The ability to use data to determine when it’s time to add or replace staff beyond a reasonable doubt allows business owners to properly staff for production and a great client experience. Combining the business control panel where there is a way to measure performance and track growth is one of the ways we will discuss.
Doug Bracket, Uwe, and Bill discuss what the future will bring and how all of us need to prepare to maximize 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’re watching us live, you’ve obviously registered on AutoVitals.com/radio. We’d like to thank you. If you’re listening on a podcast later on, we highly encourage you to click the link and ask any questions you might have, and they’ll be emailed directly to one of our panelists.
Today, I’ve got Doug Bracket from Downtown Automotive with us here helping us out, a very great shop owner, and we’ve got our Auto Vitals very own chief innovation officer Uwe here to assist me.
So, today we’re going to explore using data to determine proper staffing levels for growth, possibly discover some training needs, or in some cases, unfortunately, maybe having to make some decisions about staff replacement. So, using the business control panel, we’ve got more data than we’ve ever had in the past, and it’s collected automatically in the background without any additional work.
But we’re going to focus on how to use that to diagnose your shop and put some things in place to make some changes.
So, today’s focus is going to be on using this information to define and measure process changes and use the data and strategies you develop to stay ahead of the competition.
So, Doug and Uwe, you guys ready to dig in here?
Uwe: Of course.
Doug: You bet. Good morning, good afternoon, everybody.
Bill: Awesome.
So, what I’d like to do is start out by talking about some of the different levels. So, right now, in the automotive industry, getting full production out of your staff seems to be a big hurdle in a lot of cases. And we want to talk about accepted levels of production for certain types of employees, first of all, so we can define what good looks like. And then we’re going to talk about using some data to determine what’s going on in the shop.
If that’s good, what I’d like to do is start out and talk about some different production levels, which we always measure in terms of in completed hours. And let’s define them for some of the different employees.
Doug, what do you think about a general service guy? What type of a completed production hours per day are we seeing out of these folks in a shop environment?
Doug: Definitely things are slightly different up here in Canada. We run our apprenticeship program quite well in my general opinion. But our expectations from an entry level technician standpoint, we’re talking about our first and second year apprentices, provided you can keep them fed with good work, should be producing anywhere from six to eight hours out of their eight hour days.
When we’re talking about our high level, well-paid technicians – up here in Canada it’s a Red Seal trade qualification; down there I believe you’re talking about ASE technicians – those guys should be billing over eight hours a day, and we’re talking in the nine, 10 range.
Bill: Cool. And so, in the states, and I’ve actually got the advantage of looking at hundreds and hundreds of shops, our general service guys we’re seeing in the four to five range on average. There’s a lot of reasons behind that, the type of work they’re doing and so on.
And then our technicians, we’re getting in somewhere around the six to seven range, which is really kind of low. So, there’s a lot of opportunity.
And then we’ve got these guys that I would call the general technicians, the R&R guys. They’re not doing a lot of diagnostic work and a lot of electrical work. Those guys can actually be in the 10 or 12 hour per day range.
And then we’ve got the diagnostic guys, which a lot them get beat up quite a bit in that they’re only getting paid for the amount of time they actually use to diagnose a car. Some of that’s got to do with the amount of time the service writer gets approved and so on, but those guys seem to be lucky to get one hour of pay for one hour actually worked, if that makes sense.
Uwe, are those kind of the things that you are seeing also?
Uwe: Yes. And I would really ask the question, why is a GS—Let me just say this differently. To me, if I have a certain mix of work and go back to what Doug said, let’s assume the feeding machine works, why would the GS not produce eight hours or 10? Because the work level seems to be matching the skillset. It’s not that they take longer for the type of work they do.
Am I making sense?
Bill: Yep. And a lot of it has to do with menu priced jobs, where the shop is trying to stay ultra-competitive on certain jobs, and that’s what these GS guys normally do. And so, they’ve got a lower price per hour on those jobs and they have a tendency to reduce the time on it also.
So, there’s a lot of reasons behind it, but a fair time for a fair job, and adjusting the labor rate would probably be a better way to do it and is not disguising something else.
Doug: Yeah, I really agree with you there, Bill, for sure. To answer this question a little bit from a shop owner perspective there. The type of work that the GS tech is doing is a lot more difficult to have a high efficiency on than the more skilled work that takes more experience, probably more specialized tooling to get it done, and things like that as well too. One of the biggest factors that plays into all this, and we’re going to see this really nicely in the data that we’ve got, is the billed hours per work order, sold hours per work order, where we really get to see that when we’re only doing an hour of work on a vehicle, we can’t possibly be efficient on it. All the efficiencies in our shops come in between vehicles, which is when we have one vehicle that we’re doing work on, we are going to be significantly more efficient than if we’ve got three vehicles that we’re doing the same amount of work on, obviously.
Uwe: So, can I translate that into another statement and you tell me whether that’s hitting the [mark]?
If we would increase GS work, the efficiency for the shop goes down, because I have to rack up, rack down, take down vehicles at a much higher frequency nobody’s paying for.
Bill: That is correct. There is a lot of wasted movement in the GS position, and that doesn’t include cleaning the shop, chasing parts, shuttling customers, walking the dog, cleaning the refrigerator, whatever else they might get assigned to.
