Opportunities for sustainable Fixed Operations growth and profitability start by making strides in each of the six paths:
- Consistent implementation of effective processes
- Effective management of customer traffic
- Coaching and guidance of personnel
- Talent management
- Setting of goals and KPIs
- Development of service leadership
Each dealership will have its own combination of these processes to focus on, with greater or lesser emphasis on each area as it relates to that business’ unique needs. The benefits of proactively addressing these processes are broken down into three categories:
Increase in profitability
Fixed Operations departments should be able to meet and exceed industry-wide benchmarks such as hours per repair order, net profit to gross/sales and more. Rising to this level involves having a consultative partner to help set the specific goals and targets, developing performance improvement strategies and introducing accountabilities to reach them.
Staff who have been through a consultative engagement will emerge with heightened sales skills, top-quality customer service ability, confidence and a better approach to communication. This improved level of performance maximizes their contributions to the dealership as a whole.
A fully revamped Fixed Operations department can deliver higher sales numbers and better customer retention by adopting transparent and customer-centric policies. With better accountability and documentation, it becomes much easier to keep levels of performance high. Creating a plan based on these six paths and targeting those three outcomes will introduce an opportunity for impactful — and sustainable — Fixed Operations growth and financial improvement. We’ll break down each path and reveal the potential value found there.
Consistent Processes that Lead to Profit
Profits coming from your Fixed Operations department can lift earnings, as these transactions have higher margins than new car sales. A team of top sellers is able to achieve a 100% absorption rate, meaning their fixed service department offerings cover the overhead for the dealership. All additional revenue from the sales side becomes pure profit.
To reach this level of Fixed Operations success, your dealership must ensure personnel are applying a consistent and intentionally designed set of processes. This is one of the greatest areas of opportunity for most dealers.
One of the clearest divisions between variable and Fixed Operations has to do with how employees are taught. Traditionally, Fixed Operations departments have received less sales training than other teams, leading to inconsistency which could cost dealerships thousands of dollars in profit opportunities.
Every member of the department at all levels should be following a standardized approach to sales that reflects customers' preferences and needs.
Every member of the department at all levels should be following a standardized approach to sales that reflects customers’ preferences and needs. This means your personnel should be aware of your dealership’s online and in-store offerings, as well as pricing and timelines.
Fixed Operations products are sold to customers just as variable operations are, and by taking a rigorous approach to the sales process, your dealership can begin counting on this department for higher profit margins, strengthening your bottom line.
Breaking Out of Cycles to Create Consistency
Fixed Operations are more important to your dealership than ever before — in decades past, when new car sales were at high-volume peaks, it was commonplace for dealers to overlook Fixed Operations, making up lost profits with booming vehicle sales.
The industry landscape has shifted, and owners are starting to realize Fixed Operations is the key to a profitable and sustainable business model. Long-term disruptions to the industry, including significantly longer new-car purchase cycles and the introduction of electric and hybrid vehicles, are joined by more sudden impacts such as the economic chill that has accompanied the global pandemic.
Owners realize the need to revamp their Fixed Operations processes: 53% of dealers are working on improving these departments to boost revenue, making it their most-cited priority. Adding urgency to these efforts, online giants such as Amazon as well as mobile repair companies are competing with dealerships for customers’ service needs. These companies are defined by their efficiency and convenience, which means dealers must be similarly dedicated to their customers. Looking to indicators like Customer Satisfaction Index (CSI) scores can shine light on how customer-focused your service lane is and help you develop strategies to improve.
Efforts to this end start with employee performance:
Every customer should receive the same experience, with clear communication that extends from the meet and greet, to the inspection process, the issuing of time estimates and thorough service delivery.
All employees in your service department must be consistently coached on the offerings so the dealership’s improved approach is applied in all cases and internal communication breakdowns don’t create delays or customer dissatisfaction.
Standardizing these processes is especially important in the face of increasing employee turnover — ensure that when anyone leaves your dealership, practices will remain consistent and effective.
