Welcome everybody to Service Drive Revolution on today’s show, we answer your questions with our special guest for the episode.
Please give me a round of applause to Mia for being a special guest on the show. I wasn’t going to have to do this alone because I’ve been abandoned by Christian. I really appreciate Mia for doing this and I hope whoever is reading this enjoys it too!
Our Top Dog event is coming up. If you’re in the Coaching Group or in our OnDemand, you know about it, you’ve received your invitation, and your ticket. You’ve probably RSVP’d already, but if not, we have our annual event coming up soon. I’m going to be giving away my Jeep to the Service Manager that has the biggest improvement in Net to Gross, Effective Labor Rate, and strong CSI, which is going to be extremely fun, there’s always a clear winner every year.. Second place is always a little upset though, but the numbers are always pretty clear to correlation to the performance of the Service Manager candidates.
We’re pretty excited about this and it’s a great way for you to get out, get around some positive people, make some new friends, get rejuvenated, get some new ideas, and a new perspective. It’s going to be a blast and we’re doing it here in Los Angeles. I know people are pent up and want to get out of the house, Top Dog will feed your soul.
I was really excited to have Mia on our show and I told her that I’m super excited about our relationship and her style, because I think her style appeals to the younger generation inside the Automotive Industry. Maybe I’m a little out of touch with it, so having Mia on our platform is going to assist our clients in having more engaging training for their younger staff based on their preference, because she has this fresher and more fun way of approaching the Automotive space.
In response, Mia said,
Before we go to our guests, we will answer a couple of questions.
Remember if you have a question and you call into the show, we’re going to send you some swag, but also you get to be on the show.
Call us at 1-833-3-ASK-SDR
“My name is Anthony and I’m the Express Service Manager at my Dealership. We started our express department in 2019 with COVID unfortunately, it really hurt business quite some bit. Now we’re seeing a very large surge of customers coming back in, which is excellent. However, one thing that I am noticing is that we have one Express Service Advisor and we’re trying to find another one. Additonally, we’re trying to establish the rapport that we need with our clients. I read Millionaire Service Advisor when I used to be an Advisor and I loved every page of it. It taught me a lot about the Automotive Industry and I read it over again many times. Long story short, it’s definitely a different world writing up main shop service, as opposed to writing up Express Service and that tendency for the clients to want to get in and out as quickly as possible, it is also difficult to try to build that rapport because you have a much shorter time span and with a lot of the customers coming in for purely Express Service, there’s only so much we can really do to build that rapport to increase our numbers across the board for Customer Service Scores (CSI) and also profit. Chris, if you have any suggestions, I would definitely appreciate it!”
Mia answers this question first and she tells us that if Service Advisors give off a really good first impression in those first seconds and the customer continues to bring their car back to express, to get their oil changed or their basic maintenance done, that’s where you’re going to start building that rapport. Mia says that it’s not going to be the first visit that gets to the customers. She said that it doesn’t matter if the car is there for half an hour or two weeks because customers still want their car out as quickly as possible. Mia tells us that it’s not necessarily about the amount of time that you have to build that rapport, it’s more about how you do it, how you approach the customer, and how empathetic you are.
My approach to Anthony’s question looked a little differently, I believe that quick lube is fundamentally designed to fail in a sense. I believe that from a customer’s point of view, the concept of doing an oil change rapidly and conveniently is a huge asset to your business. What happens behind the scenes is where we get it wrong. How we structure it in the back with the Quick Lube Technicians and Quick Lube Advisors is what we’re doing wrong. Furthermore, the way that we execute it behind the scenes is what’s flawed, not what the customer perceives. We want the customer to perceive that oil changes are easy and convenient, but we should do it in a way where we have the opportunity to sell work.
Financially, the Quick Lube doesn’t make sense and creating opportunity that is part of a business model of being available to do additional work that’s needed is what dramatically diminishes your Dealership. The other thing is in the way we approach this, those Quick Lube Technicians also become Mainline Technicians.
As a result, the turnover for Technicians is way lower because turnover for Technicians is somewhere around 60% in the first two years. It is already hard to get kids into the Automotive Industry and the best thing we should do is maintain their job/position at the Dealership. Having Quick Lube Technicians mixed in with the Main Technicians and having a mentor for them keeps them excited. Your Technicians feel like they’re learning and growing. Which makes your turnover dramatically reduced just by giving your Quick Lube Technicians the opportunity and showing them a path.
“I listened to your podcast about focusing on the things that you can’t draw, that 85% you were saying previously, that you were also talking about Gross Profit. As a Service Advisor, some Dealerships choose the worst way to pay Service Advisors. I agree with you, one hundred percent Gross Profit, as you mentioned, writers have nothing to do with it, don’t see it, don’t control it. So that 15 additional percent of things we can’t control often have a big impact on, um, the money that the writers can make. My question to you is, if this was the worst way to pay Service Advisors, what’s the other way to pay us?”
Thank you for the question. This is something that I’m passionate about, if you heard me talk about NADA, what happens is Dealers go to 20 group meetings and then somebody in there says, “I pay my advisors on gross. You got to pay them in gross.”