Uwe: Non-billable hours. So, the amount of non-billable hours goes up if we focus on GS work.
Doug: Dramatically. And we typically refer to this as what we call an activity-based shop, where there is a really high focus on car count, dealing with a lot of cars in a day. [It] really strains our processes. When we’re able to slow our processes down, take that care with every client, the sold hours per work order goes up and we’re not stressing the machine to the same extent, where when we’re handling a lot of vehicles, there’s so much activity in the shop nobody’s got breathing room. Everybody’s kind of running around just trying to get things in and out the door. The shop’s not actually making money doing it because of this efficiency problem that [inaudible].
Bill: And so, one of the things we want to talk about doing is, at any time a production person isn’t working in a production role, if we have a tea time set up that we can actually capture that time. So, if your GS guy works in the office of the service advisor part time, have a tea time to find that they are working in the office, settling customers, chasing parts or whatever. Then we can find out where the rest of their time is going so that we don’t think it’s just strictly a production problem.
Doug: Absolutely. And this is a critical element to all of this work we can do with the BCP. Our ability to analyze the data is only as good as the data we’ve gotten. So, there’s a lot of diligence that has to go into building the data properly. Having your system set up properly. Having good process in place so that the time is captured, so you can go back and look at where the potential improvements are.
Bill: Then we’ve got the diagnostic tech. Those guys, because of the way work gets dispatched to them, they normally get the toughest stuff to do in the shop. Is there anything we can do to help those guys out to make sure there are billing hours to have or are we going to have to talk about a different compensation program for them just because they are not getting the gravy work? A flat rate diagnostic tech has got a tough life unless they’ve got a service advisor and a shop owner that support them properly.
Doug: Definitely a very interesting category of work that shops do and typically one that is probably the least understood in the shop as well. When we’re doing diagnostic work, in no other industry do we penalize our brightest and most talented resources the way we do in the automotive industry with discounting diagnostic time, billing it at straight time.
It was a huge realization to me when I recognized that diagnostic time should have the same efficiency into it that my rock star technician has when he is doing a straightforward mechanical job.
So, billing straight time on diagnostic is not a great approach. I hope everybody by this stage recognizes that their straight door rate is not adequate for diagnostic time. If you’re billing your door rate for diagnostic time, you’re losing out on probably about 30% of your GP associated with that job because there are no parts that go along with it.
So, our diagnostic rate is about one and a half times what our actual door rate is. And we have never talked about diagnostic in terms of time with our clients. Diagnostic is dollars, just like every other job that we do. People buy the whole service from us. They don’t just buy it in an hour or .1 of an hour chunks.
So, when they’re buying a diagnostic, we might bill that one hour at $200, but all we talk about with the clients is the $200. Our rock star tech has seen that before. He gets that diagnostic complete in half an hour, 35 minutes, [but] we’re still collecting that $200.
So, that efficiency needs to get built into what your diagnostic technicians are doing, and then you’ll see their sold hours per day go up along with the rest of the shop operations because you’re selling their skill. And don’t underrate that skill. It is one of the most valuable pieces you have in your shop.
Uwe: I had a question about this. Doug, do you have good sense of how much work on average percentage-wise follows the findings of the diagnostic? In other words, how many times is a diagnostic done presented to the customer together with a proposal to do work to fix the root cause found, and how often is that successful on average?
Doug: Yes. I don’t have some metrics for you with respect to that. I definitely have some feelings as to where that ends up. And I feel that so much of this is all set up in the interaction with our clients and the qualification of our clients, that we are going to be able to meet their expectations, that their expectations are in line with the service that we intend to provide as well too.
And I’d really like to bring up a quote from a good friend of mine, who is also a local shop owner that deals with an area that is a lot more rural than where my shop is. He’s very specific about it. He actually has this on the bottom of his invoices.
And it says, we are in the business of repairing vehicles. And if your intentions are to not repair your vehicle, we are probably not the right shop for you.
So, in selling this diagnostic work, what goes along with that is creating the expectation that once we have this diagnosed, you’re going to want to fix this.
The reason you have us doing this diagnostic in the first place is because you know there is something wrong, know something needs to be fixed. We need to figure out what that’s going to cost and exactly what it is. So, if your intentions are not to fix it, don’t take on the diagnostic work as well.
So, there’s a lot of base process involved to make sure that we are qualifying people on this as well too.
We’ve also got to remember that an appointment booked for just a diagnostic is of course going to get a complimentary inspection that goes along with it. And that’s the opportunity to provide additional inspection results to your client on the condition of that vehicle, educate them about it, and if you’ve done the rest of the process, qualified the client, qualified their expectations, when you present those results, nice, clear transparent backup with a great inspection, they’re going to want to buy the additional services.
Now, the critical element in this is you’ve got to have time in your schedule to actually complete this work as well. So, without the proper scheduling practice in place, you can hit all the other items perfectly. You’re still going to have to deal with that vehicle twice. And that’s going to cost you in that efficiency department, which is the absolute critical pat. That’s what we’re trying to build up in our shops.
When we’re efficient and productive, you’re profitable. 100%.
