One of the reasons some farm equipment dealers have avoided expanding their business operations to other locations is the lack of management talent to effectively oversee the integration of the two business cultures.
“There are several challenges involved in trying to meld cultures,” says Shawn Skaggs, COO of Livingston Machinery. “The biggest challenge is having the right people in your existing business trained and ready to go to lead the people in the dealerships being acquired. Leadership sets the tone of the dealership and can answer questions from the perspective of your current company culture and that is huge when bringing in a new dealership.”
Skaggs emphasizes that this doesn’t mean the leaders he’s talking about have to be a store manager, but he insists, “They need to be in a position to lead, especially in customer facing situations.”
Another major challenge is training the new people on the acquiring dealership’s systems and processes, he says. “This is hard because whether you realize it or not, there are many processes in your business that everyone ‘just knows,’ but they’ve never been written down, and no one is going to think to teach them to new hires until it causes a problem, which is often not until you are in the middle of busy season.”
Livingston Machinery is a 6-store AGCO dealership group in Oklahoma and Texas. Its most recent acquisition was in February 2016 when it reached an agreement to purchase the ag division of Warren CAT.
Skaggs says the biggest mistakes the dealership has made in trying to transition new acquisitions usually center on people, and often they result from a lack of training for new managers.
“Sometimes these acquisitions are planned out for years and give you plenty of time to get people ready and sometimes they come along when you least expect them but are too good an opportunity to pass up,” he explains. “This is why it is always important to have backup managers trained in every department in every store. In addition to giving you a backup should the worst happen, it also gives you plenty of management candidates when you need them.”
Leadership & Company Values
Skaggs says along with well trained management, at the heart of every successful transition is leadership. He describes the role of this person as one who can effectively demonstrate and convey the company culture and values. “It is also a good idea for the senior leadership of the company to get to know everyone in the new acquisition that they can and encourage them to call with questions,” adds Skaggs. “Anytime you can have influence in that new business, it is a good thing no matter how busy you are.”
Going hand in hand with effective leadership is clear communication of the company’s mission and the values required to live up to that mission. “They should be written down,” he says. “We hang them on a poster in each dealership.
“Something else that we should have done much sooner is to have our experienced people develop a Standard Operating Procedures Manual. It doesn’t have to be anything extravagant. Start by having them write down the top 10 things that they do most often, then split up the list among your experienced people to write the procedures,” Skaggs explains. “Having everyone invest an hour or so upfront doing this will save the company countless hours and dollars in the long run.”
Common Traps in Acquisitions
Another people mistake is hiring too many people to start, he says. “I hate to say it, but sometimes everyone who worked there before can’t be hired into the company. It may be because they are not a good cultural fit, but it may also be because the math for that level of staffing doesn’t work. Wages are your biggest expense in a dealership and they can break a dealer just like inventory can,” says Skaggs.
“You have determine beforehand what the correct staffing levels are based on projections, and stick to it. This is especially hard when you have new managers who think they need more help than they really do.”
Finally, he advises dealers contemplating an acquisition to not become a victim of what he calls “deal heat,” which often happens during the excitement of expanding.
“When making that acquisition, you often end up agreeing to things that hurt the new business instead of help it because you just want to get it finished and you are excited about the prospects. A good rule of thumb is that if you wouldn’t have considered doing it in your existing business, you shouldn’t consider it in the acquisition.”
