Chasm between Fixed Ops & sales

[Richard]

Ok, let's say your Fixed Ops Department runs pretty well, Parts & Service are singing from the same page, ect. What's the 1st steps to get Fixed Ops and the Sales Department to work better together, instead of tossing snide comments towards each other? How do you go about showing the New or Used MGR that you have to mark-up the parts used on his/her vehicles to remain profitable to be able to provide Fixed Coverage for the entire operation? I think this is in reality a good task for the owner or GM, but if they don't how can we as Fixed Ops managers do it?

[Gary J. Naples]

Hi Richard,

You're absolutely right! The only real solution to this type problem must resonate from the top. There must be a corporate wide no tolerence policy toward interdepartmental squabbling. Sad to say, its just not the case in many dealerships. However, my research points to higher productivity and a less stressful work environment when this type of operational behavior is not condoned.

Unfortunately, there is no cookie cutter answer. But, if you haven't already, you could try this approach.

I'm assuming the sales manager is a professional business person. You can try improving the working relationships between the departments by increasing positive dialogue between yourself and the sales manager. Communication is key. You have to find common ground and strike accord. You may find that you have to be flexible, but not to the extent that you compromise principles or the integrity of your departments. The objective is to create a close business relationship based on shared cooperation that will reduce the likelihood of adversarial confrontations. Its not as easy as it sounds and it won't happen over night. It will take work. But, when you do win the department head over he will set the tone for the rest of his departments employees.

Short of any type of mutual solution, between yourself and the other department manager, you'll have to get the GM or owner involved and hope they respond quickly to discourage this type behavior.

Good luck.

Gary J. Naples

[This message has been edited by Gary J. Naples (edited 06-01-2000).]

[sallen1]

To Richard,

You are right that the strategy must come from the top and you need to exert some influence. Ask yourself: what differentiates your dealership from the competition? Probably your Fixed Ops (service)! That's true for us and I suspect it's true for everyone.

The service department is historically more profitable due to margins on what is sold. Markups on vehicles may reach 8% (and that's high). Service is usually 50%. The big difference between the departments is cash flow: There is little cash flow resulting from service especially compared to the variable departments. Cash flow is just as important as profit. Businesses that show a profit will fail with negative cash flow. Remember, every hour of labor you sell has a cost of maybe $20 whereas each vehicle on your lot represents tens of thousands of $$. Quite a difference!

To maximize both profit and cash flow simultaneously, cars must be ready for sale as soon as possible. This becomes a function of the service/get ready department. Low priority set for new-car prep and used-car recon has a negative impact on sales (read: cash flow).

Service markups on internal sales must reflect 'retail' pricing so that the proper priority is realized. Why would the service department want to work on discounted (internal) jobs? Also, ther service profit only shows on paper until the vehicle is sold: time is money.

The bridge across your chasm is easy to build when all key managers agree on what's important. Compensation plans help too, keeping in mind that vehicle sales generate vehicle service, and a good service department is a competitive advantage. I subscribe to the idea of 'pay from the bottom line' for all department heads.

Remember, business strategy and dealership policy is defined by the owners/general manager. That is where this starts. The rest is up to you and your ability to work with other managers/employees. I've heard of dealers who'd rather have the fixed ops and sales completely separate and perhaps competitive with each other. But that makes no sence: internal competition is destructive. The only thing that matters is if you're making money.

scott

[Chuck Hartle]

Wow! What a loaded subject. What a great response by Sallen. Spoken like a true dealer who can really grasp the importance of a single operation. I couldn't agree more with you.

I had some real frustrations with our Sales Department. Our dealer was very 'pro' in promoting harmony between sales and service, yet was literally absent quite a bit. "When the cat is away the mice will play"! Our Sales department, while being warned not to send out any work for sublet unless the service department authorized the sublet work, would constantly use the back door and challange us. They would devise sneaky ways of doing certain things such as
---- Have a aftermarket bedliner company or stereo company come in the evening, very early morning, or weekend to install cheap bedliners, alarms, and sound systems in some of our new trucks.
---- Have salemen drive vehicles to detail shops and independent garages behind the service department's back.

Then came the deception. "It is better to ask for forgiveness than to ask for permission". The sales department would 'hold' the sublet bill until the vehicle was sold (usually finance held on to the sublet bill and made sure the costs were added to the cost of the vehicle) and secure a purchase order when it was too late to make any type of difference.

