Benchmarks are they Valid??

[TheOne]

I stand by my comment. I haven't got time today, but will take the time to night to put the math in an organized fashion that explains exactly why I say it is old school thinking. Dollars and hours do not mix, and labor costs are only an issue if you are not on properly designed performance based pay plans.

[bsilcox]

Thanks Everyone for All the Feedback!! But! I am still having a concern with the number 11 question? Does everybody have 5% or less of Customer Paid repair order count with only 1 line item customer paid per repair order.............????



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Bob Silcox

[TheOne]

Ok so I couldn't just let it sit. By the numbers:

1. Service Advisors should write 10-12 RO's per day with a maximum of not more than 15. In saying this earlier I suggested this was a number that would create the opportunity to maintain CSI and more importantly strong sales. I really pay very little attention to CSI, choosing instead to focus on the sales aspect. My sales process which is fully documented and more importantly tracked daily for compliance relies heavily on the premise that people buy from those that they both like and trust. If customers are buying consistently from people they like and trust who are operating a sales system with built in accountability measures solid CSI is a given. CSI then becomes one of the measurement criteria with which to evaluate how the Advisors are operating the sales process.

2. Daily technician productivity should remain at 120% for domestic stores, and 135-140% for imports. I agree with these numbers, but only really pay attention to them if I am working an hourly shop, or stall space is tight. There are too many variables that come into play such as average skill level and work mix to really deal effectively with this until the shop has matured, and the higher priority items have been dealt with.

3. I like 1.5 bays per technician because it help create a sense of urgency in the shop which is then transmitted to the advisors and the parts department. Too many bays equals too many uncompleted projects in my opinion. I love the idea of one bay per technician and have seen this work really well in Honda and Toyota shops with well trained technicians.

4. Labor gross should be at 70% to 73%. This benchmark has been around for a very long time. I think it is still valid, but I too question it. I believe it is very possible with the right systems and targeted customers to increase this to 80%. As my shop matures and more things come into line I will be tweaking to get closer to this. Variable labor rates coupled with variable labor costing should make this a reasonable number, but it will have to be balanced with my desire to attack the customer base the independents have taken from us.

5. Parts gross should be at 45% of sales. I absolutely agree with this. I have several stores that approach 48% and one that routinely hits 49%. The inventory has to be right, maintenance has to be priced properly (mine is at 42% except oil filters and tires), sourcing has to be right, and the matrix must be properly adhered to. To clarify this is for parts sold on retail repair orders only.

6. Retail sublet should be held to 20%. Not much new or much sublet being done anymore, so who really cares?

7. Tech to advisor ratio should be 4:1. I actually prefer to start new advisors experienced or not at 3:1. I want them to earn the right to have another tech. This is a daily disappearing inventory. I want them to value it accordingly and earn the extra tech. In extremely rare cases I will alow a team to go to five.

8. Two techs per support person in the service department. I agree with this number, but routinely violate the benchmark. I will increase support to increase sales and keep my cycle of growth moving forward.

9. Hours per repair order should never fall below 2.0. There has been a lot of cussing and discussing about this number over the years. Calculate it anyway you like, but I see it as a translation of sales units not flag hours. Average labor dollars per retail repair order divided by posted labor rate is how I calculate it. Through the many years I was doing consulting work this has never failed me. As a matter of fact if all of the NADA benchmarks are used properly it takes the average dealership 2.2 HPRO to break even after fixed allocation

10. I agree wholeheartedly with NADA that policy adjust should not exceed 2% of gross profit. Further more I insist that it be billed at retail if it was a retail or internal mistake, Warranty if it was a warranty mistake.

11. One line repair orders not to exceed 5%. I agree with this number although I haven't reached it. Got to have something to reach for!

12. I have told hundreds of Dealers in twenty group meetings that they are entitled to, yes entitled to 20% of gross to fall to net after fixed allocation. Why else deal with you and me and all of the liabilities if there isn't a reasonable payoff?

Now to address the comments already made.

Gene,
1. I have done the math! There is not enough time in the work day for each advisor to handle 20 to 25 repair orders per day AND maximize the sales opportunities per customer AND maintain CSI AND answer the phones AND AND AND. This kind of volume causes mistakes and is probably why you are willing to accept 5% policy adjust.

9. I addressed Hours per repair order above as a measurement of sales units only. This number does not for me have any connection to technician flag hours. This number comes into play when dealing with effective labor rates, which is fairly easy to back burner if the advisors are paid on a performance based pay plan that calculates hours per repair order as I do. i can go into far more detail if you wish.

