P-202 Seven Controllables of Service Department Profitability

Item #: P-202 Paperback
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Forward by Terry L. Carlisle

Almost twenty years ago when I first got involved in the consulting business, I was in a position of being trained by some of the most experienced and skilled consultants in the automotive service industry. A consultant's training at that time was basically limited to training through association. One would be hired and sent out on a variety of field assignments with a senior member of the consulting staff to learn the applicable techniques and processes necessary to make substantive improvements in a given environment. While involved in one of my earliest consulting assignments, I observed that the consulting methods were focused on what appeared to be advanced service management techniques. What I found interesting was that many of the problems with which we were dealing were a result of very fundamental issues and simply did not require a tremendous amount of sophistication to resolve. What they did require was a better understanding of the basic logic that drove the service department in four key areas: financial, marketing, personnel, and organizational structure.

In trying to find answers for a number of elementary financial questions, I asked the senior staff and realized that even the most senior consultants at the time did not have, what seemed to me, the appropriate answers. Questions such as; "Exactly how many technicians does it take to retire the expenses of the department?" "How many technicians are required to cover the expenses and make a reasonable net profit?" "If you build new facilities, how much labor sales volume is required to retire the incurred liabilities and make a profit?"

It appeared to me that these were very rudimentary issues. But the more I asked, the more it became obvious that the answers did not exist. Service consulting at that time was driven with the advent of the service menus, the employment of the team concept, rearranged work weeks, Shop Track, and a variety of different attempts to satisfy the retail pricing dilemma in the face of increased competition. My contention was that those issues were completely valid, but should be addressed only in shops that had full command of the fundamentals of the business. I struggled with that dilemma along with my associates and superiors for several years. During that period of time, several methods were isolated yet never documented in a comprehensive fashion.

Then, along came Ron Stoner. Ron came to work for ATcon several years ago and early in his tenure with the company became concerned over the very same issues. How many stores fail simply because they lack the fundamentals to be successful? He realized very quickly that high levels of sophistication may not be required in every service department environment. Ron began to work diligently to amass information that had been gained in the past from other qualified consultants and added to it his unique perspectives. After years of hard work and analysis, Ron isolated the basic elements of automotive service financial management that needed to be addressed and developed a method for dealing with the relevant issues.

One of the key areas of Ron's focus was the development of a logical process that would allow a service manager to design a mathematically viable business equation and run a successful operation. When I first heard about his quest to deliver this type of message, I thought it was going to be another "also ran" financial training effort. Like most retail service managers, I have been through numerous classes on how to read a financial statement. The problem I have had with many of those classes is I know how to read it but if the statement indicates that I am losing money, what things can I do and what are the financial implications of each of those actions.

Ron has done an absolutely brilliant job of taking the mind-boggling complexity of a service department and reducing it to a series of basic controllable elements. The more I have read what Ron sets forth in this book, the more obvious it becomes that teaching someone how to make good financial decisions is more important than teaching them how to read a financial statement. If one makes financially viable decisions, then the statement will simply reflect whether or not those decisions were correct. On the other hand, if one is capable of reading a financial statement but incapable of projecting the financial implications of their decisions, then the statement simply reflects that their decision making process is flawed.

Many of the managers with whom ATcon has worked over the last fifteen years have been exposed to the elements of this book in one form or another. However, this is the first comprehensive document that clarifies in detain fundamental operating equations and then explains specific operating techniques that can be applied to each element to yield a relative improvement in virtually any service environment. I know the use of the concepts set forth in this book have allowed us to train ATcon consultants and clients in a more efficient and expeditious manner. It is now much easier to assess the financial value of many of the decisions or recommendations we make prior to their employment and minimize the probability of error.

Approximately two years prior to publishing this book, Ron began to collaborate with Skip Vanderwall, who was the writer of The Evolution of Traditional Service Departments. Skip's ability to communicate and Ron's mastery of the concepts have combined to make a book that is infinitely valuable to the contemporary service manager. I believe dealers, field representatives, and retail consultants now have a tool they can work with to get a new manager up to speed much quicker than the old trial and error or association methods that were used in the past.

Ron has cited a wide variety of specific operating techniques that can alter the financial results in any service department. It is obvious that he has picked from a multitude of techniques and that those explained in the book are a mere sampling of those applicable in a service operation today. The selection of the various structures and operating techniques used as examples in the seven different controllable areas was a very difficult task in itself. I am convinced that running a service operation is essentially an art form and not a science. Every technique known has its own applicable merit. I believe that it is our responsibility to make today's service manager aware of many different "ways" to increase the return on their efforts. The selection of the techniques Ron uses in the book are not indicative of the most advanced nor the most primitive. They are simply examples of alternative "ways" in which things may be done.

Equally as difficult was writing the book without exploring proven methodologies to enhance customer satisfaction. I think it is unrealistic to separate profits from customer satisfaction and prosper in the long run. They are inseparable issues. It should not be interpreted that the intent of the author or the writer is to separate the two. They realize that making a profit in any business is not a question of choice, it is a basic responsibility that is no different than the satisfaction of its customers. They may be addressed separately as subjects, but from a day-to-day business operating standpoint, they are inseparable issues.

I hope that as you read this book you will gain the same type of insight that I have gained over the years having been privileged to work with both Ron Stoner and Skip Vanderwall. Having incorporated the logic they have used to address the "business" of service I feel that I am more capable of doing better work for my clients. There is no doubt that it has allowed me to answer questions about complex techniques with a higher degree of sophistication, minimize my probability of error, and keep the risk of my employer at a minimum on my quest to increase both ours and our clients' customer satisfaction and profits.