Automotive Service Management Principles Into Practice

Automotive Service
Management
Principles into Practice
ANDREW A. REZIN
Columbus State Community College
Upper Saddle River, New Jersey

Columbus, Ohio
Library of Congress Cataloging-in-Publication Data
Rezin, Andrew.
Automotive service management : principles into practice / Andrew Rezin.
— 1st ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-13-199863-6 (alk. paper)
ISBN-10: 0-13-199863-3 (alk. paper)
1. Automobile repair shops—Management. I. Title.
TL153.R46 2009
629.28'72068—dc22 2007047251
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ISBN-13: 978-0-13-199863-6
ISBN-10: 0-13-199863-3
BRIEF CONTENTS
Preface xi
About the Author xiii
S E C T I O N 1 S E RV I C E O P E R AT I O N S
1 The Automotive Service Industry 3
2 Physical Resources 10
3 Manpower Resources 21
4 The Service Workflow 34
SECTION 2 MANAGEMENT STYLES

5 Classic Management 53
6 Being a Leader 63
7 The Complex Role of Management 74
8 Ethics and Stewardship 86
S E C T I O N 3 M A N AG E M E N T S T R AT E G I E S
9 Long-Range Planning 99
10 Strategic and Short-Range Planning 110
11 Decision Making 120
12 Quality and Continuous Improvement 135
SECTION 4 FINANCIAL MEASUREMENT

13 Income and Expenses 153
14 Compensation Plans 164
15 Production Plans 179
16 Analysis and Action 192
iii
■ Brief Contents
SECTION 5 ORGANIZING AND MANAGING

YOUR EFFORTS
17 Managing Yourself and Your Time 205
18 Organizing Tips and Tools 217
S E C T I O N 6 C U S TO M E R R E L AT I O N S
19 The Value of Satisfied Customers 229
20 Building Basic Communication Skills 242
21 Resolving Customer Disputes 254
S E C T I O N 7 E M P L OY E E R E L AT I O N S
22 Recruiting and Selection 269
23 Motivating Employees 283
24 Progressive Discipline 294
SECTION 8 MARKETING, MERCHANDISING, AND

SELLING SERVICE
25 Marketing and Mass Media 307
26 Target Marketing and Building an Identity 321
27 Point-of-Purchase Merchandising 331
28 Selling Service 340
SECTION 9 THE LEGAL ISSUES AND

RESPONSIBILITIES
29 Legal Guidelines for Service Operations 355
30 Workplace Safety 365
Index 377
iv
CONTENTS
Preface xi Key Terms 21

About the Author xiii Introduction 22
Service Cashier 22
SECTION 1 SERVICE OPERATIONS Dispatcher 23
Claims Administrator (Booker) 24
CHAPTER 1 THE AUTOMOTIVE SERVICE
Shop Foreman 25
INDUSTRY 3
Service Advisor 26
Chapter Objectives 3
Key Terms 3 Lead Technician 27
Introduction 4 Porter 28
The State of the Industry 4 Parts Specialist 28
Service Market Segments 5 Technician 29
Summary 8 Customer Relations Specialist 30
Practicing the Principles 8 Service Manager 30
Service Director 31
CHAPTER 2 PHYSICAL RESOURCES 10
Summary 32
Chapter Objectives 10 Practicing the Principles 32
Key Terms 10
Introduction 11 CHAPTER 4 THE SERVICE WORKFLOW 34
Facilities 11 Chapter Objectives 34
General Facility Guidelines 11 Key Terms 34
Facility Needs 11 Introduction 35
Support Space 13 Traditional Management View 35
Customer Space 15 The Systems View of an
Organization 37
Tools and Equipment 16
Advanced Systems 39
Planning Your Investment 19
Systems Thinking 40
Summary 20
Practicing the Principles 20 The Repair Process 41
Charting the Workflow 44
CHAPTER 3 MANPOWER RESOURCES 21 Summary 48
Chapter Objectives 21 Practicing the Principles 48
v
■ Contents
Delegating 83
SECTION 2 MANAGEMENT
Summary 85
STYLES
Practicing the Principles 85
CHAPTER 5 CLASSIC MANAGEMENT 53
CHAPTER 8 ETHICS AND STEWARDSHIP 86
Key Terms 53 Chapter Objectives 86
Introduction 54 Key Terms 86
Introduction 87
Traditional Management 54
What Is Ethics? 87
Scientific Management 57
Applied Ethics 88
Management by Objective 59
Ethical Leadership 89
Comparing Management Approaches 59
Stewardship 92
Leadership (Goal Orientation) 61
Summary 95
Summary 61
References 62
SECTION 3 MANAGEMENT
CHAPTER 6 BEING A LEADER 63 S T R AT E G I E S
Key Terms 63 CHAPTER 9 LONG-RANGE PLANNING 99
Introduction 64 Chapter Objectives 99
What Is Leadership? 64 Key Terms 99
Management versus Leadership 64 Introduction 100
Leading 24/7 71 Vision 100
Summary 72 Mission 102
Practicing the Principles 72 Values 105
Notes 72
Long-Range Goals 106
References 73
Tracking Progress 108
CHAPTER 7 THE COMPLEX ROLE Summary 109
OF MANAGEMENT 74 Practicing the Principles 109
References 109
Key Terms 74
CHAPTER 10 STRATEGIC AND
Introduction 75 SHORT-RANGE PLANNING 110
An Ever-Changing Enterprise 75 Chapter Objectives 110
More Art Than Science 76 Key Terms 110
The Major Management Roles 76 Introduction 111
Qualities of a Manager 81 Levels of Planning 111
vi
Contents ■
Strategic Planning 112

SECTION 4 FINANCIAL
Environmental Scan 113 MEASUREMENT
SWOT Analysis 114
Tracking Progress 116 CHAPTER 13 INCOME AND EXPENSES 153
Operational Planning 116 Chapter Objectives 153
Key Terms 153
Tactical Planning 117
Introduction 154
Summary 119
Practicing the Principles 119 Income 154
Expenses 155
CHAPTER 11 DECISION MAKING 120 Profit 159
Chapter Objectives 120 Summary 163
Key Terms 120 Practicing the Principles 163
Introduction 121
Is It Worth It to Me? 121 CHAPTER 14 COMPENSATION PLANS 164
Return on Investment (ROI) 122 Chapter Objectives 164
Key Terms 164
The Ben Franklin Decision Model 124
Introduction 165
Risk versus Reward 125
The Flat Rate System 165
Control, Influence, and Frustration 127
Variable Rate Pricing 168
The Three Levels of Performance 129
Technician Skill Levels 169
Practical Principles 132
Technician Pay Plans 170
Summary 133
Practicing the Principles 133 Pay Plans for Other Service
Reference 134
Employees 175
Fringe Benefits 176
Summary 177
CHAPTER 12 QUALITY AND CONTINUOUS
IMPROVEMENT 135
References 178
Key Terms 135
Introduction 136 CHAPTER 15 PRODUCTION PLANS 179
Quality 136 Chapter Objectives 179
Key Terms 179
The Gurus of Quality 137
Introduction 180
Practical Approach to Achieving
Consistent Quality 145 Technician Organizational Plans 180
Summary 148 Increasing Capacity 185
Practicing the Principles 149 Summary 191
References 149 Practicing the Principles 191
vii
■ Contents
CHAPTER 16 ANALYSIS AND ACTION 192 Organizing Your Surroundings 224

