The number of support personnel needed must be determined in every organizational model. Taking a position on this issue in the retail automotive environment is impossible prior to a brief review of this environment and its unique nature.
The automobile industry has changed dramatically in the last 10 years, and even more significantly post-COVID. Cellular telephones, global positioning systems, and alarm systems that speak to you if you get too close to the car can all be a technical nightmare. Compound technical issues with a customer mentality of “I want it now,” and you begin to understand what technicians and service advisors are faced with every day.
While service advisors and technicians are contending with these issues, management is busy re-examining its marketing and merchandising efforts. This is due in part to the fact that companies such as Wal-Mart, Pep Boys, Firestone, and other mass merchandisers are positioning themselves, not only to control but to dominate maintenance patrons of the automotive aftermarket.
B. The Changing Manufacturer/Dealer Relationship
In addition to rapidly changing technology and increased competition for sales revenue, dealers are faced with a changing relationship between manufacturers and dealers. The manufacturers, in general, are building a product that is better in quality than in the past. These improvements have allowed manufacturers to bring about substantial reductions in warranty expenses.
Manufacturers are warning dealers that the reduction in warranty expenses will have a significant impact on the dealers’ fixed operations gross profit dollars. Manufacturers are advising the dealers to replace the “lost” warranty sales by increasing their customer pay business via retention. One of the ways that manufacturers are recommending that dealers increase their customer pay business is by reclaiming the maintenance services that dealers have lost to non-franchised independent service shops. Programs such as Good Wrench Plus, Preferred Service, Quality Care, and Express Lane Service are promoted by manufacturers to retain the customer in the dealer buying cycles, as well as increase customer pay business.
C. Importance of Customer Retention
Customer retention at the dealer level has become even more crucial to the long-term success of service departments than in the past. The dealership must satisfy customer buying concerns every time the customer comes into the facility to earn consideration for future business. The dealership needs its customers to continue to return for all their automotive needs. The cost of replacing the existing customer base with a new customer is too high from a financial standpoint. Ask any dealer what the cost is for a new car “up.”
While management is internally focusing its efforts on maintaining its customer base, the point-of-sale personnel are overwhelmed. They cannot execute all of the requirements—taking appointments, answering the telephones, researching special order parts—in addition to all of their other responsibilities. This prevents point-of-sale personnel from performing any type of quality follow-up. This inability to perform the required follow-up is confirmed by technicians. They will take the posture that it takes too long for them to receive authorization and approval for additional needed services. The advisors’ inability to perform these functions is detrimental to the overall business logic of maintaining a positive customer relationship.
II. Re-examining Current Business Philosophies and Logic
Unfortunately, far too many times, the issues discussed above are unheard of by service management or just never addressed. With all the changes faced by staff and management regarding product lines, customer relationships, and manufacturer relationships, it is in our best interest to re-examine current business philosophies and logic.
A. Organizational Dynamics
An understanding of organizational dynamics can provide insight into the manifestations of the most common designs utilized in our industry. Organizational structures are evolutionary in nature. Each has its own equities and inequities. The demand for increased support staff can vary dramatically based on the organizational structure chosen by the service department.
All levels of production will work. You must determine which is the best for your shop. Some structures are more demanding of the existing personnel. These demands contribute to the necessity for additional support personnel.
The main point in any structure is to put your staff into positions to succeed. Because there is such a variance in abilities, physical constraints of the dealership, management skills, training, and experience, the best way to organize just based on size is not the most important consideration. The ability to perform the job description and enough time to interact with the guest and other staff members to complete the tasks assigned is most important.
B. Analysis of Service Operations and Economies
More and more dealerships across the country have begun to analyze their service operations. They are looking for more efficient and effective means of operating their service operations in terms of answering telephones, tracking results, waiting on customers, etc. In that search for more effective processes, the standards, benchmarks, and operational logic of yesterday are being challenged.
Many of the standards and benchmarks that were established in the automotive industry are older than our customers. One standard is, “A service department should maintain a 65%-75% gross profit on labor sales.” Who developed this standard? If your current gross profit was 65% on $100,000 of labor sales, would you accept 64% of $125,000? What if you could do it with the same level of staffing and no increase in overhead?
