There has been considerable interest in the labor efficiency subject. Next Monday at 9:00 Pacific there is a webinar on this very subject. You can register on our website at www.rjslee.com or directly at the AED. See you there. The time is now.
Last time we talked about the six steps in selling. Let’s dig a little deeper into the first one.
Within research there are three more points to cover.
a) The Customer
b) The Products of Service
c) The relationship.
Customer: For researching the customer we need to know everything and anything that might be significant. In the Capital Goods Industries this means specifically the equipment that the customer owns. The make model and serial number of every piece of equipment; the hours of use of each unit and the applications; any special attachments or configurations on each unit. This is what determines the opportunity. The consumption of parts and service is dependent on the hours of use and the application.
Then we need to have a complete customer profile; family circumstances and birthdays and anniversaries, hobbies, etc. A company profile; in what industries they work (SIC codes); type of business, years in business, number of employees, influential, etc.
The Products or Services: This is the full features and benefits area. This has become a lost art for many people in sales. I think this is extremely important. It allows you to separate yourself from the competition. It allows you to sell value if you have this knowledge. I also think it is important knowledge such that you will be able to “position” your offering rather than making a presentation which can become stale and sound canned.
The Relationship: This is the purchase history of the customer with your company. What they buy and what they don’t buy. How the purchases relates to the potential – this for both parts and service.
With these three stages completed in Research we can move onto the second step in the sales process. Good sales people are diligent in their research. It makes a difference in their success. The time is now…..
The question that most of you thought of when during the afternoon discussion between the supervisor and the technician the technician says he is not going to finish all the work that you gave him to do today is “why not.” That is not the right question. You are all thinking like production managers from the old school.
The question that I believe is right is “how much longer will it take to complete the work?”
Once we have the length of time required we can ask the next most important question “can you stay.”
We have established that the technician will miss the standard time for the job – that might be #1 (remember) now if they can’t or won’t stay to make it right – that might be #2 all in one event.
If they can’t stay then the labor efficiency will drop precipitously as the following morning when he starts up on that job again he will have to take between thirty minutes and an hour to get to the point where he was when he left last night. That is either a 6.25% drop in labor efficiency or a 12.5% drop. Neither one is good.
If the technician can stay you will eat a little overtime but your schedule is intact and the completion date for the work is still in line. The time is now.
Many ask the question “how can I get technicians to be more efficient with their labor hours”. I suggest that having proper supervision is the best way to get each and every technician to be more efficient. Imagine if you will that you had one good supervisor for every eight shop technicians. (I know that many of you don’t have that many – in which case you are in what I call no man’s land. You are too small to have the proper levels of supervision and that leaves you with too little time to increase the labor sales revenues.) I want to have a supervisor in the middle of the eight technicians. I want the workstation for the supervision on the floor with the technicians. They can see the supervisor all day long as the supervisor can see them all day long.
Let me ask a simple question. Will the men be more efficient with the boss in their midst? Will they be more efficient with the boss watching them all day long? I also want the supervisor to spend at least fifteen minutes with each technician every morning and again every afternoon another fifteen minutes.
Will labor be more efficient? You bet.
The afternoon discussion will have another question. Will you finish the eight hours of labor I gave you to do today before you go home? If they say “yes” everything is good.
If they say “no” what is the first question that you ask? I thought you would say that. That is not the right answer. More on that later. The time is now.
Some of you have equated the labor efficiency blog with the actual market capture rate of labor. They are two very different elements in the business. One measures the performance of the supervision of the labor pool and the efficiency of a particular technician on a specific job or group of work orders. The other measures how much of the available market the dealer in question has actually obtained and maintained.
The market capture rate is dependent on maintaining an accurate and up to date machine population and the hours of work for each of the machines in the dealer territory. With the arrival of GPS on most current production machines this is becoming easier to maintain and to track. Older machines, however, still outnumber new machines in most geographical jurisdictions and as such this remains an elusive goal.
If we have an accurate machine population as well as the hours of work for each machine then we can calculate the market potential for both parts and service. This is an important step in the maturation of the parts and service management as we will be able to determine the successes of each of the store locations in a territory. We will then need to become much more professional and effective in our processes, systems and skills when we deliver customer service. The Manufacturers and your bosses will be able to measure objectively how well we do our jobs. I think that will bring a lot more attention to the skills and execution of the management and supervision in parts and service. The time is now.
Service Departments the world over are concerned about efficiency and effectiveness. There is a very easy method in which we can measure and manage the labor we offer to the marketplace. There are two critical pieces of information from which we must start. The first is called Gross Profit Potential and the second is the actual gross profit.
Gross Profit Potential is the number that you would obtain if you took all of the labor in your department at the published labor rates and the average wages of the technicians employed. From these two numbers you would get the potential gross profit. Take that number and divide it be the published labor rate and you will get the gross profit potential. That is very straight forward and very easy.
The actual gross profit you can get from your financial statements. Just be sure that it is only labor.