Bill: So, one of the things that we found early on with AutoVitals [is] that a shop that has proper documentation from the customer of what’s going wrong, follows the [three] C’s – concern, cause and correction – documents tests performed and what the expected results were, those shops had no problem whatsoever collecting for their testing time and the diagnosis that was part of it. And they would normally get the work done with it unless the car needed to be recycled – car, truck, vehicle, whatever. And they would also use that as a great opportunity to do a complete inspection because they would say, ma’am or sir, before we do this other thing that might be expensive, wouldn’t you like to know the overall condition of your vehicle so you can determine whether you want to continue investing in it or not?
So, using all the tools together really helped that process and if a shop is still afraid to charge for testing and diagnostic these days, the handwriting is on the wall. They probably need to be looking for a much simpler business because we spend more time testing and diagnosing vehicles today than we ever have before, and we’ve got to learn how to charge for the skills and tooling and education required to do it.
How about our service advisors? We want to make sure we have a base line for service advisors. We measure them based on gross sales, average repair order dollar amount, hours per RO. What do we expect for them? And maybe we should start with the ratio of service advisors per technician.
We know a technician should be an average of three hours per repair order. They want to do 10 hours a day, so we know they need three and a half cars per day. How many repair orders does the service advisor need to write? That gets us into the $600 per repair order range. What do we expect out of a service advisor, as far as weekly revenue, hours per RO, and average repair order dollar amount?
Doug: Right of the bat, I’d like to say that we expect an awful lot out of our service advisors.
There’s a huge argument that those guys and girls have what is possibly one of the most challenging positions in the shop. They get pulled in seven different directions all the time. They have so many tasks assigned to them. Some of them are small. Some of them are highly detailed. Some are personal tasks. Some are computer tasks. These people need to have almost three different personalities operating all at the same time in order to be highly successful at what they’re doing.
I hope everybody out there has gotten to experience a rock star service advisor and watched them really manage both their technicians, their customers, and their work load all at the same time. It’s a lot of balls to juggle in the air.
I feel that one of the things our industry needs to focus on is unloading our service advisors so that they can spend more and more time concentrating on the vehicles that are actually in the shop at that moment.
Those are the critical ones and it’s the attention to the vehicles that the technicians are currently working on that build the work for the shop to be able to excel in all those metric areas. If a service advisor can’t manage an inspection and send in a timely fashion because they are interrupted five things by things that are not happening inside the walls of the shop at that moment – we’re talking about customer phone calls, or preordering parts for future appointments and things like that – you’re going to struggle getting these metrics up into the category where we know they really need to be in that three hours sold per vehicle [goal], the over $600 AROs and things like that.
Imagine going back to talking about that general service tech with one sold hour per vehicle high vehicle turnover. That workload gets increased on the service advisor multifold at that stage. It’s almost exponential as they start getting kind of behind with the vehicle.
If you don’t have the other processes in place just like we were just talking about, then your advisors are really going to struggle to do that. This is definitely going to end up in a what do I fix first category.
And I really feel that works us right back around to that appropriate scheduling, so that we slow the processes down. We give everybody time to do what we need to do, and all of a sudden we’re getting more done by slowing things down.
Bill: So, if we take what a lot of the coaching companies talk about, [which] is three hours per repair order, and then we say [that] a technician [has] to have thee to three and half repair orders per day. We should have a ratio of one service advisor to maybe two to two and half techs. That gives us some numbers that we can work with and use the business control panel or other data to see all these service writers in the window they need to be in.
And that’s what we’re talking about right now. We want to get kind of a baseline to work with. What can be normal and what how are our machine systems in it performing within our shop, if that makes sense.
Doug, you made a mention that all this that we’re talking about now is kind of the building blocks. You want to go into that just a little bit before we move on?
Doug: Yeah. Absolutely. There’s all kinds of different levels of implementation in the shop. We’re all in a different place. We’re all dealing with different challenges, different people, different locations, different clientele, different vehicles. Everything like that.
I’ve always looked at it as there’s this base structure of a shop and how to build a shop’s processes out. Think of it as a big giant pyramid. Right at the top of that pyramid is your perfect client, the well serviced client taking all of the recommendations. Everything’s happening.
The base layer of that pyramid is a bunch of building blocks of the standard procedures that need to be in place to build the next layer of processes to eventually get all the way up to the top of that pyramid and have everything in place.
The point of the BCP is partly to recognize when one of those building blocks is maybe a little rotten and is not working properly, we need to go back and revisit some of those processes. I think one of the biggest challenges that shops deal with as they’re developing, growing, working their way towards that final top block that is the ultimate 100% implemented shop, the recognition of which blocks are missing or not working properly is really difficult.
We all work within our operations. It’s hard to step out sometimes and see how all the moving pieces mesh together so that we can identify those process that are not working to the extent that we need them to so that we can put the next block on top. And shop owners are constantly getting frustrating because they might be trying to build a level three block and the level two is not solid, so it’s not going to be able to support it as well.
It would be nice to be able to lift out and label all these blocks for you. I think we’ve got a lot of this information in our best practices and process items, but they’re still going to be different for a lot of shops as well too. Right? So, incredibly important.
Bill: Cool. So, the takeaway there is there’s no point in trying to build a castle on a weak foundation or the walls are going to come tumbling down. Right?
