Fixing Service Departments

Tracking employee performance in dealership service departments “isn't rocket science,” says Randy Cyb, a fixed-operations consultant.

But nor is it something done often, he adds. “A majority of managers get too caught up in operational details and forget the value of proactive management.

“Managers consumed by the details of the day-to-day operations of a fixed-operations center cannot lead their department to higher levels of profitability available to them.”

That short-sightedness stems from the slow evolution of the service department, where managers tend to focus on daily personnel and operational details, he says. “They don't believe they have the time to manage the long-term performance of their employees or the department.”

They're wrong, Cyb says, citing a case study he did at Boardwalk Volkswagen Park Cities, part of a dealer group with three VW stores in the Dallas market.

“When an employee knows that they are being looked at, they want to look good in their boss's eyes,” he says. “It's really simple classic personnel management.”

Boardwalk VW has 12 technicians and five service advisors. In an attempt to boost their service business, the dealership extended hours to 7 a.m. to 7 p.m. Monday-Friday and 8 a.m. to 5 p.m. on Saturday.

But in this new environment, the fixed operations manager and his team were in “constant crises concerning training in a number of areas: the meet and greet, service menu presentation, and multi-point inspection,” says Cyb who did the case study for ATcon, a management consulting firm.

“It was like trying to repair a vehicle as it is driving down the road,” he says of the dealership dilemma.

The dealership's service department barely showed a profit, he says. “Lack of consistency in effective labor rate and inadequately managed technician productivity have huge effects on the department's ability to generate gross profit.”

His evaluation found pricing was “inconsistent at best.” Technicians and service advisors had no fixed objectives. Invoices were constantly adjusted to compensate for incorrect parts pricing information from estimating work.

ATcon used a software program to review a statistically significant sample of recent repair-order data from the dealership-management system.

This software uncovers red flags. In addition, an in-depth review of production records coupled with process observation and individual interviews “revealed both the lack of accountability and proactive one-on-one technician production coaching,” Cyb says.

The goal was to show the department manager how to control the effective labor rate and improve productivity. The resulting process changes allowed for an increase of over $4.00 in the customer pay effective labor rate.

Management's job was to run systematic reports to ensure compliance with the new standards. If the manager sees someone deviating from the strategy, he intervenes and readjusts behavior.

This accountability stems from the ability to review each repair order for red flags that don't support the effective labor rate targets.

“The ability to quickly call out inconsistent pricing and put the service advisors on notice that you are looking, prevents them from giving away the deal” by not adhering to effective labor rates, Cyb says.

The culture suffered from inconsistencies, poorly-executed pricing and a production situation with service advisors doing whatever they thought was needed, he says. It changed to “a shop able to manage more business with the same resources.”

The proactive management reforms also included the establishment of a performance measuring system. A group leader can use it to show where each technician stands in relation to the objective improves productivity significantly.

Stretch goals were set at the VW store, with an overall target of a 10% increase in productivity.

“When they reach these individual thresholds, the technicians are rewarded individually and collectively,” Cyb says. “The lead technician gets a group-based reward and each technician gets a reward based on individual contribution.”

With objective management, productivity increased 16 percentage points. In one month, gross profit on labor sales increased 27%; net profit, $40,000.

“By getting everyone focused on the variables they control, we achieved more success in selling,” Cyb says. “With technicians, you show them how to better inspect vehicles as a path toward their productivity goals and service advisors have more opportunities to sell in the service lanes.