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Dealership Consultant, or 3rd Party Vendor Sales Rep in Disguise?

There are thousands of dealership consultants out there...from process consultants, to internet lead management consultants, to financial statement consultants, to social media consultants, and so on.  In my experience, I would say that a minority are truly awesome, many are weak, and most fall somewhere in between.

 

That said, I think a major concern for a dealer is a consultant who receives compensation of some type from dealership service providers (DSP) or vendors in the hopes that the consultant will bias their dealer recommendations favorably toward that particular DSP/vendor (otherwise, why would they receive such compensation in the first place?).  This begs the following questions:

 

  1. Would you be more likely, or less likely, to hire (or listen to) a consult knowing they are receiving compensation from a potential 3rd party dealership vendor/supplier?
  2. How would you try to identify, evaluate, or weed out those consultants receiving such compensation versus those that are not?


Personally, I would most likely avoid any consultant compensated by a 3rd-party DSP/vendor because of the potential/actual conflict of interest.  Seriously, if he/she is receiving compensation from a particular DSP/vendor, how can you be 100% sure they are looking out for YOUR best interest versus the best interest of that DSP/vendor?  You really can't, which is the problem.

 

As for how to identify those "sponsored" consultants, while I have personally done dealership consulting work for compensation as well as pro bono just-for-the-fun-of-it, I admittedly haven't hired a consultant to work in a specific dealership, so I can't speak from experience here.  But thinking about this scenario, if I was back in the retail world and had to hire a consultant for some reason, I might do the following:

 

  1. Put a T&C in the consulting contract or application requiring the would-be consultant to identify whether or not they were receiving any compensation from a 3rd party DSP/vendor, where the penalty for perjury by the consultant would be significant to that consultant.  At least with full-disclosure, you can make an educated decision.
  2. Do your due diligence and contact trusted friends/associates to help determine if there are any such financial arrangements between your prospective consultant and a potential DSP/vendor. 

 

Again, these are just ideas based upon this potential scenario, and different dealers could handle this differently.  So the questions I have for everyone are:

 

  1. Would 3rd party compensation of your would-be consultant matter to you before hiring him/her?
  2. If so, what steps would you take to prevent/address this?  If not, why not?

 

I'm curious to hear what you all have to say...let me know...thanks!

Views: 129

Tags: charles kim, compensation, consultant, disguise, sponsorship, truecar, vendor sales rep

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Comment by Thomas A. Kelly on July 28, 2011 at 3:16am

Your question:

  1. Would 3rd party compensation of your would-be consultant matter to you before hiring him/her?

 Yes, and I would add to my concerns ownership in part or in whole of entities being advocated for or against by the would-be consultant. In some cases, it may not be well known that the would-be consultant has ownership of like or competing positions currently being advocated. Full disclosure of all holdings and interests would help me consider the credibility of the person lending or selling his/her advice.

Your question:

2. If so, what steps would you take to prevent/address this?  If not, why not?

I would, in addition to what has already been suggested, Google the crap out of the would-be consultants. Make note of previous relationships and associations, positions and opinions held.....adding to the due diligence you suggest. Compare your own discoveries, if any, with what is widely known or commonly understood before assigning a degree of credibility.

(I still like the idea of all consultants having to wear a NASCAR like suit when they speak!....there would never be any doubt whos interests they represent and most importantly to what degree as indicated by the size of the logo.....beware of the consultant whos jumpsuit patches only say ME...ME ...and Me....lol)

 


Comment by Stan Sher on June 14, 2011 at 7:48pm
I believe consultants should have vendor relationships and be able to make suggestions. They should recommend more then one website, crm, dms, etc...

Perhaps one dealer has a bigger budget then the other. The flexibility should be to help the dealer find the solution they need. A consultant should be looking after the dealer's best interest not the vendor.
Comment by Keith Shetterly on June 14, 2011 at 11:22am

I'm readying a "Shetterly's Laws" article on this and thought I'd float it ahead of publishing.  Thoughts?

 

3 Laws of Automotive Consulting


1) Do no harm.  Deliver agreed-to, measurable, and positive results. 

2) Charge fairly.  Base your job rates on what the market for your abilities and your relationship with your customers will bear.

