Keep your service teams busy. It’s good for them and good for your bottom line.

The top three greatest mysteries of human history; the Lost City of Atlantis, Stonehenge and of course Unapplied Time.

That nasty number on the financial statement that no one really knows what it means or why it keeps getting bigger. Let’s do a little exercise so we are all on the same page.

Say a dealership’s labour rate is $150 per hour.

So consider an apprentice that is not flat rate and makes $25 per hour, and works an eight hour day. Today he/she worked on five cars and punched on for five hours. We sold their work for 10 hours. 

The total sale for the day is $1,500. We got that by taking their sold work which was 10 hours and multiplying it by our labour rate which was $150. Are we good so far? 

The gross profit for the day is sale minus the cost of sale, $1500 – $125 ($25/hour x 5 hours Punched) = $1,375 GP.

As a percentage $1,375 / $1,500 gives us 92 per cent GP.

So the million dollar question is…What is the unapplied time in hours and dollars?

In this example we have three hours of unapplied time and $75. At the end of the day, a time ticket was sent to accounting to pay the apprentice eight hours.

If you have unapplied time, look at what your apprentices or hourly people are doing and look at how we are utilizing them. Are they working on cars with a technician and the tech gets all the flat rate time with nothing credited to the apprentice?

The DMS (Dealer Management System) only accounted for a cost of five hours.  Accounting has a problem, they don’t balance. This difference should be going into unapplied time. So we can see how important it is to keep our apprentices busy. 

They generate a large amount of Gross Profit and if they aren’t working they cost us money. If you really want to analyze what it costs us, it is almost a double whammy. We not only have to pay in unapplied time, but we also have to think about the lost revenue of what we could have charged for those lost hours. We can really blow your mind if we take our lost revenue and multiply it by our parts to labour ratio — the loss gets even worse…but let’s not go there. We want to be clear we are pro apprentice. We need apprentices in our industry desperately. You can’t hide the fact we need technicians in our industry but you need to keep them working, learning and growing.

Now let’s do the same exercise with a flat rate technician.

Again, let’s say the dealership’s Labour Rate is $150 per hour.

The flat rate technician makes $35 per hour and works an eight hour day. Today he/she worked on five cars and punched on them for five hours. We sold their work for 10 hours. 

• What is the total sale for the day? 
• What is the gross profit percentage?   
• What is the unapplied time both in hours and dollars?

The total sale for the day is the same as our first example at $1,500. We got this the same way by taking their sold work which was 10 hours and multiplying it by our labour rate which was $150.

The gross profit is sale minus the cost of sale, $1,500 – $350 ($35 x 10 hours) = $1,150 GP. As a percentage $1,150 / $1,500 gives us 77 per cent GP. Interesting to see what the difference between the gross profit generated in both examples.

We earn 77 per cent from our experienced flat rate tech and a whopping 92 per cent from our apprentice…just saying.

The next question is what is the unapplied time in both hours and dollars…the answer here is ZERO for hours and dollars. Flat rate technicians do not give us unapplied time, they give us lost sales but no expense hits the unapplied time account. 

A time ticket was sent to accounting to pay 10 hours to the flat rate technician, the DMS costed 10 hours, therefore accounting balances. No unapplied time. **Note: Technicians will need to be treated like apprentices when you have guarantees. If their sold hours are less than their guaranteed hours you will have unapplied time.

Now pull out your financial statement. Go to the gross profit page and look at the service department. Is there a value in unapplied time? If the answer to that question is no you have no way of knowing how much time is being wasted. Your gross profit will be inflated because this expense is a direct expense in the employment section. 

Do you pay bonuses based on a percentage of gross profit? Hmmm! If there is a value in unapplied time, divide that amount by the average hourly rate your apprentices make.  The answer will tell you how many hours are being wasted every month. Make sure you are sitting down, the number may shock you.  The first question will be: “I must have done the math wrong?” Probably not.

If you have unapplied time, look at what your apprentices or hourly people are doing and look at how we are utilizing them. Are they working on cars with a technician and the tech gets all the flat rate time with nothing credited to the apprentice?