Another standard is, “Service advisor pay plan budgets should be maintained between 4% and 6% of the sales generated by the service advisors.” Would this be true in an environment with a $70 effective labor rate? Would this be true in a market with a $135.00 labor rate? What sales increase would be needed to justify to you an increase in the percentage that you are currently paying your service advisors? Could the same type of analogy be drawn up with the service advisor pay plans as with the gross profit percentage on labor sales?
III. Training for Fixed Operations Managers
Current educational materials and training available for fixed operations managers and staff are better than they have been in many years. Managers are being taught to question existing logic as it pertains to their service operations. Entire college curriculums have been developed to provide students studying fixed operations management with the education needed to work in today’s automotive industry.
IV. Evolution in the Size of Dealerships
Operations are growing larger every day. The day of the small “Mom and Pop” dealerships is fading rapidly. Some operations are being acquired by investment corporations and consolidated into existing facilities. Others are being consolidated by the manufacturers into product lines within the same manufacturer, such as Stellantis multi-franchise dealerships; Ford, Lincoln, and medium-duty trucks; and General Motors franchises. The consolidated facilities are faced with the same challenges as every other dealer. They are also addressing one additional factor—the larger the facility, the larger the management process.
V. Managing the Processes
The typical service manager of any dealership is currently shouldering the responsibility for the following operational factors:
- Sales management through the use of service advisor performance evaluations and an aggressive additional service requests process.
- Development of marketing tools, such as service menus and service pricing guides.
- Effective rate management.
- Production management through the use of production objectives and technician hit ratios.
- Cost of sales controls.
- CSI and customer retention.
- Extended warranty.
In larger operations, management of these processes naturally becomes even more complex. However, for several different reasons, there has been a demonstrated ability to effectively manage this increase in operational size in some operations more than others. The reasons are the individual ability of the manager and staff, the tools and/or equipment possessed by the manager, and the product line represented by the dealership.
Most service managers strive to maintain their effectiveness. As they are examining their facilities, they are faced with the fact that some of their streamlined operations are becoming ineffective. To maintain personal expenses, they have structured their operations to yield the most effective productive-to-non-productive support staffing ratios. So, what constitutes our need for additional support personnel? What is an acceptable level of staffing as measured in the productive-to-non-productive ratios? Does a ratio of two to three productive personnel to one support a realistic goal?
I pose to you this scenario—You have a service manager who is very effective in training service advisors, performing service advisor evaluations, and working with the customers. The only problem is that, due to an increase in the size of the structure, as well as the many other responsibilities of the manager, he or she begins to neglect the advisors on the drive. It could be argued that the manager needs an assistant to aid in performing the other duties so that he or she can spend the time with the service advisors as needed. How many managers would like to hire an assistant so that the manager can work with the service drive? Would the benefit of having the service manager actively working with the service advisors and the service drive increase sales proportionately to retire the additional expense structure and provide a return on investment?
Now change the scenario—Your service manager is not a gifted person when it comes to working with other people. The service drive is still experiencing “pains” due to increases in sales or size. Would hiring a person to assist the manager by providing the manager with the time to work with the service advisors and service drive be the best solution? Or would it make more sense to hire an individual to work with the service advisors directly?
Regardless of the scenario, the manager needs assistance. When additional staff is warranted, the manager should consider hiring an individual who will contribute to achieving relative improvements to the overall current position of the department while alleviating a known inequity. If that individual does not address the known inequity, the additional person must be able to relieve the manager in such a way that the manager is able to address the known inequity. One or the other must occur for additional support to be a viable solution. When making the hiring decision or considering hiring additional support staff, the manager should consider the following:
- Does this individual have the personality profile, training, and experience required for the position?
- Has this person best demonstrated the ability to do the job?
Every manager needs to be provided with the opportunity to effectively delegate responsibility and authority to an individual who can assist the manager. Some considerations when contemplating this type of change should be:
- The need to do a better job as it pertains to providing better customer service.
- The need to improve process development and management.
- The need to better maintain employee relations.
- The need to sustain previous levels of achievement.
VI. Calendar Utilization and Customer Retention
More than 18,000 dealers are in operation in the United States today. These facilities are operated and managed through an organizational structure determined by the manager. Regardless of the size of the operation or the production techniques employed, deterioration in calendar utilization within the support staff can bring much pressure to bear on that staff. Calendar utilization is affected by vacation days, sick days, personal days, and training days. Whenever the employee is not present, an increased workload is placed upon the remaining staff. Who fills in when a service advisor is absent?