Chapter Objectives 192 Summary 225
Key Terms 192 Practicing the Principles 226
Introduction 193 Reference 226
Achieving a Net Profit 193

Increasing Income 193 SECTION 6 CUSTOMER
Controlling Expenses 197 R E L AT I O N S
Summary 202
Practicing the Principles 202 CHAPTER 19 THE VALUE OF SATISFIED
CUSTOMERS 229
SECTION 5 ORGANIZING AND
Key Terms 229
MANAGING YOUR
Introduction 230
E F F O RT S
Customer Orientation 230
CHAPTER 17 MANAGING YOURSELF Measuring Customer Satisfaction 233
AND YOUR TIME 205
The High Cost of Cultivating New
Chapter Objectives 205 Customers 235
Key Terms 205 The Low Cost of Repeat
Introduction 206 Business 235
What Do You Do Best? 206 Word-of-Mouth Advertising 237
Doing What Makes You Feel Customer Loyalty 237
Fulfilled 207
Fundamentals of Human
Establishing Your Priorities 209 Behavior 238
You Choose: Fireman or Fire Quality Customer Service 239
Prevention Specialist? 210 Summary 240
Focusing Your Efforts and Taking Practicing the Principles 240
Control of Your Time 211
Getting Organized: The Three-Step
CHAPTER 20 BUILDING BASIC
Process 212
COMMUNICATION SKILLS 242
Summary 216
Key Terms 242
CHAPTER 18 ORGANIZING TIPS AND Introduction 243
TOOLS 217 Basics of Communication 243
Chapter Objectives 217 Nonverbal Communication 245
Key Terms 217 Questioning Techniques 249
Introduction 218 Summary 252
Sorting Your Workload 218 Practicing the Principles 252
Tracking Tools 220 References 253
viii
Contents ■
CHAPTER 21 RESOLVING CUSTOMER CHAPTER 24 PROGRESSIVE DISCIPLINE 294

DISPUTES 254 Chapter Objectives 294
Chapter Objectives 254 Key Terms 294
Key Terms 254 Introduction 295
Introduction 255 Progressive Discipline Process 295
The Rules of Complaint Handling 255 I Did Not Realize It 295
Diffusing the Situation 261 In the Wrong Place 296
The Power of Thinking Win-Win 262 Discipline or Punishment? 297
Complaint Handling Process 263 Steps in the Process 297
Summary 264 Summary 303
Practicing the Principles 264 Practicing the Principles 304
Reference 304
SECTION 7 EMPLOYEE RELATIONS

SECTION 8 MARKETING,
CHAPTER 22 RECRUITING AND SELECTION 269 MERCHANDISING,
AND SELLING SERVICE
Key Terms 269
CHAPTER 25 MARKETING AND
Introduction 270
MASS MEDIA 307
Defining the Job 270
Job Descriptions 271 Key Terms 307
Finding Candidates 276 Introduction 308
Screening and Selection 278 The Five Basic Goals of Marketing 308
Summary 281 Establishing Value 309
Characteristics of Value 309
How Much Is Too Much? 315
CHAPTER 23 MOTIVATING EMPLOYEES 283
Advertising 316
Summary 320
Key Terms 283
Introduction 284
Setting Clear Expectations 284 CHAPTER 26 TARGET MARKETING AND
Tracking Performance 285 BUILDING AN IDENTITY 321
Measuring What Is Important 285 Chapter Objectives 321
Performance Evaluations 287 Key Terms 321
Employee Compensation 289 Introduction 322
Incentives 289 Defining Your Market 322
Summary 292 Market Research 323
Practicing the Principles 292 Wants versus Needs 324
ix
■ Contents
Awareness 325
SECTION 9 THE LEGAL
Building Identity 326 ISSUES AND
Establishing an Image 328 RESPONSIBILITIES
Communicating Your Message 329
Summary 330 CHAPTER 29 LEGAL GUIDELINES FOR
Practicing the Principles 330 SERVICE OPERATIONS 355
CHAPTER 27 POINT-OF-PURCHASE Key Terms 355
MERCHANDISING 331 Introduction 356
Chapter Objectives 331 Customer Issues 356
Key Terms 331 The Repair Order 356
Introduction 332
Quality of Repairs 358
The Goal 332
Repair Warranty 359
Merchandising Locations 332
Safety and Reliability 360
Signage 333
Civil and Criminal Liability 361
Product Displays 334
New Vehicle Issues 362
Impulse Items 336 Summary 364
What Should I Merchandise? 337 Practicing the Principles 364
Summary 338
Practicing the Principles 338 CHAPTER 30 WORKPLACE SAFETY 365
CHAPTER 28 SELLING SERVICE 340 Key Terms 365
Chapter Objectives 340 Introduction 366
Key Terms 340 Workplace Safety Legislation 366
Introduction 341
OSHA 367
Support Services 341
Summary 374
Selling in the Service Drive 342
Selling in the Shop 347
The Value of Increased Sales per Vehicle 349 Index 377
Some Words of Warning 350
Summary 351
x
PREFACE
Automotive service is a very complex business. It is rare that a service manage-

