Being judged on something without you knowing is kind of like being asked to drive without a steering wheel, but it happens to Service Managers all the time… So that’s why today’s show is all about the 3 KPIs, or Key Performance Indicators, that Service Managers are judged on– Whether they know it or not.
But before we get to Service Manager KPIs, we got a story from one of our own guys regarding the infamous Parts Department. Our editor, Michael, had a question for the show. So he crawled out from the broom closet where we keep him, and told us about his recent experience getting his car serviced. Now, Michael needs his car serviced pretty soon because he's taking some buddies on a road trip across the state of California and into Oregon, so he needs to make sure his car is safe.
Keep in mind, Michael drives a 2020 Corolla hybrid. His car is literally a brand-new model, and the reason why he's bringing it in for service is because there's a recall on the back seat belts. So he's getting the car, which is brand new, serviced at the dealership of purchase due to something that was entirely the manufacturer’s fault. This is a slam-dunk for the dealership to give Michael a fantastic experience and earn his business for life (hint, hint: Customer retention is one of those KPIs that Service Managers are judged on). How do you think it went?
Well according to Michael, it went like this:
They told him on the phone, “Okay, well, we can't deal with the recall until we check out the car,” so he says, “Great, I'll take it in.” He takes the car in, they inspect it, and he gets a phone call at the end of the day saying, “Hey, we did your maintenance and everything's done. But unfortunately, we don't have the part for the recall, so we're going to order it, it should be here next week, and we’ll just have come back in and we’ll replace it then.”
Fast-forward to last week. He calls the Service department saying, “Hey, I'm bringing my car in tomorrow for a recall. Last week, they told me to schedule an appointment for this week. Before I bring it in, I just want to confirm that you guys have the part that you needed.”
So, it's been a week and they still haven't confirmed with him whether they have the part. The lady on the phone puts him on hold for a good minute because, wouldn't you know it, she has to confirm with the Parts Department. Then she comes back and says, “Hey, so in order to do that recall, we need to get your car in so we can inspect it and see what part to order.”
Now, Michael is certain that he doesn't have some form of amnesia, because he swore that already happened. “Oh, well, I did that last week,” he says. “They already inspected my car.”
She says, “Oh, well, in that case, your part is definitely here!”
Really? You magically confirmed you have the part in the 5 seconds? “If they’ve already inspected it, it's definitely here. Come on in!”
So whatever happened to Michael? Is he still with us? Did he survive that trip? Maybe you'll have to tune in next time to find out.
In all seriousness, what I'd probably do in this situation is I'd call and ask for the manager like, “Hey, this is my confusion and I'm getting frustrated. Could you help me?” Either that or ask specifically for the Parts Department, because naturally everything's their fault.
However, Jeremy personally wouldn't rely on Parts for that. To him, there's two possible scenarios for what happened: they either have a stockpile of those replacement parts ready, but they need to have the inspection done first, which they apparently forgot that they did the first time. That or, like countless Parts Advisors, they're saying the parts are on order, then they never show up.
What boggles my mind is that this is a major Toyota dealership in Hollywood. Do they really not have an appointment system or CRM in place to just send him a text message saying, “Hey, your part has arrived. We're ready for your appointment. Confirm your time. Push the button.” I guess I should stop complaining. After all, if every Service drive was hitting their KPIs, there wouldn't be a need for coaches and training, would there?
So if you're ever in a situation like Michael’s, I would call and talk to Parts. Maybe even ask for the Parts Manager, but make a big deal of it. Christian gave some pretty interesting advice which is to make them physically touch the part when confirming with you, or at least maybe have them stare at it longingly from across the room.
There's also the chance that you could get them to provide a loaner vehicle. Although, if they don't have the parts for the recall, who's to say they might have misplaced some of their loaners? One thing to keep in mind is that places might not give you a rental if they know you're, say, driving across the state with it. So this is one of those few times when I'll tell you that it's in your best interest to lie.
This story was a perfect example of a Service department that’s objectively failing to hit their KPIs, so let’s get on to our main topic for this week– the 3 KPIs you're being judged on without realizing it.
This is one that just boggles my mind. A lot of times when I get on a strategy session and ask shop owners, “What's your profitability,” nobody knows. Now I may be wrong, but I always thought that the reason for doing business was profitability. Your business doesn't work if it isn't creating revenue, so profitability is the KPI for everything. Last I checked, shops and dealerships aren't charities… unless you're just a nonprofit where you can pay yourself a salary of $5 million a year.
A key thing with profitability is to not get caught in the four letter word of B-U-S-Y like a lot of other Service Managers. Not all work is equal, some is profitable, and some isn't. Help people but, at the same time, be careful about work that's bound to be inefficient and will waste time, which will essentially mean you're paying to fix a customer's car.
Every month, the General Manager or Dealer is getting a financial statement, and the first thing they're going to do is look at the profitability of each department. Most of the time, the Service Manager never sees the financial statement, but they're still being judged on it. It's a trick bag from the Dealer's side, but they're not being educated on that. It's just this secret metric that you're getting judged on.
