A performance management system is using the financial management system at Inchcape to focus on key drivers of financial performance and change behaviour. Inchcape is a leading global automotive services provider and its fast-growing UK retail operation currently consists of 70 car dealerships.

“We are only just getting started,” says Gary Woodcock, head of financial control for Inchcape United Kingdom Retail. “The results are being received favourably by the managers and directors. They are really starting to use the data and help the whole business to focus on the key areas we want to improve, so it is certainly driving the right behaviours. As we develop these we are able to slot new businesses into it a lot quicker than we have been in the past.”

The company uses a motor trade specific financial management system from Kerridge. This handles industry-specific business processes, such as parts exchanges and sharing the cost of a service between customer, manufacture and dealership. It is integrated with wider business processes, such as marketing, inventory control and point-of-sale terminals.

Although it is operated from a single central computer, its acquisition history and its decentralised structure mean that each dealership has its own accounting structure, so central reports are impossible without major changes. “The transaction software is widely used in the motor industry, but nobody uses its very primitive reporting module,” says Mr Woodcock.

Dealership accountants download their information and use spreadsheets to prepare monthly management accounts that are sent by e-mail to head office where it was loaded into a Hyperion Essbase multi-dimensional database for consolidation and reporting. This produced a paper-based book with summaries supported by detailed pages, which had to be printed externally and then collated and bound. As the company grew, the book became fatter and fatter and was running to an unwieldy 42 books with 100 pages.

The company needed a better way to report and IM Group, an IT consultancy, helped to build a data warehouse. This uses Microsoft SQL Server, Microsoft Reporting Services and Microsoft ProClarity.

Operational directors and franchise financial controllers now have access to summary accounts from Microsoft Reporting Services through a web portal. From here they can drill down to details, by franchise or dealership. This is available two working days earlier than before, as they printing process has been removed.

The portal also gives access to daily operational reports, such as sales volumes, vehicle stock profile and debtor profile. These are uploaded each night from the dealership systems. The reports are also sent by e-mail to dealership managers. These compare their performance with their peer group, such as other dealerships of the same car manufacturer.

“The users love it,” says Mr Woodcock, “particularly the daily data that wasn’t there before. They also like drilling through from the monthly accounts.”

The most powerful aspect of the new system is the way it supports a performance management system based upon key performance indicators (KPIs). Mr Woodcock explains that the motor trade has always used a large number of KPIs and new ones are always emerging.

“We needed to see the ‘wood for the trees’,” he says. “As part of our previous annual planning process, we developed as set of about 25 aspirational ‘gold standard’ KPIs. Our reports show how we are tracking against them and in our current strategic planning review we are trying to whittle them down to target the ‘killer’ ones that will have the most impact.”

These will then be fed into the annual budgeting process. They are also incorporated into each dealership’s action plan, to ensure that they deliver the change necessary to achieve them. This may involve changing organisational structures, adding more resources or changing general managers and directors bonus schemes.

The KPIs have to be personalised for different dealerships and franchises, as their businesses differ because of their geography and the local market they are operating in. Another complication is that some KPIs are outside the dealership’s control, such as manufacturer’s marketing activity which drives new sales and impacts the key ratio of new to used car sales.

The performance management system is making the company much more focused on some of the key operational drivers of financial performance that lie outside the financial system. For instance, bonus schemes are also linked to the customer satisfaction index. This is to drive long-term profit rather than some of the more short term tactical KPIs. The intention is to establish Inchcape as a leading player in the market in customer’s minds over the long term.

The performance management system will constantly evolve, but the company is hitting its financial profit targets and has good annual growth. The board, meanwhile, is reviewing the gold standards set last year because some of them may not be as ambitious as they could be.

“We are just starting to find out feet,” Mr Woodcock concludes, “and have only just got enough data to know what our gold standards should look like. It is early days, but it is exciting and it has great potential. It can only get better and better.”