We have seen a decline in the calendar utilization percentage, especially post-COVID, along with the family demands of both parents working full-time jobs. Bench strength and cross-training of staff are more important than ever to address this characteristic of our work environment today.
Customer retention, follow-up, and CSI are major points of interest to dealers and manufacturers. Can the service advisor and/or service manager alone be expected to manage the necessary follow-up to these processes?
Regardless of the size of the facility or the number of staff, the inability to have adequate coverage of support level staff consistently influences the overall effectiveness of the operation.
VII. Procuring Additional Support Staff
A. Reviewing Support Staff Needs
The service department evolution process that takes place can be combined or separated depending on the needs of the manager and the facility. It is important to have a means of effectively managing and controlling the production output of the technicians. Daily management of technician production objectives, management and assessment of technician hit ratios, administration of the necessary meetings, scheduling of technician training, and ASRs are all part of the production management process. Equally important is the management of the service drive and the sales efforts of the service advisors. Training programs to continuously improve service advisor performance are necessary. Evaluation of processes to track and manage performance is necessary when determining the effectiveness of the advisor. Marketing and merchandising processes as well as administrative responsibilities can rapidly consume management’s time. All these duties are pressing management to rethink their current staffing levels of support staff.
Several inequities have begun to emerge in an environment where the manager and his or her support staff are extended beyond the point of effectiveness:
- Employees are no longer managed.
- Production management begins to decline.
- ASM performance evaluations stop.
- Asset management processes are not being managed.
- Policy adjustment increases past the point of the normal historical point of growth.
- CSI deteriorates.
- Employee morale deficiencies increase.
- Technician lag time increases.
Two arguments can be presented at this point regarding additional support staff. The first argument is that you are not now at the point where you can justify an increase in support personnel, but at the same time, you cannot improve without some help. In some cases, there should be consideration for installing additional support staffing with an agreed-upon timeline for achieving your goals. The second argument is if you need this person now, how will you pay for it? Regardless of which argument you present, it would be in your best interest as a business manager to know how you would retire any increase in operational overhead that you will incur for this type of position.
B. Paying for Additional Support Staff
There are three common understandings of how to pay for this position:
- Increase labor sales proportionately.
- Increase the gross profit percentage on current labor sales.
- Reduce operation expenses proportionately.
Each of these three is a viable option by itself. The best option would be a package where the expense is retired through more effective management of all these areas. The position would then be contingent on an agreed-upon expense reduction in several key areas, an overall sales increase, and an improvement in labor gross profit. Effectively making use of all three options and gaining relative improvements in all three areas is the ultimate objective. But is bottom-line profitability the only consideration to be made when analyzing the feasibility of additional support staff? How much is improved customer satisfaction and customer retention worth? Can you place a price tag on it?
C. Ensuring the Effectiveness of Additional Support Staff
The implementation and addition of support staff should be premised upon gaining relative improvements in key operational areas of the service department. Base-line measurements, as well as processes to improve CSI, gross profit, increased production output, improved sales, more effective control of expenses, improved operational structure, and improved net profit, should be developed to assist in determining the effectiveness of the changes. A well-designed job description and concurrence from the staff members are vital in achieving the goals. It should specifically address the department’s needs. It positions the employee to be the most effective. You are making the change to improve the current effectiveness of the operation.
These improvements would occur because the manager has written a prescription to address a known inequity in the current organizational structure. These inequities can be addressed by the manager personally or by someone hired by the manager. Which improvement/s occur depends upon how the new position is structured.
A well-run fixed operations department has proven to be a great asset in reducing a dealership’s dependency on new and used car operations. Dealer principals and general managers are asking for fixed operations to provide even greater levels of expense absorption. To achieve this level, the service department must constantly work on improving its operations.
In some markets, dealerships are larger than before. This author has personally seen dealership service departments that employ 50-plus people. The service manager is ultimately responsible for each of these people.
Most of these dealerships are currently utilizing some form of an advanced production technique. These advanced production techniques were developed by people who were looking for solutions to the inequities of their operations. We must continue to question the logic in our operational structures and continue to think of all the “ways.” We must continue to challenge the operational techniques of the past, as well as redefining jobs and positions as they are known today.