On-line Trade Show - Seminars
Is the tail wagging the dog ?
by Art Little
This article appeared in the November 2013 issue of Transmission Digest.
Do you know how many leads you got last week? How many were lost? How many were converted into a sale? How many units did your builder build ? What was your average parts percentage on major repairs ? If you can not answer core questions like these, the tail is probably wagging the dog at your shop.
We are in the business of high priced skilled labor and parts. That is what they pay us for . So, you have to be able to monitor and control your labor and parts costs in order to have any chance of making any real profit for yourself . That's the game. If you can do that , you can make a lot of money. If you can't do that, everybody gets paid but you.
All transmission shop owners look at reports. As a consultant in our industry, I have had the opportunity to look at a lot of reports. The first thing most shop owners want to do is let someone else look at the numbers that have been driving them crazy. What reports they give me to look at tells me a lot about how they manage their shop.
I had a customer that was great at advertizing. He could tell me all about it. He introduced me to his advertizing reports from the people that sold him advertizing. He knew how much , when and where regarding those reports. Then, he showed me his profit and loss report and how they matched up with his advertising reports and asked me what I thought. I said "I don't know what to tell you". You see, there was this little matter of not having sales and production reports to look at that would have completed what I needed to be able evaluate the shop. When I asked for those reports, he could not produce them.
Turns out, he and his manager were not recording these great leads or identifying where they came from. His workflow system consisted of a chalkboard out in the shop that, was not touched the first three days I was there. The manager said he kept up with it in his head and he did not need the production board. By the way, when a manager tells you that , two things should come to mind. 1. There is no one that smart. 2. You are hiding something. Unfortunately , shop owners that don't monitor the work in progress process are creating a problem for themselves and they don't even realise it sometimes. When the employees know the shop owner has not set up a way to track employee productivity or they know he does not enforce it , the employees tend to take advantage of the shop owner.
This is when shop owners that hide from work in progress management get penalized in the productivity game. Red flags everywhere. Theft is easy if there is no accountability. Sales are missed. Parts get bought that they did not need and not sent back for credit. Vehicles are not delivered on time that hold up cash flow. The parts houses charge what they want to because there is no price shopping done.The owner never knows what his parts bill is going to be. Employees get away with low productivity ....the list goes on.
It is hard to make a profit with all of those penalties working against you. These shop owners have to wait for the final numbers from the accountants to come in before they know if they have made a profit. It is like sitting in your car outside the arena where the game is being played with no radio. That is a miserable way to make a living.
The solution to the above customers problem was to install a sales procedure and workflow procedure at his shop that he could understand and help him recruit a manager that knew how to work a lead system and manage workflow . Problem solved. Here's the point. If you are a shop owner that doesn't track work in progress and you just get involved in production issues after the money is spent , the tail is wagging the dog at your shop, plain and simple.
Here is the acid test: If your manager walked in and quit right now, could you or another manager go into your shop and easily pick up where he left off? Would you know where the manager left off? Would you know what to sell? What was promised to the customers? What parts to order ? What work is assigned to the techs ? If the answer is no...the tail might be wagging the dog.
This situation is not uncommon. Why do a large percentage of shop owners not get involved in the production process ? First off, most have not been trained on proper sales and workflow policies and procedures. Others have no sales or workflow experience because they have never worked in a shop as an employee and team member. So, it truly makes it tough, when they have no educational background or experience in that area, for them to control arguably, the most important part of their business. This is true especially for the new owners coming into our business. They pretty much end up settling for what they get. Is this happening to you?
It does not have to be that way at your shop. You can lay down and take it or you can make up your mind to learn what you need to learn so you can do something about controlling parts and labor at your shop. Your choice. Step up and get in the game. Quit hiding from it. You can lead your team and be a tremendous help to everyone if you want to. It is not rocket science. It is process management .You just need to decide that is what you want to do and be willing to make some changes.
You can start by making it your responsibility to implement a new sales and workflow system that you , and everyone that works for you, understands. Find a completely new system or update the one you have. The main thing is that it is different than what you are using now and that you learn and understand your new work in progress system well enough to train everyone on the system for as long as you own the shop.
That will give you the control you need to protect yourself from the profit draining red flag penalties. This effort on your part will eliminate the problem of the transient manager hiding what he doesn't want anyone else to know and using his own "special system" that only he can figure out. When you have everyone focus on your new system and get excited about productivity, it is like you are saying " We are still going play but now, we are going to play with my ball." The message is clear. You are focused on productivity and you will never be out of the loop again. You have gotten out of your car and entered the arena.
