When asked about the secret of his success as fleet administrator for State Farm Mutual Automobile Insurance Co., Dick Malcom answers without hesitation.
“The people I work with help make me successful,” he said, adding that he attributes his willingness to change and encouraging open and constant communication as keys to operating an efficient and cost-effective fleet.
Malcom, a 30-year fleet industry veteran, received Automotive Fleet magazine’s 2013 Professional Fleet Manager of the Year award at the Automotive Fleet & Leasing Association (AFLA)’s 2013 Annual Conference in Scottsdale, Ariz.
Instituted in 1985, the Professional Fleet Manager of the Year award is sponsored by Automotive Fleet magazine, Wheels Inc., and AFLA. As part of his award, Malcom will aslo receive a $5,000 scholarship check, sponsored by AFLA, to bestow on the business school of his choice. This year marks the first year the award has been presented at the AFLA conference.
“This is a huge honor, and a kind of validation for all the work we have done at State Farm,” he stated upon receiving the award. “This is not just recognition for me, but for everyone I have the honor of working with in transportation across [State Farm].”
For 2013, the industry nominated 20 fleet managers for the Professional Fleet Manager of the Year award, and a 37-member judging panel selected Malcom as the winner. The panel included past winners, manufacturers, auction representatives, fleet management services representatives, dealers, and the media.
Partnering to Excel
In his role, Malcom oversees policies and procedures relating to the purchase, lease, sale, and operation of the company’s fleet of cars and trucks. He conducts contract negotiations of varying levels of complexity to obtain/maintain supplier agreements (including legal terms and conditions and business requirements).
He also monitors and manages vehicle expenses, including fuel, maintenance, and depreciation; researches vehicles, choosing safe, reliable, cost-efficient, and comfortable vehicles appropriate for various business needs; and leads and/or coordinates project work.
“I would like to thank State Farm for providing me with the opportunity and the environment to succeed,” Malcom said. “Without them, none of this would have been possible.”
Malcom said he is also thankful for the mutual respect he has established with his internal partners and external vendors, as well as for his mentors Don Fenton and Ed Bobit, the founder and CEO of Bobit Business Media, publisher of Automotive Fleet.
“Don took me under his wing and introduced me to the best people in the industry, including my friend and mentor Ed Bobit,” Malcom stated. “When Don included you, the others knew you were ‘OK.’ I will never be able to thank him enough.”
Personally, Malcom thanks his family and friends for their continued support, including his wife of 38 years, Kitty, daughters Brooke (a paralegal at State Farm) and Abbey (a claims communication staff assistant at State Farm), and three granddaughters, Chloe, Teaghen, and Lennox.
Malcom also credits his father and uncle as huge influences in his life. “I lost my father at the age of 57, but he was always a ‘tell-it-like-it-is’ person, and I had a great deal of respect for him,” he said. “My uncle, a Ford dealer, also taught me an incredible amount about our business.”
In his free time, Malcom spends time on his hobbies, including golf and cars (a kind of “must” in the automotive business).
Relying on a Solid Business Philosophy and Best Practices
Malcom’s notable achievements at State Farm during his 12 years at the company include increasing oversight and accountability of the fleet.
Combined with an updated business model, this resulted in downsizing from more than 20,000 vehicles to 11,058 in the U.S. and Canada. Vehicle types in operation within the State Farm fleet include sedans, vans, a few pickups, and some specialized catastrophe vehicles. About 4,500 of these vehicles are largely fueled with E-85. Vehicles are driven by agency employees, learning and development, administrative service, HR, and claims, the latter being the State Farm fleet’s largest client.
Malcom also recently combined efforts with State Farm Bank to create the State Farm Bank Visa Fleet card (fuel, maintenance, tolls, license fees, and accident repair), which reduced internal costs and provided internal income. He also introduced a rental option to the pool car fleet, which eliminated underutilized vehicles and lowered internal expenses.