ment employee has the luxury to specialize in just one area. Just as in most
small businesses, a manager in automotive service is expected to be a jack of
all trades. As a result, an effective service manager must possess a wide range of
knowledge and skills to effectively address daily challenges, skills ranging
from accounting and advertising to customer relations and scheduling—and
beyond.
In addition to the diversity of knowledge and skills required, there are few
industries where employees perform under more pressure than automotive
service. The automobile that you purchase or lease is the second largest invest-
ment that you will probably make in your lifetime. The sheer dollar value makes
your car an important commodity, but a car’s value goes beyond that. Not only
does the average person invest heavily in his or her car, he or she depends upon
a car more than any other purchase. The public’s extreme dependence on an
automobile as a key to maintaining their way of life makes keeping a car in
proper running order essential to maintaining their lifestyle.
Whether you own a mansion in the countryside or share a small apart-
ment in the city, you could wake up any morning with problems ranging from
an air conditioner that doesn’t work to a leaking faucet. Even though these
problems are upsetting, you can still go to work, go to church, go shopping, go
out to eat, and have a social life while you’re waiting for the technician to
schedule a visit to fix your problem. That is not true when you have a problem
with your car. Without reliable transportation you can’t get anywhere, and
loss of use of your car may even result in the loss of your job—your means of
income to support your family, your home, and your lifestyle. This scenario is
not rare. It applies to just about everyone you know. Now, that is high stakes!
This book is an effort to share my 30-plus years of experience in the auto-
motive service industry. It is an overview of what I believe are the basic knowl-
edge and skills needed to succeed in this challenging business. It will not
provide you with all of the answers to all of the situations that you will
encounter in the automotive service industry, but it will provide you with a
broad-based foundation upon which to build a fruitful career.
The book is divided into the following sections:
• Section 1: Service Operations
• Section 2: Management Styles
• Section 3: Management Strategies
• Section 4: Financial Measurement
• Section 5: Organizing and Managing Your Efforts
• Section 6: Customer Relations
• Section 7: Employee Relations
• Section 8: Marketing, Merchandising, and Selling Service
• Section 9: The Legal Issues and Responsibilities
xi
■ Preface
Supplements
To access supplementary materials online, instructors need to request an
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Center link, and then click Register Today for an instructor access code. Within
48 hours after registering you will receive a confirming e-mail including an
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on for full instructions on downloading the materials you wish to use.
Acknowledgments
Special thanks to my wife, Shelley, and my entire family whose patience and
lifelong support have allowed me to undertake this project and my lifelong
career in the field that I dearly love, automotive service.
I thank Mark Hambaum; Timothy Gilbert, Northwood University; Drew
Carlson, Cosumnes River College; Carl Eric Anderson, Fullerton College; and
Tom Grothous, University of Northwestern Ohio, for their assistance with the
text review of the original manuscript.
I also wish to thank my friends and business associates at Germain Motor
Company, Ricart Automotive Group, Clintonville Auto Repair Service, Boyd’s
Goodyear Tire and Service, and Midwestern Auto Group in Columbus, Ohio,
for allowing us “free access” to their facilities to shoot the photos for the book.
And, finally . . . thanks to all of those who I have worked with and
learned so much from during my automotive career. Without your friendship,
support, and examples, I would have had nothing to write about!
I hope that you enjoy the journey and that it provides you with a solid
foundation for a long and prosperous career in automotive service. I hope you
enjoy it nearly as much as I have enjoyed my association with this industry
and the great people that I have been privileged to meet and work with over
the years.
—ANDREW A. REZIN, PH.D.
xii
ABOUT THE AUTHOR
Andrew A. Rezin, Ph.D., brings a unique perspective to the subject of service

management based on his diverse automotive background. Drawing upon
twenty years of private sector experience working for major automotive man-
ufacturers and as a manager in large retail service departments, combined
with his more recent experience as college instructor and department chair, he
provides a unique and informed perspective based on real-life experience of
the critical topics students need to be successful in the modern automotive
service industry.
xiii
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SECTION
1
SERVICE OPERATIONS
T he automotive industry plays a very important role in our economy and our lives. Auto-
motive service plays an essential role in the support of this mammoth industry. There
are many resources required to provide the proper service environment. These resources
include the buildings and equipment required to perform service. They also include the
human resources needed to staff and operate repair shops. Service departments are far
more than a place where a technician repairs vehicles. Many support functions need to be
performed to meet customer needs and qualified personnel are needed to perform these
essential tasks. The interplay of all of the physical and manpower resources in automotive
service forms a complex system that needs to be expertly managed and directed. The
service manager is the individual who is primarily responsible for orchestrating and coordi-
nating the complex operations that make up the service system.
• CHAPTER 1: The Automotive Service • CHAPTER 3: Manpower Resources

Industry • CHAPTER 4: The Service Workflow
• CHAPTER 2: Physical Resources
C H A P T E R
1
The Automotive
Service Industry
CHAPTER OBJECTIVES
■ To understand the size and current state of the ■ To identify the major types of repair organiza-
automotive service industry in North America tions that comprise the service industry
and globally ■ To compare and contrast the unique benefits
■ To recognize the challenges facing those in the and challenges of the different types of repair
automotive service industry in developed coun- organizations
tries and also in underdeveloped nations
KEY TERMS
service departments service chain stores fleet

independent repair shops service stations
3
SECTION 1 ■ Service Operations
Introduction
Wherever you live, wherever you travel, automobiles are there. The worldwide
market for automobiles continues to grow in leaps and bounds. In developed
countries there are, on average, currently more than two vehicles per house-
hold and this number continues to grow. Currently, there are over 200 million
cars registered in the United States and another 25 million in Canada.
In developing countries, access to individual transportation is a major
focus as they work to build their economies. Today there is hardly a location
on earth where there are no cars. It is estimated that there are over 600 million
vehicles running on roads worldwide today. So there is a very large and con-
stantly growing need for a robust automotive service industry to keep them
running.
The State of the Industry

The demand for vehicle service continues to grow faster than the supply. The
U.S. Department of Labor (USDOL) indicates that in the United States alone
there are currently more than 818,000 automotive technicians and 249,000
bus, truck, and diesel technicians (Bureau of Labor Statistics, USDOL, May
2005). There continues to be a shortage of qualified technicians. Further,
future USDOL projections indicate that the shortage will continue to grow as
the current population of technicians ages and retires faster than they can be
replaced by entry-level technicians. They also predict that by 2012, annual
demand for technicians will grow by 12.4 percent. These labor trends are not
unique to the United States. Similar shortages abound across the globe. A 2005
report from the British Columbia Sector Council (Canada) reported that
Twenty-seven percent of employers have at least one unfilled position for a

qualified journeyman automotive service technician. There are reasons for
this shortage but there are also solutions . . . Industry needs to act now to
avoid an employment crisis.
(Automotive Training Industry Association, July 2006)
A similar chronic shortage continues to be the cause of alarm in Europe

