On today’s show, we’re pleased to welcome back Don Reed, CEO of DealerPRO Training, one of the nation’s top fixed-ops training platforms for dealers.
VIDEO TRANSCRIPT:
Jim Fitzpatrick: Hi everyone. I’m Jim Fitzpatrick. Thanks so much for joining me on another edition of CBT News. Today, I am very excited to have the auto industry’s fixed ops guru with me, Mr. Don Reed. Welcome back to the show, Don.
Don Reed: Thank you so much, Jim. It’s a pleasure to be here.
Jim Fitzpatrick: Sure. So it’s good to have you back. Let’s kind of dive right in here. As you know, NADA said we need about 75,000, 76,000 technicians I think a year for the next four or five years. How do you attract good technicians into your dealership?
Don Reed: I think the first thing that dealers need to be aware of is what sets you apart from your competition there in your marketplace? How can you be different to offer technicians not only benefits but a working environment that sets you apart from everyone else? Secondly, we see more and more dealerships that are offering signing bonuses, and a lot of dealers are resistant to signing bonuses because they just flat don’t want to spend the money. But if you are going to offer a signing bonus, number one, it needs to be a good one, and secondly to protect the dealer, it should be spread out over a period of time.
Jim Fitzpatrick: Yeah. If it was Don Reed Auto Group, would you offer a signing bonus?
Don Reed: Absolutely. All day long. I was about to say, we just spoke to someone this morning, as a matter of fact, that he offers a $30,000 signing bonus for a technician.
Jim Fitzpatrick: Wow.
Don Reed: But he doesn’t write them a check for $30,000. He spreads that out over a period of 12 months.
Jim Fitzpatrick: Okay.
Don Reed: If you do the math on what the value of a flat rate technician is, $30,000 is not that big a deal over a one year period.
Jim Fitzpatrick: That’s right.
Don Reed: So you need to be aggressive. You’ve got to do something different and signing bonuses, whether it’s 5,000 whether it’s 30,000 or any number in between, you want to protect yourself and spread that over to some commitment over a period of time.
Don Reed: Another idea is that we know there are numerous technicians who are probably willing to relocate. They want to go to a rural area because they hunt and fish or they want to go to some different part of the country for family reasons. So we find you’d be surprised at how many technicians are actually willing to relocate. Now if that is the case, not only do you got to talk about a relocation bonus or you may assist them in covering the expense of moving their family to your store, but one of the real keys is of course compensation. I mean, if you have the same old pay plan everybody else in town has, there’s no reason for a technician to move. And we have to realize that there’s not a wealth of technicians sitting out there waiting for somebody to call.
Jim Fitzpatrick: No that’s for sure.
Don Reed: They’re all working.
Jim Fitzpatrick: Do you have any secrets that you can share as to how to reach those folks?
Don Reed: Yeah. Put it in the ad. You have to get aggressive and proactive in your advertising, whether it’s on job boards or whether it’s in your local newspapers or whatever. And of course there’s different vendors that we have in our industry that are getting quite good at recruiting technicians as well. But we’ve got offer them something that they don’t currently have, and oftentimes… Let me give you an example. We were working with a dealer group up in the Northeast. I think they have like 15, 16 stores. They go to a local technical college with two buses and they fill those buses with graduating technicians and they take them out to their dealerships and give them tours of their dealerships to show them their state of the art equipment, the great working conditions. They actually have existing technicians at the dealership conduct the tours so that they can answer any questions that these new apprentices might have. So there’s a real proactive example of a dealer group that has a huge appetite for techs that’s being very proactive [crosstalk 00:04:02].
Jim Fitzpatrick: No question about it. That’s actually… I think that’s a great idea. So let’s touch on pay plans a little bit. What’s your preference on how to compensate technicians?
Don Reed: Two words, performance driven.
Jim Fitzpatrick: Okay.
Don Reed: Any pay plan that we write, whether it be for a technician, it doesn’t matter with parts, personnel, department managers, it needs to be performance driven. And by that I mean there has to be some focus in the pay plan on the responsibilities that you’re hiring that person to do, and it’s called their individual performance. I’m speaking specifically about individual performance as opposed to departmental performance.