Other key initiatives included Malcom overseeing the design, development, and implementation of new fleet management software; design and implementation of a new charge-back system to increase accountability and compliance and of a new driver policy; and coordination of a collaborative project with claims, catastrophe, strategic resources, safety, and systems divisions to develop an advanced ergonomic/efficient mobile office for more than 2,500 claims employees.
In addition, Malcom introduced “domestically assembled foreign vehicles” (Toyota, Nissan, and Subaru) into the fleet, increasing driver satisfaction and reducing cost of ownership; initiated a centralized purchasing program to take advantage of the State Farm buying power; and created and implemented an online employee purchase program, which increased fleet’s return on sale and resulted in a sales tax savings of more than $3 million through the trade-in program.
When asked about how he achieved these best practices within fleet, Malcom said it was by a combination of listening, learning, and communicating. “Really listen to what people are saying. Don’t tell people what they want to hear; tell them what they need to hear. Embrace change. Never stop learning, and communicate,” he advised.
He also stressed the importance of being willing to make a decision. “If it is wrong, it can always be fixed. But, don’t overanalyze,” he explained. “Embrace change, and tell it like it is. Your clients don’t want to be baffled by double talk. They want the truth.”
Another important foundation of Malcom’s success includes working with his partner, Diane Parmele, at corporate who handles ordering, billing questions, and other fleet functions. He also coordinates with field personnel, who interact directly with the fleet’s business partners and handle the majority of the day-to-day fleet tasks.
“They are my lifeline to what is happening in all areas of the country, both good things and not so good,” he pointed out. “They are critical to our organization.”
As an AFLA member and former member of the AFLA Board, and a current member of the General Motors Commercial Sounding Board, Malcom has the advantage of interacting with the best fleet managers in the country. This allows him to listen and learn from the experts and share any best practices the State Farm fleet may be doing.
Remaining Nimble in a Fast-Paced Environment
While State Farm’s business model constantly changes, the most recent dramatic shift occurred in 2012. The company’s claims partners had been using a folding-type ladder for decades, but, due to changes in home roof heights, it was decided to require all estimators to have a minimum 20-foot extension ladder.
For the 2012 model-year, to satisfy this need as quickly as possible, the fleet department placed a moratorium on all sedan sales. The only orders approved were either Transit Connect or Subaru Outback Wagon models (both with ladder racks). During the course of the year, fleet reallocated more than 1,700 vehicles to other drivers to satisfy the replacement need.
“We are becoming a much more nimble company, and one that can respond in a very rapid manner,” Malcom stated. “This change impacts our fleet, not only in vehicle type, but in numbers.”
Another initiative that has impacted the State Farm fleet recently is the desire to do more business with “diverse vendors.” According to Malcom, diversity is not just something talked about at State Farm, but it is a part of the business culture.
“If you are really going to have diversity as part of your culture, then you are going to encourage others to practice that model in every aspect of the business,” he said.
While somewhat of a challenge in the industry, the company has been fortunate in finding outstanding partners who qualify as diverse vendors. In fact, in 2012, the company’s diversity vehicle purchases exceeded $16 million.
Implementing New Fleet Management Software Tool
Malcom helped increase oversight and accountability of the fleet by implementing a new fleet management software program. The tool allows the company to dig deeper and better analyze the utilization of its entire fleet.
“Like they say, information is power,” he said.
It turns out that the initiative was one of the most difficult tasks Malcom has ever been involved with.
“I will admit I am technologically challenged, and without a great team I would have been completely overwhelmed,” he said. “This type of initiative takes years, and a lot of change. First, we went through a process called business architecture to review all the processes that were currently in use. Then, we created a new set of processes around how we wanted things to work going forward. We then choose a vendor and went through a difficult implementation process.”
The fleet team is just starting to scratch the surface of data capture and analyses. The information the team can now glean from the system includes vehicle expense data, miles driven data, days used data, and vehicle data (make model, color, VIN, equipment, etc.), among other measurements. Malcom can run reports on demand as well.