and around the world.
Propelling the increases for service productives is the well-known skills short-
age in this area. And the 369 respondents to the 2006 Pay Guide survey reported
a high turnover of service staff—essentially technicians and mechanics—and
difficulties filling these positions.
(Retail Motor Industry Federation, 2007)
At the same time that nations with more mature, well-developed automo-
tive service industries are struggling to find qualified employees, developing
countries around the world not only struggle to find technicians and other
service employees but also travel to the United States and other nations seek-
ing insights for building an automotive service infrastructure. For example,
many delegations from China have toured U.S. educational institutions in
recent years to understand how our service infrastructure operates and to
learn what they need to do so that they can manage the explosion in demand
that they are currently experiencing.
4
The Automotive Service Industry ■ CHAPTER 1
These technician shortages are a clear example of the global issue of

increasing demand and growing shortages. The automotive service industry is
more than just technicians, however. There are critical needs in all service sup-
port positions. National data indicates that technicians occupy 52 percent of
the total jobs in automotive service careers. According to 2005 data from the
U.S. Bureau of Labor Statistics, the production support activities needed in
service operations account for 48 percent of the total jobs in the industry. The
total need for service personnel is roughly twice that indicated for technicians.
Management and sales-related jobs (for example, service advisors) account for
about 15 percent of the support positions in service organizations. The 2 per-
cent of all automotive service employees that are managers are responsible for
guiding and directing the other 98 percent and are accountable and respon-
sible for 100 percent of the final results. In this book we will focus on the skills
and responsibilities needed to guide and direct that 98 percent.
Service Market Segments

There are five major market segments in the automotive service industry.
They are
• New car and truck dealerships
• Automotive repair and maintenance shops
• Automotive parts, accessories, and tire stores
• Gas stations
• Fleets
Each of these major market segments poses unique characteristics, needs,
and challenges for employees. Let us briefly explore each of them.
New Car and Truck Dealerships

According to the Bureau of Labor Statistics, automobile dealership service
departments account for about 40 percent of the total automotive service mar-
ket (USDOL, 2005). Dealerships play a unique role in the automotive service
industry. As the only factory-approved sites for warranty repairs, dealerships
are solely responsible to make all of the warranty repairs to vehicles. Because
of this mandatory specialty, service work in new car and truck dealership
service departments has historically been dominated by warranty repairs. Service
Because of their close ties with a specific manufacturer, dealership service Departments
departments specialize in the maintenance and repair of the specific make and Dedicated service facilities
models that they have been awarded an exclusive franchise to sell and service that are a part of all new car
in their market. Because of this agreement, they are solely responsible for the and truck dealerships; the
warranty repairs of that brand of vehicles in their area. As part of this close tie sole warranty repair stations
with the manufacturer, these service departments have access to the latest that perform general
technical support data on those models. Thus, historically, even when mainte- maintenance and repairs
nance and customer-paid work is involved, they tend to limit their work only as well.
to their manufacturer’s products.
In recent years, because of dramatic improvements in product quality,
dealership service departments, which were originally built to support huge
volumes of warranty work, have begun to look for other sources of work to
sustain their large operations. As a result, dealership service departments have
become more engaged in retail sales of repairs and preventive maintenance.
5
Whereas two decades ago many dealerships generated 60 percent or more of

their total business with warranty repairs, this percentage of total work has
significantly declined. Recent industry trends indicate that the volume of war-
ranty repairs is less than half of what it was just ten years ago. As a result of
this decline in warranty repairs, dealerships have shifted their focus to the
highly competitive retail service business. Even though their total market
share of retail repairs and maintenance still hovers in the 20 to 30 percent
range, in most markets dealerships are making a concerted effort to increase
this market share.
Another unique trait of dealership service departments is that they are a
small part of a much larger organization. Dealerships are a group of diverse
operations all working under one roof. The six major departments in dealer-
ships (new vehicle sales, used vehicle sales, service, parts, body shop, and car
leasing) are commonly managed and operate as unique and separate subcom-
panies within the organization.
Although the service department is only one of six profit centers of the
overall dealership operation, it is essential to dealership stability and prof-
itability. Dealers depend on service as an essential profit center that produces a
steady source of income that they can count on to pay the bills each month.
Automotive Repair and Maintenance Shops

Independent Repair Unlike dealerships, automotive repair and maintenance shops are independent
Shops repair shops that operate as single-purpose organizations. Their sole purpose is
Single-purpose service to repair and service vehicles. Independent shops range in size from locally
shops that are not affiliated owned one-bay proprietorships to large multibay shops that are comparable in
with a specific manufac- size to some of the local new car dealerships. In most cities the number of inde-
turer or product; perform pendent service shops is much larger than the number of dealerships.
service and repairs on a Automotive repair and maintenance shops do not have a built-in business
wide range of vehicles. as do new vehicle dealerships. They cannot depend upon the consistent flow
of manufacturer-paid warranty repairs. Conversely, they do not carry the
liability and burden of being the sole source for resolving some of the difficult
new vehicle problems. Their singular focus is customer-paid work. Nationally,
automotive repair and maintenance shops account for slightly more of
the total service business than dealerships. In addition, they generate more
than double the amount of customer-paid service of their dealership counter-
parts.
Unlike dealerships that focus on servicing only one make of vehicle, auto-
motive repair and maintenance shops are not tied to any specific manufacturer.
They work on all makes, models, and years of vehicles that come to them for
service or repairs. To be successful, their technicians must be jacks of all trades.
However, it is not uncommon in any city to find some shops that have chosen
to specialize in a specific segment of the market (such as domestic, European,
or Japanese vehicles).
One of the greatest challenges to the nondealership organizations in auto-
motive service is access to technical information and training. The manufac-
turers open their books only to their franchised dealers, providing those
dealers with the latest specific technical information; this poses an ongoing
challenge to others in the service industry. The nondealership organizations
must actively seek out information on a broad array of vehicles and vehicle
systems, yet their access to manufacturer technical data and specifications is
limited. While this is a major challenge, over recent years the rapid expansion
6
in access to technical information, primarily through the Web, has been of

great help to improve this situation.
Automotive Parts, Accessories, and Tire Stores