Managing Customer Traffic and Providing Support
Customers spend a great deal of time at your dealership maintaining their vehicles. Improve the convenience and experience of these interactions and you can keep their Fixed Operations revenue stream alive over repeat visits.
Customers are visiting your dealership more often than in the past because of the advanced technology in their cars. In fact, 62% of consumers with high-tech vehicles prefer to have their cars serviced by the original seller.
Of course, it’s important to realize these customers have a choice in where they go for service, meaning your operations have to be efficient, friendly and transparent. The same study found 30% of customers are frustrated when service takes longer than expected. It helps to offer a seamless customer experience with convenient online scheduling and highly transparent information around dealership policies and pricing.
Dealership owners should be looking for additional ways to improve the customer’s level of service. Sometimes, this means implementing a better scheduling process to help both staff and customers.
In other cases, it will mean strengthening the repair active delivery to reduce after-the-fact questions about the quality of the job and resulting lack of trust.
Each step in the interaction between staff and clients affects this process, and as such they are all subject to review and improvement during consultation.
Rethinking the Customer Service Mindset
Embracing new customer service values, such as mindfulness and empathy, helps satisfaction and retention.
Treating people with care is essential for securing repeat business. Customers now expect service offerings to be:
- Valuable, saving people time and not putting them under pressure. Having “early bird” or “night owl” hours can help immensely.
- Transparent, with pricing, timelines and availability of service clearly outlined.
- Trustworthy and honest, meaning dealerships do what they say and never use “bait and switch” tactics.
- Frictionless, featuring streamlined ordering processes on a level with online sellers like Amazon.
- Highly personalized to fit into each customer’s preferences.
Reviewing the present state of service performance may reveal issues with scheduling and service. Consistency matters, as does keeping promises to your customers. You can introduce new perks and incentives, such as a smooth process designed specifically for people who pre-book their appointments, to become more service-centric. You must then ensure you’re ready to back up these policies and follow through.
A mindful approach to customer service can take a few forms, including:
Remembering that cars are necessary for people to go about their day-to-day tasks, meaning maintenance and service have to be treated with appropriate care. Understanding that the customer is experiencing a life event when their vehicle needs service, not dismissing the situation or becoming unempathetic to the customer’s needs.
Delivering timely, “now” service to mirror customers’ convenient experiences with other kinds of businesses and product types. Performing frequent assessments to ensure all policies are being followed and employees at every level of the department are aware of their role in the process.
Creating a modern Fixed Operations experience can pay off with continued business, both fixed and variables.
Coaching and guidance of personnel
A hands-on and extended consultative approach to reforming your Fixed Operations employee development can set your team up for repeated and sustainable success, giving employees the tools and techniques they need to succeed. Existing structures in Fixed Operations departments often lag behind those seen in variable operations, creating a clear path for improvement.
Dealerships wondering how to close revenue gaps often have opportunities to achieve their goals without drastically increasing customer traffic, or hiring more technicians or advisor staff. They simply need to boost the productivity and value of each employee.
- Maximizing employee effectiveness involves breaking down profit across the sections that make up Fixed Operations: competitive, maintenance and repair labor.
- Fixed Operations development is often handled via online classes, instructional CDs or one-time seminars, which aren’t ideal for all employees.
- Developmental programs customized at the level of individual needs are better suited to boosting employee contributions and productivity.
Making Sustainability of Knowledge a Personnel Objective
Expert consultants don’t share knowledge with your dealership’s present staff and then leave. Instead, they create a lasting and sustainable infrastructure for process improvement over time. This commitment to leaving behind a stable framework can be the difference between a brief increase in performance and lasting change.
Your dealership’s success in this regard will rely on giving the personnel responsible for internal employee education the skills and tools they need to bring everyone on board with the new approach.
During an engagement, consultants work specifically with these learning and development leaders to ensure they’ll be positive forces for change and the implementation of the new practices for years to come.
