Cash For Clunkers: When Paces Collide

Tortoise and the hare by Flickr user Bad Rabbit, Inc.
"Tortoise and the hare" by Flickr user Bad Rabbit, Inc.

The White House has announced that it will divulge details shortly about how it will wind down the seemingly successful Cash for Clunkers program. As of July, car dealers nationwide had done $1.8 billion in deals under the program, and are on track to exhaust the $3 billion available for the program. The initiative has been held up as an unmitigated success, burning through its initial capital quickly and needing more because it’s just so popular.

But there are cracks showing. Car dealers are complaining about slow reimbursements from the government. In some states, half of the car dealers have ceased offering Clunker deals because they can’t afford to wait for the funds anymore. Automobile manufacturer financing arms have stepped in to offer short term loans to dealers who are in trouble.

These difficulties show what can happen when two cultures that operate at fundamentally different paces have to work together. These are the same kinds of problems that can get in the way when any two organizations hook up as partners.

On the one hand, you’ve got the car dealer world, where things operate on a monthly basis but where deals need to get sewn up within days. Dealers operate on very slim margins and need to stay afloat from month to month. They’ve got payroll and debts to service.

On the other hand, you’ve got government, which has to make sure it does the right things and doesn’t make rash actions that can’t be undone. Government has to take the long view. It also is hard to get it moving. There aren’t many (any) mechanisms to get money flowing into the commercial sector easily or quickly.

These are two worlds that just operate on a fundamentally different pace. Each one must see the other as behaving unreasonably.

Sometimes, when organizations are planning to work together, they come from worlds that operate at different paces. For instance, foundations and service organizations have wildly different time horizons. This isn’t something that can just be papered over, but there may be some ways to plan ahead and mitigate troubles:

  • Be honest about comparing your timelines. Often, organizations will like to say they are “responsive” when their default rhythms are 60 or 90 days and more. Other organizations operate to the rhythms of their semiannual board meetings. Still others look at the end of each week as a make-or-break deadline. Compare these — honestly.
  • Recognize there may be pace-related problems. Once you see the different paces involved, you can see if there may be problems. If you recognize this ahead of time, it will be easier to handle them with equanimity. That way if trouble brews it won’t be seen immediately as failure.
  • Acknowledge the need to change course if need be. There may need to be creative solutions to problems that crop up (for instance, short term loans from auto financing arms). There needs to be room to make these happen.
  • Create a no-hard-feelings exit path. Sometimes it just doesn’t work for organizations with different paces to work together. That doesn’t mean it’s anyone’s fault that the plan failed — it’s just the way things are. If there’s an easy way for organizations to get out of the deal without engendering ill will, maybe they can come back around later.

What is your experience when organizations with different paces collide?

One thought on “Cash For Clunkers: When Paces Collide”

  1. All good points, Brad. Whether your desired outcome is profit or something else, when you find yourself engaged with other organizations each marching to different drum beats, the key to success is to know everything you can about the composite system of interaction in advance. Otherwise, like some of the dealerships in the “Cash for Clunkers” program, you will be caught in “choke points” you didn’t anticipate. My own experience with this systems approach occurred when we established Elvenwork Press and produced our first title for Worldwide distribution.

    Before even beginning, during the planning phase, I determined we would be engaged in several distinct payment streams, both outgoing and incoming, each at widely differing schedules. Outgoing payments were pre-production design and digital-to-press file preparation, and press expenses (about $40k/initial and subsequent printings). These two were on the “immediate” payment track. Warehousing and fulfillment (outbound shipping) were on a monthly payment track while our distributor paid for deliveries on a 90-day basis. Other income tracks were our own Internet individual sales which were immediate, and our own vendor wholesales (other than our main distributor) which were on a payment-upon-receipt track. The assortment of payment schedules was rather daunting, with several unknowns thrown in for good measure at first. The whole “system” had to be charted out PERT-style to actually see our predictable payment “choke points” once a sales experience was established.

    Of these, the biggest could be seen to be our first reprint. Our distributor’s 90-day payment schedule would tie up about $10-12k in revenue on any given day and our first reprint (another $40k) would come along before we had accrued enough income to overcome that shortfall. Since our contractual agreement with the distributor was “etched in stone”, I worked out a low-interest loan plan with our banker in advance to cover that printing cost shortfall, using our distributor’s payments-due list as collateral. That was the key to avoiding the kiss of death many start-up publishers face: going temporarily out of print. Once the wheels of book commerce stop, they sometimes don’t ever re-start.

    What you say is very true: Anticipate as many of the timing issues you can in advance, and innovate solutions to free up the unavoidable “choke points” before you encounter them.

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