That’s not fair to the dealership or the apprentice. We realize that we need to keep our flat rate techs busy because their paycheque relies on that. We also need to keep our apprentices busy and making us money.

Our apprentices are not for us to send out for coffee runs, running to the license office or cutting the lawn, they are there to work. If we don’t keep our apprentices engaged, working and treated with respect there will be another mystery of the human race along with, the Lost City of Atlantis, Stonehenge and Unapplied Time…a lack of skilled technicians.

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A little care, attention and praise can go a long way in boosting morale and retention.

Finally, you have hired what seems to be the right person and they showed up on day one. Now what?

Ask yourself what does that employee say to their family when they get home after their first day of work? 

“I am not sure I made the right decision.” Or, “holy crap I had a great first day.”

What is your plan for that first day? Are business cards ready? Are phones set up? Are passwords to computer systems set up? Are there scheduled appointments to meet every manager? Are the managers prepared to explain their departments?

A lot of us work at exciting brands. Are we excited about our new hire? Is there a process manual on how you do business? So many questions, so many things to do! 

Yes, you need a well laid out plan to impress your new hire on DAY 1. It sounds so simple, but does it actually happen?   

We often train new managers and the horror stories we hear are incredible. “They had me stroke the previous manager’s name on the business card and write my own name, I opened the drawer and an old lunch bag was in there, I am using the last manager’s passwords like everyone else.” 

So many horror stories, yet so simple to change. Develop a plan and make that new employee feel like they made a great decision joining your dealership.

A recent study showed that 60 per cent of our employees are disengaged from the workplace.

That means a whopping 60 per cent are showing up just on time or late, doing what’s asked of them and heading to the door at 4:59 and squealing their tires out of the parking lot. How do we get our aftersales staff more engaged? 

Goals and targets are one of the easiest ways to engage aftersales staff. However, so many managers we talk to can’t explain their targets to us. The targets come top down and sometimes seem unrealistic.

Goals and targets are one of the easiest ways to engage aftersales staff. However, so many managers we talk to can’t explain their targets to us. The targets come top down and sometimes seem unrealistic. 

One of our company’s mottos is very clear, “If they are part of the battle plan, they won’t battle the plan!”

We need to teach our managers how to properly target aftersales. It’s actually very easy if we are properly tracking productivity and efficiency.   

Capacity is the key. Every technician has the ability to produce so much. Figure it out! 

Available Hours X Productivity X Efficiency X Effective Labour Rate = amount the technician can produce.

Ask yourself: Are your targets attainable? 

We recently had a General Manager show us his yearly target he had given the service manager. The target was a half million dollars over what the department could produce. 

Needless to say everyone disregarded the target because they never hit it. The purpose of a good target is so your employees can hit it, and you can celebrate it! Engage your staff in target setting. Remember: If they are part of the battle plan, they won’t battle the plan!

Communication is key. Lack of communication can be one of the biggest reasons technicians don’t feel part of the team.

Do you ever hear your technicians saying: “Oh I am just a tech, no one tells us anything”?  OMG, just a tech!

We hear this all the time. How often does your service manager meet with your technicians? Is it the standard quarterly tech meetings? Those are productive right? 

No! The techs usually come with a list of grievances and the service manager quickly becomes defensive.

The meeting gets some voices raised and it turns negative quickly. Everyone leaves the meeting more frustrated than when they arrived. 

The chances of another meeting get slimmer and slimmer. We suggest weekly if not twice weekly ten minute meetings. This is where managers usually tell us we have nothing to talk about every week. Really? The service manager can talk about the business. How are we doing towards our common goal?

Remember we praise in public, discipline behind closed doors. Celebrate the successes in these meetings. Any bulletins we want to highlight; a new special tool we just received from the manufacturer. Talk about what it is and what it does and where you will find it. Read some positive CSI feedback you received from the customers. Techs would love to hear what their customers are saying about them. A good manager might ask a tech about a difficult repair they had. “Hey Steve, last week you worked on the F150 with the check engine light on. That was a tough one. Why don’t you tell us about it?” This accomplishes two things publicly. The boss recognized that the tech had a tough job and pointed it out making the tech feel good about getting the recognition and when he explained the job the other techs, heaven forbid, might learn something.

