By Walter J. McDonald
POSITION OPEN: Machinery Dealer Service Manager
Requirements: Successful candidate must be a Superhero and a Magician.
So, you have just been promoted from Service Technician to Service Manager. Holy #@&%! What do you do now? No, you don’t have to be a Superhero or Magician to be successful.
What do you need to know/learn and what do you need to do? In this article we will look at key success factors in the three critical performance areas essential to your success
- Business Management
- Operations Management
- Leadership
I’ll also suggest resource materials that will provide in-depth information to help you build your skills and knowledge in each area.
Business Management
Business Management is all about learning how to read the departmental P&L (Profit and Loss Statement) and understanding what areas need improvement. Not as hard as it sounds. The challenging part is determining what corrective action is needed and how to do it.
It’s useful to know something about the P&L when your Financial Manager says, “Charlie, you missed your targets again!”
The P&L will tell you what your financial performance scores are, if above or below budget. For example, SALES is total labor billing but it often doesn’t break out sales to External Customers, Internal Customers (Rentals, Used Machinery), Building Maintenance, or Warranty. In the Operations section below we’ll examine this in more detail.
COST OF SALES is total technician wages and benefits excluding uniforms.
HINT: Increasing technician productivity increases Billing (Sales) but does not increase Cost of Sales or Technician Wages & Benefits. This is a big deal.
GROSS PROFIT is simply SALES less COST OF SALES. Service Labor Sales is the most profitable business activity in a machinery dealer. GROSS PROFIT MARGIN or GROSS MARGIN is simply the Gross Profit Percent of Sales. (Gross Profit ÷ by Sales $) 65% is a good Gross Profit Margin score for Service.
EXPENSES include all of the day-to-day expenses necessary to operate a Service Department: non-technician payroll, vehicle cost, utilities, training, computer and cell phone expenses, advertising, consumables such as grease, recycling service, and so on. The typical dealer P&L will illustrate if you are above or below budget for each expense item.
PROFIT AFTER DIRECT EXPENSE or OPERATING PROFIT is Gross Profit less Expenses. A good score for a machinery dealer is 25%.
If you want to learn a little more about the P&L, check out Service Management Resources shown below.
Service Management Resources:
Profit and Loss Demystifiedf: Understanding Financial Statements
By Simon Kent
According to Amazon, this handy little book breaks down the complexities of profit and loss statements (P&Ls), turning them from intimidating documents into powerful tools you can use to drive better business decisions. Inside, you’ll discover how to interpret each line item, understand the relationships between revenue, expenses, and profit, and gain the confidence to analyze your own financial performance. Available on Amazon.com.
Operations Management
This is where the action takes place. The primary challenge of Service Operations Management is to process Customer Repair Orders in a timely, skillful and accurate manner.
The key to this is service labor productivity. But, to do this you are dependent on your partner, the Parts Manager, to provide you a high level of off-shelf parts availability, especially for your primary line. This means you and your Parts Manager must collaborate to help ensure parts inventory count is accurate and upcoming jobs are reviewed to order needed parts in advance.
The big limitation of the P&L for Service Managers is that it is historical. It shows what happened last month. Now, it is too late to change that score. Also, even more challenging, the P&L does not tell you HOW to fix any low scoring areas. The P&L just gives a hint at what’s wrong.
This lack of clarity demands knowledge of operations, events and processes that impact each area of the P&L. And, if you were able to monitor critical performance scores during the month, you could immediately make necessary course corrections as needed before impact on the P&L.
These measurements are called Critical Profit Variables (CPV). CPVs are the essential metrics your Service Managers must measure, monitor and control for the Service Department to be come profitable and achieve long term objectives.
Benchmark Performance Standards indicate target scores for each CPV achieved by high-performance/high-profit machinery dealers. By looking at the way each performance area impacts financial results, corrective action can be taken now before the books are closed. For example, Technician Productivity. An acceptable score is about 90% for a machinery dealer. This is Hours Billed ÷ Hours Available. If today is Thursday, and your score for this week is only 57%, now is the time to find out why and make corrections.