They have no idea why, most Dealers don’t even understand service and they think that by paying advisors on gross, they’re protecting themselves somehow and punishing the advisors. I think sometimes when I ask people why they pay on gross, they say, “Because it lowers discounting.” So they don’t even understand what gross is and it’s the weirdest thing. It’s a huge demotivator because advisors on most DMS can’t even tell what the gross is easily and so they don’t know what they’re tracking to make and oftentimes office managers are putting other things to the cost of sale.
Just so everybody knows the difference between sales and gross is the cost of the Technicians. But are you putting benefits in there? Are you putting vacation school in there? There’s lines on the Financial Statement for that, however, a lot of times office managers are charging unproductive wages against their employees and things that are completely out of the Servie Advisor’s control and that they don’t understand.
Let me better answer your question, my preferred payment plan is paying the advisors a percentage of everything they write, warranty, and customer pay internally. I know some people believe that you don’t pay advisors on warranty, which is nope!
At the top of the pay plan, I try to make this 50% of the advisors pay as a percentage of parts, labor, internal, warranty, and customer pay, so that’s 50% of the pay. Now that’ll change if I’m in a scenario where the Service Advisors have a base rate, it won’t be 50% of their pay, it’ll be less.
30% of their pay is going to be on CSI, if it’s a manufacturer that has CSI. Let’s say an advisor makes $6,000 in a month and they hate CSI. I want them to make $4,000 because I want it to hurt. I want them to be invested in their position and I don’t want an advisor that will just sell, not caring about the CSI or the Customer Experience. Then the rest of it, I’ll do an Effective Labor calculation and then I’ll do a customer pay bucket bonus where it’s just buckets of customer pay and an amount.
Part of the design of this pay plan is to be Service Advisor friendly and that the harder you work, the more you can make. In general, this tends to attract the higher performing Service Advisors and scare away the under-performers.
Mia talks about her previous experience of getting paid as a Service Advisor by telling us,
“I worked at several dealerships over my entire career and every time I would start at a new dealership, they would decide to change the pay structure. When I say I’ve literally dealt with every kind that you’ve ever heard of, I really have! However, I have never worked at a dealership or shop where they didn’t pay the Service Advisors on Warranty or Internal and that blows my mind”
Our guest Dan Beaky talks about hiring Technicians, Service Advisors being replaced by kiosks and other interesting things that come into his mind.
He’s a great guy and without any further hesitation here’s Dan!
Dan caught our attention because of his enthusiasm, positive attitude, sense of humor, and how it applies to leadership and the morale of everybody around you. The Automotive Industry’s got a lot of obstacles right now and they’re trying to replace Service Advisors with Artificial Intelligence. Dan first tells us that,
“We’re seeing a lot of other issues with a massive global or at least nationwide Technician Shortage and I don’t think having a pessimistic approach is going to attract Technicians. To be honest with you I’ve been really working on trying to be optimistic and I feel like there’s a huge shift in the Automotive Industry, especially with being able to contact other dealerships via LinkedIn and so on, it seems to be a lot of teamwork going on where if you need help, you can find someone that can help you, which is something we didn’t have 20 years ago.”
To dive right into the water, I ask Dan where he sees things going? How does he view the Technician drought, Service Advisors being replaced by iPads, and Dealers Consolidating?
Dan quickly answers our questions and talks about Technicians first, saying,
“As far as Technicians, the Automotive Industry needs to rethink flat rate. We need to think of something more along the lines of hybrid. Technicians are in huge demand right now and obviously the Technicians know it. If I was a Technician, I would completely use that to my advantage. It’s hard to say where it needs to go, but obviously the Automotive Industry is not going to survive if we just give Technicians $100 an hour just to obtain them; we’re not going to maintain profitability. We’d have to raise our labor rate so high that the customers would seek services elsewhere. We have to think of something that’s fair to the Technicians, something they can count on, but still have some kind of incentive for producing more than the next guy next to them.”
Dan tells us that he doesn’t agree with paying them all hourly, because there’s always going to be one Technician that works harder than the other or works on more complicated jobs. He thinks maybe hybrid style pay plans are probably the way to go and Dans not saying he has this completely figured out, but that’s where his guts going.
Though I completely agree with Dan’s point of view, I told him to think from a business model, if your production is 60% and your cost of the technician per hour, let’s just say it’s $30. If you’re running it at 60%, what does that make your cost to produce an hour? If we said that they’re running at 50%, our cost to produce that hour would be 60 bucks. Because they’re spending two hours to produce one hour. If my cost of labor is $50 in a shop that is hourly, what I have found is that it’s better to pay $40 an hour for good flat rate Technicians than to flip to an hourly thing and have your production go down. The other thing that happens in an hourly shop is that Technicians no longer have to write good stories, they no longer care about that hour of diagnosis, and therefore you have 20 to 25% shrinkage in your billable time because they’re not incentivized to get the most out of each Repair Order.
Dan agrees with me, however, he tells us that,
“There’s obviously a problem in the Automotive Industry and I don’t think any one person knows how to solve it yet. I do love flat rates, don’t get me wrong. But I feel like something has to change.”
Dan finishes off the video and tells us that without a doubt, this is a problem that he knows the Industry needs to solve. Obviously the automotive business is not going to go away because Technicians dried up. It’s a business that has to survive and Dan is trying to get to the bottom of this Technician shortage.
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