The frustration was I always had to 'police' the situation and calm down the service and parts managers who were livid and felt like pawns. The owner would promise to end the practice and for a couple of weeks things would be better. But, once he left the practice continued.

I guess what I am trying to say here is that you can have all the policies in the world but if the dealer or general manager is not there to back it up and constantly enforce those policies they mean nothing. My dealer got to a point where he would avoid me because he felt I made too much an issue of our sales department using the back door. If you leave it open, even a crack, they will take advantage of it.

Our dealership had a very agressive sales staff (almost to the point of embarrasment for our service and parts department) and they were making so much money in sales that the dealer would close his eyes to some of the practices that were used by the sales department. So, I can relate to your question Richard and I know first hand the frustrations that you go through day in and day out. Bottom line, you need a dealer like Sallen to enforce policy and promote a pay plan for key sales managers that encourages all work to be done internally without 'ripping' the sales department off in the name of service and parts!

Chuck Hartle'

[This message has been edited by Chuck Hartle (edited 06-01-2000).]

[sallen1]

Just an idea how I prevent what Chuck described whether or not I'm at the store...

We only pay bills that have a valid purchase order number attached. About 5 years ago we installed an electronic p.o. system that has password controls (i.e., advisors can only write p.o. for rental cars or tow companies but no others). We then sent letters to all vendors (with return ack. cards) stating our business policy and set an 'approved vendor list'. Any new vendors can only be added by the parts manager.

Anyways, the system is controlled by my parts manager. Big deal, you may be thinking but think of this. Any 'backdoor' sublets tend to dissapear because the vendor won't get paid without a p.o. The sales dept. must have someone write the p.o. for them (they don't have the authority).

What Chuck described is actually very destructive in other ways besides the bickering. If costs are added to vehicles and the amounts are not accounted thru normal buz. office proceedures (like where the F&I office 'holds' the sublet bill), there's the potential that your inventory value is inaccurate.

I don't think anyone would want that.

scott

[This message has been edited by sallen1 (edited 06-04-2000).]

[Chuck Hartle]

Scott,

Once again you are right on. This is exactly what happened at our dealership. Not only does it hurt the overall profit structure of the dealership when sales does any sublet work the shop is qualified to do, but I wish I had a dollar for every month the sales department would tell the dealer that they grossed "X" and the office would then come in $40,000 to $50,000 less than what was booked.

Of course, this was not all sublet, but it played a part in it. To ask this question directly, Scott, what is your best suggestion to really get sales and the fixed opertions working in harmony together?

Thanks,


Chuck Hartle'

[sallen1]

To Chuck with some ideas...

Obviously, the best way to get people to work to gether better is to make it unaviodable. That's the way the individual departments are set up: Sales managers must work closely with F&I, service manager works with his/her foremen, etc. But how to bridge that chasm between?

We are used to a full management staff meeting for 1hr every Tuesday at 9:30am. Included are all the dept. managers, warranty clerk, shop forman, new car get-ready mgr., etc. We first go over the DOC (everyone gets a current copy and our inventory schedules) by department starting with newcar the used, service bodyshop and parts. We compare current numbers with forecast and ask lots of questions: How many cars are in recon? Why does the board show 17 sold and the DOC only 12? We also go over the CSI reports when they hit. Everyone gets into the discussion, it's unavoidable. Any projects are delagated with deadlines. This creats a bunch of accountability!

The payplan helps alot too, as all department managers get paid on the total store. Every so often, I have to remind the sales managers just how valuable (to their paycheck) the service department is and visa-versa. This makes the chasm much smaller to cross. But payplans are not the only way.

The people are the key and if you (the dealer) hire managers that are narrow thinking, you'll never get anywhere. Vehicle sales are immediately gratifying but the customer's loyalty to your service department build long term success. Therefore, the focus has to be on both, sales and service, simultaneously and continuously.

This is an easy explaination of a very complex relationship between all the people that work at my dealerships. To say that you could apply this system to your store and share the success would be simple minded. However, to get people working together on anything is a step in the right direction.

share your ideas, please!

scott

p.s. Most of this stuff is the result of a Cadillac 'culture change' program called Standards for Excellence. You'll begin to hear more about it because SFE is going to all the divisions. While the objectives of SFE is to 'sell more Cadillacs and satisfy more customers', we used the techniques and research to shape our managment style.

And as the research results change, so do we.