Major regional and national service chain stores have been the outgrowth of Service Chain
some of the larger parts and service retailers over the years. Much like car deal- Stores
erships, these companies house several unique departments. Whether their Stand-alone service centers
core business is tires, mufflers, batteries, or general parts, the service operation that are part of a group of
is most often only one profit center among several. There, however, are many independent repair shops,
ways that these organizations are similar to their smaller automobile repair owned and operated in
and maintenance shop cousins than they are to dealerships. conjunction with a major
These service departments generally work on all makes and models of provider of parts or
vehicles. They also work with limited access to manufacturer technical infor- accessories.
mation. One unique benefit that they possess, however, is that they are part of
a much larger network of shops. Because they are part of a large group of iden-
tical shops in varying locations, they can share information, training opportu-
nities, and even equipment and tools across different sites to become more
efficient.
Although some exceptions exist, large chain operations tend to be “semi-
specialists.” That is, they intentionally limit their range of work. For example,
if they are part of a major tire store chain, they may choose to focus primarily
on tires, suspension, and brake repairs. Although they may accept some minor
repairs to some other car systems, they will most often completely, and by
the company’s edict, steer clear of heavy mechanical or electronic repairs or
troubleshooting.
Gas Stations
Although gas station repair shops have been an institution in automotive
repair since the automobile’s introduction over a hundred years ago, their
numbers have declined significantly over the past decade. Today they employ
just over 4 percent of the total number of automotive technicians in the
United States. This is primarily because of the difficulties in keeping up with
the technology and the high cost of specialized equipment, tools, and train-
ing. In the limited space that most gas stations can provide (typically one to
three service bays), the cost to equip the shop is often prohibitive.
These small businesses face the same challenges as the automotive repair
and maintenance shops but with only a fraction of the space and production
capacity to make them profitable. Unfortunately, because of these trends, many
of the existing service stations have converted their service bays into conve- Service Stations
nience stores. As new gas stations are built, they are rarely designed as service Gas stations that also
stations, their previous common name and description. They are most likely to provides automotive service
begin life selling gasoline, soft drinks, chips, and other convenience items rather repairs and maintenance.
than venture into the highly competitive automotive repair business.
Fleets Fleet
Fleet service operations are departments within companies or governmental A group of vehicles that are
agencies that maintain and repair only those vehicles that are owned or leased owned and operated by a
by that particular company or agency. These shops do not accept business company to support its
from the general population. Their sole responsibility is to keep as much of business operations.
7
their fleet up and properly running at all times as possible. These fleets range
widely in size and variety of vehicles serviced.
Many corporate fleets limit the number of makes and models of vehicles
that they service at any one time. This helps to simplify their needs for techni-
cal information and allows them to become specialists in working within their
unique market. Fleet service departments are support functions of an organi-
zation in another primary business. Therefore, the composition of their pool
of vehicles is dictated by the business that they are engaged in. For example,
the fleet of the local transit authority may have several makes and models of
vehicles in its fleet at any one time. With rare exception, however, the compo-
sition of the fleet will normally be dominated by buses. Likewise, a fleet
service working with the state police will specialize in preparation, mainte-
nance, and repair of police cruisers.
Fleet services, like their other nondealership counterparts in the service
industry, struggle to obtain technical information. There are exceptions to the
rule, however. Because many of the larger fleets purchase large numbers of new
cars or trucks every year from major automotive manufacturers, they may
request and be granted special privileges by these manufacturers. This may
include access to the manufacturer’s latest technical bulletins and service man-
uals and even access to direct training from the manufacturer. Some of the
largest of these fleets are even granted the status of becoming local warranty
service centers, which allows them to perform their own warranty-reimbursed
repairs in-house.
SUMMARY
In this chapter we learned about the size and importance of The automotive service industry is divided into five dis-
the automotive service industry today and into the future. The tinct types of service operations: dealership service depart-
need for automotive service is very large in North America and ments, independent repair shops, chain stores, gas stations,
around the globe. Many countries report a shortage of quali- and fleets, all of which experience unique challenges in the
fied technical workers in the automotive service industry, and marketplace. Now that you have a general idea of the size
this shortage is growing at an alarming rate. This growth in of the business that you are getting into, let us explore in
the need of service workers is not limited just to the devel- detail what it takes to build, maintain, and staff a service
oped nations. It has more recently taken on greater impor- operation.
tance in many of the developing nations.
PRACTICING THE PRINCIPLES
1. Which of the following service operations may be author- c. poor quality.

ized to perform manufacturer warranty repairs? d. all of the above.
a. fleets.
3. The type of shop that is most likely to have access to
b. independent repair shops.
the latest manufacturer bulletins and technical informa-
c. tire stores.
tion is
d. chain stores.
a. new car dealership.
2. Automotive parts, accessories, and tire stores may provide b. large fleet.
vehicle service but it is likely to be c. new truck dealership.
a. low priced. d. all of the above.
b. limited in areas of service provided.
8
4. Which type of service shop is least likely to provide c. 48.

service to all makes and models of vehicles? d. 75.
a. independent repair shop.
8. There are more than __________ automotive technicians
b. tire store.
currently in the United States.
c. new truck dealership.
a. 800,000.
d. chain store.
b. 250,000.
5. Even though the demand for service continues to grow, c. 1,500,000.
the one type of shop that is rapidly vanishing is d. none of the above.
a. tire store.
9. Shortages of qualified technicians have been reported in
b. chain store.
the United States and
c. service station.
a. Canada.
d. parts store.
b. Europe.
6. According to reports, there are more than __________ c. China.
vehicles in operation worldwide. d all of the above.
a. 6 billion.
10. One of the greatest challenges to the nondealership
b. 835,000.
organizations in automotive service is
c. 2.6 million.
a. being price competitive.
d. 600 million.
b. access to technical information.
7. Automotive technicians make up __________ percent of c. access to factory technical training.
the total number of employees in automotive service d. a and b.
shops in the United States. e. b and c.
a. 52.
b. 67.
9
C H A P T E R
2
Physical Resources
CHAPTER OBJECTIVES
■ To identify and lay out the physical facilities nec- ■ To be able to calculate the total investment in
essary for an automotive repair shop facilities, equipment, and tools required to prop-
■ To identify the equipment and tools necessary erly equip a repair shop
for operation of an automotive repair shop ■ To calculate the total investment required to
properly equip and operate an automotive repair
shop
KEY TERMS
physical facilities support space communications equipment

repair stalls administrative area computing system
storage space special tools
10
Physical Resources ■ CHAPTER 2
Introduction
If asked to list the resources needed to run a successful repair shop, a typical
automotive technician would likely answer with one word: Me. Although the
automotive technician is an essential part of any automotive repair shop,
building and maintaining a successful repair operation requires a far more
complex mix of resources and assets. In this chapter, we will look at the physi-
cal resources needed to operate a repair shop, which include everything from
the physical facilities to the service equipment, tools, and also other consider-
ations that are a part of outfitting a typical repair shop.
Facilities
Physical facilities are required to operate an automotive service business. Physical Facilities
These facilities are the land and buildings that provide a suitable physical The land and building that
environment for conducting business. The need for suitable facilities is espe- provide a suitable physical
cially important for an automotive service operation. Because of the nature environment to conduct
and complexity of the automotive service business, the investment required business.
to provide these physical resources is substantial. There are some very impor-
tant factors that must be taken into account to provide facilities for any auto-
motive repair shop.
General Facility Guidelines

