The ability to measure behavioral KPIs beyond a reasonable doubt allows business owners to align business drivers with staff compensation.
Combining the business control panel (BCP) – where there is a way to measure performance and track growth – is one of the ways to measure KPIs that we discuss in this episode. Is flag hour pay obsolete or can we use data from the BCP and a written career path for a better plan? Join Greg Masewic, Frank Scandura, Uwe, and Bill as they discuss what the future will bring and how all of us need to prepare to maximize auto repair shop success.
Episode Transcript
*This transcript was generated using Artificial Intelligence. Errors may occur. If you notice an error, please contact [email protected].
Bill: Good morning. Good afternoon. I’m Bill Connor. And if you’ve joined and registered, and you’re attending live by going to autovitals.com/radio, you can see our smiling faces. Thank you.
And for those of you that are listening to us on one of the many podcasting platforms later on, welcome and good day to you.
Today, I’ve got with me again Frank Scandura of Frank’s European in the Vegas area. And I’ve also got Uwe Kleinschmidt, our very own chief innovation officer. And today, we’re going to explore what every shop owner is probably going to be dealing with over the next three to five years and how it is going to impact the compensation plans and stuff that we need to attract the best and brightest into the industry and keep them here.
So, we’re going to be talking about one of my favorite things, which is M&Ms, and that’s how to measure, manage and motivate your staff. And I would like you to go back when you’re done and let’s share some M&Ms with your staff.
And so, although it is not certain, these are some trends that we are seeing in the industry right now. We participate in a lot of groups that are having this conversation, so we thought we’d open it up today. Today’s focus will be on process changes and strategies to stay ahead of the competition when it comes to the different pay types and compensation systems we have.
So, gentlemen, are you guys ready to dig in here?
Frank: Ready and willing.
Bill: Awesome.
So, let’s start with defining some of the different pay type systems that are in the marketplace right now, the shop, and the pros and cons of those systems when it comes to the different employees also. So, for everything that’s out there that may be good for the shop and good for the employee, there’s probably a flip side, and we’ve got to talk about that and then the balance.
So, Frank, if you want to start off. Let’s start defining some of these programs and work down and start dissecting.
Frank: Sure. Some of the basic things are hourly [and] sales quotas for service advisors. Nothing real complicated. Very easy to understand and implement. Still trying to figure out what’s best in that process.
There’s hourly for techs, plus team bonuses based on gross profit, [and] sales goals for service advisors, plus team bonus based on gross profit. That’s really, really important. If you guys don’t understand gross profit dollars and how critical that is to the success of your business, you need to really, really zoom in on that. The benefit of that is alignment with individual goals and team goals.
Then there’s the flat rate for techs, and sales quotas for service advisors is another. Best alignment with individual goals and controlled cost per billed hours are the benefits there. Flat rate is risky for high-producing techs, especially if the shop has a hard time keeping up with those guys that just grind out hours. And we all know we’ve got those rock stars and we’ve got make sure we’ve got the sales force that can keep up with them.
But Bill, I do want to challenge you real quick. You said that shops will really need to think about this in the next three to five years. I would challenge that. It’s the next three to five hours. We’ve really, really got to focus on what we need to do to improve our industry, and we need to do it now. We need to make this an attractive industry for people to get into, and compensation is a part of it.
Bill: Being that there’s such a shortage of technicians right now, and we don’t seem to have many coming in, maybe we should start by dissecting some of the pay structures for the technicians, and the most common one out there is the flat rate system, and maybe we should talk about the advantage to the shop for the flat rate system, the advantage for the tech for the flat rate systems, and then some of the things that the technicians struggle with about the flat rate system.
That sound like a good path for you, Uwe and Frank?
Uwe: Yeah.
Frank: Sure.
You know, flat rate’s good if the tech has the tools he needs to succeed. What are some of those tools? The technicians that feel like they have to purchase their own scanners and have to buy their own special tools, I think, are in a tremendous disadvantage. I think if you aren’t providing basic tools for the cars you’re working on, you’re making a huge mistake.
I don’t know of a single plumber that works for a plumbing company that has to buy his own truck and equipment. I don’t know of a single electrician that has to buy his own truck and equipment. But we seem to make our guys have to do that.
Bill: So, as part of the compensation program for techs going on to the future, supplying tools, toolboxes, all the tools that they need to come in to the shop and work, that is something that you’re hearing talked about quite regularly?
Frank: Sure. The dealerships started doing it years ago where they’re providing toolboxes for the techs. Anybody who’s bought a Snap-On or Mac tool box knows that they don’t give those away. They’re several thousand dollars. One of my guys a couple of years ago decided to upgrade his toolboxes. I think he said he spent $11,000 on toolboxes. That’s a lot of money to store your tools to work on someone else’s car.
Bill: So that’s part of the barrier to entry for new techs for sure. Those of us who’ve been in the industry for a million years, we’ve already got $100,000 worth of tools [and] up. But that’s a definite barrier to entry for the new ones. One of the other barriers for new technicians changing shops is just the simple thought process: if I change to another shop, who’s going to move my tool box, and more importantly, is it going to be covered insurance-wise if that building burns down or if they get robbed?
