Are you falling short? As a dealer, are you getting the return on investment you expect? As a GM, are you meeting net profit projections for the year? If you are a fixed operations director, are you increasing your customer pay retail sales for parts and labor over last year? For all of you, is your service absorption increasing? If any of your answers are “no” then you have a problem.
Your Service Department Needs an RO
Your financial statements will show you where the opportunities for improvement (conditions) are but what they won’t show you is how to fix them. To fix them you have to know what’s causing the out-of-line condition. Once the cause is determined you can then make the corrections necessary to properly bring the condition in line with industry guides.
For those of you who have ever written a repair order, you probably recognized this as the “Three C’s” — Condition, Cause and Correction. The technician needs the Condition to properly diagnose the Cause, which then enables him to make the necessary Correction.
It’s no different for the dealer, the general manager or the fixed operations director when it comes to making money. So, now that you have studied your financials carefully to determine the conditions that prevented you from attaining your respective financial goals, let’s determine what the cause might have been. I believe the culprits here are comfort zones and accountability.
Comfort Zone Tune-Up
Everyone in your dealership has a comfort zone, just as you do. The issue is not to get rid of them but to simply move them again and again until you achieve the results you’re looking for and then move them again! This is important because it enables you to focus on the performance of your employees.
Next, you must hold them accountable for their individual performance. Currently, most of you are doing that in the new car, used car and F&I departments, which of course is where you devote much of your time and energy anyway, but you fail to do so in the service and parts departments.
Allow me to give you some examples to clarify what I’m talking about:
- If I am a salesperson and I sold an average of five units per month last year, what are you going to do with me? Answer: Train me how to sell 10 units or more per month or replace me with someone who can.
- If I am a service advisor and I sold an average of 1.2 hours per customer pay repair order last year, what are you going to do with me? Answer: I have a job for life!
- If I am a sales manager and my sales team averages five units per month and my gross per retail unit is at $700, what are you going to do with me? Answer: Train me how to average 10 units per salesperson and gross $1,500 PRU or replace me with someone who can.
- If I am a service manager and my service team average 1.2 HPRO and my technicians’ productivity is at 80%, what are you going to do with me? Answer: Leave me alone because the other dealers in your 20 Group are about the same.
- If I am your general sales manager and my sales team averages five units per salesperson, $700 gross PRU, $200 F&I gross PRU and lose $600 per wholesale unit, what are you going to do with me? Answer: I wouldn’t have lasted six months, let alone a year!
- If I am a fixed operations director and my parts and service team averages 34% in retail parts gross, 62% in labor gross, averages 1.2 HPRO, shop productivity of 80% with a declining repair order count, what are you going to do with me? Answer: Thank you for being back there because I sure as heck don’t want to fool with that stuff!
Accountability is the Starter
Are you starting to see my point? Most dealers and general managers will hold their sales team accountable for their performance on a daily, weekly and monthly basis and make any adjustments (moving their comfort zones) on an as-needed basis now! Meanwhile, their parts and service teams remain in their comfort zones to continue to dwell in the land of underachievers.
Why does this happen? My belief is that most dealers and GMs are outside their comfort zone in the back end of their dealership since their roots are in the front end. What can a dealer do to enable him or her to leave their comfort zone and cross over the demarcation line to the back end of their business?
Measure Everybody’s Performance
To begin with you must measure the performance of the people you intend to manage. Secondly, your people must know that you are measuring their performance. Thirdly, their performance will be compared to industry benchmarks. Last of all, they must understand that they will be held accountable for achieving or exceeding those benchmarks.
Simply say what you mean but more importantly mean what you say. Again, most dealers don’t hesitate to do this in their sales and F&I departments, so why not follow this same process in fixed operations?
Now I want you to rid yourself of the usual whiny excuses that I here from dealers when I’m speaking to 20 Groups, dealer associations, dealer groups or individual dealers. It doesn’t matter whether it’s north, south, east, west or rural versus metropolitan, I hear this all across the U.S., Canada and the United Kingdom:
“Don, you don’t understand, my market is depressed.”
“Don, you don’t understand, my service manager has been with me for a long time.”
“Don, you don’t understand, I can’t find an advisor who’s any better.”
“Don, I don’t want to run off my customers by up selling”
Well folks, here is what I do understand. A depressed market has nothing to do with accountability for performance. Time on the job does not dictate a good performance on the job. If you can’t find better people, look harder because they are out there. If you or any of your people are afraid of “running off customers from up selling” then you need to get out of the retail business of selling parts and service. (By the way, the aftermarket already has about 80% of your customers’ maintenance business.)
Don’t you think it’s time to get out of your comfort zone and make the return on your investment that you deserve? Please, drag your fixed operations team out of their comfort zones and start holding them accountable! Once they stop kicking and screaming, they will all make more money, they will be happier and your customers will realize you have the best dealership in town.
“The entrepreneur always searches for change, responds to it and exploits it as an opportunity.” — Peter F. Drucker
Don Reed, CEO, DealerPRO Training