With the rollout of this new tool, the fleet team also worked with employee compensation, HR, and corporate tax to completely revise the company’s driving policy. They now have clearer and more concise guidelines, including dozens of day-to-day examples that help drivers better understand how the fleet vehicles should be used.
Changing Vehicles Leads to Savings
Malcom also recently coordinated a collaborative project with claims, catastrophe, strategic resources, safety, and systems divisions to develop an advanced ergonomic and efficient mobile office for more than 3,000 claims employees.
“State Farm needed a mobile office for our catastrophe employees and our claims estimators, because they needed to be able to work out of their vehicles, just as others do in a building,” Malcom explained. “So we gathered a team together to create a mobile office that provides them with the electrical power they need, in as comfortable an environment as we can create, and one that is as ergonomically correct as possible.”
The team is currently on interior upfit generation number five, and the inverters, desks, chair, vehicle type, and configuration have all been revised over time. The team primarily uses two models for the mobile vehicles, the Chevrolet G 1500 Express Van and Ford Transit Connect.
Another important change in the company’s fleet vehicles was the introduction of domestically assembled foreign vehicles, including Toyota, Nissan, and Subaru models into the fleet. The change led to increased driver satisfaction and reduced cost of ownership.
“It does not matter what a vehicle costs to purchase, only what it costs to operate,” Malcom stated. “Toyota, Nissan, and Subaru models now make up approximately 35 percent of our fleet. They were all chosen for their cost effectiveness and ability to do the job.”
This change was possible as a result of the operational cost of these vehicle models coming in line with other vehicles in the same class.
Downsizing by Half
The State Farm fleet’s business model has undergone a significant transformation over the past decade. When Malcom arrived at State farm in 2001, the fleet possessed in excess of 21,000 vehicles. As the business model evolved, so did the fleet, and today the fleet size stands at just over 11,000 vehicles.
“The entire process took years to achieve. It started with asking a lot of questions, understanding why we had done things the way we had, and asking why we could not do things differently,” Malcom explained. “We implemented stricter parameters, increased vehicle lifecycles (from 50,000 to 75,000 and now 85,000 miles for most vehicles), and called for a moratorium on all vehicle purchases.”
The stricter parameters for any vehicle additions start with requiring:
- 15,000 business miles per year
- Minimum usage of three business days per week
- Not to be used as a primary vehicle for commuting to and from home to an office
- No personal use allowed
The fleet management team also did a better job of analyzing need and business utilization by focusing on monthly mileage and days of use (thanks to the new fleet management software program).
“Many times a driver may only drive 25 or 30 miles per day, but he or she may use the vehicle five days per week all day,” Malcom said. “We have to be careful about trying to have a one-size-fits-all vehicle approach.”
At the same time as the vehicle parameters were changing, modifications in the company’s insurance business model were taking place — State Farm consolidated a large number of offices, and many of the company’s drivers began and ended their day from home (mobile workers or telecommuters).
“It was like the perfect storm and has resulted in a 50-percent decrease in our fleet size,” Malcom said.
Staying Proactive in a Changing Industry
When looking back at his time in fleet, Malcom offers up some valuable lessons learned to keep fleet costs in line and operations efficient.
“Don’t ever be satisfied with the status quo. So many things are always changing, you must keep looking for a better way, a better vehicle, different equipment, pretty much everything,” he stated.
Malcom also advocates the benefits of reading all you have time to read about the industry, talk to other fleet managers, and always look at total cost of ownership.
“Don’t get hung up on what a vehicle costs,” he said. “The important thing is what the cost is to your company to operate that vehicle. There is so much more to the process than just looking at capital cost and discounts.”
Looking into the future, Malcom predicts that the State Farm Mutual fleet will continue to evolve as the company’s business model continues to change.
“It will all be about providing our drivers with the best transportation tool possible,” he said. “It needs to be safe, comfortable, and provide them with a vehicle that will satisfy both their and our business needs.