A successful automotive repair facility must be large enough to house the cars
being repaired and should occupy a convenient, accessible, and easy-to-find
location. The ideal facility for an automotive shop
• Is large enough to handle an average day’s business
• Is visible and easily accessible to customers
• Has adequate external space for customer parking and vehicle storage
• Has adequate space for repair support services (write-up area, locker
rooms, parts storage, business office, equipment storage)
• Has adequate space for customer services (customer entrances, a waiting
area, and restrooms)
• Provides a neat, clean, and professional customer friendly environment
Although it is important to address all of these criteria when selecting or
building a facility, it is important to approach all brick-and-mortar investments
cautiously and conservatively; do not overdo in any of these areas. Whether
you rent, lease, or purchase them, facilities are fixed assets, and therefore are
very difficult to change or dispose of rapidly. As a result, they continue to be an
expense whether the business is good or bad—even when the shop is not open.
When planning your investment in facilities, keep in mind the need to provide
a facility for efficient operation and keep fixed expenses to a minimum.
Facility Needs
The guidelines listed above are good starting points for choosing a facility, but
your ultimate choice must address the need to support repair and customer
11
services essential to your business. We will now discuss each of these needs
your facility must fulfill, as well as their importance.
Repair Space
Repair Stalls The typical service shop dedicates the majority of its facility space to the repair
The physical space, each stalls. Each stall must provide room for the car and a reasonable workspace
stall typically measuring surrounding it so that the technician has sufficient space to easily access all the
12 × 25, that is set aside car’s systems. Because a standard midsized car measures 6 161⁄2, the average
to provide adequate room size of a repair stall is 12 25 (300 square feet). A stall of this size is large
to repair an automobile. enough to accommodate light-duty trucks as well. A shop that repairs smaller
import vehicles and/or sports cars can reduce the stall size to 10 20 (200
square feet). Because most automotive manufacturers now offer products in
several classes—from subcompacts to full-sized sport-utility vehicles (SUVs)—
however, planning for a more spacious and flexible 12 22 stall is a wiser
investment.
Providing access to each of the repair stalls is as important as setting aside
adequate space for the stalls. Stall access is often provided by means of two over-
head doors and a large drive-through aisle that runs the entire length of the shop.
The aisle must be long enough to provide access to each stall yet wide enough to
allow vehicles to be turned and driven in and out of the stalls. This layout is very
common, especially in areas where the seasons change dramatically. The two
overhead doors provide adequate access for vehicles while limiting entry to the
facility. This increases building security and reduces the direct effects of the
weather inside the shop. Figure 2-1 shows examples of basic repair area layouts.
In milder climates, individual overhead doors lead directly into each
repair stall. Whereas this layout reduces the total square footage required
under the roof, it adds to the risk of theft and increases wear and tear on the
Straight Drive-Thru Layout Drive-In Bay Layout L-Shaped Layout
Type of Lift Min Space Ideal Space
Surface-Mounted 12 ft. × 25 ft. 13 ft. × 25 ft.
In-Ground 11 ft. × 25 ft. 12 ft. × 25 ft.
Figure 2-1 Basic repair area layouts
12
building (most often in the form of frequent door repairs). The mildest cli-
mates, such as the desert Southwest, often feature open-air facilities housed
under roofs suspended over concrete slabs. Shops in such environments expe-
rience a unique set of climatic obstacles: instead of contending with cold tem-
peratures and rain, they must deal with extreme heat and dust storms.
Storage Space
The repair space must also include adequate storage space to house the equip- Storage Space
ment and tools typically shared by the technicians (such as a brake lathe, wheel The physical space required
balancer, valve grinder, and other special tools), and it must be easily accessible to house equipment, tools,
from any part of the shop. At the same time, storage space for shared equip- and supplies.
ment must provide adequate security to prevent loss or damage to these expen-
sive tools. The shop layout must also allow sufficient room for each
technician’s toolbox. Professional automotive technicians own and regularly
use a large variety of tools. These tools are stored in large rolling toolboxes.
These toolboxes range in size from a small 26 19 box for entry-level techni-
cians to more extensive and specialized sets of up to 6 21⁄2. Locating storage
space for toolboxes close to the repair stalls provides technicians with easy
access to essential hand tools.
Drainage
An important, but often overlooked, point is to make sure the shop floor pro-
vides adequate drainage. Two common methods of drainage include sloping
the entire floor toward a central floor drain trough, or locating a variety of
drains throughout the repair space. Drainage is essential for cleanliness and,
more important, safety. Hundreds of cars drive in and out of the shop every
day, causing an accumulation of road grime. Incidental fluid leakage or spills
involving antifreeze, oil, and other fluids further contribute to dirty, slippery,
and unsafe floors. The shop owner must anticipate and plan for these condi-
tions in the design and preparation of the repair facility.
Support Space
Now it is time to discuss the rest of the shop—the support space in the facility Support Space
that is not directly involved in repair. Although a shop may be adequate with- Facilities required to
out one or more of these areas, you should always consider them when devel- conduct functions that are
oping an automotive service shop layout. In most cases these support services not directly involved in the
require space equal to at least one-half the size of the repair shop. primary activity of
automotive repair.
Employee Facilities
The nature of the repair business makes the employee facilities among the
most essential supplemental areas in a service shop. To keep the vehicles that
they work on, the shop, and themselves clean and neat, technicians require
ready access areas where they can clean up and change clothes when needed.
Technicians must be able to change quickly and conveniently from street
clothes into work uniforms. Because they work with hazardous chemicals such
as oils, greases, cleaners, and solvents; they also need an accessible space that
allows them to clean up quickly and thoroughly. Most technician locker rooms
13
in mid- to large-sized shops therefore include employee restroom and shower

