A New Measure
In today’s marine business world, more and more dealers are catching on to the idea of tracking technician efficiency. For many of them, however, the number they arrive at is simply that: a number that is known but rarely understood. And still, many others, aren’t yet tracking the number to begin with.
Three dealers have found their way out of this challenging rut that oftentimes finds them struggling with employee payment structures and motivational plans for increasing the profitability of this all-important department. These dealers are just like the myriad others who’ve battled their way through. They found their technicians to be a temperamental bunch, they’ve struggled back from running a service department they discovered to be a half a million dollars in the red, and they’ve added structure, predictability and incredible profitability to these departments.
And now they’re offering their methods and lessons for you to learn from.
Measuring a temperamental bunch
How you can slowly implement a better efficiency-tracking program.
By Taylor Richards, owner, Taylor’s Boats
It has been my experience that almost all dealers measure their new and used boat margins, their parts and accessories margins, their expenses and their total net. We do this to make sure each department is profitable and our dealership ends up with the net we need and deserve.
Most dealers, however, do not measure their service efficiency. Service is one of the most important parts of our dealerships, yet we don’t regularly measure the important components of service to tell us if we are profitable or not.
I believe many dealers don’t do this because of the human factor involved. Most of us find it difficult and uncomfortable to directly and daily measure a person’s performance. Especially when it comes to technicians. For some reason we view them as a temperamental bunch, and we don’t hold them to performance standards like we would our sales people or other people in our dealerships.
In our dealership we have monthly goals of hours we need to bill based on the number of technicians we have, working days available and the efficiency we expect from our technicians. It is broken down to weekly and daily goals by department and then by technician.
Each day our technicians know how efficient they need to be and how many hours they need to bill. We keep track of their hours on time tickets and they clock in on every work order and every individual job on the work order. At the end of the day the time tickets are turned in, their hours and efficiency totaled up, and then we post the hours and efficiency for each technician on a white board in our service department by 10 a.m. the next day.
Years ago when I was trying to figure out how to run a boat dealership, I attended the Spader training for service. Greg Snyder taught us the importance of measuring efficiency and how to do it. It made sense to me so I returned to my dealership and began measuring our efficiency.
I can’t say that when we announced we were going to start measuring efficiency everyone was excited about it. In fact almost everybody was very resistant to the idea. When first implementing the process, we were very careful not to make a big deal about it. We just started doing it. We didn’t post it daily, we didn’t punish for low efficiency, we didn’t reward for high efficiency; we just started doing it. As time went on, our technicians became naturally curious as to how efficient they were. That’s when we began to share the information with them regularly.
After several months of tracking the efficiency, we implemented an incentive for total department efficiency, not individual, as recommended in the Spader program. At that time we started posting each technician’s efficiency and total department efficiency in the shop every day. The incentive totaled about $25 to $50 for every 10 percent increase in efficiency for each technician each month. It was amazing to see the technicians motivate themselves to start achieving higher and higher levels of efficiency. They also started working together more as a team, encouraging and helping each other reach higher efficiencies.
When we first started tracking our efficiency, we were at the average level for most dealerships of around 60 percent. This last year we finished the year with an annual average of well over 100 percent.
One of the key motivators of this came along two years ago when we created an incentive program that rewards technicians for every 10 percent increase they achieve in their individual efficiencies. At different levels there are cash bonuses, tool allowances and small perks like a gift certificate for dinner and a movie. As they increase to higher levels, the incentives include vacations and use of a company demo boat. One of the highest levels includes making the payment on their tow vehicle. A value of $500. When we implemented this program, our shop efficiency jumped 20 percent in the first month.
The concern with measuring efficiency and trying to get technicians to work faster is that the quality of work will suffer. In our bonus program, technicians are not allowed to have more than two comebacks in a 30-day period or they miss the bonus for the month. We have found that not only has our efficiency increased, but so has our customer satisfaction, while decreasing our comebacks.