So, these are all some of the things we need to consider when we’re trying to attract and move the new people in.
One of the other things that I know as a technician that I always used to hate – I always used to be on the cutting edge of everything and put myself in a position where I could fix everything – and one of the things that always really drove me nuts is the more I knew and the more I invested, the less I would make flag hourly-wise because I was assigned all the stuff that was time bandits. So, being assured proper dispatching and thing things like that, these are all things that come into the flat rate system, so that your really good techs can sometimes say, this flat rate system can be used against me because I’m going to be doing all this stuff, and the guy that doesn’t know anything and has got a tackle box of tools, he’s sucking all of the gravy out of the shop.
Frank: That’s interesting, because I think shop owners tend to forget about their top people and they look at that guy whose just burning through hours because he doesn’t want to diagnose cars because he knows how hard it is. So, it’s just like, this is what I’m good at. And then you start feeding him at work because he’s getting work done, the advisors are feeding him at work, and they don’t even realize they’re doing it. They’re getting work done. Getting it done. Getting it done. Getting it done. And then you’ve got the guy who’s really good at the diagnosing stuff, and he’s like, hey man, I’m only doing 30 hours a week. You’re killing me here.
Shops don’t really know how to fix that problem, and this is where the flat rate really has to be looked at. Is this the best possible scenario that we can do for our guys?
We had our Transformers mastermind meeting an hour ago and one of the guys does a team system where they share hours. And you’ve got to have the right team for that to work. You’ve have to have the right culture. So, if the entire team of four guys can do 200 hours, they’ll still split that evenly.
There’s a lot of things we have to look at. We cannot do what we’ve always done in the past. I don’t think it’s working anymore, to be honest. That’s why we’re here today, right? What do we have to different? How are we going to attract people? How are we going to retain people? And it’s more than money, because when you survey people, what is it that you are looking for in an employer, dollars is never number one.
Uwe: But it has to be enough and fair.
Frank: That is absolutely correct. I’m not going to work for you for free just because you wash my car every day. So, it does have to be enough. It does have to be fair. It does have to be competitive.
Uwe: If I may, the toolbox discussion triggered in me the thinking, the toolbox ownership and the flat rate discussion seems to create a kind of lone wolf existence for a tech. I have to bring my tools. I only get paid for exactly the billed hours I can finish. So, I’m on my own. I don’t know whether they see it as empowerment or more as give me the work. It’s really a production cause being cut with work and I bring my tools to the work.
So that whole idea that only the process and the team makes it work seems to be in the background in the flat rate model. Am I in the right direction?
Frank: I think things are so different today. It’s kind of hard for those of us with the white chins. When a dog gets old his chin turns white first. It’s hard. My business model has always been, find out what my customers want and give it to them. So now I need to really think about, what is it that employees want? Can I give it to them? And I think that – I don’t how to put this. When I was up-and-coming in the industry, I never bought a brand new toolbox. I just never did. It was more valuable for me to have good tools than a big, shiny box for it. I had these homemade carts and whatever I could to do to get tools to roll around on them. The drawers would grind and screech as I opened and closed them and I didn’t care. I did buy one brand new toolbox when I brought my tools home, which was a tough decision as a shop owner. I think it was $8,000 or $9,000 for a Snap-On bottom box.
That’s when I really realized [that] those days of you have to have the biggest, best, shiny box, you’ve got to get away from that mentality. You have to get these guys to understand. Get the brain going. Let me help you get educated. I just signed my team up for a 75-module electric vehicle training. We’ve got to really focus and change directions on it. I said, I want you guys to get really focused. I want you to be the best you can be.
I think they’re earning more money sitting at their bench analyzing information than they’re actually twisting wrenches. That’s got to be the way we move in, so how do we compensate for it? You can’t pay a flat rate for –.
Bill: Not unless the shop learns how to bill for it appropriately, which requires them to get an authorization for testing, charge for individual tests – just like a doctor would or a dentist would or anything else – and then the diagnosis is given after the tests are performed.
So, if I’m the diagnostic guy and you are going to pay me for my testing by individual tests, I’m going to be in that all day long, especially if I’m a diesel guy.
Frank: Well, you’re right. And the shops who don’t test and who run back to the techs and say, hey man, we’ve got to help the customer out. Can you spare me a couple of hours? Stop doing that.
Bill: I wish I had a dollar for every time the service writer said, I’ll make it up on the next one.
Frank: You don’t. It doesn’t work that way. There was an old joke years ago. A guy was going to open up a factory rebuilding engines. He was going to sell the engines at $5 below his cost and make it up on volume. It just doesn’t work that way. We have to stop being afraid to charge what it costs to fix the cars.
I can’t get emotionally involved. I can’t get my wallet involved in the cost of repairing someone else’s car. If you’re out there and you struggle with this or your sales team struggles with this, you’ve got to get trained. You’ve got to get a coach. You’ve got to do whatever you have to do to break free of that. The problem with the independent repair market – Uwe and I have had this discussion 100 times – is they’re all independent and they all want to do it their own way.