facilities, a changing area with individual lockers, and a large multistation
washbasin. The importance of these facilities for shop safety and customer
satisfaction cannot be overstated.
Parking Lots
The facility should include adequate parking that is clearly marked and visible
from the street. The customer parking area should be paved, well lit, and pro-
vide easy access to the service facility. Providing convenient parking sends a
strong message to customers that the shop is aware of their importance and
makes every effort to take their needs seriously.
Although the parking area represents a smaller investment than a build-
ing, it is not an insignificant expense. The parking area must have adequate
space for the cars of current and potential customers, as well as for all vehicles
currently being repaired and those being stored temporarily while awaiting
service. In addition to paying for acreage and improvements (such as lighting
and paving), the owner must also ensure that the entire facility and all cars on
the property are safe and secure. Repair facilities commonly employ alarm sys-
tems and security fencing around areas where cars awaiting service are parked.
Detailing/Wash Rack
Most shops include an area for cleaning customer vehicles. Such a service is
highly recommended for increasing customer satisfaction. This area might
consist of a simple one-stall space where a porter can handwash vehicles
before returning them to customers. Many mid- to large-sized shops, however,
now feature full car wash and car detailing areas in an attempt to provide a
full-service shop that can meet all the customer’s needs in one stop.
Administrative Area
Running a service facility involves performing not only repair tasks but also
administrative tasks, such as work distribution (dispatching) and the handling
of customer paperwork and payment (cashiering). Employees in small shops
may perform both administrative and repair duties, whereas larger facilities may
hire separate personnel to handle these tasks. Regardless of the size of its staff, a
Administrative shop must have an adequate administrative area to perform these needed serv-
Area ices. Larger shops must set aside office space to house service management and
Floor space allocated to general business management (accounting) personnel. Because these manage-
perform general business ment personnel perform duties that require the ability to work quietly and with-
functions of the company or out distraction, their offices may be located out of the normal traffic flow.
department.
Parts Sales and Storage Area
Although not all service shops have their own parts department, all but the
smallest shops maintain an inventory of common parts and supplies. Keeping
an inventory of commonly used parts frees a shop from depending on a third
party to deliver the parts needed for repairs, thus making the shop more effi-
cient and productive.
Many larger independent shops and those associated with dealerships
carry enough inventory to act as retail parts outlets. This inventory requires
14
investments in both the inventory and the additional physical space needed
to store those parts while still making them easily accessible to the service
personnel. Often this means that the shop will maintain two separate parts
counters: a wholesale counter accessible to the technicians and a separate
retail counter that is accessible to customers.
Parts Inventory
Building and maintaining a parts inventory is a large investment that requires
careful consideration and even more careful monitoring. Because parts in
stock tie up a significant amount of space and money, the shop owner needs
to consider carefully the size and scope of the parts to be inventoried. After all,
parts sitting on the shelf are not generating income or a markup or profit.
Unlike the equivalent amount of money in a bank, they do not generate
income—instead, they depreciate. The longer a part sits unsold on the shelf,
the more likely it will remain there; even if it does sell, it is more likely to sell
at a reduced price. Still worse, the longer the part remains unsold, the more
likely the part will become obsolete and unsellable.
Even the smallest parts department must emphasize accurate and thor-
ough record keeping, tight inventory management and control, and a strict
policy to control obsolescence. Computer-based inventory control and man-
agement systems help provide the information a parts manager needs to stock
only inventory that is in demand. They can also provide sufficient warning to
allow the manager to dispose of nonselling inventory before it becomes obso-
lete and valueless. Once a shop has committed to keeping a parts inventory, it
should consider the option of using this inventory as a means for generating
additional income by opening a retail parts sales counter. Such a move can sig-
nificantly increase the sales of common parts and will help generate profit and
offset the cost of inventory. It is critical for the shop owner to assign a capable
employee the responsibility of managing the inventory and overseeing the
shop’s investment in this area.
If you decide to maintain a parts inventory, there are two methods to help
assure that the parts will be sold rather than just sit on the shelf: comprehen-
sive inventory control and obsolescence monitoring. Commonly available as
computer-driven programs or services, these tools provide the management
information needed to keep only inventory that is in demand and provide
warnings to allow disposal of nonselling inventory before it becomes obsolete
and valueless.
Customer Space
An automotive service shop’s reputation rests not only on the repair service it
provides but also on the overall impression the shop leaves its customers. A
clean, organized, and physically appealing facility can attract additional busi-
ness as surely as a dirty, disorganized, and unappealing business can drive cus-
tomers away.
Customer Entrances and Write-Up Area

As in every other retail purchase transaction, the first impression that the cus-
tomer has when they enter your service facility typically sets the tone of the
15
overall customer experience. The shop should feature a clearly marked and
easily accessible entrance that leads customers to a write-up area where
employees can attend to their needs. The write-up area is typically the site of
the first face-to-face contact between the customer and the service advisor.
The write-up area should provide a clean, well-lit, and quiet environment
where customers can comfortably discuss with the advisor the reason for their
visit and raise any questions or concerns that they may have. Because this
face-to-face transaction leaves a lasting first impression on the customer, the
write-up area must reflect a clean and professional environment.
In most climates the write-up area should also include a covered space
where customers can enter or exit their vehicles while being protected from
the weather. Such a space allows the customer and the service advisor easy
access to look over the vehicle and assure a common understanding of the
customer’s concerns and the planned services. This additional inside facility
space can greatly improve customer relations and satisfaction and easily justi-
fies the added cost to provide the space.
Customer Waiting Area

Providing customers with a waiting area is an important part of demonstrating
concern for their needs. You can demonstrate your concern for customers’
needs by making available separate customer restroom facilities and a customer
waiting lounge that are clean, well lit, and isolated from the repair space.
Because customers may choose to wait for minor services and repairs, the facil-
ity should feature a comfortable place for them to sit, read, or watch television
while they wait for repairs to be completed. Many shops today accommodate
the mobile businessperson by providing telephones or wireless Internet access
so that customers can conduct business while waiting for repairs. These addi-
tional amenities provide shops with a competitive edge.
Tools and Equipment

The total investment in the physical resources needed to open and operate a
service shop does not end with the lease or purchase of an adequately large
facility. Once the facility has been located, it must be outfitted with sophisti-
Special Tools cated diagnostic and repair equipment and special tools. Although every
Tools that have been technician possesses a large rolling toolbox filled with tools worth thousands
designed for a very specific of dollars, their investment pales in comparison with what the owner must
purpose and application. invest to properly outfit the shop. In this section we will look at the typical
tools and equipment required in a service shop.
Tools
Although technicians make a significant investment in their own personal
and hand tools, they expect shops to provide a wide array of specialized and
commonly shared general-use tools. These include large tools used in diagno-
sis and testing of vehicles, such as charging system testers, cooling system
testers, and electronic diagnostic scopes. Shops typically provide these tools
because of their considerable cost and the frequency with which they are
used. Most shops possess only one or two of these expensive and highly spe-
cialized diagnostic tools, which all technicians at the shop share.
16
R EAL W ORLD A PPLICATION

