A. Little Help
- Author: Art Little
- Subject Matter: Management
- Issue: Controlling costs
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 last week? What was your average parts percentage on major repairs? If you cannot 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 to have any chance of making a real profit for yourself. That’s the game. If you can do that, you can make a lot of money. If you can’t, 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. The reports they give me to look at tell me a lot about how they manage their shop.
I had a customer who was great at advertising. He could tell me all about it. He introduced me to his advertising reports from the people who sold him advertising. 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.” There was this little matter of not having sales and production reports that would have completed what I needed to evaluate the shop. When I asked for those reports he could not produce them.
He and his manager were not recording these great leads or identifying where they came from, and his workflow system was 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 did not need the board. By the way, when a manager tells you that, two things should come to mind: (1) There is no one that smart. (2) He is hiding something. Shop owners who don’t monitor work in progress are creating a problem for themselves and may not even realize it. When the employees know that the owner has no way to track employee productivity or does not enforce it, they tend to take advantage of the owner.
This is where shop owners who don’t manage work in progress get penalized in the productivity game – red flags everywhere. Theft is easy if there is no accountability. Sales are missed. Parts that weren’t needed get bought and not sent back for credit. Vehicles are not delivered on time, holding up cash flow. The parts houses charge what they want to because no price shopping is done. Employees get away with low productivity percentages; the list goes on. It’s hard to make a profit with all these penalties working against you. You have to wait for the final numbers from the accountants before you know whether you have made a profit. That is a miserable way to make a living.
The solution to this owner’s problem was to install sales and workflow procedures that he could understand and to hire a manager who knew how to work a lead system and manage workflow. Problem solved.
Here’s the point. If you don’t track work in progress and get involved in production issues only after the money is spent, the tail is wagging the dog, plain and simple.
This situation is not uncommon. Why do a large percentage of shop owners not get involved in the production process? First, most have not been trained on proper workflow policies and procedures. They can’t go to the local college and sign up for a course on transmission-shop workflow management. Many have no sales or workflow experience because they have never worked in a shop as an employee and team member. So, when they have no educational background or experience in that area, controlling arguably the most-important part of their business is tough. This is true especially for the new owners coming into our business. They pretty much end up settling for what they get.
It does not have to be that way for you. You can learn what you need to know to control parts and labor costs. 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 a way to get started 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 who works for you understand. Find a completely new system or improve on the one you have. The main thing is that it be better than what you are using now and that you learn and understand the new system well enough to train everyone on it for as long as you own the shop.
This 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 everyone focuses on your new system and gets excited about productivity it is as if you are saying, “We are going to play but we are going to play with my ball.” The message is clear. You are focused on productivity and will never be out of the loop again.
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 as in any game there are rules and a scorekeeper. You have everything you need to play that game. Use lead reports, sales reports, production reports and parts reports to keep score. If you track workflow, you can measure productivity and get the information you need to avoid red flags. Let me give you an example.
Let’s say you are working on a 4L60-E. You look up the book hours, and let’s say 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. Suppose he took seven 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 be based mainly on this percentage. That is just one of many ways to measure productivity.
You want to be fair to your builder and yourself. Keeping score and grading productivity allow you to do that. If he is a 120% builder, you might avoid a red flag for overpaying him.
We can also track parts costs to avoid a red flag for paying too much for parts. Rule No. 1, get two or three price quotes and delivery times on every order. Now you have the time and money information you need to make the right decision and avoid red flags.
I know change is always hard to implement. We manage transmission specialists. They are set in their ways and don’t like anybody messing that up. I get it. Sometimes, however, that attitude has caused us 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 money the shop goes out of business and employees do not have a job.
A lot of shop owners in our industry have gone out of business the past 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 to understand and control productivity. It is a team effort, requiring cooperation and teamwork. Employees who refuse to cooperate should be replaced by employees who will comply. You must show your resolve to every employee. You may lose employees and create some drama, but in the long run everyone in the shop will be better off.
There is usually a good reason why some employees don’t want to be held accountable. The best thing you can say to this type of 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 make it like a game. Keep it simple to start. Set some basic goals, such as the manager needs to sell $17,000 a week, the builder needs to build nine units a week, the installer needs to do 10 round trips, parts costs should be 23%. That will get you started.
There are many goals that can be set for the shop, and bonuses are an easy way for you to communicate your goals to the team. Establish the payouts to employees when they meet their goals, and have fun with it. Good employees like friendly competition and a chance for recognition and money.
A lot of shop owners who delegate sales and workflow management and do not monitor productivity have missed the opportunity to make higher profits for many years. Are you one of them? 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? Which parts to order? What work is assigned to the technicians? If the answer is no, the tail might be wagging the dog.
If your parts costs are high, why? If your labor costs are high, why? If your sales are down, why? On the other, hand if your sales are up, why? If your parts and labor costs are falling in line, why? If you do not get involved in the sales and production process you may never know.
If you are new at this, keep this in mind: Sales and work in progress are all about the money to you but 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, technicians waiting on parts and the owner wanting money all day, every day. 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 game so you can help guide and support him in an effort to make your customers happy and make yourself a decent profit.
The successful management model today includes a shop owner who gets involved with the sales and workflow processes and helps his manager control sales and the cost of parts and labor. These shop owners set goals, then monitor sales, parts costs and production. Communication lines are always open. He 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 have any real control over sales, parts costs and productivity, shop owners have to be on top of their work in progress and take timely action.
So, if you find yourself eating lunch with advertising guys and accountants nowadays, it might be a good idea to pack a sack lunch and go into the shop and eat with the guys who do the work too. Who knows, maybe that dog will start wagging his tail again.
Art Little is the founder of TransTeam. His website is the home of the National Employment Headquarters for the transmission industry. He has been an industry pioneer in Internet technology since 1997, and his background in shops goes back almost 30 years. He is respected nationwide as an owner and manager who specializes in multiple-shop management. Today he is a software developer for the transmission industry, offering apps that make everyday tasks in a transmission shop easy by using today’s technology. TransTeam’s mobile technology puts transmission-shop production on a smart phone. Art invites all Transmission Digest shop-owner fans to go to his website and become a TransTeam fan. Visit www.transteam.com .