That’s great. You can still do it your own way. But you have to have a baseline industry standard of doing it right, and that includes compensation, equipment, personnel, sales training, parts inventory management, everything. It’s not enough to walk into the shop and see a pile of parts and go, I wonder how many cores are here that I need to send back.
Bill: Before we talk about technicians –.
Uwe: Can I add another thing which I observe as a motorist as well as looking at – I don’t know how many – hundreds of work orders? It seems that the language used in the presentation to the motorist is parts-centered, not labor-centered.
So, in other words, the work is devalued by it’s a necessary work to put this part in, not the part is needed to get the car into the shape it needs and I’m the doctor performing that work, and the part is just a necessary thing. There’s a lot of language used where it’s a parts exchange and then we’re wondering why the value for the work doesn’t hit the motorist’s brain, and they say, why is it so expensive to diagnose? Nobody would ask the doctor why it’s so expensive to diagnose my body. Nobody. It wouldn’t even come to mind.
Frank: Let’s go down that road a step further. Does anybody know how much it costs to replace a knee? Does anybody know how much it costs to get a shot of cortisone in your shoulder when it hurts? Does anybody really know the cost of any medical procedure anywhere? No, and they never ask, so there’s no price transparency in medical. Zero.
I’m not suggesting there should be no price transparency in what we do, but we tend to overcomplicate what we’re doing. Good news, Mr. Jones. I found this noise in your brakes. Here’s what we’re going to do. It’s only going to cost $927.53. I can have it done this afternoon. What say you?
Instead, what we tend to do is I need brake pads for $99. I need this brake cleaning kit for $15. I need a brake sensor for $12. $100 to put it all on. And we break it down into parts and pieces, and people don’t buy parts and labor. They buy trust.
We have to truly get it to that point, where this is what I am going to do. This is the total package. You don’t need the part numbers. Don’t go shopping for brake pads that are cheaper. Let’s teach our staff how to overcome that.
Bill: We used medical as a correlation. Can we break our technicians down into similar things like the medical industry does? So, we’ve got the family practitioner, and we’ve got these little popup places that are coming up all over the place, all the way through to people that are doing the tests, and then we have surgeons.
Can we start thinking about our technicians the same way, as far as we’ve got one that’s a need spotter, that’s our inspector; and then we might have another technician that’s a different level; that’s an R&R guy; then we’ve got one that goes all the way up to my diagnostic technician that pretty much can do it all.
So, by classifying people as A, B, C and D, are we devaluing ourselves just specifically because of the title we attach to it?
Frank: I don’t know if we are devaluing ourselves based on a title. But we are devaluing ourselves because we don’t understand how important we really are. Even last year in the pandemic, we were all considered essential. We really needed to take a look at that and see how serious it was. Who was essential? The plumbers, the electricians, the carpenters, the mechanics. Everybody else stayed home. Then the rest of us had to go out there. Medical was essential. Keep the world moving. And we are so important to keep things moving that there is no reason for hackery in our mindset.
I was talking to somebody this morning. In the early days, people would say, what’s it like owning your business? And I would always say, it’s like an adult daycare. Now, the problem with that is, when I was thinking it was an adult daycare, I treated everybody like they were in an adult daycare.
We’ve all heard the tongue is the gateway to the heart. So, the things that come out of our mouth is how our spirit is. So, if I go into the environment thinking, a bunch of complainers, a bunch of idiots, a bunch of this, a bunch of that, no matter what I think – even if I don’t vocalize it — I act it out. So, we’ve truly got to get ourselves in the right position where these –. First of all, I need to surround myself with the right people. Stop putting up with mediocrity. Stop not holding people accountable. Because some people need to leave the industry. Let’s just face it. It’s just not natural for them. They’re not doing a good job. Or they’re on the counter in the back, sweeping the floor. Doesn’t matter.
So, we have to truly hold ourselves accountable, hold them accountable, and raise the bar across the entire industry. And this is not easy to do. You can’t just do this because you wake up one day and decide to do it. You’ve got to surround yourself with people who know how to do it – they can share ideas and help you do it — and then make it better for everybody. And it’s better for the motorists that way.
If there’s going to be shops out there that are going to keep giving away their test time and they’re going to keep giving away their value, then they’re going to miss out on those profit dollars to truly invest in their people and truly invest in their business to just make it better.
Different track?
Bill: So, when it comes to technicians, in the past, flag hourly was the main go-to. Some shops hourly and so on. But let’s talk about for the technician, we never want to get back to the quota system where it’s said, hey, you’ve got to sell X number of shocks, X number of brake pads or whatever. We want to get them to work on behaviors based on a condition-based inspection and proper documentation.
So, can’t we take a pay structure for those and modify it to where the behaviors that discover, document and things like that are part of that pay structure?
Frank: True story. So, when I worked at the Mercedes dealership, they often did spiffs for whatever you sold, which opens the door for all kinds of problems. And I remember one in particular. There’s a spiff for whoever sells the most alignments. And I get dragged into the office. Well, you won again. I don’t understand; how come there’s always a spiff? You always sell so many alignments. Why don’t you sell alignments all the time?
