Reynolds on long-term path to shed inflexible image

DAYTON, Ohio — When Reynolds and Reynolds Co. leaders head to Dallas this week for the annual NADA Show, they'll have a key goal in mind: Demonstrate to auto dealers that the company is shedding its inflexible and difficult past.

For two years, the dealership technology giant has been remaking itself under new leadership following the departure of longtime CEO Bob Brockman, whose tenure at the company ended in November 2020 after he was indicted in what the federal government has called the largest tax evasion case ever brought against an individual in the U.S.

Under Brockman, who died in August at age 81 while awaiting trial, Reynolds and Reynolds gained a reputation in the industry as a challenging business partner, with complicated contracts and rigid policies. Executives say the change at the top — Tommy Barras, the company's former president and COO, took over as CEO after Brockman stepped down — was the "inflection point" that prompted them to examine their operations, practices and policies.

The transition also coincided with the pandemic and the market changes it prompted, they said.

"If you would have said five years ago, what does automotive look like today, would you have predicted that it looked like it looked like today? I wouldn't," said Chris Walsh, Reynolds' president. "What does the next five years look like? I don't have any idea."

Yet, he added, "we have to continue to look at the market: How is it changing? How do we change to better serve — whether it's product, business practices, people?"

Their goal is not just to improve the company's image among retailers, but also to boost the bottom line by retaining more dealership customers and winning more new business for its dealership management system and other software products, which include digital retailing platform Gubagoo and its docuPAD interactive tabletop finance-and-insurance menu.

That will be a long-term process without an end date, Reynolds executives told Automotive News. The next step will be the unveiling of an updated logo at the NADA Show that they say is visual proof that Reynolds and Reynolds is no longer the same company it once was.

Barras, who spoke last week at a meeting to present the new logo to employees at the company's headquarters here, started in 1976 with Universal Computer Systems, the company Brockman founded before it merged with Reynolds and Reynolds in 2006.

That long history with Universal Computer Systems and later with Reynolds and Reynolds is "who I am," Barras told Automotive News. "That's ingrained in me. But we have a new mission, we have a new focus, and we have a very focused group that wants to be successful. And there's some things we shed from the past. Some painful, but necessary for us to move forward."

Reynolds said it has begun to shed the complicated contracts and other inflexible policies that had caused friction among dealerships. While comprehensive market share data is not readily available, Reynolds has faced market pressure in recent years as new and smaller dealership management system providers have sought to grow their own businesses. And the company lost some market share, according to court filings from 2017 in a federal antitrust lawsuit against CDK and Reynolds.

Now the company wants to empower employees to make more decisions on the front line with dealership customers, said Kasi Edwards, senior vice president of marketing. Leaders say Reynolds is open to giving dealerships the ability to cancel products they purchased that ultimately don't work for their stores. Walsh said Reynolds is experimenting with pilots to test products and gather dealership feedback.

"Our tailwinds have always been our products and our people. But our headwinds [have] been the way we operate. That's what's been kind of governing our momentum," Walsh said. "I felt like if you can remove that, the products and people is going to become center again, and that's what's going to bring people back."

Executives said their changes are attracting more dealership customers back to the company's products, though Reynolds does not disclose data about dealership customer counts. Walsh said that as of the end of August, the company had recorded a 52 percent increase for the previous 12 months in the number of stores that had converted to Reynolds from a competitive dealership management system. That performance, he said, "by far" outpaced the rate of defections, or stores that left for another company's system.

Reynolds leaders said they are moving away from the centralized leadership style Brockman used to a more decentralized system in which a committee of executives makes decisions alongside Barras. Brockman announced the executive committee structure when Barras was appointed president and COO in June 2020, according to a company memo he sent that was included in federal court records. A Reynolds spokesperson confirmed that Barras has led the committee since it was formed and has, over time, adjusted how it operates.

Barras split the role of president and COO between Walsh and Willie Daughters, the former executive vice president of operations who is now COO. That change has been in place for about a year.

On the product side, Reynolds plans to continue buying companies to expand its portfolio. Walsh said several acquisitions are planned for 2023, but he declined to share details of potential companies or product segments. Recent acquisitions include Proton Dealership IT, a dealership information technology and cybersecurity service provider, in July, and Gubagoo in June 2021.

Matthew Gillrie, owner of the Gillrie Institute, which advises dealerships on dealership management system contract negotiations, said he senses that Reynolds is trying to be a better dealership partner and has become more willing to negotiate on pricing.

"I do believe they want to make it better, I really do, and I think that they are trying to put the right things in place," he said. "Big ships don't turn quickly. It's a huge amount of things that need to be shifted, and it's a cultural change."

Edwards said Reynolds' actions will be what improves relationships — one dealer, automaker and vendor at a time.

"That's not something that we can flip the switch on overnight," she said. "But do I think the evidence of all of that good work the last couple of years is improving? Absolutely."