How many peeps does it take to screw in a light bulb in a dealership service department? Let’s calculate, a factory expert to determine the appropriate bulb (new national factory VP), a parts person to locate the almost unheard of bulb, a porter to locate the now concealed ladder, a service manager to explain how to do the job, a volunteer ladder climber to replace the bulb, a generous good-body to steady the step-up, a general manager to take credit for doing the act, a call center plebe to catch a phone-in while it’s being done, and an owner to ensure the damn ladder gets put back where it belongs. That would be nine participants, almost to government specs!
Virginia, personnel expenses are out of control for too many service (or other) operations. Support staffing and their related overhead in proportion to actual productive producers (wrenchers) is at the highest level in dealership history. Go back thirty years and the ratio was .4 support scrubs to 1 tech, so a ten-tech shop only staffed four support personnel. That would be a do-it-all manager, two do-it-all ASMs, and an admin/porter/gofer/whatever.
Of course, the usually technical ASMs owned the customers, warranty flowed freely, vehicles weren’t generously cleansed, impatient waiters were few, 5:30 p.m. was considered a late closing, and Saturdays were half-day at best, if opened at all. Service managers were writing, working on vehicles, cashiering, phone answering, getting beat up, or cleaning something up – and shallow, time-wasting, no-point meetings were few and far between. Every day was a blur of applied activity; but it felt good from my perspective.
“Do current-day dealer service operations need all these extra peeps to survive, or is the opposite happening?”
There were far more dealer locations (about 70%), a lot more mid-sized and smaller shops, and customer satisfaction surveys consisted of four to-the-point customer-retention-driven questions – on the high side. High schools regularly conducted auto shops as an important elective, and youngsters began tinkering with cars and trucks as soon as they were tall enough to see through a split grill. The workings of cars and trucks were a passion to large parts of society.
Setting a service appointment meant leaving the vehicle for the day, then catching a ride with a friend or a family member to and from. Getting a shuttle ride was just for those few loners / losers with no networks or clan. The primary dealer employee benefits were you got to keep your job if you did it and your attitude right every day, and the bonus was a paid week or two off a year – otherwise you were at work making “good” happen and off the streets.
What the hell happened?
The dealer count collapsed thanks to several serious financial recessions, continuously increasing factory purchase demands (i.e. training, tools, facility improvements/changes, vehicle models which no one wanted, etc.), a disproportional growth in business-related costs, rising costs of consumer expenses – especially related to additional “gotta-have-it” stuff (i.e. cell phones, electronics, Internet, etc.), vehicles which didn’t need money-making service expenditures till the second owner who went somewhere else, growing heady competition (i.e. quick service centers), government mandated employee benefits, inflated payplans, satisfaction surveys which planted more and more unrealistic customer expectations, and a diminishing gross profit per vehicle – currently almost a sad joke. All the while overall dealer net to sales dribbled down from an acceptable (not great) 5 to 8% to a measly 1 to 1.5% for many franchises, an investment only an over-imbibed individual would consider investing in late one night.
As time marched forward, there was a perceived need to staff more dealer service personnel to meet the competition’s success, while also reducing service pricing and related gross profit. Introduced, not necessarily in this order were full-time, service cashiers, vehicle washers, call center/business development personnel, shuttle drivers, porters, greeters, dispatchers, parts runners, warranty administrators, and suddenly the need for fixed operations directors.
Fat city now
Direct personnel expense sans benefits, which once floated in the 20 to 25% of gross profit range with labor rates in the $30’s, have grown to over 45% of the service gross profit in too many cases, leaving little room for other growing expenses, and at least some profit. The question has to be posed: Do current-day dealer service operations need all these extra peeps to survive, or is the opposite happening? How fat can personnel expense be and still survive?
I have had the opportunity to visit a lot of dealer service operations over the years and I have found support staffing to be quite variable for the same number of producers. It is quite noticeable that many of today’s DMS programs have made the appointment / reception / updating / delivery process more complex and paper-driven than need be – I have to smile thinking about the early intro to computers and software – “Paper soon will be eliminated, yeah right!” Software developers in general appear to not be educated or exposed to the actual needs of dealer service ops, which also vary from franchise to franchise and market to market.
A study for you
About five years ago I developed an Excel spreadsheet which examines tech and support staffing and related budget options. I have updated it, and you may have it just by writing to me at EKovalchick@Dealer-Communications.com. Put this on the subject line: “Service Staffing – How Many Do I Need Buco?” and I will get it to you as soon as I receive your fine note. Some have written to me that they had trouble reaching me through our magazine email address. I will have more thoughts on this impactful subject in coming columns.
Author: Ed Kovalchick
Ed Kovalchick is the CEO and founder of Net Profit Inc., Alabaster, AL, an international fixed operation consulting and training firm located in Alabaster AL. Mr. Kovalchick and his firm have assisted hundreds of dealers and manufacturers, and conducted workshops throughout the world for thousands of students since 1979. He has written columns for Dealer Magazine since its inception. Reach him at Ed@NetProfitGroup.com.