I said because 90% of them come back with the wheels crooked or different problems; the techs don’t do them right. So, why should I sell them? So, there’s proof in the pudding. You dangled that carrot in front of me. OK, I can sell alignments under that circumstance. What would have been better was, don’t put a spiff out for how many batteries we can sell this month. Put a spiff out for how many batteries we can test this month. That will bring in the battery sales with integrity.
Don’t say, hey, let’s sell some cabin filters this month. Let’s check some cabin filters this month. And then get in the habit of doing those inspections and those checks, then the sales will follow. So, I think, Bill, the path you are heading down is, how do we do it with the integrity? How do we make things happen that are measurable and then give opportunity for income.
I love, love, love, the business model of I’d like to pay you enough money for food and shelter. Food is hot dogs and bologna sandwiches. Shelter is like a two bedroom apartment for you and your four kids. I would also like to include opportunistic income opportunities, so you can have steak and lobster and a four bedroom house with a pool. You decide where you want to be. Do you want to do the minimum, get the minimum, or do you want to know what’s available for you, what future you can have [and] how you can advance to do that?
Bill: Well, we all know the condition-based inspection is a critical tool not only for the shop, but more importantly for the motorist, to make sure they’re safe in a reliable, comfortable vehicle. So, the inspection criteria for anybody on the production side of the wall has got to be something that’s got to be part of that compensation program in my opinion. What say you?
Uwe: I want to go back to what Frank said, because there’s also a huge danger in this. So, number one, I really want to say [that] I wholeheartedly agree with what you said, Frank. The challenge is if the culture and the accountability have not reached a certain limit, people start testing batteries at a quality which is not sufficient to create the battery sales we assume are going to happen.
I’ll give you an example. In the beginning, when we introduced the inspections, shop owners would ask us, what’s the minimum number of pictures? And we followed that trap. We said 14, whatever the number was. And then techs took 14 pictures, sometimes 10 of the same thing. Because all they had in mind was the 14.
So, I think there has to be a certain baseline in which – what we were just talking about is possible – that battery testing is done with the same quality and the same performance every single time. And then the battery sales will follow and the customer. So, trust the process includes trust the culture.
Am I making any sense?
Frank: Yeah. Absolutely. And it’s probably a good way to start a consistent process. Why aren’t we making certain recommendations might be the question. So, let’s try. Let’s do this. Let’s as a team do this. I’ve coached shops that say, yeah, the technicians, I just can’t get them on board. I said, take one guy, get him on board, get him to be consistent, and then show everybody else the results.
Uwe: Yes. [Inaudible.]
Frank: Yeah. Exactly. You’re right. It’s not enough to just do the battery test. Why are we doing it? How are we going to do it? Let’s become consistent. What is that –.
Uwe: And how we present it to the motorist. It’s the whole thing.
Frank: Yeah. Presenting it to the motorist is why we’re doing it.
Bill: Sounds like a perfect shop meeting topic.
Frank: During your weekly mandatory shop meeting.
Uwe: So, all of a sudden we landed at the shop meeting and the topic was compensation. How come?
Frank: Good question.
Bill: How come? Because in a well-run shop, it’s got to be organized and run as a team. All the players have to be playing on the team in their role in order to win the game. And that’s where the shop meeting comes in.
Could you imagine a sports team where they never had a meeting, [but instead] they just talked to everybody individual? That would be kind of crazy.
Building that culture through shop meetings is key, whether it’s a five-minute morning meeting to scrum to find out what’s going on today. Even a small shop, without having some meeting to set direction, for the captain to say, this is where we’re going to sail the ship and it’s not going to crash on the rocks, we can’t do that anymore. We’re multi-million dollar businesses and this isn’t a hip pocket national game anymore.
Frank: And it’s an important part of the culture, communication. It’s not just enough to run around and play the telephone game all the time. I’m going to tell Bob. He’s going to tell Mike. He’s going to tell Mary. She’s going to tell Jim. And then hopefully at the end of the year, everybody’s doing the same thing the same way. It doesn’t work that way. You all need to have it together.
I heard something really interesting today that kind of goes down that path. Ask your team, what are we not talking about?
Uwe: And should.
Frank: And should. Right? Good stuff, Bill.
Bill: While we’ve got this particular path that we’re on, let’s talk about recruiting. We’ve got transparency with the customers. We’ve got meetings. We’re having transparency with our staff. Can we use that same transparency for a technician coming in to make them feel comfortable, and say, look, here’s our process. You follow my process. You can see here that every tech in the building, they’re working on three cars a day. They’re making eight, nine, ten hours per day working on three cars. And if you follow our process, doesn’t it make you comfortable that you’re not going to have to be working on 10 cars a day to get 10 hours?
So, just by having transparency about the process you use, why you do it and so on, doesn’t it make it a lot easier to recruit the best of the best because they’re probably not leaving somewhere that has a process that’s stacked in the direction to make them successful?
Frank: I think there’s a large number of technicians that think the bad shop they’re in is the same everywhere. There’s a lot of banter online. I wish I could get in more of these technician groups. But they kind of vet guys like me out, because they want to complain amongst each other. They’ll actually attack newcomers. Oh, get out of this business. It’s horrible. Don’t do it. Go be a plumber or something. Which is sad.
