– Don Reed, CEO
“This time of year is the perfect time to sit back and reflect on your year to date performance by your fixed operations team.
As a Dealer, General Manager or Fixed Operations Director you might want to start with the “Operating Profit” line of your financial statement and measure your team’s performance with the following industry benchmarks:
• Service Department Operating Profit @ 20% of Gross Profit
• Parts Department Operating Profit @ 30% of Gross Profit
Are You Doing a Good Job?
If you are exceeding those benchmarks then congratulate your team for a job well done! If, however, you are falling below those benchmarks then you obviously have some work to do so let’s begin by asking a simple question: “Are your Expenses too high or are your Gross Profits too low?”
After working with hundreds of Dealers I have found that in most cases the fixed operations team is doing a good job in controlling expenses but are missing out on huge opportunities to increase their Gross Profits. Wouldn’t you agree that you can’t “save your way into increased profitability?” If so, then why are so many dealers missing out on the level of gross profits that they deserve? The answer is people!
- Do you have the right people in the right position?
- Do you have the right people properly trained to become Top Performers?
- Do you have the right number of people to exceed your customers’ expectations?
- Do you have compensation plans that reward individual performance?
- Do you hold your people accountable for their performance?
Look at Performance
Take a look at the individual performance of your fixed operations team—Technicians, Service Advisors, Service Managers, Parts Managers, Warranty Administrators and then ask yourself this question: “If I knew then what I know now would I hire this person?” Remember there are only two reasons why any employee is not a Top Performer. They don’t know how to or they don’t want to!
The first scenario can be cured with training each employee how to perform at a higher level and the latter can be cured with an aggressive recruiting campaign that will attract those who want to do what you hire them to do. If you answered the above question honestly, my guess is many of you will be in the recruiting mode for new hires, so I want to give you some ideas for recruiting the right people.
A key position for building gross profits is that of the Service Advisor. These people speak with more customers on the phone than any other employee in your dealership, other than the phone receptionist. These people speak with more customers face to face than anyone else in your dealership.
Who do you think has the most impact, good and bad, on a dealership’s customer retention?
Who do you think has the potential to produce $500,000 + in gross profit per year?
The answer on both counts is the Advisor. This is a very important position and requires a definitive plan for recruiting qualified candidates to achieve Top Performer status. Here are some simple rules to follow:
- Do not hire an experienced Service Advisor who has not exceeded 2.0 HPRO-you don’t need to hire someone else’s
- Recruit aftermarket Advisors and Managers—they all have had proper training and understand accountability for performance.
- Recruit aggressively for women—at least half of your customers are women
- Advertise “No experience necessary”—no bad habits to break
- Do not advertise for Service Advisors—use titles that will appeal to higher number of applicants, i.e. Customer Service Representative, Customer Service Associate, Service Secretary, Administrative Assistant-Customer Service, etc.
Green Peas Are Healthy Additions
Your goal is to interview as many applicants as possible. I actually got the idea of advertising for a “Service Secretary” from one of our dealers who ran this ad and had over 50 applicants show up—mostly women. We interviewed and profiled the applicants, then hired a young lady, gave her 5 days of training, compensated her on a performance based pay plan and watched her finish her first month at 1.8 HPRO followed by her second month at 2.1 HPRO!
She has no technical skills and no bad habits to overcome. Her customers love doing business with her, she loves her new job and as you can imagine the Dealer is thrilled! Sounds like a pay-raise for the Dealer!
Okay so how many Customer Service Representatives do you need to employ? We use a guide of 12 customer repair orders per day per representative—Customer Pay and Warranty, not including Internal. If your Advisors are working with more than 12 customers a day and you want to grow your gross profits then you will need to start planning for hiring another—NOW!
If you are successful in growing your traffic count and you keep the same number of Advisors your sales per RO will decline starting immediately resulting in a decreasing gross profit even with more customers. Each Advisor should have time to spend 15 minutes with each customer at the time of write up and another 15 minutes at the time of delivery so hire that additional Advisor once your traffic begins to increase.
Next, take a look at your Shop Productivity. Our goal is 100% meaning that your technicians produce 40 flat rate hours billed for every 40 clock hours worked. If your productivity is at 100% or above then you need to start recruiting additional techs since your Advisors will stop selling once they believe the techs can’t get the work completed. Do not wait until you reach 100% to start recruiting techs.
When recruiting these techs you will most likely need “C” skill level since that skill level is where the majority of your sales growth opportunities are. Coach maintenance and light mechanical repairs is where the volume is and of course that is where the aftermarket thrives.
On the other hand, if your Shop Productivity is below 100% you have to ask yourself-why? Tell your Service Director to prepare a 24 months trend analysis of your customer pay RO count month by month. Is your traffic going up—down—or flat lining? The only good answer is “UP.” If your traffic is going down then you can assume that your customers don’t like doing business with your fixed operations team and prefer to go elsewhere.
Developing a Solution
Plant your management team at the service reception desk during the busy hours to observe how your customers are being received. Have them observe the delivery process of the vehicle back to your customers to insure the customers are given a clear and precise presentation on the repairs or services performed.
Low productivity is a direct result of a lack of selling and or advising by your Advisors as well as your Techs. Advisors who are not properly trained how to effectively communicate with their customers through feature/benefit presentations on vehicle/coach maintenance and repairs, will not sell enough hours to maximize technician productivity. Technicians will not inspect 100% of vehicles serviced when they believe their Advisors won’t sell the work. This of course is another reason why your Advisors should not be servicing more than 12 customers per day. Remember this—all of your Technicians have the ability to produce more hours and will do so when they have confidence in their Advisor’s ability to sell the work.
Do It Now
Starting today why not focus like a laser on building gross profit by utilizing customer driven processes that will exceed their expectations on each and every visit to your service department. In doing so, make sure you have the right number of employees at the right time to support your plans for growth in your operating income. Make sure everyone is continually trained on doing things right as well as doing the right things.
Training your employees is the best investment you can make to enable your fixed operations team to reach your goal of 20% Net to Gross in your Service Department and 30% Net to Gross in your Parts Department.
Call Don Reed toll free at 1-888-553-0100
Or email firstname.lastname@example.org.