Because escalation procedures in project management are so critical, first you must trust your team and offer up some power and accountability so teams can act or react. Because I’m in the auto industry, let’s take a look at the Cash for Clunkers program. Depending on each dealer’s escalation procedures and how quickly they implemented a plan, it really did mean success or failure.
Under the Cash for Clunkers program, new car buyers were encourage to trade in their less fuel efficient cars for newer, more fuel efficient cars. With this program came rebates that lowered the sale price of the new car by up to $4,500, depending on the model purchased.
When the program was announced, it was explained in detail to car buying consumers, but not fully explained or understood by auto dealers. This is a great example of why dealers needed escalation procedures to ensure they reaped the rewards of this program.
Smart dealers and their sales staff saw right away that because the rebates would be coming from the government and not the manufacturer, there would be a time delay. To prepare for this, dealers often expanded on capital loans for cash they would need during the lengthy wait, or negotiated with manufacturers on when they would have to actually pay for the vehicles (floor plan liability)—meaning they asked for extensions from five days to up to a month.
Some dealers realized that more cash flow would be needed during the program and reached into their other factory receivable accounts to replenish needed cash during the program.
Basically, the well-prepared dealers saw the risk, prepared a solution, and were successful while the program lasted.