Don Reed: So for example, we have hourly technicians in the automotive industry, in the aftermarket industry, in the tire industry. Most everyone has hourly paid technicians. And what we find at Dealer Pro is that most of those hourly paid technicians are probably going… if they’re working 40 hours a week, they’re probably going to produce somewhere in the vicinity of 25, 26 hours. They’re about 60% productive.
Jim Fitzpatrick: Yeah.
Don Reed: So if you have a technician that’s producing, let’s say 26 hours a week, what is his incentive to produce 28? Absolutely none.
Jim Fitzpatrick: Right.
Don Reed: He gets paid the same whether he’s turning 28 hours or 26 so we install what we call hourly bonus performance plans whereby as they increase the hours that they produce, they get an hourly pay raise based on clock hours worked.
Jim Fitzpatrick: Right.
Don Reed: Okay. So if I said, “Jim, I’m going to give you an extra $2 an hour if you hit 28 hours,” that would be $2 an hour times the 40 hours that he’s working. He makes $80. Dealer makes out a lot better than that because the average labor rate today’s close to $100.
Jim Fitzpatrick: That’s right.
Don Reed: Would you give up $2 to get a hundred? I think that’s a pretty good return on investment.
Jim Fitzpatrick: That’s exactly right.
Don Reed: They need to have some performance bonuses built into these hourly technician, and it doesn’t matter whether they’re an express tech or whether they’re an internal check, PDI tech. Doesn’t matter. They should all be incentivized to produce more hours.
Jim Fitzpatrick: Let’s talk a little bit about culture, because when we talk to technicians that have left either a dealership or the industry in its entirety, they will tell you that it was a grind, that they don’t treat people with respect. It’s an industry that often just really doesn’t take good care of its people. What are your suggestions on building the right culture in a fixed ops department?
Don Reed: I’m going to give you an example of exactly what you’re talking about. I visited a dealership a year or two ago that had just gone through a major renovation, the typical factory upgrade with all the new signage, you know, redid the parking lots, all new face on the front of the building, showroom floor.
Jim Fitzpatrick: Millions.
Don Reed: Was a showcase, absolutely gorgeous. And then you walk past the service drive and it’s a dump.
Jim Fitzpatrick: Right.
Don Reed: They didn’t even put any paint on the walls.
Jim Fitzpatrick: What is that all about?
Don Reed: You got these nasty floors with oil dry and oil all over the place, antiquated equipment and they got a front end machine in that shop that’s probably 20 plus years old. So that pretty much sums it up right there. You know, most dealers came from the front end of the store. So, number one, I ask dealers in my workshop, “How much time do you spend talking to your F&I department, your sales managers, your desk managers, your salespeople”-
Jim Fitzpatrick: All day.
Don Reed: How much time in a given day are they going to spend in that part of the dealership? And then I say, “Now compare that to how much time do you spend in your parts department, in your service department?” We got dealers that probably can’t even find their way into the parts department. So you’ve got to allocate some time.
Jim Fitzpatrick: Now we’re painting with a very broad brush.
Don Reed: Huh?
Jim Fitzpatrick: I said we’re painting with a very broad brush. Not all your dealers, but some of those dealers.
Don Reed: No.
Jim Fitzpatrick: Some of those dealers, he’s right.
Don Reed: That’s right. I was a dealer for 27 years. I understand. But you’ve got to pay attention to everybody in your store. And I just tell them, look, all you have to do, just walk through your service department once a day. Just walk through there and just say good morning, good afternoon, whatever to every technician that you walk past. That’s all you got to do is say good morning and hopefully you’ll know their name.
Jim Fitzpatrick: That’s right.
Don Reed: And you want to, but pay attention to those people back there. You know, one of the questions that we ask is this, “As your trainer, if there was one thing I could do for you to make your job more enjoyable and more productive, what would it be?” And when we ask that to a shop full of technicians, I can tell you the overriding response is equipment.
Jim Fitzpatrick: Equipment, really?
Don Reed: It’s not pay plan, it’s not give me a pay raise. It’s my equipment’s broken. We need more equipment. Don’t have enough. Equipment’s too old. Equipment is by far the number one response.