There are hundreds of procedures and management actions available that support high achievement scores. These are called BEST INDUSTRY PRACTICES. Your challenge is to increase the Financial Performance (P&L) of the Service Department. And, the best way is to take time to learn what activities impact the P&L and examine what management actions would be most appropriate for your circumstance to make necessary improvements. This includes identifying low scoring CPVs and applying appropriate corrective actions.
Suggested Steps:
1. Define and Examine the Problem. Compare your current operations performances in each benchmark category. For example, if your labor productivity score is 57%, this means your technicians are not billable for 43% (almost half) of each day. This is a serious problem. What P&L line item is most impacted by a low technician productivity score? Actually, there are three: Labor Sales, Gross Profit and Operating Profit. An increase in productivity generates incremental billing, say $10,000.00. That amount is added to Sales, Gross Profit and Operating Profit. There is no additional cost associated with technician productivity improvements.
2. Identify Possible Solutions. How do you increase technician productivity? Now is the time to study Best Industry Practices for Service Managers. These are the potential solutions. I’ve captured best practices to improve both shop and field service technician productivity (plus dozens of other Service Management problems) in my Service Management: Machinery Dealer Manager’s Handbook.
Service Management Resources:
Service Management: Machinery Dealer Manager’s Handbook
By Walter J. McDonald
Service Business Management
Service Operations Management
Leadership and Supervisory Management
World Class Service Management Best Practices
Customer Service and Retention
12 Essential Strategic Product Support Investments
Successful Technician Recruiting, Apprentice Program and Onboarding
Service Manager’s Product Support Performance Assessment
Leadership
Most dealer equipment Service Managers have been technicians much longer than they have been managers. Consequently, the transition to manager is often a difficult challenge. In fact, many never really successfully make the transition.
The duties of a Service Manager will vary from one dealer to another. However, all Service Managers have certain common characteristics with Service Technicians. Both are concerned with quality service work performed, customer service and their own advancement in the company. Both the Technician and Service Manager must be capable of planning particular activities.
Service Managers must be able to get along with supervisors and technicians, win their confidence and respect so they will be responsive to directions and improve performance.
Service Technicians must be able to relate to customers, work effectively with their Service Managers and fellow employees while completing job assignments.
However, we must now look at the critical differences between the two jobs to have a solid understanding of the management function and how to make the successful transition.
First, the technician’s responsibility is to repair machinery. Whereas the Service Manager, on the other hand, has the overriding objective of developing the technical team and meeting performance targets. These are by far The Service Manager’s chief responsibilities.
Secondly, the technician performs the job, perhaps as a “lone wolf.” However, the Service Manager performs the job with and through others.
The third difference is functional. The technician is more like the player on a team, while the manager is the coach. The technician has a job to do and he can do that job without being part of the team. However, the manager must develop his/her technicians and supervisors into a team. The Service Manager does this by winning loyalty by making technicians feel they are working for a great company, their department is the best and the company management is tops and really “on the ball.”
The fourth difference is that, unlike technicians, the Service Manager is part of management. The relationship is much the same as that between an officer and enlisted personnel in the armed forces. While there must be understanding and empathy for the technician, there must still be recognition that the manager, like the officer, is in command.
Finally, the contrast between the technician and the Service Manager is accentuated by the fact the Service Manager has a great many more–and diverse–responsibilities. The technician is assigned a number of repairs to complete and this is almost his sole responsibility. There is a very limited choice on what is to be done today.
The Service Manager, however, may have such varied responsibilities, as training people, recruiting, running branch operations, seeing key accounts, maintaining records, and working with other department managers to achieve the overall objectives of the dealership. Consequently, the Service Manager must know how to organize his/her work every day and use his time effectively possibly to a greater extent than is required of the technician.
Service Management Resources:
Developing the Leader Within You 2.0 and Developing the Leaders Around You by John C. Maxwell.
These works by Maxwell are very popular with Service Managers attending my dealer management workshops and virtual seminars. These paperbacks are inexpensive and available on Amazon.com.
Congratulations on taking on this new challenge in your career. If you would like to receive a personalized Study Guide to all of the Service Management Resources mentioned above, please contact me at walt@mcdonaldgroupinc.com. I look forward to helping you become an even more successful Service Manager.
No, it’s not a magician or super hero required for this job. It’s you, employing the proven success tools and techniques of high achieving industry leaders.