3) Work for your customers only.  Be clear to customers that any vendor advocacy is only for the benefit of needed work; reveal upfront any usage of recommended vendors that may benefit you financially.

Comment by Thomas A. Kelly on June 14, 2011 at 3:29am
NASCAR style driver suits for consultants, vendors and presenters??? I agree with you Keith, "100% that do should reveal those associations" ....and I would add, include entities owned in whole or in part related to the industry. If an owner of company A makes a broad, bold statement like "we do not sell leads" and puts it in the context that to do so would be bad while at the same time the same owner has stock in company B who does in fact sell leads and that is not disclosed, then I start to have problems. The common ownership is not problematic for me, the lack of full disclosure is. There was a point in time not too long ago when someone mentioned that a company will post your inventory on your own facebook account for free. Others jumped in and thought it was a good deal. I went to the page linked and yes, their inventory was there but within 3 clicks of arriving I was invited to view their competitors inventory and get quotes. Do you think that if the dealer were told that in advance that he would have allowed them to put the inventory up? My point is, while it may be legal it don't make it right. We have too much to do and don't have the time to play Sherlock Holmes. You put it right Keith when you say "And nothing is as valuable as reputation in any business."
Comment by Keith Shetterly on June 13, 2011 at 4:50pm
Hmmmm.  Contract terms are fine and likely needed, but remember the legal consequences of a contract happen only if a party to it gets caught breaking it AND the other party(ies) want to litigate; consequences otherwise render on reputation, however, fair or unfair.  My personal reputation is preeminent to me, and just so there is no worry on this point I do NOT accept nor seek commission on recommended products at a client.  If I ever did want to do that (and I don't ever want to do that), then I would disclose it, and I believe 100% that any who do should reveal those associations.  Case in point on why I NEVER want to do that is that I just got that question from a prospective client--and I was able to answer NO I DO NOT with a clear conscience and maintain reputation.  And nothing is as valuable as reputation in any business.
Comment by Charles Kim on June 13, 2011 at 2:43pm

I guess my concern as a dealer is that if a consultant is being compensated by any vendor or provider, that they are being compensated because that vendor is getting a benefit from that consultant (e.g. promoted over other -- possibly better -- solutions).  Otherwise, why else would you compensate that consultant if you were NOT getting that benefit? 

 

So if you were advising a dealer on using a consultant, would you have the consultant sign a contract that required full disclosure of any such relationships, with consequences for failing to do so (e.g. no payment or full-refund of services rendered)?  I can't really think of another way to safeguard a dealer this way.  Any other ideas?

Comment by Thomas A. Kelly on June 13, 2011 at 4:00am
I have no particular problem with a vendor/consultant hedging it's bets or diversity in it's offerings as long as I have ample opportunity to understand the money trail.Their interests and holdings should be widely known. Your suggestion of terms and conditions in contracts should extend to include ownership in entities related to the industry. Having many hats in our closets does not make us inherently bad guys, we only have one head. I just feel better when I know he/she has others with different logos.
Comment by Keith Shetterly on June 9, 2011 at 8:19pm
I have never been compensated by any vendor for work I did at a dealership as a consultant for that dealership.  I'm not really sure who does that, but I have had offers to do that and turned them down for just the reason in your post.  Thanks!
Comment by Thomas A. Kelly on June 9, 2011 at 4:59am
Consultant, trainer, vendor, presenter, supplier, the lines become blurred to me sometimes Charles. It is important to me to understand the financial interests of anyone before I influence a decision based on their recommendations. Full disclosure is important. Omitting details of "other interests" is still an untruth. I have seen solutions to problems suggested by "consultants" only to find that they are part of the problem they claim. As an example, third party lead providers have been discussed over and over, their dominance on Page One when a dealers name is searched. One of many solutions suggested is to list your inventory on free sites hosted by... you guessed it...some one who collects and sells leads who is also one of the above... but that is omitted. The solution suggested simply redirects whos pocket the money goes in as opposed to help solve the problem. A vulnerability is focused by the consultant and he places himself in a position to gain and rank even higher than previously. It is what we don't know that can potentially hurt us sometimes. I respect and require full disclosure. If I find after I am engaged with someone that there is "more to the story" then they have lost my respect. Integrity is full disclosure up front. Wear it, live it, we should not have to go look for it. We all trade on our reputation.

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