So, let’s move on a little bit further. What are the top three to five KPIs that we need to start out with to monitor here? I’m going to see if I can share my screen and bring up a sample business control panel.
Doug: While Bill brings up that business control panel, I would definitely like to mention that as you get into this BCP and get familiar it, my, there are an awful lot of numbers. Look at all those numbers. And it can so quickly become overwhelming to kind of glance at these and go, I don’t know; there’s too much information here. I don’t know if the changes I’m making are making any difference.
The important thing to take away is pick one, pick two KPIs and really pay attention to them. Look at what affects them. Don’t try to take on 12 of these at a time. You’re going to struggle. Start working on the one and two, and what you’ll find is that the watched number gets better. And it almost seems like something that happens in the background, but it’s you. You’re making that happen. When you’re paying attention to these, they will get better.
So, pick what you think you can work on and watch it get better.
Bill: Well, to kind of sum that up, what we want to do is we want to think about this like a technician diagnosing a vehicle. Just because there’s 150 different data pins on the engine control module doesn’t mean that we need to look at all of them right now to determine what’s going on with the vehicle. And that’s what we want to do is [to] define some KPIs here that we’re going to look at, and we’re talking about productivity – so this is our productivity number, and then we want to understand [the] different data that feeds into it.
I love the way the L1 ASE test is broken out. It’s got a composite vehicle. And what I’ve done is I’ve built a composite shop. I’ve actually built three of them. So we can go down through and start using the thinking process as far as what’s going on in the shop. And so what I’m going to do is move over and we’re going to share this composite shop, and let’s take a look at it.
And Uwe, if we get off track, I’m sure you’re going to focus us back in the right direction.
Uwe: I think we need to be very clear in the definition of the KPIs. What is SA efficiency, we should start with, and what are the impact KPIs? Because, yes, I agree with Doug. You look at any type of report and you don’t know where to look first because there are so many numbers.
On the other hand, what’s more important is, what do those numbers mean and how interdependent they are, because the biggest challenge I see in talking to shop owners is, you look at the KPIs like they were not interdependent, like they were independent, and most of them are not.
And that’s why it’s so important to say, what is the top level KPI I’m trying to optimize for, knowing what other KPIs I can watch – ideally behavioral ones because only change of behavior will change the top level KPI. If I try to do the same thing over and over again and hope for a better outcome, I think that’s the definition of insanity.
Bill: Yes. Where I live.
Uwe: So, let’s be really clear to say SA efficiency is –.
Bill: So, let me actually work through this then. So, our top level KPI that we really want to drive is going to be service advisor efficiency. Really ignore the title of service advisor efficiency and think about this as paid, posted and billed hours per day on average.
So, on these particular composite shops, they are open five days a week, and we’ve got three different shops here with three different opportunities for improvement, because I’m not going to say they’ve got problems.
We’ve got one shop that is billing 21 hours per day, shop number one. Shop number two is billing on average 10 hours per day. Shop number three is 12.65. And all three of these shops [have] got different opportunities. But what I wanted to do is look at some individual employees to further understand what’s going on.
So, in shop number one, when we look at Michael and Kyle, if we just looked at their hours completed per day on average only, knowing we’ve got Saturdays and Sundays in here also, these guys here on the face of things look like they’re producing really well. They’re getting in that nine, ten hour range, and if we average including Saturdays and Sundays, these guys are really stout.
But when we’re looking to see, is this a long term thing that can be sustained, when we move down and look at their average hours per repair order, now we can see that one is averaging 2.19 hours per car or per vehicle and one is 1.25.
So, these guys here are working their butt off. They’re probably got a budget for new sneakers pretty often because they’ve got a lot of wasted movement racking in and racking out cars, jumping around, and so on.
So, again, this is one of the things that we see right off here, looking at this particular technician.
Then, we move over here to Jeremy, shop number two, and he’s averaging 5.5 hours per day, at 2.28 hours per repair order. So, he’s touching two vehicles per day. So, on the face of it, it looks like maybe he needs more vehicles to work on.
So, Doug, do you want to give us some input on this, and Uwe also? Obviously we need more data, but does the logic behind what we’re seeing here kind of make sense?
Doug: Absolutely. I think you’re right on the bat right there. Like shop number one, from initially looking at SA efficiency or billed hours, they’re pretty happy certainly when it’s related to their goal there. The shop should be operating with what they look like there, with two technicians, one service advisor. It does look like potentially they’ve got some shop helpers helping those two technicians produce, and that’s a pretty reasonable way of running an operation. It’s very much what we do in my shop.
Shop number two, for sure, there’s potentially a car count issue. There’s definitely an average billed hours per RO going on there as well too.
What do you think there, Uwe?
Uwe: I agree with you, but they are good news. The trend is positive.
That’s another thing I want to mention about the numbers. So many numbers. If you only look at snapshots and absolute numbers, you might draw different conclusions than when you look at the trend. A positive trend is all you can ask for. Don’t set your goals too high and then hope you’re going to reach it. Hope is never a strategy.
But the moment you have a positive trend, you can calculate yourself when you’re going to reach your goal.
