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Dealer Service

If It Ain’t Broke – Break It!

Something exciting is about to happen to your employee retention, which will result in ongoing owner retention.

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Don Reed is the CEO of DealerPRO Training

“Thank you very much but our service operations are not broken, we’re doing just fine and don’t really need any help. We can do this ourselves and we don’t need to spend the money for training.” 

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ARGHHHH!
This is so frustrating when we hear this.

Recently one of our fixed operations specialist’s spent two days at a dealership performing a courtesy performance evaluation of their service and parts operations, at the request of the dealer. Once the evaluation was complete, we held a review meeting with the dealer and his management team to identify their “opportunities for improvement” in their service and parts processes, strategies, compensation plans, marketing and management practices.

Once the opportunities for improvement are identified, we then explain what changes need to be made to improve employee productivity and overall department performance with a profit improvement plan. Next, since we are a fixed operations training company we obviously presented a customized training plan for the dealership’s fixed operations team. As with any good sales presentation, we saved the best for last and outlined the dealer’s training investment.

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The dealer responded with:
“Thank you very much but our service operations are not broken, we’re doing just fine and don’t really need any help. We can do this ourselves and we don’t need to spend the money for training.”

Here is a brief overview of our evaluation of this dealer’s fixed operations:

Current Service Performance   Industry Guide
Service Absorption @ 65%  100%
Technician Productivity @ 75% 120 %
Customer Pay Hours Per RO @ 1.2 2.5
One-Item RO’s @ 52%  15%
CSI Scores below Zone Average  Above Average
Service Net as % of Gross Profit @ -6%  20%
Parts Net as % of Gross Profit @ 21%  30%
Customer Pay RO Count Declining 15%  Increasing 10%

But Wait, There’s More …
I’m not done yet, it gets worse! This service department is closed on Saturday. I wonder if that has anything to do with a 15-percent decline in customer count? I wonder if below-average CSI is affected by being closed on Saturday?

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Of course, my obvious question is, if anyone thinks they can do the training and make the needed changes by themselves, why have you not already done so? What are you waiting for? Why are your employees not on performance-based pay plans that compensate to motivate?

Why are the service advisors failing to present maintenance menus that train their customers on how to properly service their vehicles to keep them in a safe and reliable condition? Why are there hourly technicians producing 20 hours or less per 40 hour work week? I’m guessing you’re getting my point by now!

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Here is my response:
“If this operation AIN’T BROKE – ­BREAK IT!”

This Dealer Needs a Serious Fix
Regarding the objection “we don’t need to spend the money for training,” it’s interesting to note that the average dealer in America, according to NADA Market Data 2017, is spending about $17,000 for their average used car sold so they can make a gross profit of about $2,000 PRU and would absolutely love to make this sale 100 times a month or more. Additionally, the data shows the average dealer is spending $600+ PRU in advertising to sell a car.

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For those of you who think investing in training for your fixed operations team is expensive consider this: The absence of professional training in this dealership is costing this dealer $57,000 per month for a total of $684,000 a year in added customer pay parts and labor gross profits. That’s the equivalent of selling an additional 342 used cars at $2,000 PRU. In addition, if the service advisors, the BDC staff, the parts counter-people and the fixed operations management team were properly trained on effective communication skills that exceed the customer’s expectations on each and every visit, they might just have a positive impact on their current underperforming CSI scores.

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These scores of course have a lasting impact on owner retention and every survey I have ever seen from manufacturers, JD Powers and NADA will tell you that 75 percent or more of those service customers who have all their service work performed at their new car dealership will buy another vehicle from that dealership. Sounds like a big pay raise for the dealer.

This dealer we evaluated is a nice guy. He has a good fixed operations staff. So, what is he lacking? The answer is: commitment to processes, protocols and accountability for performance. Notice I said “he”? That’s right, the dealer must get committed to make the necessary changes first if he or she expects their employees to be willing to change.

