From a service, parts, and body shop viewpoint, the competition has never been more successful. Non-dealer service operations and parts houses continue to expand rapidly by offering prospective customers more services, highly discounted pricing when necessary, superior locations, user-friendly facility designs, and extended hours, while aggressively marketing these concepts locally and nationally.
On top of these heady challenges for dealers, non-dealer employee training is at an all-time high, as both individual and franchise operators battle for market share and employee loyalty. One recent service customer survey revealed a startling message: the majority of respondents believed that non-dealer independent shop personnel have more skill than dealer personnel!
In examining differences between independent operators and franchised auto dealers, one organizational difference stands out. In non-dealer operations, the parts and service or body shop departments are structured as one department; that is, parts management is never separated from service management, and in most cases, there is only one overall manager. Interestingly, this same parts/service management structure exists in dealerships-and non-dealerships-in most of Japan and Europe. North American dealer service/parts operations tend to stand alone in having separate management of parts and service. It is becoming evident to me that this dual management concept is hindering more than it is helping dealers to be successful in competing with such aggressive competition. This point became very evident for me when I watched a focus group member examine a dealer repair order with a discounted oil change price of less than $20. Most quick lube operations are charging at least $25 to $35 for this service, so the price was quite fair. During the review, the member pointed out that the oil filter was priced at $6.95 and that the oil change would have been a much better deal if the customer had not been "ripped off" on the oil filter charge. Consequently, the excellent overall price for the service turned into just another dealer scheme to overcharge customers! How unfair to the dealership is this observation? This customer's viewpoint developed simply because, as usual, the only discount on the service came from labor. Because the service and parts management did not work as a team, most likely the service manager structured the pricing and simply discounted the labor to get the 'total price" in line with local competition.
I am not suggesting that all dealers adopt one manager for parts and service, but I feel it is mandatory that they function equally as a team, almost as one person with the benefit of the knowledge and experience of both. One sure method to assist in helping make this marriage happen is to pay both the service and parts management using the exact same pay plan for the combined departments. View them as dual managers over one parts/service department, with individually different responsibilities in some areas. In fact, I have found that cross-training them to be able to perform each other's job is the perfect way to develop an appreciation and understanding of what is expected in each management position. This extra training can be a great asset for the dealership overall, especially when one manager is absent or needs to be replaced.
Last year we restructured a dealer group management team so that the top managers of parts and service changed to combined pay plans. Almost immediately, and after years of continuous bickering and conflict, relationships changed. Added benefits included a regular review of the stock order by both managers, a parts delivery system to eliminate wasted counter time, a new interest in cleaning up special orders, a flat rate hour pay plan for the service parts counter personnel, and maintenance logs for the parts trucks. All of this took place in the first month! The best part occurred when managers called us to say thanks for the pay plan revision. I have never instigated this change and had a bad experience afterwards. The goal is simply to meet the competition's success. Right now, with more than two-thirds of service and parts customers finding alternatives to dealers, competitors are determining the playing field. When it comes to organizational performance, the service and parts team has to function as one department, just like the successful predators they are battling every day.
Ed J. Kovalchick is CEO of Net Profit Inc., an international automotive manufacturer and dealer training and management consulting firm located in Alabaster, Al. Mr. Kovalchick is a featured speaker and instructor at conventions, 20-Groups, associations, and other automotive related events. He is also a former six-franchise new car dealer and independent shop owner. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3.