The other thing I’m not quite clear [about] is, on the second shop, it looks like there are many helpers, and they are all in a very low number. Isn’t there something fundamentally to be discussed about the composition of how it’s set up?
If the top performer is at 2.28 and everyone else is below two, sometimes even below one, aren’t there too many bodies in the shop?
Bill: That could very well be, and as we go through some more of the data, we’ll make some discoveries to determine what’s going on. In each one of these three shops, there is obviously room for improvement, and we are going to continue on down the list.
So, after we look at the average hours per repair order, then what we want to do is discover what percentage of vehicles are being inspected. Are we delivering safe, reliable, and comfortable vehicles to our customers by doing inspections?
So, in shop number one, we can see that both of these technicians are inspecting about 30% of the repair orders that go through the shop, and no other support person in the shop is doing that. So, this is kind of a low number and it makes you wonder a little bit what these other guys are here for. But again, this is the kind of data that we have to see and kind of correlate to each other and see how they interact.
Now, on the second and third shop, these guys are doing a very high percentage of inspections. You kind of wonder what’s going on that is still not helping us discover the problem.
You guys seeing the same thing here, gentlemen?
Doug: Yeah. I see this for sure. And it’s very interesting that average billed hours per RO is very similar in these two tests shops and inspection rate is so different. This comes in to obviously needing more data to able to do a full analyzation involved here, but let’s consider scheduling in this factor. Picture shop number one is likely scheduling a whole day’s work for their technicians. They come in at eight o’clock, they have every vehicle lined up, and they’ve got that eight to nine hours of work all planned out for their day. We’re talking about some quite efficient technicians in getting through that work as well, too.
But there’s no room for those technicians to complete additional work on those vehicles, so the inspection process falls down. They have their day set up.
Bill: So, they’re just fixing what the customer brought it in for.
Doug: Exactly. A similar situation in these schedules might look identical as well, too, where shop number two is inspecting everything, but maybe they’re not providing those recommendations. They’re not the giving the opportunity of the technician to have more work to complete on those vehicles that they just finished inspecting. And that can be a scheduling issue as well, too, if they have their schedule filled. But we’re dealing with an efficiency issue, and the work is taking longer because of potentially a really, really thorough inspection, but without the follow-up of actually selling the recommendations at that appointment as well.
Bill: Right. So, our inspection rate is, we’ve got our primary KPIs that we’re looking at, we’re trying to drive, and now what we’re doing is, we’re starting to measure the behaviors that actually have a direct influence on them.
You have anything that you’d like to add on this particular KPI, Uwe?
Uwe: I don’t want to jump too fast to the conclusion, but I’m wondering whether shop two is a quick lube specialty shop.
Bill: We’ll find out in a little bit. We’ve got to keep the suspense going here.
Uwe: OK. But that would explain a lot the numbers so far, right?
Bill: It could.
Uwe: Going back to the initial thing, we have basically more GS work from a ratio to the whole work than there should be for a healthy mix.
Bill: Could be. We’ll see if you’re right here as we go on a little bit further. And so, the next KPI that we want to look at is the average number of recommended actions. And this is when the technician is doing an inspection, are they actually spotting needs, and are they spotting needs at an average amount that should be for the particular trade area they’re in, or is there something else going on?
So, on shop number one, you can see that when the technicians do inspections, they’re spotting an average of three things per vehicle that need to be tended to, which is, by most standards, we see between five and eight is the general rule.
And then when we move over to shop number two and three, we can see that their average number of recommendations is in the 30 to 35 range.
Uwe: Wow.
Bill: What are kind of cause and effects here?
Uwe: What is the service advisor doing in shop two?
Doug: This actually brings us right back to what I was talking about where setup and the quality of the numbers that we are measuring is absolutely critical to our ability to use them to analyze our operations and make educated decisions about what we need to do to manage our shops.
I just want to be perfectly clear with Bill. In the second KPI, there are a number of recommended actions per vehicle, [which] should include per vehicle inspected. This is not including all of the vehicles that were through the shop. This is only on the vehicles that actually had inspections. Correct?
Bill: Sure. If they don’t have an inspection, they can’t be any recommended actions on the inspection sheet. So, you are 100% correct.
Doug: Totally. So, the wording could be a little misleading if the shop owner is thinking about that as, well, I’m only inspecting 30%, so the number of total actions is divided by all my vehicles, not just the 30% that I’m inspecting based on that.
Shop number two has an inspection sheet setup issue here. We can pretty much guarantee that based on this one metric involved. Because on average, 31 actions necessary on your typical road-going vehicle means that you are only dealing with the bottom 1% of the absolute worst vehicles out there, and you’re spending an awful lot of time inspecting them.
It is absolutely critical that your inspection sheets are set up properly, according to the best practice, where we have conditions under conditions and actions under actions. Every single action on your inspection sheet should be a canned job in your point of sale system. If your technician wants an action on the vehicle, there should be an associated product that you can sell.
If that’s not the case, step number one, go back, sort out those inspection sheets. It can be a daunting task, but trust me, it will pay off. We’ve been here before. We’ve been doing these for a long time, and inspection sheet setup is still critical to this whole process.
Uwe: So, if I understand it correctly, are you saying what we see here is not really a recommended action. It’s probably a condition?