I’ve done plumbing. There’s a lot more satisfaction in working on a car than plumbing, for me. I think that we have to figure out how to reach those to let them know it’s not like that everywhere. There’s good operators out there and we’ve got to help you find them.
One of my guys, he’s been here a year now, that’s how I found him. He was on a shop owner page. He used to be a shop owner and was a tech again. He was on a shop owner page saying, man, I can’t believe the way this guy pays. He’s always yelling and screaming at everybody. What’s going on with shops and owners today?
And I had an opportunity to chime in and say, no, it’s not that way. There’s good shops out there. It turned out he was in Vegas, and we said, we’ve got to get together and sit down and eat. [We] went and shared a meal together, and I was able to convince him that it’s not like that. There are good shops out there. I’m one of them. Come and join the team. And he did.
We have to get the message out: Your experience is not the same everywhere. Your bad luck is not the same everywhere. And maybe you’re the problem. How do we help you get better and learn the skills to help you deal with things.
Uwe: Bill, if I may. I’m trying to connect the dots here to our topic. It seems like if you have a newcomer and you wave your hands, and a lot of the compensation depends on things they initially perceive as not in control over, that’s not a great speech.
So, the question is, is there a compensation model where you start, let’s call it safe, like hourly, as you learn how the team works and the dependencies are clear on what you can influence and what you can’t, and how your team works, you add or replace compensation portions not by how long you are present but performance-based. You go in on a sliding scale. I don’t know. It sounds super complicated, but what I’m trying to say is that you don’t want to be politician at the beginning and promise stuff and then everybody listens and, yeah. No, give me hard money at the end of my first week, so I stay.
Frank: I agree with that. I have found that new hires need time to figure out, where’s the restroom? Where’s the brake clean? Where’s the nuts and bolts? Where’s the washers? Where’s the solvent? Where’s that parts guy again that I need to talk to when I need something? How do I communicate with the service advisor again when I need something? Because in my old shop, all I had to do was stand behind him and tap my foot and cross my arms, and he’d eventually give me an audience. And you won’t let me do that here.
And I’m a big fan of what we’ve changed our model to be for that specific question: I’m going to pay you X number of dollars per hour or flat rate, whichever is more.
Uwe: Oh cool.
Frank: Specifically, I want to take the pressure off of the entire team and the new hire because the old days where I hand you a repair order and point to the car and say, go fix it on your first day of work, that doesn’t work anymore. That’s not the work we live in anymore. I want to help you. This is our inspection process. You are going to spend days just learning how to do the inspection. And I’m going to pay you by the hour so you don’t have to worry [about], I’m not flagging. I’m doing to die.
You guys have heard me say it 100 times. I don’t know if you can see. This is a technician’s paycheck and this is how far they can see. They can’t see past their next paycheck in most cases. And it’s not always an earning problem; sometimes it’s a spending problem. That’s probably for another day, teaching our people how to be financially responsible, savings and no debt and things like that. But to take that pressure off has been a huge help for getting our teams up to speed.
Bill: So, a fixed onboarding process that has a pay structure built into it, and then in the past, I’ve seen a lot of shops especially when they do that, they say, look, this is the process were are going to use. Day one, two, three, four, these are the things you are going to do, then you are going to start doing your job.
And then when you’re flag hours, it seems what we’re paying you, I’m going to give you an option when you switch to pure flag hour, but when we switch, you don’t switch back.
So, it’s kind of a tool like that, and again, then we absolutely tie that into, our average across our shop is three and a half hours per car. I’m going to guarantee you going forward that I’m going to supply you with X number of cars per day to do your inspection and so on, and we’ve proved statistically that it’s produced the same way for X number of months, years or whatever. So, that way, it’s a more comfortable transition for them.
Frank: Why don’t we just keep that model in place? Here’s your hourly pay. Here’s your flat rate pay. Here’s your bonus for doing this and here’s your bonus for doing that, and just keep it that way.
I think the biggest problem with flat rate today is wives. Because if you’ve got somebody who doesn’t know what their next paycheck is going to be, that puts a lot of pressure on the family.
Uwe: Oh yeah.
Frank: And again, 77 or 78% of people live paycheck to paycheck. Seven out of 10, eight out of 10, live paycheck to paycheck. That doesn’t work when, how many hours did you have this week, Johnny? 27; I got stuck on a car. Well, we’ve got to pay rent. How are we going to do it?
So, there has to be true professionalism brought into the fold where I have to be able to provide food and shelter and money for the family. In our financial training, we learned that women have this little gland called the security gland, and when the security drops, the gland tightens. And when the gland tightens, the attitude intensifies. When the attitude intensifies, the husband is beat up. This is a true thing. I am not making it up. Anybody who’s married knows what I’m talking about.
Those of us who like motorcycles and cars and things like that, you think you’ve got a few bucks in the bank, and you go buy something, watch what happens to your wife when you don’t tell her about it. They like to have that security.
So, it’s a big picture. This is a part of the changes we need to make, where here’s the base. I like that, Bill, what you said. I can guarantee you three cars a day. That’s easy. But I don’t know if that’s the entire picture.
