talk about being national I do not include Scotland, Northern Ireland, Wales or the south west and will avoid the major conurbations and inside the M25.
How does the deal impact on the financial standing of Marshalls?
We’ve more than doubled the size of the company in two years.
Since 2008, we will have gone from being a £320 million turnover group to, with this latest acquisition, a run rate of £675m.
The Mercedes business acquired represents £110m turnover. Our headcount has gone from 1,350 to 1,980.
About 70% of the growth has come through acquisitions and the rest through existing businesses – we’ve invested in people rather than going backwards and attempted to cut our cost base.
Given the very different brands you represent and manufacturers’ demands for dedicated management, how will you organise a management structure that runs these businesses effectively?
One of the first things I did when I came here was change the management structure.
We used to have regional directors, but I went down the franchise director route with one running each of the six ‘legs’ of the business, grouped by brands.
Each franchise director runs a division that turns over between £100-140m.
The six franchise directors are responsible for: PAG (Land Rover, Jaguar, Volvo); Peugeot and Kia (representing a dual franchise site); GM (Vauxhall, Chevrolet) plus Kia and Alfa Romeo on dual franchise sites; volume (Ford, Seat, Hyundai, Chrysler and Saab); Japanese (Honda, Toyota, Nissan, Chrysler and Saab) and Mercedes/Smart.
They are quasi-managing directors; each has a divisional financial controller, an HR business partner and divisional aftersales manager.
You have to provide the franchise directors with this level of support.
When a group expands there is enough evidence to show how it increases middle management which simply adds cost, dilutes the strategy and slows down decision making. How will you prevent this?
The great advantage at Marshalls is that the management structure is me, the franchise director and the general manager for each division of the company.
There’s no MD, COO or multi-level brand director between me and the franchise director. Decision making is very fast.
The danger you’re alluding to is that once you get to a certain size you have to put another tier of management in because you couldn’t be a £2-3 billion pound company with a structure like that because I’m one individual and wouldn’t be able to do it.
But we do want to restrict our size because we have always said that I don’t want to be the biggest, but the best.
Guiding my strategy is the maximum number of people I can have reporting to me to be effective.
I believe it’s eight. Considering we have nearly doubled the size of our company effectively in two years, our growth in head office function has been probably 10%.
How much more can you grow and still maintain that core value about management structure?
I don’t see us growing beyond more than 80-90 dealerships because once you get over a certain size, unless you put another layer of management in, you lose all the culture.
We hear quite a lot about the lack of quality staff in dealer groups. How do you attract the best without paying above the odds?
The problem is we are all chasing the top performing people and there are not enough good management to go around.
What we are trying to do is to grow our own, which is not very easy for all sorts of reasons.
Why is it not easy?
It comes back to recycling the same old sales people again.
One of the things we do is put a lot of work into attracting new people to the industry.
Almost every month this year we have been running selection centres, attracting people outside of the industry and actually there are some really good people who have never considered the motor trade before.
What is a selection centre? Do you put out an ad in the local paper?
Yes, announcing we are recruiting.
We get about 40 people come at a time, mostly from outside the industry, and we put them through tests with our managers watching them.
You can identify who has and who hasn’t what we need. It’s far better than interviewing sales people.
Once we get them through the selection process we put them on a one-week residential course.
Give them the Marshall DNA chip so to speak, talk about the customer service, why it’s important, why they are important as part of that, what our expectations around customer service are, make it very clear what our company standards are.
A favourite story is a girl we took on last year who came from Morrisons; a checkout supervisor. She sold something like 30 cars in her first month.
Manufacturers sometimes state a preference when selecting groups (eg strong in regions, local heroes in their territory). How is your expansion going to maintain this?
Through the franchise director structure we have and the use of common processes and systems.
So, for example, on day one of the Mercedes acquisition we had Kerridge running there, day two our inhouse KPI system Phoenix and within the first month our sales process in place, then scale purchasing economies.
Within 72 hours of purchasing a business we tell the new staff what is coming.
Then we introduce them to our vision and our values, drilling each into them ensuring they realise we will not accept own goals – mistakes that should have been avoided: “my car wasn’t clean when it was handed over”, “the car didn’t have any fuel in it”, “the invoice wasn’t explained”.
What is your percentage return on sales?
For the group it is 1.6%. We’re probably ahead of where we should be as a group of this size.
I compare Marshall with every plc and most are at the 1.0%–1.2% mark. Franchise mix is key.
If you have a prestige dominant portfolio you will make more RoS, such as Inchcape that has a good portfolio and territories. I would like us to get to 2%.
What will bring you to 2%?
A constant concentration on our strategy and values: optimising the performance of existing businesses and growth.
We still have a number of businesses that are under-performing, mostly down to people and structural issues. In one instance we have a dealership with a rent of £225,000.
The franchise, territory and location are all fine, but the site is too big. We will never make sufficient return on it. We’ve simply over-invested in that location.
Our PAG centre in Peterborough is a palace in which we invested millions. Within that is the Volvo showroom and, while it is a great franchise, we have over-invested in it for the territory.
I couldn’t have fixed everything in the two years I’ve been here.
We achieved a £70m turnaround in profits in 2009 year-on-year and will have a very good 2010 and are on track to have the most profitable year in our 100-year history.
It will take five years to get the business to where I want it to be, so 2013 is when I would like to achieve our 2% RoS.
What is your staff turnover?
Annually it’s 18.12%. I think the industry average is 25-30%.
I wouldn’t want it less than 10%, but would like to bring it to about 15%. People leave because of poor management.
Where we see sites returning poor scores in our staff survey it’s largely down to weak management and where you have that you have poor CSI and poor operational and financial performance.
What practical things do you do differently to make Marshalls a fantastic place to work?
We do a lot around people recognition – although we could do more. So there are trips to Barcelona, Moscow and Marrakesh for the best staff.
Our pay plans are linked to individual and team performance and strike a balance between the two.
All schemes are linked to customer service. If a manager is budgeted to make £100k and brings in £1m he can earn almost nothing in bonuses if his customer service scores are poor because I would rather have less money, but great CSI.
We’ve got to get slicker at succession planning and talent management, however.
What are the key performance improvement projects you’re working on now?
We’re working on continually improving Phoenix.
Recently we improved it to allow KPI tracking for individual sites and trends. Most management accounts have the month, budget, variance and year to date but you can’t see trends and what the drivers are.
We want the management to be able to investigate these. The people agenda is massive.
We now have six HR business partners, up from one two years ago, which demonstrates the commitment we have made to attracting and retaining the right people.
Looking at operational excellence, aftersales is a focus. We made a massive investment in the divisional aftersales resource costing us £500,000 in headcount for an additional six people.
We invested in electronic vehicle health checks about a year ago and we’re driving for constant performance – is every technician carrying out EVHC properly, are we upselling properly.
The new aftersales resource will drill down into the processes to identify weaknesses and driving as many sold hours as possible.
As a result our aftersales absorption is in the mid-80s when the industry average is 80%.