Jim Fitzpatrick: I appreciate all your time here today, but I want to just ask you this one last question. That is, the service department is an area that obviously, I think from my perspective, lacks in training. We focus on training for sales department, we focus on training for F&I managers, we focus on management training in the dealership. How do we close more deals? How do we manage our people better and the software and everything else. But in the service drive, it seems like one of those areas that’s kind of the forgotten territory in many cases when it comes to setting up a training budget. You’ve been a trainer for decades in the auto sector and the retail auto sector. A, why don’t dealers focus more on training in the service department, and what do they need to do moving forward to to change that? Because training 100%, I’ve been in the business 35 years, equals greater gross profit at the end of the day.
Don Reed: No question about it. As dealers, we do it year in and year out in our F&I departments. If we want to get an extra $500 for retail unit in F&I how are we going to do that?
Jim Fitzpatrick: That’s right.
Don Reed: Well we can’t keep doing what we’re doing right now, we’ve got to do something different and that’s called training on a new process.
Jim Fitzpatrick: That’s right.
Don Reed: When that happens and lo and behold our F&I income goes up by $500 a car.
Jim Fitzpatrick: Yeah.
Don Reed: So you know, training is never a one time event.
Jim Fitzpatrick: That’s right. That’s right.
Don Reed: It’s an ongoing process. It’s an ongoing process in the United States military.
Jim Fitzpatrick: Yep.
Don Reed: It’s an ongoing process in athletics.
Jim Fitzpatrick: That’s right.
Don Reed: And it’s an ongoing process in the top businesses regardless of what they are in the US, so training has to be an ongoing process so we can make sure, number one, that our processes are being properly utilized. That our customers are being properly serviced and that we’re hitting the goals that we talked about in our profit improvement plan or we’ve got to measure the performance of those people. And the training is what is the driving force behind process compliance.
Jim Fitzpatrick: That’s right.
Don Reed: So [inaudible] here’s the process. Okay, great. Show me how to do it, and then make sure that I do it and evaluate how I’m performing in that process daily, weekly, monthly, you know, throughout the entire year. So training is ongoing, it never ends. And unfortunately we have far too many dealers who don’t see that value. And you asked me why do you think that dealers are not giving the same emphasis on the service drive as they are on the showroom floor?
Jim Fitzpatrick: Yeah.
Don Reed: I just ask all of your listeners right now, or your audience, just get with your controller and ask that controller to calculate for you for last month, for the entire month of August, how many dollars do my service advisors produce in gross profit for my dealership? And I can tell you right now an average service advisor is writing an hour and a half per repair order, is going to be in control of about a half a million dollars in gross profit.
Jim Fitzpatrick: Wow.
Don Reed: Over a 12 month period. Now, how many employees do you have that can have their hands around half a million dollars in gross? Not sales, I’m talking gross profit.
Jim Fitzpatrick: That’s right.
Don Reed: I think they deserve our support.
Jim Fitzpatrick: There’s no question about it. And to your point, just with some of the things that you mentioned on our show here today with regard to making changes with the number of service advisors that you have in proportion to the number of ROs and some of the things on the technician side, there is another 30% sitting there for dealers if it’s done right. The dealers just have to get on board. And I would tell you dealers, if you’re listening to this and fixed ops directors and GMs as I know you are, because I get your emails, Don, and I probably could speak for you here, pick the phone up to Don Reed and say, “Hey, here’s my situation. Show me the way to another 30% in my service department.”
Jim Fitzpatrick: And I’ve known Don for a long time, he’s either going to tell you, “Man, you’re running efficient and there’s not a whole lot of room here to improve,” or he’s going to say, “Here’s the pathway to get you that 30%,” and I think it’s probably going to be the latter of the two.
Jim Fitzpatrick: But Don, I want to thank you so much for joining us on CBT News. It is always a pleasure. Our viewers always get a lot out of what you said. I’m sitting here making notes myself, so thank you so much. You’re the man. Dealer Pro Training guys. If you don’t make the phone call, shame on you, not shame on Don. He’s waiting for you. Thanks so much.
Don Reed: Thank you, sir. I greatly enjoyed it and thanks for having me.
CBT Automotive Network, the number one most watched network in retail automotive. This has been a JBF business media production.