The next thing a good manager can do is say thank you. I know you do bbq’s for your staff but that doesn’t mean we should get the apprentice to drag out the bbq, run out to the grocery store and buy the supplies and then cook them.   

After everyone has been fed the lucky apprentice can clean it all up. The apprentice will dread when you want to celebrate. The manager should do this all. Cooking for your staff and handing them a burger and saying “Thank you for working so hard” is the least they can do. Find people doing something right. As managers it is so easy to find stuff going wrong. Imagine what kind of culture you could build if you caught people doing stuff right?

It’s really pretty simple. Excite me when you hire me. Give me attainable targets that I understand how to achieve. Communicate with me and please, please celebrate my successes publically.

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They might already be working for you but you just don’t see them.

How do we know if our workshops are working at their maximum?

Stand up, walk to the service manager and ask them: What was our shop productivity last month? The answer should come very quickly. Heads up: 80 per cent is a failing grade.

If you are tracking proficiency…forget about it.

Proficiency is a KPI created by the manufacturers because dealerships couldn’t get their technicians to punch properly. To fix proficiency you must go back and first look at productivity. Why not just track productivity correctly in the first place?

Productivity is simply hours punched (clocked) on work orders divided by available hours. Every day our technicians walk through the back door and hand us a gift of 8 hours of skilled time.

Think about that gift like a pizza. Productivity will tell you how much of that pizza you are eating every day. We want to eat the whole pizza every single day and WASTE nothing.  The responsibility of eating that whole pizza falls on the service manager. How busy we keep our technicians is up to us. Below are four tips to help you devour that pizza:

Tip 1:

Productivity is won or lost by the appointment. Walk to the service advisor/appointment coordinator and ask how many hours per day are we currently booking, and what is our booking plan.

If they tell you they don’t book by hours they book by the number of appointments, throw the pizza out. You will never eat all of it. Every good service department knows how many hours a day to book to keep productivity high.

Sit down, develop a well thought out plan on how many hours per day you are going to book. Here is a very simple plan.

We have 9 technicians and one first year apprentice. Everyone works an 8 hour day.  Take the 9 technicians and multiply that by 8 to get 72. The first year apprentice we will book 4 hours per day. 72 plus 4 would give you 76 hours per day you must book.

Wait! What about upsells? Upsells will be handled with efficiency.

Efficiency is sold hours divided by punched (clocked) hours. We see efficiency numbers ranging from 125-150 when tracked correctly.

Therefore we have the ability to sell 90 (76 X 125 per cent) hours that day. This sounds so simple but a lot of dealerships we walk into don’t do this. If you fail to prepare, then prepare to fail.

Tip 2:

Train the meaning of productivity to everyone in the dealership. Everyone must understand the value of time, and what we lose when we waste it.

Let’s take the same technician count we had in tip number one.

10 (total techs) X 8 (hours available/day) = 80 available hours.

Your shop is working at 80 per cent productivity. Take 80 X 80 per cent = 64 hours. 80 – 64 = 16 lost hours.

What does 16 lost hours per day cost a repair facility per year? 16 X $150 (door rate) X 21(working days in a month) X 12 (months in the year) = $604,800.

And you thought 80 per cent was a passing grade! By the way, increasing productivity from 80 per cent to 90 per cent would generate an additional $302,400. You must start to obsess about time.

Tip 3:

Go to the Gemba is a Japanese term meaning “go to where the action is.”

Go out to your workshop and grab a chair and sit down somewhere in the shop and find out why your technicians leave their bay. If they are not in their bays turning wrenches then they are not making you money.

Observe and document everything and how long they were away from their hoist. We often recommend that you do this at three specific times of the day. First thing in the morning when your technicians start their day, at lunch and at the end of the day.

In the morning  observe if they start work on time? Are your techs dressed, tool boxes open and ready to work? Do we ask our techs to be on time and there is no work available because our service advisors start at the same time so nothing can be written up? Are your techs back on time for lunch? What happens in the afternoon? Are we out of work by 4 o’clock?