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Now Is the Time
In our current market we are on a path toward selling about 17 million new vehicles again. This is great news but we all know this sales pace cannot last forever. Do you remember 2008? My point is don’t let the good news going on in your sales department have a negative influence on what’s going on in your fixed operations.

Most of you have probably heard of the 80/20 Rule, which in this case means the aftermarket has about 80 percent market share and new car dealers have about 20 percent market share of the total parts and service industry. How about we start getting back some of that 80 percent? How about we focus on increasing our service absorption to recession-proof our dealerships in preparation for the next downturn in vehicle sales? How about we train our advisors how to always put the customer first all day every day? How about we clean up, paint, remodel, our customer reception area to match the showroom?

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Fixed operations accounts for about half of a dealer’s net profits, so how about you dealers and general managers devote half of your time and efforts in support of your fixed operations team? Have your salespeople had any form of sales and communication skills training? Have you F&I managers had any form of sales and communication skills training? Have your sales managers had any training in desking deals, appraising vehicles and managing a sales team? I’m guessing you “spent the money.”

Wouldn’t you agree your fixed operations team deserves to be trained as well? Will a properly trained employee out-perform an untrained one? If you own or are managing a dealership that AIN’T BROKE — BREAK IT and start getting the return on your investment that you deserve! Let’s go from Good to Great this year!

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Over and Under in Fixed Ops
Now, let’s move to the “BACKBONE” of the dealership-fixed operations. Most dealers have the same scenario that I just outlined, taking place in their fixed operations, i.e. advisors selling at 1.5 HPRO or less, technicians producing less than 120 percent flat rate hours to clock hours, service managers losing money, parts managers losing money, poor CSI, etc. So what can be done to reverse this cancerous condition called underachievers?

It all begins with the recruiting and hiring process. Spend the money necessary to recruit as many applicants as possible. Complete a thorough screening. Administer a psychological personality profile test. Make sure you have more than one person participate in the interview process. Look for the best of the best and make your choice. If they have not been a top performer in any previous position they’ve held, what makes you believe they are going to start doing so now at your dealership?

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Next, evaluate your existing staff by asking yourself one question: “If I were interviewing this person today for the first time, for the position they are currently in, would I hire them?” No “buts” here, just “yes” or “no.” If the answer is “no” then start the recruiting process now.

Maximizing Employee Retention
For maximum employee retention you should not only make sure you hire the right person for the right job but also insure that they are properly trained to proficiently handle the responsibilities of the job. Remember what I said last month:  “There are only two reasons why any employee is not a top performer 1) They don’t know how to, 2) They don’t want to. If they don’t know how to you can correct that with training. If they don’t want to you must start the recruiting process and get ready for the exit interview.

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Once you have the right person, you must make certain that they clearly understand (written job descriptions) what is expected of them on a daily basis. So, if they are properly trained and they know what is expected of them, you must then hold them accountable for their performance both good and bad. This must be done on a regular basis and should be a consistent process. Correct poor performance now.

Employees want to feel like they are “in” on things. Let them know their contributions are important to your overall success or failure. You are doing them and yourself a disservice if you are not straightforward and truthful with them. Performance-based pay plans are an essential part of the accountability process and provide incentives for the employees to focus on their individual performance as well as those working with them.

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How to Give Employees a Say
If you really want to make an impact on employee retention in a positive way then you might consider what I call an “Employee Council.” Once a month ask each department to elect one person from that department to attend a council luncheon with the dealer principle. This luncheon should last no more than one and a half hours. No managers are allowed to attend. Each council member must bring an idea for improving any department in the dealership.

They can also bring up any concerns that they may have regarding any department. The council must provide the solution for any concern presented. You must listen and not dominate the conversation. This is not meant to be a complaint session but a concern resolution session.

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Believe me you will be amazed at how many good ideas are presented and how well the employees will work together to solve the concern by themselves. Most concerns are caused by “bad processes” not “bad people,” which means it rarely requires any monetary investment from the dealer to follow their solution. Remember, once a month with no managers. Of course it would be nice if the dealer picked up the check.

Something exciting is about to happen to your employee retention, which will result in ongoing owner retention.

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