Bill: No, because it’s got to come with, I’ve also got the support staff so it’s going to estimate it, present it to the customer and gain approvals or authorization. And that comes in the culture.
I know a lot of employees will leave the shop, not necessarily because of the money, but because the culture is so negative, it just drives them nuts. A lot of them will also leave based on the condition of the facility they’re in. So, these are all things that are part of the overall program: providing them an air conditioned building if you’re in Vegas or Texas; that’s an employee incentive, so to say. Having a good culture in the shop where they can come in and they can meet everybody and visit with everybody and talk to everybody in the building freely without the owner around to learn and understand the culture of the shop.
Or, in some of our earlier episodes, we had something that they were talking about where the staff is actually doing the interview with the prospective employee to see, do they fit with the culture of the shop?
Frank: Do you know what your culture is? Because if you as a shop owner don’t set the standard for your culture, if you don’t have core values that you normally and regularly talk about and communicate, somebody else in the organization will set the culture. Somebody else in the organization will set the value standards. That’s not how it works.
Employees are not much unlike having kids, where the best way to be a successful parent is having boundaries for your children. When I was a young parent –. I got married when I was 19. I had my first kid when I was 20. I didn’t know how to set boundaries for my kids. And when I did learn how to set boundaries, it changed all of our lives. And it’s no different at work. We need to have boundaries. These are the boundaries where we operate. Here’s our culture. Here’s our core values. These are the boundaries we operate in. And we have to have boundaries of integrity, where it’s understood across the board.
And I think a lot of times, people leave when they don’t have that structure and those boundaries in place. Take, for example, someone who’s allowed to be sloppy, and he has a lot of comebacks but he’s making a lot of money, so we won’t do nothing about it. I may not say something about that, but I sure see it going on, and I sure don’t like it, and I’m assuming, if I see it, you see it. And I’m assuming, if you see it and you don’t do anything about it, you don’t care. And if you don’t care, why should I be here?
Bill: So, for technicians, you can see the industry trending toward a place where it’s going to be hourly plus bonuses based on certain behaviors that we can easily measure and something that allows people to be compensated at a level that is according to their skillset and what they produce. But it is also going to be measured in other ways, like, are they doing inspections? Are they discovering needs? Are they documenting it properly? Are they efficient at what they do? Are they marking jobs complete on the tablet? Things like that. Ways that we can easily measure without a lot of work by anybody, and use that as a way to measure and motivate them to continue growing in the right direction.
Frank: And even take it a step further. Have a plan laid out with milestones, that if you reach this, you get that. I think that’s more important, too. I think that’s missing in the industry also. I don’t think enough shops understand the importance of, what does somebody’s future look like?
If you are not in a position to provide room for growth and promotion for your team, you should be providing an opportunity for them to learn and encourage them to go find that opportunity elsewhere. In other words, help them learn how to be a better person. Maybe you’ve got somebody who’d really like to be a shop foreman. I’d really like to be a service manager. Well, maybe your shop is small and it’s not going to happen there. Help them get there and have that kind of plan documented.
Bill: Right. That comes back to the defined career path from cradle to grave. You start here and you graduate here, here, here and here. Then, when you get to the end of the role as a technician, then you go back and you’re a mentor to somebody else, get compensated based on what you do, plus what you’re helping the guys do that you mentor.
So, there’s all kinds of different positions in this industry, but we’ve never taken the time to sit back and define them. But many shops today, they do these things, and they don’t even know they’re doing them or how to define them or how to document them.
Frank: It’s true. We don’t know how. If you’re doing it by yourself and you don’t know how, you’re never going to figure it out. And you’re just going to be mad when people leave, and you’re not going to understand why.
Uwe: We have 15 minutes left and we’re talking about technicians. Can we wrap up the technician part and go to the service advisor, foreman, production manager, parts people, etc.?
Frank: Sure. What’s first?
Uwe: So, to wrap up the technician, create a secure income in the beginning until they figure out how they have impact on that income. So, you start hourly, you give them a choice, and then once that’s established, you start with bonus.
So, how do we do that for a service advisor? Typical service advisor compensation is sales quota, right?
Frank: Yep. And I did that for years, and this year we changed it, and it changed our business. We’ve changed to a gross profit dollar model.
Here’s how we made the transition. We used to pay off of gross sales X percent. So, we did the math, and said, OK; here’s what our gross profit dollars was along that path. We need to pay this percentage. So, maybe we went from 1% gross sales to 3% gross profit dollars. So, the dollar amount was the same. We didn’t want to penalize anybody.
That change increased our gross profit dollars because we weren’t discounting anymore to make the sale. It was like getting other tools so we don’t have to say, well, let me see what I can do. OK. I’ll take $100 bucks off. Well, that comes right off the gross profit dollars. When you’re paying 1 or 2% plus the base, it’s ineffective to an advisor. I really like the idea of, again, we do this with a base bay, food and shelter kind of money, and here’s your opportunity to earn. And I think it would work for everybody if they would look at it.