A super technician program
A change of perspective can lead your service business out of the red.
By Alan Bohling, President, Seattle Boat Co.
There was a time in our business here at Seattle Boat Co. when we did not report profit and loss within individual departments. We looked simply at the whole company without regard to the performance of each department. But we received a shock when we began allocating a proportionate percentage of expenses departmentally. Our service department (technician labor, fiberglass and detail labor only) was running nearly $500,000 in the red each year. We were a $7 million sales and service dealer with a seemingly healthy 2-to-3 week service backlog but were consistently hovering around break even. So solving the service loss became our top priority.
A few other key factors contributed to our change in perspective. Our commodity was the number of hours a technician can collect and at what rate. A discounted rate given to the sales department, or for warranty work, didn’t make sense when retail customers were lined up, willing to pay normal rates. The technician’s billable hours were the key to supporting several other staff, not just themselves, plus the department’s overhead and proportionate corporate expenses. We looked at the department in reverse by determining our total expenses, and then by adding a reasonable net profit to determine our service department revenue goal.
Although it didn’t happen overnight, we slowly changed our technician pay plans to incorporate a “flat-rate bonus.” Flat rates are determined by normal allowable time per service job, as reported in flat-rate manual resources, such as Spader, Mercruiser, Volvo, etc. We made every effort to support our technicians so that every minute of their time was productive. We measured the technician’s punch card versus billed hours for efficiency every day and posted them next to the time clock. We provided tool bonus incentives for reaching certain levels of efficiency at month’s end. The results of these efforts began paying off.
We continued to evolve and improve the process. We reviewed other dealers’ methods of operation. At each salary review period, we added wage benefits to the flat-rate bonus rather than base wages. Each off-season, we meet as a team to brainstorm definable goals and strategies to reach them. Key procedures today include:
• Measuring turn times – the number of days a boat stays in the service yard from drop off to pick-up
• Customer satisfaction – immediate report from the customer regarding three critical factors; Was the boat fixed right the first time? – Was it easy to schedule? – Was it finished when promised?
• Clearly understandable flat-rate hours – reported on the technician job cards for each job before the work begins
• Pre-prepared parts bins for all standardized jobs – completed the night before for each technician
• Boat staging load sheets – completed and arranged the night before
• Special order parts – ordered in advance of the scheduled service
• Valet pick-up and delivery – expedite movement of the boats to prevent customer schedules from interfering
• Comeback reporting – logging any work that was incomplete or faulty
• Mobile marine service – regularly scheduled on-water service adds additional revenue stream
• Same-day service – our goal is to achieve 10 percent of all service boats scheduled and completed in one day
• Proactive scheduling – contacting customers and scheduling before peak periods
• Weekly revenue cash receipts goals
• Visually shared schedule – available on the companywide server for all sales, service and marina staff to view
• Minimal back log – Goal to not exceed one week service back log
• Spring customer gift pack – special complementary gift set on the driver’s seat of each completed service boat.
Most recently, we introduced the “Super Tech” program. This incentive program rewards the technicians who accomplish better than 120 percent efficiency for one month or more with an additional tool bonus, gift certificates and even resort and travel rewards. More importantly, once a Super Tech reaches 120 percent efficiency for three consecutive months, he receives the benefit of a Journeyman Technician. This entry-level mechanic works side-by-side with the Super Tech receiving valuable training while assisting in any task requested. The two then work closely toward a common goal of efficiency and customer satisfaction and, almost immediately, the Super Tech escalates to 160 percent efficiency and beyond.
The important thing, I believe for dealers, is to get started with an incentive-based program right away. Even if you set monthly target revenue as an entire “team” and reward everyone similarly when goals are met and exceeded, you will see immediate and exciting results.
Double time
Add some predictability to your service department’s workflow — and profitability.
