Just What the Doctor Ordered

This is a good time for dealers to reflect on their 2011 performances and think about what areas of business to improve in 2012.

Then they should think about what specific steps are needed to capitalize on those opportunities.

A 20-Group best-practices exercise I’ve always found productive is for participating dealership people to grade their operation’s performance during a specific period. 

Taking this exercise a step further, it is productive for dealers, department managers and comptrollers to assign an A to E grade to a previous period’s performance.

Everyone also must explain the reasoning behind a particular grade and the actions they feel are necessary to improve performance in the subsequent period.  This eye-opening process can help provide direction as the new year starts.

If you aren’t careful, the grading exercise only may identify a symptom, not the real illness. Discovering the latter requires a deeper dive.

I’ll give you an example.

During our meeting, a comptroller, noting that the dealership’s previous year’s fixed-operation coverage declined 5%, says, “Our fixed gross is approximately the same, but our total fixed overhead is up.”

So as we compare the components of 2011 to 2010 fixed-overhead to date, we find much of this increase has come from employee benefits, supplies and special tools.   Our tendency is to take a quick dive into the expenses and possibly forget or ignore the other component.

If we were to look at the gross generated by the parts department, service department and body shop, we might see growth in one department offset by decline in another. When we look more deeply, we see there has been some margin deterioration in all three departments.

Concentrating first on service, we note a change in the component’s contribution, such as the work mix changing. We might see fewer warranty and customer-pay repair orders in the year, but more internal work such as reconditioning of used cars for the pre-owned department.

We might see an increase in our quick-service work, but a decline in our traditional customer-pay traffic. Continuing to dig, we notice the dollar amount of per-customer-ROs has decreased during the past 12 months and the effective labor rate on those tickets is less.

As we’ve worked our way through this concern, we begin to identify the illness. The next step is curing it, in this case by finding ways to increase the volume and level of repair orders.

During a recent best-practices session, one operator told of how he began save-a-deal meetings at the dealership, but with a different twist. He noted his store had suffered a decline in service sales.

Knowing how save-a-deal meetings have benefited his variable operations, he implemented the process in his fixed operations as well.

In his service operation, his advisors, among other things, are contacting customers who miss appointments and try to reschedule new times. Customers who initially decline recommended or needed work are contacted too, with the goal of setting up a service appointment.

When necessary, the service manager also gets involved in contacting customers. The bottom line results were impressive. The dealer showed the positive results of this action by providing us with increased sales and gross figures.

So what began as a simple management-team exercise of assigning a grade to a performance went on to allow us to dig deeper into specific areas needing performance improvements, diagnose the illness and start the needed therapy for a full recovery.

Good selling!

(Tony Noland is a veteran dealership consultant. He is at  [email protected])