I’m really astonished how many shops struggle to get certain goals met, but they pay their advisors like $15 bucks an hour, period. They don’t understand why they can’t get technician hours up. They can’t get parts returned in a timely manner. They can’t get customers taken care of. It doesn’t work.
Uwe: So, what do you think is a good ratio between a secure base bay and cost profit dollars?
Frank: I think it’s really market dependent. If you can rent the three bedroom house for $750 a month, it’s completely different than a community like Las Vegas where a three bedroom house rental might be $2000 a month. Again, I want you to have enough money to have that one or two bedroom apartment and hot dogs, and if that’s the life you want, okay. But here’s the opportunity to have more. Have a couple cars. And I think that’s important.
I think if we give too high a base, it’s going to get too comfortable. We ran into that in the past. We used to pay our bonuses weekly for the service advisors, and we’ve have no bonus, no bonus, no bonus, bonus! Everybody’s ringing the bell celebrating, running around the building. I made it! I made it! I made it! And then no, bonus, no bonus, no bonus, no bonus.
It’s like, now here’s the monthly goal. In this way, here, I’m taking pressure off of three bad weeks, giving you the opportunity to have one good week and push hard if you need to, but if you don’t make it for the month, you don’t make it. That’s just the way it goes.
Uwe: That’s how the numbers are.
Frank: Yeah.
Bill: If you want to develop highly skilled service advisors, and I mean skilled when it comes to presenting value to the customer, the gross dollar profit pay structure is really designed to do that, because they’re not going to be able to give stuff away because it is going to cost them also. When they learn how to deliver and present things to the customer that [are] value-oriented, then their pay goes up. So, that’s one of the things that really has to be built into the equation.
Frank: And it’s all about training. Training, training, training. If you’re not training your service advisors to present correctly, you’re missing out.
Here’s an example. We teach this at Transformers. If a car comes in, it’s got 100,000 miles and it’s got a leaky water pump, we’re going to recommend the water pump, the hoses, the cooling system flush, the thermostat. The car’s old. Here’s why we’re presenting it. Here’s the entire package. Here’s the entire price.
So, when a customer hits the floor and goes, oh my gosh; I wasn’t expecting that. What can we do? Well, perhaps if we didn’t do the hoses and perhaps if we didn’t do this. And then we start taking things off the total package, [so] I no longer have to do the discount. Because if I say, here’s your water pump and here’s the price, he’s going to have the exact same reaction. Oh my gosh; I didn’t expect that. What can we do? Now I’m forced to discount the water pump because that’s all I presented to him.
And there’s nothing unethical about that. If the car’s got 100,000 miles on it, it’s seven or eight years old, it needs hoses. It needs a thermostat. You don’t want to take chances and not do a proper complete repair. Same thing with brakes. If you’re not lubricating the pins, and you’re not doing anti-squeal material, and you’re not selling the brake clean, and you’re not doing it as a package, you’re not giving the customer the value they deserve.
Bill: So, that comes back to the age old discussion with the customer, when they ask you how much time you charged me for and what labor rate, is ma’am or sir, we don’t charge based on boot time and dollar amount. We charge based on boot time and previous experience. And the previous experience of our technicians is more reliable than what’s written in a book any day. So, there’s different things.
If we can, I would like to talk about the different measurement methods we have, and are we missing anything in the business control panel that we might be able to measure going on into the future for these different types of compensation programs we’re talking about.
So, one example might be for a service writer, call conversion. Customer calls – what percentage is actually turned into an appointment. And if it is turned into an appointment, does it get dropped off and what is the dollar value and so on.
So, are there some KPIs that we don’t currently have that would be highly valuable to put in place for a truly dynamite compensation bonus program?
Uwe: What I have on the list is actually, I look at the service advisor as somebody who creates the highest lifetime value for the customer. So, it’s not just what you sell at this visit. It is how often does the customer come back in and how often does the yellow stuff on the inspection sheet get recommended for the next visit and actually the customer shows up and does it.
One of the KPIs that I really think is important to access the service advisor is, how much is deferred — how much is not deferred forever, every single time it is deferred – [but] is actually then written up and billed.
Frank: Yeah. I think that’s good, and I think you could add some other things in it. Are we exit scheduling?
Uwe: Exit scheduling. Yes.
Frank: Are we exit selling? Are we reselling the ticket after? We have a lot of technology out there. You should have cameras so you can watch this stuff. It’s not because you’re spying. It’s because you’re verifying they’re doing the job you asked them to do. Are you listening to call recordings? Are we saying, hey man, how much is a set of brakes? $299 bucks, and I’m really busy. I can’t get you in for two weeks. That guy needs help.
So, there are a lot of things I think can be done, Bill, in that.
Uwe: We have six minutes left. Can we cover foreman [and] production manager? How do you pay them? How do you compensate them? How do you compensate the service advisor who is 40% selling and dispatching techs, 40% in ordering parts, the remaining 20. Is it all lumped into gross profit and done?
Frank: I think that position should be treated more like an assistant advisor. It’s probably more of an hourly plus a bonus if the goals are met.