Bill: No. We are not saying that. What we’re saying is that somebody who set up the inspection sheet has put an information line rather than something that leads to money on the action side of the inspection sheet.
Uwe: OK.
Doug: Exactly what Uwe said as well, too. I’ve seen both of these scenarios.
Uwe: Yes. OK. Makes sense.
Bill: There shouldn’t be anything on the action side of the inspection sheet that doesn’t lead to something that requires time or a payment by the customer in some way, shape or form. So, if you’ve got something on that side that is an information line, maybe a condition for example, it belongs on the conditions side, so that way, when the technician is looking at a topic, they’re looking at the topic you want them to, they’re choosing a condition that makes sense, and they’re choosing an action only if there’s something that needs to be done about it.
Uwe: So, assuming for our listeners, we have canned jobs, what is the expected number of recommendations per vehicle on average?
Bill: Normally we shoot for between five and eight on a vehicle. That’s within a reasonable range and reasonable maintenance. That seems to be an average range to shoot for as far as a number of recommendations. Some vehicles are going to be more; some are going to be less. But that seems to be a fairly decent average.
The only time we see it in a really high range [is] let’s say the vehicle is a reconditioning facility for a car lot, where they’re going through the whole vehicle, they’re understanding everything that it needs and presenting that for an approval or send the [expletive] thing back to the auction. Those shops will normally have a very high number of recommended actions.
Doug: Interestingly enough, one of the things that we certainly notice all the time as well with our operation is new clients. We actually have a specific flag for our work orders when we’re dealing with a vehicle that we’ve never seen before, because – I’m going to go right out here and say that – typically we’re 10 to 14 recommended options on vehicles that we’ve never seen before.
Uwe: Yeah. That makes sense.
Doug: And that means that as a well implemented shop we’re doing a better job of inspecting vehicles than wherever they’ve typically been going to before. So, I’m bring those new clients up to the Downtown Automotive spec of this is how you take care of your vehicle properly.
Bill: Cool. So, the next thing we want to talk about is when the technicians are actually doing inspections and making recommendations, are they taking the appropriate amount of pictures that go with them for proper documentation? Are they taking enough or too many or where?
You can see shop number one here, when they make recommendations, their average number is three, and they’re taking about half a picture – which I don’t know how you do that, hold your hand over half the lens?
And then we’ve got shop number two. Jeremy, for instance, his average number of pictures is 9.5 and his average number of recommendations is 22. So, again, that kind of points to a mismatched inspection sheet.
And then we’ll leave number three up to Uwe and Doug to dissect.
Doug: Well, we’re talking about an inspection policy here that goes right hand-in-hand with inspection sheet setup to make this even possible for technicians to be able to manage anyway. Certainly the way we operate this is that if we have a recommended action, it needs to have a picture associated with it.
There are a few situations absolutely where that gets difficult or — let’s call it — pointless, where the picture isn’t going to actually have much informative value for our clients at that stage. That typically gets offset by situations where more than one picture is more than appropriate for a recommendation as well, too.
So, generally, the number of recommended actions per vehicle and the average number of pictures taken per appointment really ought to at least be in a one-to-one ratio if not more pictures than recommendations essentially.
So, all three of these shops have a bunch of work to do with some inspection policy.
Bill: And so, one other thing I noticed right off the bat on shop number one as far as protecting the liability and assets of the shop, we can’t possibly have any walk around pictures taken before or anything else because we’ve got such a low count. 10 to 14 is the lowest range you really want to see for proper documentation.
But again, each one of these shops has got a different thing going on and we’re using behavioral data, [so] to audit this kind of stuff and find it out by looking at repair orders and stuff like that, it’d take hours or days to dissect the shop, and nobody’s got time for that.
Let’s look at the next behavior, and that’s the edited pictures percentage. To me, this tells us how well the service writers and the technicians are kind of both working as a team. Is there an arrow, a note, or some type of information on the picture to understand? Shop number one, 82%, but that’s only of half a picture per whatever, so that could be just a simple arrow or so on.
And then we get over to shop number two and three, and we’ve got different numbers.
So, this gets into the discussion of how well are the techs and service writers working together to make great educational content for the customer? And we’re going to measure that [by what] the customer thinks of that in a minute.
So, anything here draw your attention out? It’s good that they’re going in a positive direction from someone.
Uwe: I think shop one has not changed any process versus the paper inspection. That would explain because we see high numbers of editing pictures. It’s kind of cherry picking the topic to be presented to the customer.
So, you look at the vehicle and see something, and then you do the inspection after you have already identified what is kind of a ripe fruit to be presented to the customer and then you follow the process. And that’s obviously in 30% of the vehicles the case. And then you focus on the recommendations which are really making money.
That is how it looks to me, if I’m making sense.
Bill: And that falls into what Doug was saying. Because they’re taking an easy path because they don’t have room for expansion and they’re focusing on the quick, easy things that they can turn with whatever time they had allowed.
Uwe: Allowed, or, I mean, it takes two. They obviously have not tried to implement an inspection policy, which is that all vehicles get inspected.
Doug: Which is a level one block that we were talking about, right?
Uwe: Yes. Exactly right.
Doug: If that policy’s not in place, how do you build on actually having inspections edited properly if you don’t have the level one block?
