As the old saying goes, the easiest way to eat an elephant is one bite at a time.
Shawn Butler can relate. The recently hired fixed ops director at Bristol Honda in Tennessee is taking that metaphorical advice to heart as he works — step by step — to revive a moribund and neglected service department that’s been underperforming for years.
The importance of Butler’s mission is magnified by the inventory shortage hampering dealerships’ vehicle sales, which fosters more reliance on fixed ops revenue. Furthermore, service departments now serve as valuable funnels for potential used-car acquisitions that can at least partially replenish stores’ flagging inventories.
The problems at the 55-year-old store, recently purchased by Umansky Automotive Group, of Memphis, Tenn., are, well, elephantine in scale: a well-below-average level of customer-pay repair orders per day; a low effective labor rate stemming from below-market prices for services; inadequate investments in training and equipment; little marketing to generate customer traffic; no express service lanes; and insufficient emphasis on processes and protocols.
Smaller issues also reflect the larger problem of neglect, such as the more than 400 burned-out lightbulbs in the shop and service drive, says Butler, who was hired April 1 to initiate a fixed ops makeover.
“Little things matter, too,” says Butler, who has 27 years of fixed ops experience.
Mike Lee, dealer principal and general manager, says he and Greg Moore, the auto group’s fixed ops director, believe Butler is up to the task.
“We like his energy,” he tells Fixed Ops Journal. “He brings a lot of enthusiasm to fixed ops. And he’s doing a fantastic job.”
For his part, Butler says he’s “super passionate about fixed ops. I live and breathe this stuff.”
The shop has 19 service bays and employs 34 people, including 14 technicians — 11 line technicians and three recently hired express lane technicians, he says.
Butler says his makeover formula centers on three basic actions: Assess the situation, prioritize what needs to be done and then execute the plan.
The first step was talking to individual employees and generally observing operations. Butler says he looked at myriad things: How do customers and personnel interact? How do advisers greet customers? What’s the overall atmosphere like? Do customers seem happy to be at the store? How is employee morale? How well does the parts department work with technicians? What are the technicians’ skill levels? And so forth.
“I also study the numbers,” says Butler, who has quarterbacked fixed ops makeovers at two other stores, located in Virginia and Tennessee. “The numbers don’t lie.”
Butler determined he had two big advantages on the plus side of the ledger: solid and skilled technicians who’ve been good long-term employees.
“We have a really good core staff,” he says.
On the negative side, there’d been no training or process updates for the last four or five years.
“Over the course of time, if you’re not investing and evolving, things start going backward,” Butler observes. “You start underperforming and not living up to your potential.”
Furthermore, technicians were underpaid, which largely stemmed from a low effective labor rate, he says.
“If your ELR is too low, you can’t afford things like paying techs more or upgrading equipment and facilities,” Butler explains. “It affects gross income and ultimately your bottom line. A higher ELR allows you to hire more personnel and afford extras like porters and greeters.”
Another red flag: The department generated an average of only 30 repair orders per day — a troubling figure.
“A typical RO count should realistically be in the range of 65 to 70 per day,” Butler says.
That shortfall indicated another issue: lack of marketing campaigns that drive more customers to the store, he notes.
Furthermore, without express service lanes, the shop couldn’t efficiently handle customers who just want basic services performed quickly — a definite competitive disadvantage, Butler points out.
“Express lanes are instrumental to getting people to return, as well as giving the store more looks at cars for possible trade-ins,” he explains. “The whole shop benefits from a well-run express department because you can suggest future maintenance.”
Looking at the bigger picture, the shop also suffered from an overall malaise.
“Everyone was basically just existing — fending for themselves, if you will,” Butler says. “It wasn’t the fault of the people that work here … the previous ownership just was kind of stuck in a time warp from an operational and pricing standpoint.”
Things were stagnant, Lee adds.
“There was no sense of anyone pushing the needle,” he says.
Since April 1, Butler has checked off a lot of boxes. For starters, the store hired FixedOPS Marketing to kick-start promotional efforts. Subsequent improvements include a revamped dealership website that now showcases a variety of service offerings, Butler says.
“Before, all it said on the service page was that we sell tires,” he notes. “Now we have videos that show different services, links to coupons on every page and an online-scheduling link.”
The dealership also became a certified RepairPal facility, an online resource that enables customers to, among other things, compare prices for repairs and service.
“We’ve already logged more than 2,700 hits from people who use RepairPal,” he says.
In addition, the store scoured its database to find inactive customers who haven’t returned for service from 10 months to three years. In staggered mailings aimed at avoiding an unmanageable rush of business, those customers will receive a coupon for a $69.95 oil change with a free tire rotation, just to get them in the door.
