Culture builder
The automobile dealer industry is extremely fragmented. Only 6 percent of dealerships are owned by publicly traded companies; the rest are operated by entrepreneurs, who are known for their independence. That made AutoNation’s growth strategy of acquiring existing dealerships to bring under its umbrella a sometimes-tricky move.
“Five years ago, when I arrived here, that was a huge cultural issue,” Jackson says. “It clearly had to be addressed and was going to be the key issue of whether we succeeded or not.”
To overcome that issue, Jackson made sure every executive at the company understood and was willing to adopt the newly defined role of executive. Those who couldn’t — or wouldn’t — abide by the new profile were out of a job.
“The profile basically said that we want entrepreneurial energy, high ethical and integrity standards, but combine with that executives who have an understanding of the power of process and who want to be part of something big. And, we wanted people who get extreme motivation by creating something extraordinary,” he says. “It’s not all about them, the individual.”
And, Jackson says, he expects his management team to have passion for their work.
“We had to ask quite a number of executives to leave the company,” he says. “And we had to recruit executives who fit that profile. I’m happy to say, today, that’s the culture we’ve created. It’s not an issue. Everybody who is with the company is deeply involved in discussing how we do it, but not if we do it. That cultural war is over.”
Jackson does not use the word war lightly. Nearly half of the company’s executives never fit the profile.
“It took a full five years,” he says. “When I started, 10 percent of the executives fit that profile. Fifty percent maybe fit that profile and 40 percent did not. Today, we have 90 percent who fit that profile and 10 percent are on their way there. That’s a dramatic transformation.”
The result of that transformation is evident not just in the company’s top-line revenue of close to $20 billion, but also in its net income, which increased nearly $200 million from 1999 to 2003 as Jackson made the tough decisions and built a new corporate culture from scratch.
Efficiency also improved as a result of the moves.
“We look at every aspect of the business, from how we buy electricity to how we interact with the customer,” he says. “And we systematically bring, on a given issue, the best people in the company together to figure out what is absolutely the best practice, best process for the customer and the company, and then systematically implement that across the company.”
That would not have been possible in the old days, with each dealer operating independently.
“Everyone in this company (understands) the combined power of entrepreneurial energy with best practice process,” Jackson says. “It’s tremendously powerful combination. Where (with) small business, it doesn’t make sense for all the incremental improvement, it makes sense for us because we apply it to such a (large) scale.
“For us, every time we find a 10-basis-point improvement, it means something. It means something to the existing business, and it means something to everything we acquire in the future. Imagine, by 10 basis points at a time over five years, we have created a 500-basis point advantage of cost over our competition, and we feel we have another 200 (to go). That’s a 700-basis point improvement that we’re creating in seven years. That’s quite something, and it’s very difficult for anybody else to match.”