10. 5% of labor going to policy adjust suggests you have systemic problems. It also suggests that either you have a CSI issue, or are trying to avoid one by buying the problems before the customer becomes aware that there is one. It also suggests to me that what is being counted as a sale really isn't one. Why else would you be paying so much of what your customer is recieving.

11. 10% of customer pay RO's as single line. Probably a reasonable number nothing for me to argue with.

I don't find your benchmarks particularly lean. Like I said I find them to be old school at best.

Sermgreby,

No argument from me. I would point out that the math I prefer says clearly that if I employ ten technicians I really have only nine. Someone is off to school, out sick, on vacation, or having a baby. I work absenteeism into my mathmatics.

Gmservice1,

I use an advisor pay plan that is 100% performance based. Because this is the case other than payroll taxes and benefits it makes no difference if I have two advisors or twenty two. Atcon and I went round and round about this for years. Their position was that I was creating a tracking cost which is true. My point has always been if the cost fits the guide and I can always work on improving retention and other cost reductions to further improve the bottom line.

I am certain many of you will disagree, and I am certainly open to enlightening ideas. Micheal Causey suggested a webinair on a different subject, maybe we should consider this topic instead.

[sermgreby]

THE ONE

I agree with every statement you make. I do not hit all these guides but am trying every day. The only thing I do not understand is how to get enough hours out of so few ro's written per day. What is your hours per repair order?

[TheOne]

sermgreby,

I will follow the post up with the math in the morning. Thanks for listening!

[jrjgm123]

The One.

You mention you have a fully documented process. Is that available? If so email to jrjgm12@hotmail.com

Thanks

[capsgs]

I have been waiting for a topic like this for some time now. I must say that I agree with "The One" on almost all accounts. Some of the numbers you quoted we have already achieved and some we are still working on. I think billing policy at the door rate is a bit harsh, unless the rest of the dealership, that is living off of the service department, pays the same thing. I am currently attempting to get my ELR to 90% of my door rate. It is a bit frustrating to say the least. We do so much quick service, that it's hard to drive that number without pricing ourselves out of the market. I would be interested in hearing any ideas out there!!

[PB]

What our organization strives for:

1. Good service writere can write between 15-20 repair orders a day. We own over 20+ stores and they are all above national averge in CSI. I agree people buy from whom they like!

2. What difference does it make between domestic and imports. You should be around 140-150%, after that you need to hire more techs or if room is not available open 7 days a week or start a night shift. Hire the best and expect the best.

3. I beleive in 1 bay per technician. If they
are not motivated get rid of them.

4. In todays market labor gross should be no less then 75%. our lowest store is out 75% and we have some exceedeing 82%

5. I agree with a parts gross of 45% and no less. Sell the investment not the price!

6. Why shouldnt all sublet be at 20% except warranty?

7. Tech to advisor should be 4:1. I wont put a new advisor in any of my service lanes until there fully trained!

8. Two techs per support person is correct!

9. Hour per repair order should be at least 2.0, our stores very between 2.3 and 4.5. So it can be done!

10. Again, I dont always agree with NADA its just a guideline. 2% of gross profit is what you strive for, but taking care of customers no matter the cost is the key to GROWTH.

11. 5% is very obtainable. Make sure your advisors introduce the Multi-point inspection on every repair order starting at there first visit. Opens the door later for upsells!

12. I agree 20% should be the lowest percentage and should approach 30% or better.

[sp7128]

PB knows!!!!!!!!!

[GENE WHITE]

Benchmarks, to be effective must produce a profit in the long run through customer retention and long term profit or they are not valid. Keep in mind that benchmarks are like sphinkter muscles (spelling ?) -everyone has one.

Reference the article in this DealersEdge issue "Case Study - California Dealer Ops for Lean sales process..........".

We must not follow our government's lead and hire more people to do less work. This is normally what causes the gross profit to stagnate and not increase especially during good times.

I am reminded of the many times I see one government person digging with a shovel and 3 supervisors watching.

REPLY TO COMMENTS ABOVE

My clients usually have less than !% policy adjustments at full list based on labor sales. This takes Service Advisors selling and quoting properly. It is not easy or everyone would be doing it.

If you need more than 1 stall per technician normally you have a parts availability problem. As we progress more to a General Garage type repair facility as I talked about in my NADA 2000 convention workshop, working on older and higher mileage vehicles, parts availability becomes much more important. You either need parts in stock or redialy available or you will need more stalls or the ability to push vehicles out of the Service Department until the parts arrive.