To manage a fleet requires quite a bit of skill, expertise, and patience. From juggling the requests of higher-ups to putting together the right vehicle selector, managing an executive fleet requires additional diplomatic and management skills. Several veteran fleet professionals share their experiences and best practices for taking on the executive fleet.
Communication is crucial to successfully managing executive vehicles, according to Dean Yerem, purchasing manager, corporate services for Nestlé Business Services - North America, based in Glendale, Calif. Nestlé operates a total of 120 vehicles in its executive fleet.
"Communicate as much as possible. It is overstated all the time, but you must communicate any changes to the program or differences to policy. [You must] give [executives] periodic updates and plug them into the process," Yerem said.
Communicating with fleet users requires specific knowledge, according to Yerem. In communicating important information such as policy changes, he said it's advisable to involve the right people, such as Human Resources representatives, if necessary. The fleet management company can also help assemble a distribution list of drivers.
In addition, providing as much information as possible to stakeholders is usually beneficial, including the total cost of ownership (TCO). "At least they have it, and if someone asks them a question, or they have to convey that recommendation out to others," they have the infomation, Yerem said.
Lee Miller, manager, fleet services, Boehringer Ingelheim Pharmaceuticals, Inc., emphasized the importance of having a clear, written policy for executive fleet management. "Management, senior management, and leadership need to commit to sitting down with fleet and HR and putting in writing everything, either before they launch an executive car program, or in fine-tuning it, making sure everything is in writing and clear," she said.
Boehringer Ingelheim, headquartered in Ridgefield, Conn., operates an executive fleet of about 175 vehicles. The company has had an executive car policy for about 15 years, which Miller and HR review every three to five years to make adjustments, revisions, and benchmark against competitors.
The policy is detailed to prevent executives from making too many demands, clarifying the vehicle types the company feels are appropriate. This includes provisions as minute as no custom vans, no two-door vehicles, no convertibles, and no manual transmissions.
"We want to be able to take an executive vehicle and pass it along to either a new executive or another executive if the need arises," Miller said. "We are stringent, but I think we still keep it flexible and appealing to the executive."
The policy, posted on the company intranet site for easy access, also lists user requirements, such as tax reporting and business and personal use.
Miller added that an important policy for fleet includes documenting everything and making sure everybody is in the loop, especially important since audits are performed every five to 10 years. "I am happy to say that we document thoroughly and as a result, have had few issues during an audit," she said.
Stand Your Ground
Vehicles assigned to senior management are often part of employee compensation packages, which can make it a somewhat sensitive issue.
"You don't want to rock the boat too much because obviously these people are policymakers within the company. But you do have to have some control," said Frank Memolo, fleet manager, Panasonic Corporation of North America in Secaucus, N.J.
"To know how to be able to say no to an executive is a necessity in managing an executive fleet," said Christy Coyte, corporate global fleet manager for Johnson Controls, Inc. (JCI), a global provider of automotive systems, building efficiency, and power solutions, based in Plymouth, Mich. For example, "You have to know how to handle yourself with an executive who gets a little excited because she or he can't get the level of options or vehicle choice they desire," Coyte said.
JCI has worked to limit vehicle assignments based on position within the company, going "higher and higher in the organization for eligibility." Fleet collaborates with HR and the compensation and benefits team to determine vehicle eligibility and provides direction on the level of vehicle the eligible employee should receive.
Mark Walters, director of administrative services for Los Angeles-based Farmers Insurance, manages the company's 143 executive vehicles. He advocates for a vehicle selector over a monthly car allowance.
"From a best practice perspective, it is a better economic value for the executive to have that selector list available to them," he said.
Walters admitted that "trying to meet the needs of the entire executive population can be challenging from time to time." However, the company does offer an alternative when executives ask for other vehicles. "We do have an exception process, but most of the time, when somebody wants something not on the selector, we advise them to select the monthly car allowance," he said.
For years, Panasonic's executive fleet drivers had a dollar amount they could purchase vehicles with, according to Memolo. One of the challenges he faced with this model was convincing impatient executives to order through the factory instead of through a dealership, even if it meant a slower delivery.
"You have to put a salesman hat on and pitch it a couple of different ways. Explain that they get more car for their dollar by factory ordering, and by taking advantage of the incentives, it adds some more options to the car," Memolo said.
A couple of years ago, Memolo assembled a selector list, giving executives the option of choosing from the list or an allowance. Since the allowance hadn't been increased in more than 10 years to match the increase in auto prices, and Panasonic already had an Audi program for its sales team, he ended up piggybacking an Audi program for the executive fleet. This way, executives acquire a higher-end vehicle than possible with the allowance, and Memolo said nine out of 10 executives have opted for the Audi program.
One of the benefits of piggybacking is volume purchasing. Panasonic has about 100 vehicles in its executive fleet. "I am able to take advantage of that volume, and it adds additional incentives onto the executive cars," Memolo said. "If I was just going for those executive cars on my own, I don't think I'd have enough volume to get the same kind of discounts."
Mike Sims, fleet operations manager for the Salt Lake City-based Church of Jesus Christ of Latter-Day Saints (LDS) is also an advocate of maximizing buying power. "Don't make your selector so big that you dilute your buying power with the manufacturers. If your volume is really small, you might want to limit it to one brand," Sims advised.
