The situation: A high-line dealership service department with 26 line technicians turns 4,400  flat-rate hours in its best month on record.

The problem: At 4,400 hours, the department only breaks even financially.

The solution: Let all departmental personnel know that the new target is 5,000 - 5,500 FRH per month; use a standard "white" board to post daily progress toward the goal; hold a service advisor sales meeting first thing every morning.

During a consulting assignment with a luxury import store in the Southwest, Car Dealer Insider editor Mike Bowers was interviewing technicians to get a sense of how the mechanical shop functioned. When one tech was asked "how's business?" he responded, "business is very good, in fact we produced just over 4,400 labor hours last month for the first time." The consultant then asked, "How do you know 4,400 hours is good?" The technician said, "That's the target the service director told us to shoot for."

Wrong targets caused misdirected efforts

So problem number one was a service director who set what he thought was an aggressive target for shop production, but did not know that achieving the goal would still not put his shop in the black. Another roadblock was the dispatcher, who thought the primary purpose of his job was to let the techs know that the dispatcher controlled their incomes. Twenty-six technicians producing 4,400 hours means each tech averaged eight flat-rate hours per day, but at that level the shop should at least earn a profit. Some expense cutting was obviously in order. But Mike Bowers noticed another odd phenomenon.

Interviews with the service advisors indicated that the advisors were turning away customers who called the store inquiring about bringing their cars in for service. The computer dispatch system had been overridden so many times that its data wasn't even close to being accurate. It was apparently telling the advisors that the shop was sold out by noon on most days. Yet Mike Bowers noticed that by two o'clock most afternoons, many of the technicians were packing up their tools and going home because there wasn't enough work to keep them busy. The shop actually had 15 to 20 percent more capacity than was reflected in the dispatching system.

Common sense prevails at last

Several solutions to the service director's profit problem presented themselves. They all involved some simple, straightforward, and common sense moves. First, the shop-loading data in the computer system had to be corrected. Technicians and service advisors were reorganized into production groups. The dispatcher's job was eliminated and responsibility for dispatching became one of the service advisors' functions.

Then, during a shop meeting, the techs and advisors were given new targets. To reinforce the goals, a "white" board, similar to those found in every dealership conference or training room, was set up on the wall of the shop where everyone (except customers) could see it. The names of each tech and service advisor were listed on the board along with slots for each person's monthly production goal and a running total of production to date. Seeing this scoreboard every day inspired a sense of competition among the service staff. They wanted to see how quickly they could reach the goals each month.

Production-based incentives were added to technician and service advisor pay plans.

Finally, each morning just before the doors opened, the service director called his advisors together for a 15-minute sales meeting to discuss targets for the day. The service director also positioned himself on the service drive for an hour or so each morning. He spent the time greeting customers and acting as a service sales manager, prompting advisors when he saw obvious upselling opportunities. If the service director wasn't available, the shop foreman took his place.

The result: Within three months the service department went from breakeven to a profit of between $40,000 and $50,000 per month.