Then a simple division will lead you to labor efficiency. Divide the actual gross profit by the gross profit potential and there you are – labor efficiency. How do you stand up in this measure? You must be over 90%. The time is now.
Many Dealer Management Systems (DMS) allow a dealer to access a manufacturers’ information on standard times that are used to reimburse the dealers for warranty work. There has long been disagreement as to whether the time provided is adequate. That having been said it is also true that someone is trying to help a dealer in establishing standard times for repairs – the suppliers.
So what if the time is inadequate? Or in some cases it might be too generous. That just means you need to do a little more work. Meet with your technicians and determine the factor to apply to the time in order that the work can be performed within the time, consistently, and allow you to develop a labor schedule to follow. Well this is where the DMS has to allow the dealers to apply factors to the times provided with the supplier interface and create dealer time files. Does your DMS allow this? Don’t you think it should? When you have reasonable times to apply to a job assigned to a technician you can build a schedule. With a schedule you can develop a completion date for all work. With a completion date that you can meet consistently you will get more business. Isn’t that what you want?
I suspect you should pose this question to your DMS provider. Can you take the standard times provided for warranty and apply a factor by component code, or operation, or a machine group or even machine model. If you can’t I submit to you that it is important to be able to do this simple thing. The time is now.
The Canadian Economist John Kenneth Galbraith once said “When mankind is confronted with making a change or proving why they shouldn’t change…. why do people get busy with the proof?” The common excuse for resisting change is the same everywhere – fear. A lot of fears – fear of the unknown, fear of failure, fear that others will be better than we are, a bunch of fears – to the point there is another interesting question to pose to yourselves “what would you do if you weren’t afraid?” That is the more interesting question.
In our Unit I management training we deal with change and paradigms and I try and get people to understand that resistance to change is both natural and normal. Most of us are settlers not pioneers. The pioneer is the risk taker. They blaze the trail for the settlers. When the pioneer is finished with their explorations the settler will ask “is it safe out there?” Then if the answer is yes off they will go to the new lands. But the options available for the settlers are limited because the pioneer had the first choice.
I submit to you that your customers want you to be leading not following. They want you to lead the changes. And in this world in which we live change has become a fact of life. Change comes in waves it is not incremental. If you don’t get in on the initial waves you want to hope that you can enter later without a large loss. That is an interesting word – hope. Put with the subject of change it is really interesting. How has that worked for you so far? Not all change is good. So you have to be pretty discerning don’t you. You have to be able to evaluate the situation, consider the options and then make a decision. It doesn’t get easier over time. It might in fact lead you to missing out on chances. How do you view change? The time is now.
Some time back I looked around a room I was in and noticed that I was no longer the youngest person in the room. Of I course I still felt like the youngest in the room. But think back to when you started your first job. What did you think of the older people around you? Were they to be respected for their age and knowledge? Did you look at them wondering why they did things that particular way? Do you remember working with your father and how he was always telling you how to do things?
I think we in North America have a perverse method of teaching people at an early age. We teach them to be obedient. Now don’t get me wrong there is nothing wrong with obedience and manners. In fact I quite like them both. I do want to take issue with the fact that we are creating robots to some degree. We don’t teach people well enough to be critical thinkers. We don’t teach them to think on their own. And when they do think on their own we label them something – rebels, trouble makers and other names.
I think we need to embrace the younger generation in a more positive manner. Every younger generation gets a bad rap including the current crop of kids (maybe I shouldn’t call them kids). Imagine. They are better educated. They have more computer skills than were dreamt of when I was entering the work force. The attribute that I like the most is that they are not as patient as we were. They won’t put up with the nonsense that some of us endured. Are you ready to listen to what they have to say? Can you imagine that they might have a better way to do something? I get excited when someone asks the question “why do you do it that way?” I want to know what they mean, what they are thinking. There is always the possibility to do things better. You have to embrace these changes as never before. The time is now.
The juxtaposition of the last two blogs is intriguing. I couldn’t ignore it. I have received a lot of flak about my pronouncement of the New Reality. People suggested that I need to be more careful in how I communicated things. That it could be dangerous, I might frighten some people.
Remember Jeff Bezos – social cohesion at the expense of the truth.
I don’t think anything will get better if we ignore it. I had a wonderful teacher in Grade 8 for geometry. My majors at University were Mathematics and Physics so I rather enjoy arithmetic. But I was stubborn as heck and had a hard time with Geometry. Why?? – Because I refused to memorize the theorems. Sound familiar to any of you? Well I had a special grandmother who I call “Granny the Great” who got her Master’s degree in the 1910’s – a truly amazing woman. She got me in line and by the end of the year I was near the top of the class. I learned to memorize things. Well this teacher told me that it wasn’t going to get any better if I kept putting it off. It was going to get worse. Of course she was right.
Lou Holtz says it well.
I want to add a corollary to this list. You have to know what to do and how to do it. So there is another chapter on the New Reality. Nothing will change until we change. The time is now.