LKQ Corp., a national provider of aftermarket collision replacement, recycled OEM parts, and refurbished OEM collision replacement products headquartered in Chicago, is slowly doing away with executive vehicles as a cost-cutting and control measure, according to Mike Lahr, director of logistics. About 100 of its approximately 3,000-unit fleet are assigned to plant managers, vice presidents, and business development representatives.
"It's part of their salary and they are allowed to use them on the weekend and charge fuel to the company," said Lahr. "We are trying to get away from that. We're leaning more towards them purchasing their own vehicle and then just paying mileage for it."
Even though the executives who drive fleet vehicles may be higher on the company ladder, upper-level management looks to fleet managers as experts in their field. Executive fleet managers must build their expertise and gain upper management respect to be able to guide drivers in their vehicle selection and successfully manage the fleet's budget and vehicles.
According to Memolo from Panasonic, diplomacy is essential in dealing with upper management, as well as being straightforward and stating the facts. "You have the responsibility of overseeing the program and protecting the program, and you can't just cave in. You have to say, 'This is the program,' " he said. "They are responsible for their budget. They have to understand."
Lahr of LKQ recommends taking the "suggestive" route. "They're looking at me for my level of expertise and suggestions because I've been doing this for awhile. You don't want to come across as being a friend or an authoritative figure, but more of proper guidance. Just try and be very politically tactful."
Becoming an expert doesn't happen overnight. For anyone starting out, Coyte of JCI suggested getting involved in the industry right away and start networking with other fleet managers and manufacturers at events.
"It just opens up a world of opportunity and knowledge, and can help you come up with ideas for managing your own fleet," said Coyte.
Lahr said he attributes much of his learning over the past 15 years to attending vendor, supplier, and trade association meetings. "Networking is a fascinating, very productive, and important tool," he said.
Streamline the Process
Administrative tasks should be outsourced when it makes sense.
For the LDS Church, Sims said his staff is large enough to handle all aspects of fleet administration. With a large volume fleet, the company is unique in that it also has a large volunteer network. Each of the 110 missions in the U.S. and Canada has a church service volunteer who helps manage fleet.
"It takes a fairly large staff to do everything in-house. Without [the volunteer network], it would be very difficult to manage our fleet," said Sims. "It's so much dependent on the size of your fleet and your level of expertise. If your level of expertise is minimal, you might want to use a leasing company."
Coyte of JCI manages a U.S. fleet of more than 7,000 vehicles, roughly 300 of which are executive vehicles. With only two direct reports, she is determined to make the process as efficient as possible for her and her staff. "We implemented a personal mileage reporting tool two years ago, which was originally administered in-house. It was heavy administration, so we outsourced it to our leasing supplier to free up some internal administration cost," she said.
Coyte said an executive fleet requires more "hand-holding and more administration because there's more one-on-one contact with the manager in terms of ordering the vehicle, personal taxation, etc. A lot more administration goes along with it." Four levels of vehicles are offered, with the first three run off the spec program. Down the road, JCI is looking at drivers ordering vehicles using the fleet management company's tool, which will free up Coyte's staff. Coyte said she hopes her fleet analyst will only need to spend 25 percent of her time administering the executive car fleet by outsourcing the administration.
Preparing for possible future changes is also important in managing the administration of the fleet department. "Be aware of how fast things change," said Memolo of Panasonic. "You have a good product and you move it along, and then a year later, it [could be] turned upside-down." He names as an example his own fleet, which went from 1,300 vehicles and three personnel to 700 vehicles and one staff member. "If I knew one day I was going to be a one-person department, I would have implemented some other policy changes earlier on," he said.
To provide better service for her company's drivers, Boehringer Ingelheim's Miller is currently working on a program in partnership with local dealers for them to loan out an executive-level vehicle should theirs be in need of repairs. "I am trying to work out a vehicle that is specifically for that company executive to drive home that night if necessary. No rentals," she said.
Focus on the Long-Term
Johnson Controls changed its car policy several years ago to purchase vehicles for the executive fleet based on TCO rather than upfront acquisition cost, according to Coyte.
"We're able to put higher level vehicles in the fleet because we're looking at it from that [TCO] perspective," Coyte explained. "A $40,000 car with a better residual value and better operating cost than a $35,000 car may in fact be cheaper to have in our fleet than the $35,000 car. [This strategy] has been very positive to our employees and has really allowed a lot of different mixes in our fleet and meets both our internal and external customers' needs."
Lahr of LKQ takes the same approach, looking at the long-term operating cost of the vehicle versus upfront purchasing costs. "Consequently, we might pay more for a vehicle up front, but the long-term operating [cost] of the vehicle is cheaper. We have definitely learned that upfront cheapest cost is not the way to go," he said.
Sims of the LDS Church considers it a "given" to do lifecycle costing.
"Without lifecycle costing, you really don't know what your buys should be," he said. After attending product previews, Sims and his staff put together a list of vehicles they're interested in, then work with manufacturers to put their cap agreement in place. Once the cap agreements are in place, LDS specifies the desired vehicles and lists all the costs associated with each vehicle, such as maintenance, resale, and acquisition price, to determine cents per mile. Based on the cents per mile, Sims then selects vehicles for the approved selector list.
When purchasing vehicles, Sims also advised buying only from a dealer network that can offer support in the users' markets.