Let's say you come into a Service Manager position and your pay plan's based on gross profit. At that point, you're assuming the social contract that your measuring stick is gross profit. The truth is that it's net profit; it's total profit at the end. Whether or not you know that doesn't change the fact that this judgment is affecting your pay plan. That's why you might come in and generate a ton of gross profit and over-expand, only for your expenses to exceed your gross profit.
You lose the Dealer money, so you lose your job, and you're left wondering why.
I don't know of any industry where you're judged on something you're not privy to like that. It's like driving a car without a steering wheel. What happens in dealerships is that most of the General Managers or Dealers come from car sales. They're not sharing the Service and Parts numbers, because they don't understand them. It's kind of like, “I know this, I know sales, I know F&I, so let me work on that, but I don't understand this.”
So, the steering wheel you don't have is information, but even when you have access to the information you need, you still don't understand it!
It's like compounding problems on top of each other. If you were a person trying to run a good business, the only thing that you're going to revert to is ‘if we're busy, we must be doing good.' So what we see time and time again is that every hour of labor they sell, they're losing 10 bucks. At that point, you might as well be standing out front and handing the customers $10 bills.
My advice in this situation is to trick the General Manager or the Dealer into giving you the information. I would go them and say, “Hey, I want to be mentored on this. Would you mentor me?” I've mentioned this before to play to their ego, because they have huge egos.
Make no mistake, the Dealers are firing Service Managers because of a lack of profitability, even though they were never given the tools or training to do understand profitability. The turnover for Service Managers is high because of this reason more than anything else, even though nobody realizes it.
Customer satisfaction and retention.
In case you need a reminder, retention is one of the most important KPIs for your Service drive. An increase of customer retention by just 5% can lead to a 35% increase in profitability. So this means how many customers come back to you…. Like what Michael won't be doing for that Toyota dealership in Hollywood. So, if the dealership that sold the car has home field advantage, why do dealerships lose 72% of their customers to independents over time? The reason the retention falls is because of the customer's perception and feelings about you. That's it. So as a Service Manager, you need to get involved in the car sale!
You need to own the idea that you have home field advantage, but those customers are scared. They perceive that your prices are too high, or your new car already has a recall for faulty seatbelts. It's a huge hustle. The dealerships take advantage of the idea that the customer has to go to them, but they lose them eventually. As soon as somebody doesn't have to go to the dealership, 80% of them go somewhere else.
You're in the business of being the lubricant in the process and constantly improving the customer experience, because the customer experience is the future.
It's incredible that you're running a factory and you have no idea what the factory produces. Most of the time, the monkeys have the key to the zoo.
There's two questions that can tell you how good somebody is at their job: “What's your net-to-gross?” and “What's your shop efficiency?”
If I go to a plant manager at a production facility, Pepsi Bottling Company or something, and I go, “How many cans?” they'll be like, “We bottled 3 million cans yesterday.”
You go into an American Express phone room and ask, “How many calls?” “We had 3,000 customer issues and 1,750 of them are solved within 3 minutes.”
If I go to a shop and no one can answer those two questions, that's suicide. You're not running the shop, the shop is running you.
So those are the 3 KPIs you're being judged on, but before we wrap up let's answer some questions. Remember, if you send us a question, and we read it on the show, we'll send you some free swag.
“As a fairly new manager of an independent repair shop, how would you deal with a technician that will not take any type of criticism? He gets mad and walks out. He comes back the next day and apologizes but I still lost a lot of time and service because of him.”
Now, you could fire him.
Or, the more creative option would be to call his wife. Or his husband, whichever it is, if he's married.
The challenge here is that nobody wants to lose a technician and the talent pool for techs is dwindling, so this is a scenario that happens all the time regardless of if you're at a dealership or an independent.
Nobody likes criticism. You have to understand you're dealing with human behavior and you need to manage that behavior. The thing that raises some flags is that the guy just walks out in the middle of the day. If he comes back and apologizes later, then his heart's in the right place, but he still needs to figure out how to deal with his emotion. Maybe get some sort of therapy.
Christian's advice is to start by pulling the whole thing back. One, explain that the behavior is not acceptable. Second thing is before you make a withdrawal, you have to make a deposit. You have to connect with your people and say, “Here's what I expect out of you and if you're not doing this or this, then there's kudos or there's corrections to be done. There's going to be times when I'm going to give you corrections, because I care. And I want you to be the best version of yourself that you can be. And I'll need you to accept that criticism, grow and learn from it.”
Beautiful. You could put that in a Hallmark card.
The other line in the sand is that he can't just storm off like a toddler. It's almost as bad as throwing a wrench.
“I recently asked the service director, after interviewing an advisor, if the advisor asked what our net -to-gross percentage is at. He informed me he did not. I then inquired what we averaged month to month, and he told me we stay around 11% each month. My question is, how bad is 11%, and what percentage should someone's dealership push to achieve? Thank you for your time.”
11% isn't bad. It's a little higher than the national average, so that's not bad. The goal would be 30% plus. I hesitate to say just 30 because it seems like when we say 30, people hit 30 and then they put their feet up and quit. Do as much as you can while having high retention and taking care of customers. It's a balancing act.
If you're losing money, it's harder to get from losing to break even than from 11% to 30%, net-to-gross. You're doing more right than you're doing wrong. Absolutely.
Thank you guys for tuning in, and we'll see you next time on Service Drive Revolution!