Bill: For shop number one, how do we get rid of that level one block?
Uwe: Get rid, or introduce it, you mean?
Bill: How do we get rid of the block that they have, as far as doing an inspection on every vehicle? So, to me, the best policy that we put in place in the digital world is the first labor line on every repair order is whatever type of inspection is going to be done. Then it’s not arbitrary for the technician whether they do an inspection or not because it’s just like every other line in a repair order. They don’t get to choose whether they do it or not.
Doug: Absolutely. I agree 100% on that one, Bill. And even further to that, let’s consider the process that a technician should never be working on a vehicle if he doesn’t have a time associated with the job that he’s doing. That should, in my opinion as well, apply to the complimentary work that we do. It’s a big deal, and if we don’t put a value on something, does it maintain the same value to our clients?
Our courtesy inspections in my shop are worth .4 of an hour. Our expectation is that there are going to be some that are quicker than that, many that are longer, and we discount that labor right on the invoice.
Our oil change that might only come out to $120 if done stand alone all by itself includes a discount of about $80 on it, and that’s for our courtesy inspection and our courtesy cleanup for that client. And this just goes to show right away as well if we spent our entire day doing just oil changes, it is a huge losing proposition for the shop. We are giving our skills and talents away.
The point is that we are also accurately tracking the cost of doing our courtesy inspections, the time associated with our courtesy inspections, so that the metrics that we get out of them are real world. They do matter. And we can troubleshoot our systems with them.
Bill: Are you showing the customer the discounted amount so they can understand the value?
Doug: Absolutely. Every single time.
Bill: I knew you were going to say that. How did I know that?
Doug: It goes back to that concept that if we don’t put a value on it, is the client putting a value on it? And so much of what we do, it’s not about how much we charge for what we do. We need to charge so that we can be profitable. It’s about being able to show value for what we charge. And by showing value on these is a huge part of that proposition.
Somebody can go to a quick lube and spend the exact same amount with an oil change as with us. And the value at the quick lube is that they waited in line and got it done right away. The value at our shop is that we’ve completed a courtesy inspection and a cleanup for you at the same time, and you actually get to know what kind of condition your vehicle is really in.
Bill: So, this next metric is pretty simple to understand. We’ve talked about this many times before. If an inspection has been done, and you have an email address and a phone number, is there any valid reason not to send the inspection?
I’ve heard lots of excuses but I’ve never had a valid reason yet, so if you guys agree with that assessment, then we need to get on to what the customer thinks about the inspection.
Doug: Absolutely.
Uwe: We have five minutes left. I’m dying to get to our conclusion because I want to play devil’s advocate here.
Doug: Let’s carry on.
Uwe: The first shop has some good numbers overall, if I remember correctly, ARO-wise and billed hours. If I’m the first shop owner, I say, I’m doing fine.
If I’m the second shop owner, am I spending too much time on the inspection? I don’t have enough time left to actually work on the vehicle.
Bill: Are you asking me or Doug?
Uwe: Both of you.
Bill: For the first shop, what I want to do if I’m the shop owner is I’m going to say, look, it’s great the shop’s making money, it’s great that we’re billing all these hours, but what I’m doing is I’m making my technicians wear themselves out, so I’m going to work with them to define processes where I can slow them down a little bit, remove some movement from them and have them be a lot happier and a lot more comfortable in what they’re doing.
And that will also let it be more attractive to bring other staff in because if you can show a technician you’re trying to recruit them. Look, you touch three cars per day, you’re going to make 10 hours, because that’s all they’re really interested in. They don’t care about your weekly revenue or anything else. Those are things that they have.
And for shop number two, they may have a situation where their master tech might be mentoring those other guys and they’re not producing yet, but whatever it is, they need to solve it pretty quickly, because you can’t have that many guys on payroll not producing regardless, especially if you’re in a state that everybody’s paid hourly. That’s kind of heading down the circle of the little porcelain thing pretty quick, I guess is what I’m saying.
And it might be a recruitment problem because they don’t have good processes in the shop and they haven’t put systems in place where they can attract anybody else, because somebody walks in there, you can easily see, you’ve already got five guys here; they’re all starving to death [and] they look like Cambodians. Why would I want to subject myself to that?
You’ve got any thoughts on that Doug or Uwe?
Doug: Yeah. You bring up a really important and key element involved there, [which] is attracting technicians. This is an incredibly acute issue in our industry right now. You make the solution very, very simple. Be the place to work. That is the solution to attracting and being able to hire top talent in our industry.
If you have the smoothest operating, the best and the most profitable shop, and the culture that goes with that – I will be specific about that because you can have tyrants in well-operated shops as well too – and have a good culture that goes with it, they will be knocking at your door and dropping off resumes. You won’t be looking for them.
Bill: This last number here is the one that is the most telling, and that is, what does the motorist think about the content that is actually getting to them? And if their engagement time is low, then it’s time to do an audit and understand what’s going on. The other KPIs I’ve kind of defined here is, the number of repair orders written per day. You can see on the first shop [that] they’ve got a high ARO, but they’re still not writing a lot of repair orders per day.