Productivity is a word you need to start using every day. Do it for a week. Focus on it. Say it. Hear it. Do it. Productivity is the name of the game here. It is the game. And like any game there are rules and there is a scorekeeper. You have everything you need for the productivity game. Use lead reports, sales reports, production reports, and parts reports to keep score. If you track workflow, you can measure productivity and get important information you need in order to avoid red flags . Let me give you an example.
Lets say, you are working on a 4l60e. You look up the book hours and let's say , just for example, it takes 10 hours to build it. You can then go look at your builder's production report and see how long he actually spent on the work assignment. Lets say, he took 7 hours to build it. That would make him a 70% builder. If it took him 12 hours, he would be a 120% builder. Now, we have a way to measure one area of builder productivity. Your builder's salary should mainly be based on this percentage. That is just one of many ways to measure productivity. So, you want to be fair with your builder and yourself. Keeping score and grading productivity allows you to do that. In the above example, if he is a 120 percent builder, you might avoid getting a red flag for overpaying him.
We can also track parts costs to avoid being red flagged for paying too much for parts. Rule number one: Get 2 or 3 price quotes and delivery time on every order. Parts ordering is all about time and money. If you get two or three parts quotes on every parts order you have the money information you need. You can also see what the delivery time is for each vendor. Now you have the time and money information you need to make the right decision and avoid red flags. If you do not have the time and money information, it is not the right time to make that decision. Making a decision before you have that information usually ends up drawing a flag. Winning is all about making the right decision at the right time .
I know change is always hard to implement. We manage transmission specialists . They are set in their ways and they don't like anybody messing that up. I get it. However sometimes, it is that attitude that has caused shops to miss out on changes that would be good for everyone. Important changes that should be made. This is one of those times. This is serious business. If the shop owner doesn't make any money the shop goes out of business and employees do not have a job. Our industry has had a lot of shop owners go out of business the last few years. Were they throwing away their money on parts and labor costs? Did they focus on productivity? I often wonder how many would still be in business if they had gotten involved in managing workflow before it was too late.
We have to track sales and workflow in order to understand and control productivity. It requires a team effort. It requires cooperation and teamwork . Employees that refuse to cooperate should, without hesitation, be replaced by employees that will comply. You must show your resolve to all of your employees. You may lose employees and create a little drama in the shop but, in the long run, everyone in the shop will be better off. There is usually a good reason why some employees will not want to be held accountable.The best thing you can say to this type employee is " I am not asking you to agree with me. I am asking you to comply." If they do not comply, write them up and give them a warning or fire them. If they quit ,trust me on this, you didn't lose much.
On a positive note, tracking productivity can become a motivating factor in your shop. You can set up goals and bonuses that challenge the production team so it can be fun and rewarding for everyone. You can set up your own productivity game . Keep it simple to start with. Set some basic goals like the manager needs to sell 17, 000 a week. The builder needs to build 9 units a week. The installer needs to do 10 round trips. The parts costs should be 23 percent. That will get you started. There are many goals that can be set for the shop and the bonuses are an easy way for you to communicate your goals to the team. Set up what your payouts are to employees when they meet their goals and have fun with it. Good employees like friendly competition and a chance for recognition and money.
If you are new at managing workflow at your shop, keep this in mind. Work in progress is all about the money to you but, it is all about time for the manager. If the manager can spend money to solve a problem and deliver the vehicle sooner , he is going to spend the money and save the time. Don't blame him. He can't help it. He has customers breathing down his neck , techs waiting on parts and the owner wanting money all day long , everyday. He is in the game. It is your job to be a good coach . Productivity is all about making the right decision at the right time and balancing out the time and money. It is your responsibility to watch what is going on in the the game so you can help guide and support him in an effort to make your customers happy and yourself a decent profit when it is over.
The successful management model today includes a shop owner that gets involved with the sales and the workflow process and works with his manager to help him control sales as well as parts and labor costs . These shop owners set goals then monitor their sales , parts costs and production reports as they happen. Communication lines are always open. This owner works closely with his manager and if there is a problem , they correct it together right then , before the time is wasted or the money is spent.That is the key to keeping your penalty flags down.In order to have any real control over the productivity game , shop owners have to be on top of their work in progress and take action before it is too late.
So, if you find yourself eating lunch with advertising guys and accountants nowadays , it might be a good idea to pack you a sack lunch and go into the shop and eat with the guys that do the work too. Who knows, maybe that dog will start wagging his tail again.