By Mark Duchow, owner/President, Duchow’s Boat Center
Five years ago, Duchow’s Boat Center ran what I would call the typical service department. Like many marine dealers, our workload fluctuated from being so incredibly busy that we had to turn business away, to times that were so slow our technicians were sitting on their hands.
When we tracked our business, we focused on the same things that most dealers place their emphasis on: applied, or billable, labor and unapplied, or non-billable, labor. And we paid our technicians based on their billable hours in relation to their hours worked. It was the typical marine dealer strategy, and everyone on our staff did their best to maximize time spent on applied labor and minimize unapplied labor.
We realized, however, and I’m sure many other marine dealers in today’s market can relate, that we had enormous inconsistencies from one month to the next. One month, we had incredible amounts of retail work, and the next, the business would die down, and our techs would be forced to find things to do. It was a very inconsistent workflow, and worse, an equally inconsistent financial statement.
So we sat down to discuss ways to maximize productivity. We looked at our financial statements month to month, and there was no predictability. On the sales side, you can predict revenues because of boat shows and that sort of thing. So we had to tackle the tough questions like: How can we bring some structure to the service department? How can we eliminate any ambiguity so we have something we can count on? And our concept was borne out of this discussion.
Knowing how important our service business is for us, and realizing huge profitability potential was dependent upon the efficiency of our people, we came to believe that this old method of encouraging technician efficiency just wasn’t the right answer. And at that point, we began paying our technicians based on the business they brought in the door. From that point forward, we’ve realized a tremendous increase in our technician efficiency, our service business, and most importantly, our service profitability.
Here’s how it works: For every $0.50 we pay our technicians, we want them bringing in $1 worth of work. We want to total up everything we bill, whether we’re billing a retail customer, a warranty job or the sales department, and have that be twice the amount of our labor expense. That’s the standard we expect from all our technicians, and since we instituted this program, I don’t believe there has been one instance where a technician has not met this goal. And when they meet this goal we pay them a monthly bonus.
The most important net result in my mind, however, is that we can count on and budget for — in every single solitary month — a consistent revenue total that is twice as much as our service payroll. And this has helped make our service department the most consistent revenue-producing department in our company.
But there are many more benefits to it, as well. These days, our technicians and service writer work together very closely. As an example, if I have a tech in any given week who is not meeting his ratio, he will go to the service writer and request more retail work. Our system has matured enough to the point now where the service writer knows he is responsible for giving everyone a chance to meet their goals. He’ll divide up retail and warranty jobs to get everything done. The team works together to make sure we’re hitting the goal. And in essence, what we’ve done is create a system where everyone in the service department — the service manager, service writer and the techs — is on exactly the same page. It is very easy to measure.
And our down months … well, we don’t have them anymore. There are months where we dramatically exceed our goal, but I believe, this, too, is an additional benefit we realize because of our system. In the past, our service department would turn work away when they were too busy. Now, they’re finding ways to bring work in and space it out over time.
One of the things we do very well, for example, is in the fall, when we might not be able to winterize a boat immediately, we’re bringing the boats in, draining them immediately, and we give customers half price on storage until we can get to it over the next three or four months. They usually take that deal, whereas, in the past, if we had told them to come back in three or four months and we’d fit them in, we would lose that business. We’re looking for ways to bring business in the door and keep it here, which helps us even out what used to be our down months.
We’ve also created a menu card for the service writers to offer other services to customers, and in many instances we’re gaining extra business. And finally, one of our largest revenue generators has been our Royal Care plan, which is a package deal that offers same-day, on-the-spot service and a loaner boat for longer-term service jobs. Without the cooperation we’ve been able to foster between the key people in the service department, without the open lines of communication among team members and the cooperation we have with those people, it would have been difficult to put the Royal Care program in place.
That program has been astounding in terms of raising our CSI scores and helping us sell more boats, too. The program requires that when a customer comes through our doors we have the parts and the mechanics standing by. I don’t think we would have had the confidence in our personnel to enact a program like Royal Care if we didn’t have this service department system in place.