The ability to capture and sustain long-term ROI depends on the presence of repeatable employee education programs. This ensures everyone in the department knows how to create a consistent and positive impression on customers while performing high-quality work.
As your dealership grows and expands, you’ll inevitably add new Fixed Operations personnel. These new hires should be onboarded with the same practices put in place during the expert consultants’ engagement.
As new personnel join, gross profit targets and productivity measurements will need to change to ensure ROI for each hire.
The programs generated will suit your dealership’s objectives and situation, making them more valuable than generic employee education materials commonly used in Fixed Operations departments.
Giving Employees a Satisfying Experience to Reduce Turnover
Turnover is a major issue among today’s auto dealerships, with skilled employees frequently leaving in search of greater opportunities. In fact, one study found that almost half of service advisers leave an employer annually.
An NADA study also revealed that over 50% of service employees are disengaged from their work. This is no coincidence: High levels of ambivalence toward Fixed Operations work are harmful to business continuity and the retention of skilled employees, ones who could be improving productivity and profits in the service department.
Workplaces that struggle to offer a flexible culture and opportunities to progress, or ones that don’t have adequate tools and technology to make their employees’ day-to-day lives easier, are all too common. On the other hand, if you improve your employees work environment, you are more likely to be rewarded with long-term retention of your top performers.
There are a few principles that should guide your efforts:
- Leaders in your Fixed Operations department should ensure their workers know they are valuable assets to the company, and allow them to build careers rather than simply jobs.
- Managers must strive to offer the best culture among auto dealerships in your area — since many businesses fail to please their employees, the ones that succeed have a recruitment and retention advantage.
- Ensuring clarity around scheduling and personal objectives assist in employees enjoying their work environment. Also, implementing new benefits, incentives, pay plans and customized individual development plans can show employees you are committed to them.
When Employees Are Happy, Everyone Benefits
Employees are the lifeblood of a company, and the way they feel about their roles can impact internal teamwork and customer service alike, not to mention the bottom line. Lost productivity from poor employee engagement across all U.S. businesses falls between $960 billion and $1.2 trillion annually. A positive workplace culture is a compelling recruiting tool and has a positive impact on retention of existing staff.
That concerning figure shows that across sectors, employees don’t feel a connection to their employers’ missions, and aren’t receiving clear, useful feedback from leaders. Performance management in the traditional sense has failed these employees, and making positive, department-wide changes can have repercussions that reach the whole company.
Taking a customized, individual approach to help workers excel in their positions, as well as setting up sustainable frameworks for continued improvement, can lock in continuity and quality for years to come.
Even in tough economic conditions, modern employees care about working for companies that make them feel noticed and give them a stake in the success of the business.
Happy employees stay with employers longer, delivering consistent high-quality service and creating a sense of stability. A positive workplace culture is a compelling recruiting tool and has a positive impact on retention of existing staff.
Establishing Clear Goals and KPIs
Clear goal-setting is a valuable practice with effects that can ripple out from any department. In automotive sales, plainly stated objectives and key performance indicators (KPIs) are usually associated with Variable Operations — expanding their use to Fixed Operations can have a major impact on performance and morale alike. Supervisors, technicians, sales personnel and more can benefit from this new visibility.
When analyzing your dealership, you may find your technicians aren’t delivering benchmark gross profit per employee, there’s often room for improvement and value generation. A technician failing to reach industry-standard benchmarks is creating a loss on the balance sheet, one that can be corrected through the right combination of guidance and KPIs.
An essential metric for your dealership is to calculate the effective labor rates by monitoring the labor hours dedicated to various repair orders, offering granular oversight into revenue generation.
You will also find it helpful to determine your rate of facility utilization — labor efficiency per service department stall. Once KPIs exist to connect profitability to time spent on tasks, department heads can set and monitor individual objectives for each technician.
Managers who keep a close eye on goals and objectives, down to a daily level, are better equipped to get hours of productivity from technicians and reclaim value that would otherwise be lost.
