I’ve always believed that life has a way of serving up the most delicious ironies when you least expect them. Take, for instance, the tale of a car dealership that mistakenly turned a questionable termination into a $2.8 million lesson, all thanks to a perfect storm of incompetence, inferior software, and corporate HR overreach.
Recently, I took some time to tidy up my website and revisit some of my older blog posts from 2010-2012. During that period, I frequently shared anecdotes from my time managing car dealerships. I’ve always found storytelling to be an effective way to demonstrate the potential consequences of overlooking crucial small details, particularly in the dealership environment.
It’s interesting to note that many issues in car dealerships often stem from management’s tendency to focus solely on the big picture while neglecting the finer points of day-to-day operations. These stories serve as cautionary tales, highlighting the importance of maintaining a balance between broad strategic thinking and attentiveness to detail in the automotive retail world.
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A cautionary tale – aka: a $2.8 million mistake.
At a prestigious high-line car dealership, a General Sales Manager (GSM) was facing an unexpected challenge. Known for his stern but effective leadership, this GSM had consistently delivered impressive results, overseeing consistent monthly sales of 200 new vehicles. His no-nonsense approach to management had earned him respect from nearly everyone on his team, but it also meant he didn’t shy away from addressing underperformance.
His direct management style didn’t sit well with everyone. One struggling salesperson, aware that termination was imminent, decided to retaliate. Before the GSM could implement the planned dismissal, the disgruntled employee filed a fabricated complaint with the dealership group’s corporate office. This pre-emptive strike was a clear attempt to undermine the GSM’s authority and potentially save the salesperson’s job, setting the stage for a complex situation where corporate politics and dealership dynamics would collide.
Corporate overreach and false claims are never a good combo.
The complaint had been filed unbeknownst to anyone at the dealership and then one day, a team of attorneys and auditors from the corporate office showed up at the store to follow up on the ‘complaint’. After spending close to two weeks at the store interviewing staff, they never really found anything to substantiate the salesperson’s claim, but decided to fire the GSM anyway, likely to justify their two weeks of billable hours.
This move was very upsetting to the entire dealership and the store suffered from lower sales numbers without the GSM’s masterful leadership.
Good payroll managers are hard to find.
Enter into this story the payroll person who was tasked with preparing the GSM’s final check. The payroll software was a mandate from the corporate office and this had always been a challenge because it was not specifically made for car dealership payroll. You often had to figure out workarounds, which for an experienced payroll person is frustrating but somewhat easy. But because the choice was made to hire an inexperienced person with no accounting skills, who had never been properly trained, the payroll person was unable to navigate the software effectively.
In order to prepare the GM’s final check for $20,000, she needed to override the defaults and manually enter $20,000 as salary. Sadly, she incorrectly entered the 20,000 into the ‘hours’ column and the software calculated the paycheck. The untrained payroll clerk never verified the amount and cheerfully sent the payroll for processing.
The paycheck produced was for $2.8 million.
Enter the corporate HR manager who’d been a catalyst to the GSM’s termination. Authority is a powerful thing and when it’s given to small minded people, an oversight by a inexperienced payroll person can morph into a $2.8 million disaster.
The HR manager insisted that he deliver the GSM’s final check personally to him so that he could make sure it was “done right”. When the documents came from the payroll company there was no check printed because the GSM had been on ‘direct deposit’, so the funds were automatically sent to his bank account. A sealed envelope containing the notice of direct deposit was produced to give to the GSM.
The HR manager traveled to the dealership to meet with the GSM. Mind-blowingly, the HR manager never reviewed the documents or opened the direct deposit notice. They met in one of the dealership’s offices with the HR manager at the desk and the former GSM sitting directly across from him. The HR manager simply handed him the unopened envelope containing the payment details that $2.8 million (less taxes, of course) had been deposited into his account.
The former GSM opened the envelope. He saw the amount but kept his composure, and then asked the HR manager if ‘this was for him?’. In fact, he asked twice just to make sure. Annoyed that he was being questioned, the HR manager replied ‘yes’ both times.
You’re probably wondering how in the world a $2.8 million paycheck would clear a bank account.
Glad you asked! Each dealership in the group had its own bank account but each night, the funds were swept into a main holding account that contained all the group’s dealerships’ accounts, so the $2.8 million went unnoticed for a while. In fact, the $2.8 million mistake was only caught after the bank called to verify the transaction (it was bank policy to call on any transaction over a million dollars). But by this time it was too late, the money had been gone for over a week.
Remember the part about the GSM confirming (twice) with the HR manager that the money was his? Well, the GSM accepted that and when the corporate office demanded the money be returned, the GSM hired an attorney to handle the situation. I’m not saying what he did was right but had things gone differently – had there not been so much attention paid to a bogus employee complaint, had the corporate office not overreached its authority spending two weeks disrupting the dealership’s daily operations, had they taken a beat and listened to those who were sounding the alarm about how the GSM’s treatment – there’s a good chance that none of this debacle would’ve happened.
It took the holding company two years to settle and retrieve some of their money.
The moral of the story.
Even the most successful organizations can fall victim to a perfect storm of mismanagement. This cautionary tale illustrates how a combination of untrained staff, inadequate software, and overzealous corporate intervention can lead to catastrophic results. To avoid such costly mistakes, dealerships could focus on three key areas:
- Hiring and training competent employees at all levels.
- Investing in user-friendly, industry-specific software systems that make jobs easier.
- Establishing clear communication channels and boundaries between dealership management and corporate offices to prevent unnecessary interference.
By prioritizing these aspects, dealerships can create a more efficient, harmonious work environment and avoid potentially disastrous situations. After all, a $2.8 million error is a lesson no one can afford to learn firsthand. Proactive management and attention to detail are far less expensive than cleaning up after a perfect storm of incompetence.
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