“This is a rural area where mailers will actually work better than email,” Butler points out. “I’m not a huge fan of mailers, but you have to take into account your customer demographics.”
The department also now includes three express technicians. Butler aims to hire one more, which would create two two-person teams deployed in two of the three express bays. “We can grow from there,” he says.
Butler also updated service and repair prices. He comparison shopped by calling four other dealerships, two independent repair shops and two quick-change stores within 20 miles, he says.
“I don’t want to be the highest, but I also don’t want to be the lowest, either,” Butler explains. “I like to be somewhat close to the highest — push the edge of the competitive market without pricing ourselves out of the market.
“I’m OK with charging more than independent shops because of all the extras dealerships offer, like factory-certified parts, certified technicians, shuttle service, etc.”
Butler also boosted technicians’ hourly pay by an average of 25 percent. Some technicians were as much as $5 an hour below market rates, he says.
“And that’s just raising their hourly rate,” Butler adds. “Our hours per repair order have increased to 1.46 from 1.1, which also increases their pay.
“That may not seem like a big jump, but if you multiply that increase by, say, 1,000 more repair orders a month, that’s an additional 360 hours of work,” he says. “So there’s more opportunities for techs to turn more hours.”
Employee training and establishing processes also is progressing.
“You need consistent processes,” says Butler. “Everyone has to be on the same page, doing everything the same. That allows for more efficiency and better communication with customers.”
As an example, Butler points to one problem area: technicians entering incorrect order codes.
“Techs were entering generic operating codes,” he explains. “That negatively affected income. If you use the wrong codes, it can result in not enough labor hours being charged … so you’re giving work away because the quoted price was wrong.
“It also can create delays and confusion for customers.”
Butler also implemented a so-called 10-foot rule that encourages employees to speak to anyone within 10 feet, both colleagues and customers alike.
“It’s an old-school, Ritz-Carlton practice,” he notes. “When customers see employees communicating, it generally lends itself to a better atmosphere.”
The shop also improved its combined average effective labor rate from around $85 to around $128 in May, primarily by raising the store’s initial “door” rates. The goal is to achieve a rate of around $130 for repairs and $100 for maintenance items, Butler says.
“We had to adjust prices accordingly after conducting market research and price comparisons in our area,” he points out. “You can really move your ELR fast by building your fast-moving maintenance items at a very high ELR.”
For example, if a tire rotation pays a technician 0.3 of an hour, a $29.95 price achieves an effective labor rate of $99.83 ($29.95 divided by 0.3) — just slightly under the target maintenance rate of $100, he explains
For another example, Butler cites a brake fluid exchange, which pays a tech .08 hour. A shop that charges $139.95 would achieve an effective labor rate of $174.95 ($139.95 divided by 0.8).
“A shop that performs 30 to 45 of these types of services a day at those rates will quickly raise its ELR,” he says. “But you have to make sure your service advisers aren’t bargaining with customers over the labor rate to sell work and then adjusting prices down at checkout time.
“If they don’t hold your door rate on repair work, it will kill your ELR.”
How is Butler motivating employees to buy into so many changes? It may sound trite, but a lot of it boils down to old-fashioned communication and listening skills, he says.
“Sharing the vision is of utmost importance, and setting goals and requiring accountability all lead to success,” he says.
“But you have to be able to effectively communicate what those goals are and what the end vision is. And more importantly, explain what each employee’s role is in achieving that vision.”
Getting to know employees and figuring out what makes them tick also is critical. So is getting out of an office to greet customers and talk to technicians.
“Employees have to feel valued and welcome,” Butler says. “I believe in focusing on people’s strengths and positives, rather than only pointing out negatives and only coming to people when they do something wrong.
“You have to build up a reservoir of goodwill with employees,” he says. “Then you have a good reservoir to draw from when there’s something negative to talk about — and employees will be more receptive to constructive criticism.”
Butler says he told management it would take about 30 days to get employees on board with the changes and 90 days to see “positive traction” on other areas.
“When it all comes together — marketing, pay increases, higher prices, more customers and better processes — it’s going to be like somebody flipped on a switch,” he says.
Umansky Group recently purchased two stores in Johnson City, Tenn., and Butler now is the fixed ops director for those stores, too, tasked with turning around their underperforming service shops.
“It’s been quite hectic,” he says. “But I relish the challenge.”
Butler says he firmly believes Bristol Honda has the potential to at least double the business it was doing when he was hired. To achieve that requires plugging away at improving, one step at a time.
Sort of like eating an elephant.