There is a human resources cost to a lack of clear benchmarking, as well. At dealerships that don’t use KPIs or aren’t transparent about objectives, staff may be surprised or disappointed by their commissions.
Choosing the Right KPIs for a Dealership
One of the most important parts of a strategic consulting engagement targeting your Fixed Operations department involves creating a customized approach for your dealership.
Since each dealership is beginning from a different point regarding current levels of service, efficiency, profitability per employee and more, every one faces a different process of targeted improvement.
- Benchmarking different areas against industry standards is an important part of revealing opportunities to reclaim revenue that is currently being lost.
- Calculating the differences between expenses and profits across Fixed Operations as a whole is an essential step in creating a process improvement road map.
- Knowing the exact amount of new sales that will achieve profit targets will keep departments on track as they improve their processes.
Expert consultants can work with management personnel on the creation of KPI and objective strategies, ensuring there is buy-in from within your dealership and the new approach is understood and accepted.
Developing Managers and Leaders in the Service Department
Even expert consultants who take a long-term view of dealership success, and deliver a well-designed process improvement strategy, will eventually hand matters off to your business’ own departmental leaders and managers. These personnel are the ones who will make positive change sustainable over time.
Changing your dealership’s approach to Fixed Operations is an organizational transformation, and leaders at all levels have important roles to play in making the new practices apply — and stick.
Leaders should be empathetic and able to motivate people, counteracting turnover by creating a constructive environment within your Fixed Operations department. When managers are strong communicators, they can ease the adoption of new practices such as the use of KPIs or an improved approach to customer care.
Leadership personnel are tasked with one of the most important parts of organizational transformation: Ensuring new practices become lasting company values, not temporary blips.
Departmental supervisors are considered essential stakeholders in an organizational change. They are the ones who encourage readiness for and acceptance of the new practices by the people they manage each day.
Changing Fixed Operations with Consistent, High-Quality Management
Your organization’s culture is a composite of all of its teams, and the leaders set the tone for all those departments. Special work between expert consultants and departmental leaders can improve their soft skills and engagement with new practices to make the transformation stick.
An employee’s everyday work experience is shaped by their interactions with their immediate supervisor — these leaders must therefore embody your new company culture.
To prevent dissention, confusion or cynicism about a new organizational culture or direction, managers must share the same view of your company as the rank-and-file employees they serve alongside, as well as the executives.
Supervisors’ encouragement is especially important when seeking to keep employees engaged in learning and development — According to SHRM, 37% of millennial employees across industries say they would spend more time improving their skills if that effort was recognized by managers.
When managers feel they have a stake in organizational transformation, they can become valuable agents of change within your Fixed Operations department. Service employees who serve under these leaders can one day follow in their footsteps and carry on best practices if your company offers clear opportunities for advancement.
Maximize Your Dealership's Profitability
Work with an expert consulting team to put the six paths together
As with an intricate vehicle repair, improving Fixed Operations performance is a matter of getting all the parts to work together harmoniously. Your dealership should team up with an industry partner that can show what a better approach looks like rather than merely telling, delivering consulting experiences to set your organization up for sustainable success and ongoing revenue opportunities.
Experts from JM&A Group have delivered Fixed Operations improvements to numerous dealerships across regions, showing these businesses the gaps in their current performance levels and resource utilization rates, as well as guiding them to the available revenue opportunities.
Learning opportunities are available in all-virtual, hybrid and fully in-store models, depending on your dealership’s needs:
- The virtual model is conducted 100% online and supports weekly coaching, process adaptation, management accountability sessions and monthly performance reviews.
- A hybrid approach is a 50-50 mix of in-store and online sessions, with side-by-side coaching available in real time, along with goal and objective setting.
- The full in-store version is for more extensive hands-on practices, and allows for such programs as departmental reinforcement, management development, economic management, sales and customer handling development.
Find out how we can assist your dealership, transforming the profitable, potentially overlooked Fixed Operations department into a customer-centric service department staffed by satisfied employees.