When we were smaller, we started that way. My parts guy was kind of an assistant advisor, and then as we grew, his position changed to only parts, which is still hourly plus a percentage of gross profit dollars. He’s got to hit certain criteria in his parts, because even that person can go, ooh; I can’t sell that for $700. Let me put it down for $500. Because they feel better with that.
Shop foreman, same thing. It’s hourly plus a percentage of what the shop does based on gross profit dollars. Everybody’s working toward the same goals: the gross profit dollars.
I have a spreadsheet that I use, that I use my cost of doing business monthly average, divided by my current gross profit percentage. I can divide that by my targeted gross profit percentage and show my team, here’s how many dollars we need to sell do get there. Here’s how many cars we need to do based on our average RO. So, we all know what we’re striving for.
It’s never a case where, oh, it’s the end of the month and we didn’t make it. Aww, shucks. Everybody knows how many cars we need every single day to make it happen.
Bill: And really, as a shop owner, we know that the production side of the shop should be a certain percentage of your gross profit. The support team should be a certain percentage of gross profit, and then we just need to decide, where is this shop foreman? Does he fit into the production side or the other side and what mixes between there? And same thing with your assistant for the service advisor. Is that on the production side of the shop or is it on the support side of the shop? And just make your percentages in there.
And then, when you know that, you are going to have to adjust your pricing to the customer accordingly to support that same percentage model base.
Frank: Yeah. Don’t base your prices on what the guy down the street’s doing.
Bill: Nope. Nope. And like I said, it’s going to help the shop in the long run, because you’re going to learn how to demonstrate the value for your unique position in the marketplace that’s different from anybody else that thinks you’re a competitor, and then charge accordingly.
Frank: Yep. That’s it. Get the training. Get the coaching. Get the help you need. You can’t fix what you can’t measure. Measure what you’re trying to accomplish. Make some changes.
It’s just occurred to me during this time: whatever the median income is in your city, your tech should probably be minimum 1.5 times that. Give yourself a goal to shoot for. If median income is $50,000, it should be a minimum $75,000. How do I get my guys up to a minimum $75,000? How do I get them up to $100,000, $120,000, $130,000 a year?
Bill: And regardless of what you do, always have some opportunity for those who work harder to shine.
Frank: Yep. Exactly.
Uwe: Yeah. I love that. It’s a generally accepted metric. You can look it up anywhere. There are plenty of websites.
Frank: It’s at your fingertips. You can look up the median income. And it’s really sad when publications give the average pay for automotive mechanics, and it’s like $22,000 a year, and it’s sad because I think they’re including lube guys and tire guys in that.
Bill: The title of a technician is way too broad.
Frank: Too broad. Yeah.
Bill: It needs to be broken down by the different –. As I talk about the different career paths, it should be broken down individually in there because all that one lump thing, the averages are too skewed.
Frank: Too skewed. Yep. Yep.
Bill: You’ll hear real often these days [that] techs are in the $100,000 – $150,000 range, and then it kind of goes down from there. And then you’ve got the tire techs and stuff like that. They’re kind of now just being forced into the $15 an hour range, which is probably too low based on what they do and the liability that they can create for the shop if it’s done improperly.
Frank: Yeah. No doubt. We need to up our game. We need to make this a really attractive industry. It’s going to start by taking a close, hard look. Listen, if there’s a shop owner out there listening right now and you’re thinking, I cannot afford to pay my guys more, fix it.
Bill: And the best way to fix it is to learn to demonstrate a higher value for what you do to the consumer, and then ask to be reimbursed for it.
Frank: Yeah. Get a coach. You can get in a group. Do something. Don’t post on Facebook because you’ve got all the haters on there. That’s not the right place to get help. And I’ll exclude the Digital Shop page because you’ve got a really good team in there. But a lot of these pages, man, these guys just attack each other. It’s like, man, you’re eating your own. I don’t get it.
Uwe: It’s a self-pity group often.
Frank: Right. Right.
Bill: So, the takeaway is to use your inspection sheets to do a good condition-based inspection, use the inspection and the work order section to send pictures to the customer to demonstrate the value and the complex work that we do, and learn how to charge for it, and then start developing the highest-paid people in the industry, so we can attract the best and brightest, and more importantly, keep them.
And especially for some of the technicians in the market right now that are kind of aging out, find a place to put them that we can use them to mentor some other people in here, instead of just having them leave the industry and create big holes.
Frank: Yep. Good stuff.
Uwe: Awesome. Frank, as always, thank you very much.
Frank: My pleasure. My pleasure.
Bill: Once again, I’d like to remind everybody to go to autovitals.com/radio to sign up to register and join us live, or all the other past episodes are there. Lots of great information there. And look for us on the different podcast platforms by just searching for the Digital Shop Talk Radio, and you’ll find it rebroadcast on many of the podcast platforms.
So, once again, I’d like to thank everybody and say, go out there and make some money and demonstrate a higher value to your customers. And don’t be afraid to ask to be reimbursed for it.
Frank: Don’t be afraid to get paid what you’re worth.
Bill: Or a little bit more than what you feel you’re worth.
Frank: I like that better.
Uwe: Yes. That’s a good one.
Frank: Thank you again for having me. It’s always a pleasure.
Bill: Thank you, Frank. Always great.