By Mark Duchow, owner/president, Duchow’s Boat Center
Five years ago, Duchow’s Boat Center (Ranked 42 in 2006) 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.