And then, shop number two and three, they both really, for the staff they have, they’re not writing anywhere near the repair orders [they should be]. They probably need to work on answering the phone and instead of telling the customer what they can’t do, they ought to say, these are the things I can do for you. When would you like to bring it in?
Doug: Yeah. Certainly for metrics for us, average ROs per day, and breaking it down by service advisor. If your service advisor is trying to deal with six, seven, eight vehicles a day, they cannot possibly spend the time necessary in that relationship to have a good sales process.
Again, supported by all kinds of processes in place at the base level in those categories. Our service advisors, we want them down in the three, four vehicles per day. Hey, that happens to line up with dealing with one technician. Imagine a scenario with one technician and one service advisor and picture how well both of those employees can service those three and a half customers in that day. We’re talking about ultimate attentiveness. Things don’t get missed. Balls don’t get dropped in that situation, and your shop reputation goes up with it.
Again, we’re talking about slowing these processes down so that we’re not just scrambling all day long hitting so much activity that we can’t possibly do any of the processes as well as they really need to be done to get to that block on our big pyramid of success handling awesome clients.
Bill: So, this kind of also answers Uwe’s question earlier. Are shop number two and three a quick lube facility? If they are, they’re not seeing very many units per day.
Doug: And shop number one is operating most like a quick lube there with the amount of vehicles they’re handling in a day. No wonder they don’t have time to inspect them.
Bill: Right.
Uwe: My advice to shop owner one would be—. Actually, it would not be advice. It would be a question. Do you want to grow?
Because they have an amazing baseline to start from, and adding the inspection as a consistent process allows them to hire more people and grow the shop. He has a good problem to solve in my opinion.
The other two are in bigger trouble. It seems to be a hybrid of the ability to educate and sell and get approval rates, plus a lot of activity going on, not resulting in billable finished hours.
Would you guys agree?
Bill: Yep. And like I said, for all three of these, [they need to be] doing an inspection audit with the whole shop as a team to understand the quality of what they’re doing in the eyes of the customer, looking at that inspection result like they’re going to send it to their mom, who isn’t a technician, to understand what’s going on. That’s a key to working together and building a team culture in their shop.
Their inspection sheet isn’t set up right in any way, shape or form, because the sales, the estimate rate isn’t right on there, so again, that goes to a setup problem that they can work on. I would highly encourage them to work on that setup by defining some quick wins for their shop and then exactly what it’s supposed to look like, exactly the cannedf job that needs to be on it and so [on], and start racking them up.
All three of these shops have a setup problem, and working together to do the audit and to define the quick wins while they’re doing the audit will really go a long way toward helping them out.
Doug: And what I’m seeing here as well is, there’s an awful lot of low hanging fruit from all of these shops. There’s some basic process and procedural items that can be changed quickly and easily and likely with a huge effectiveness involved here.
And by managing these shops, using the metrics that we’ve got in the BCP, identifying those areas doesn’t take a rocket scientist. They are there in front of you. Get familiar with looking at these. Take the training. Watch the best practices videos. Find yourself a peer group with some other shops to help give you ideas of processes and that’s what AutoVitals does for us. We’ve got an amazing group of shop owners, service advisors on the forums and everything. Ask your questions. Put up your numbers. Let’s help each other out.
Bill: I have looked at literally thousands of shops for the time I’ve been with AutoVitals and even before that. I’ve never found a perfect shop. But I’ve seen a lot of shops that they don’t have an open mind to what’s going on around them. So, my thought process is if you have an open mind and ask questions, especially on the Digital Shop Talk forum, different groups and stuff that is out there, and take some advice, if you’ll ask our AutoVitals trainers, if you’re using AutoVitals, ask our trainers that are working with you. They will point you in the [right] direction, and if they don’t know, they have a whole team of people behind them that they can certainly ask and lean on to support you.
Uwe, you have anything that you want to add before we wrap?
These are just examples of what good can look like. The shop on the right, three hours per repair order. They’ve got a pretty decent shop. They’ve got several guys in that area. And then the shop on the left, they’re doing well, they’ve got some guys in there that are really good performers, but if you look through the rest of the day, they’re similar to what we did here today. You’ll always be able to find something to work on, a process to change in the shop and a way to measure it, and be able to continue to improve.
Uwe: Yeah. I would love to go into a few more of those KPIs, but we are [out of time], for example, the sales two estimate. Really for shop two and shop three, I seriously have no idea what’s going on, but I agree with Doug. There is so much potential for improvement.
And if we could have one of the shops in the audience volunteer, we might use this podcast to go into details for that shop. That would be fun.
Doug: Sounds like we need a whole other podcast series. We’ll make some five hour episodes, and we’ll go through every KPI.
Bill: Awesome. So, we’re at a little bit over the top of the hour. I’d like to thank those of you who’ve joined us and encourage you to go to AutoVitals.com/radio, or just Google us and look for us and listen to us on some of the podcast platforms that are out there – Apple, Google and so on.
And also find another struggling shop owner that might be in your neighborhood and help lift up the industry by inviting them to listen to these podcasts or join us live.
And so, I guess the only thing I have to say right now is thank you, have a great day, and go out and make some money.
Uwe: Thank you, Doug. It was awesome.
Doug: Always a pleasure. Thank you, guys.