Leasing Professionals

Richard Whitton argues that auto captives must optimise their organisation for mobility services to succeed

Whitton richard1

Organizational structure is the orphan at the banquet of mobility services.

All eyes are focused on multi-channel, multi-product mobility services with many new start-ups aimed at pumping data either from or to the car.

Some perhaps solving problems that have not yet arisen but in all cases demonstrating that the old model of a financial services (FS) unit attached to an OEM sales unit – (very dependent upon it, achieving sales mainly through presence at the traditional point of sale but not part of it) – is no longer fit for purpose.

But was it ever fit for purpose?  “Structure follows strategy” or should at least, but has it done so to date? And for the future multi-channel, multi-mode, mobility services world what do we need going forward?

Historically what was the strategy of most financial captives?

If we’re being honest it was to get as close to the sales organization as possible, not to mention to consume sales-support subsidies to achieve scale and volume, to use financial services offers as a sales tool using affordability at the dealership point of sale (POS) and, latterly, if the data was being used properly, as a retention tool.

What did such a strategy need?

It should have meant that the front ends of the sales organisations and those of FS were very close. Not just integrated IT to provide seamless offers to the customer but also close organizational alignment.

Has this always been the case? Absolutely not. FS organisations have tended to be separately managed and targeted with an often a rather dysfunctional interface to the OEM sales organisation. Disjointed IT planning, tension between the two sides of the customer interface:  “FS only exists to rip off sales” or the other way around “sales only hits its numbers through FS and tries to dump residual value losses on them”.

Historically both sides have absolutely needed one another and with PCPs and personal leasing growing, not to mention the need for dealer profitability from used cars, integrated management of the whole cycle of data collection and loyalization, sale, residual value setting and used car remarketing is essential.

But have we always worked like this? The separate silos of FS and sales still exist in almost all OEMs.  Indeed many, even large organizations don’t even have control of their own FS.

This is the worst of all possible worlds!

Disjointed interfaces for the customer, data integration a major challenge, to my mind a strategic blunder.

There are many reasons for this – some worthy but many not.  Career egos sometimes drive organizational structure, simple issues like geographic separation between the headquarters of FS and sales, or senior management simply not understanding the business allowing a disjointed separate outsourcing  model to prevail.

On the worthy side there are the questions of risk management and wholesale funding, both of which functions are generally subsumed to be part of the FS silo but maybe should now be seen as separate.

So today, as we move into a new, ultra-competitive world in which not only are channels fracturing and multiplying but products are diversifying, becoming more complex, needing far faster development cycles and many new skills do we have an organizational structure fit for purpose?

We’re miles away. I would say that our organisations were never right even for the past. Surely if an integrated face to the customer was the goal, not to mention cost optimization and speed to market, why do we still see separate customer-facing IT, marketing, data-collection and sales processes? We should have merged all customer-facing functions of sales and FS years ago.

That leaves wholesale and risk. Wholesale is a slightly different ball-game and could perhaps be combined with importer finance and vehicle logistics. Risk should be a stand-alone unit in any OEM’s FS business. Clearly the old models in which residual values were set by sales were crazy.

Short-lived career boosts

We all know of brilliant but very short-lived career boosts when sales directors set their own residuals! Risk and compliance is now an area so key across the whole of the business that it should be stand-alone reporting to the Board.

So, our organisations are barely fit for purpose for the old single-channel dealer world, what of the new world of mobility services?

What seems to be happening is that we expect these rather rigid old FS organizations – disjointed as they are from sales but relying on subsidy for their very existence and often mired in very slow corporate decision-making processes – to be able to spin up multi-channel, multi-product offerings in competition to a wave of digital, youthful start-ups.

Forget it! Merge all “traditional” FS quickly into sales to form a single customer-facing organization. Separate out wholesale/logistics and risk management as stand-alone units.

Then think about the new world of mobility services.

The skills needed are different. The speed needed, especially in IT flexibility is very different and the generational thinking needed is different. Invest in this sector as a wholly new structure. Buy in the new skills needed and don’t strangle them at birth by big corporate processes. There are still great advantages in terms of risk management knowledge and in many cases access to current customer data that the new start-ups don’t have.

The old OEM captive model is not doomed yet but it needs to rapidly slim down and focus on its core, using the savings to invest in new ideas, products and channels in organizational structures which will be sufficiently skilled, flexible, responsive and meet the speed-to-market demands of the customer in future.

Richard Whitton has worked in the automotive sector for the last 38 years, covering marketing and dealership management, leasing, captive general management, start-up and turn-round consultancy and IT project implementation. He has been involved in Financial Services start-ups in UK, China, India, Brazil, Australia and Malaysia and been responsible for major corporate Financial Services entities in UK, Belgium and the Middle East. He is currently running his own consultancy business and is based in London. whittonsat41@aol.com