Technicians walking around the shop are wasted motion and not making you money.

Tip 4:

Everyone in your aftersales department should have a target or goal to achieve. This is especially important for technicians.

Start off by having your service manager sit with each one of your techs. Show them what they made last year and then ask them what do you want to make this year (without a monetary increase).

Then take that figure and show them the hours they need to produce every day, week and for the month to achieve their goal. Make it their plan, don’t tell them this is what they have to achieve. Work together on these goals.

What you will build with these meetings are goals not only for individuals but for the entire team. Then meet regularly with them and discuss how they are doing to achieve their monthly targets. This is a great opportunity for two way communication and for coaching. If they are part of the battle plan, they won’t battle the plan.

Remember in our example above taking the shop productivity from 80 to 90 per cent generated an additional 8 hours per day.  Hmm, that sounds like you just found an extra technician and they are already working for you!

The post Need another technician? appeared first on Canadian Auto Dealer.

Our fixed ops experts will help dealerships run more profitable service operations

Each day our technicians walk through our work shop doors and hand us a gift… that gift is eight hours of skilled time.

We have usually spent a fair amount of money training the technician so we can go so far as to call it skilled time. How we utilize that gift of eight hours every day is where we will be putting our focus.

We are all struggling to find technicians, yet in many of the dealerships we go to, the extra technician is already there, just underutilized.

How well you utilize your technicians’ time is found in one key KPI: productivity.   

Productivity is defined as Hours Punched on a work order divided by Available Hours. Simply put it is a measurement of how well you utilize the gift of the technicians’ time.

In so many dealerships that we visit, productivity is either not calculated or it is calculated incorrectly. Extra technicians are already in your workshop, you just have to increase their productivity.

When you find the time lost and increase your productivity you solve two problems: capacity and profitability.

Now onto the introductions. Wolfgang and Andy have a combined 75 years of experience in the automotive dealership world.

Wolfgang has spent his entire career in After Sales holding many positions from service advisor, parts manager, service manager to fixed operations manager. Wolfgang was also invited as part of a team to open the world’s first Mercedes-Benz Mar 2020 dealership in Switzerland.

Andy has also worn many hats from service manager to general manager, and most recently as a managing partner. We have both had rewarding careers and have worked with many amazing people and manufacturers along the way.

Okay back to the topic at hand.

Find out what your productivity number is. Anything above 90 per cent, if calculated correctly, is good.

If your workshop’s productivity is below that you need to ask, how do we lose time?

Analyze your processes from your customer’s point of view. Are you booking by the number of appointments or the number of hours? Booking by the number of appointments usually leads to running out of work early, but at a minimum it will never drive customer satisfaction.

Are your customers arriving in the service drive at the same time your technician is walking into the workshop ready to work? The morning rush is never good for our technicians.

You must have the same number of work orders already processed and ready to go as you have technicians dressed and ready to go.

Do you deliver parts to your technicians or do you have your technicians leave their bay (the place they make money) and wander across the shop and stand in line at the parts counter?

How does a technician get approval? Do they wait at the back parts counter for a quote, then walk it over to the service advisor and wait for the approval?

Can you solve this problem by establishing better lines of communication to keep the technician in their bay, making money?   

Is your shop organized in a way that benefits the technician, or is it a daily obstacle course of walking over boxes of special tools and around stacks of orphan tires that costs our technicians time?

These are but a few examples of where we lose time. We can’t stress enough that every second a technician leaves their bay, YOU ARE LOSING MONEY.

It’s about time you started to obsess about time. If a parts manager lost a $1.000 part we would all know about it and the hunt would be on.  We lose so much more than this every day in our workshops and fail to go searching for it.

Our obsession about time led us to write a book called “Stay In The Bay” A Road To A Leaner More Profitable After-sales Department, which we thought would be a great title for this column.

We often ask the questions “Why do you do it this way?” and the answer we usually hear is “Because that’s the way we have always done it.”  Here lies your opportunity.

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