Shop owners and technicians often disagree over in his or her toolbox and take such tools along if he or
which tools the shop should provide and which ones she changes employers. Larger shared tools, such as
the technicians should buy for themselves. Deciding pieces of diagnostic testing equipment (charging sys-
what tools and equipment the shop should purchase tem testers/diagnostic scopes), by contrast, are appro-
and what should be purchased by individual techni- priate investments for the shop.
cians is always difficult. As you can imagine, when Special tools constitute a notable exception to
there is any doubt, the technicians would prefer that this rule. Although the individual pieces of special
the shop purchase the equipment. tool kits often are small enough to fit in a techni-
When I took the position as service director at a cian’s toolbox, the entire collection of these rarely
large dealership, I had to develop a reasonable set of used yet essential tools is too large to be in the posses-
guidelines to govern this important issue. Based on sion of any single technician. Further, manufacturers
my work experience with many well-run shops, I often require the shops that work on their products to
arrived at the following rule of thumb: “If it fits in purchase and own specific sets of these specialized
your toolbox, you buy it!” tools.
Using this rule of thumb, a technician should pur-
chase small hand and power tools that can be stored
A shop also typically provides additional specialty tools, or shop tools,

specifically designed for certain products that the shop services. Dealership
shops or highly specialized shops may need to make significant annual invest-
ments in special tools designed to service a particular product or product line.
Equipment
Shop owners make an even larger investment outfitting the facility with the
basic equipment required to provide proper repair services. Although techni-
cians often take the fact that the company buys these basic pieces of equip-
ment for granted, this equipment is a substantial investment for the shop
owner. Some examples of the most basic pieces of equipment common to all
shops, whether full-line dealerships or local muffler and brake shops, are
• Centralized power exhaust system
• Adequate lighting
• Air compressor
• Air distribution system
• Electrical outlets
• Work benches
• Hydraulic press
• Floor jacks
• Bench grinders
• Vehicle lifts
Depending on the types of work a shop performs, the shop may need a wide
range of additional equipment. Some of the most common big-ticket items spe-
cific to each major automotive repair area are
• Engine mechanical: cooling system tester, cooling system flush machine,
valve grinding machine, oil drains, mobile crane, precision measuring
equipment (run-out gauges, micrometers), torque wrenches;
17
• Automatic transmission (A/T): A/T fluid exchanger, precision measuring

equipment (dial indicators, micrometers, depth gauges), torque wrenches,
pullers, presses, pilot tools;
• Manual transmission and driveline: transmission jack, differential jack,
bearing press;
• Steering and suspension: alignment machine, wheel balancer, tire
mounting machine, strut compressor;
• Brake systems: brake lathe, power bleeder;
• Electrical systems: charging system tester, battery chargers, short finder,
multimeter;
• Heating and air-conditioning (A/C): A/C recharging/recycling system,
electronic leak tester;
• Engine performance: diagnostic testers, digital multimeter, code reader,
timing light, oscilloscope.
Communications Equipment
No shop can exist if its employees cannot communicate effectively with one
another as well as with their suppliers and customers. To address these basic
Communications communications needs, a shop should have communications equipment,
Equipment such as a commercial telephone system with multiple incoming lines, fax
Telephones, intercoms, and machine, and line-transfer capabilities. In addition, an intercom and internal
other equipment that paging system can help improve internal communications among employees.
improves employee A large shop may also employ an automated system to distribute and deliver
interaction. internal documents. For example, some shops use a vacuum-operated tube to
route repair orders and other important paperwork quickly from the write-up
area to the dispatcher and then on to the cashier’s office.
Computing Equipment
Computing System Regardless of its size, a fully equipped shop needs a computing system.
The electronic data A small shop may require only a single, Internet-connected personal com-
gathering, organizing, and puter to allow online communication with vendors and customers. Larger
processing equipment facilities with many employees may need an in-house mainframe computer,
required to support the or a system of networked personal computers, to perform essential functions,
business operation. such as inventory control, personnel and payroll management, and account-
ing. Shops increasingly are moving from traditional paper repair orders to
paperless electronic repair order systems. An electronic system allows instan-
taneous transmission of the information from the service advisor to the dis-
patcher, technician, and, finally, to the cashier. The following is a list of
common computer-based operations in a modern shop and the employees or
departments that handle these operations:
• E-mail (all employees)
• Inventory control (parts department)
• Appointments (service advisor)
• Repair order writing/preparation (service advisor)
• Work distribution (dispatcher)
• Documenting performed work (technician)
• Repair order tracking (service advisor and management)
• Invoicing and billing (cashier)
18
• Management reporting (manager)

• Accounting (business office)
Planning Your Investment

Entrepreneurs commonly are optimists, with high ideals and even higher
aspirations for success. Business research, however, indicates that most new
small businesses fail within the first six months. The most common cause of
new business failure is not the lack of a great idea, a great product, or a great
service, but rather overoptimistic initial projections and lack of initial capital.
In other words, the problem is overprojecting business and overspending at
startup. It is unreasonable to expect to survive in a competitive market such as
automotive repair without providing levels of services and benefits compara-
ble to your rivals. It, however, is just as difficult to survive if you get too deeply
in debt by trying to run before you walk. The owner and management person-
nel must develop a clear vision of the long-range needs and potential of the
company while also being prudent in their initial investments and realistic
about their strategies and prospects for growth. A successful entrepreneur
slowly and steadily builds up to long-term goals and does not formulate plans
based on dreams of instant success.
A balance of optimism, enthusiasm, drive, and conservative business plan-
ning is essential for survival. Therefore, it is critically important that man-
agement be keenly aware of the dangers of overinvestment or even premature
investment, especially in fixed assets. The prudent manager or owner must be
cautious and carefully evaluate which decisions are right for now and which
should be delayed for the future. Continue to reach for your dreams, but plan for
your company to survive long enough to see those dreams become a reality.

Be careful what you ask for. Having the best-equipped business will this piece of equipment generate, and
shop is the dream of every manager. Before you decide based on that how long will it take to pay for itself?”
to make a major investment or even ask your boss for His questions stunned me. I was not prepared
approval to do so, however, you need to think it and did not have good answers to address his con-
through carefully. Many companies have invested them- cerns. I needed to go back and do a careful analysis to
selves right into bankruptcy by buying too much, too answer them. This, however, turned out to be some
soon. of the best advice I ever received to help me deter-
In my first job in retail service management, I had mine the value of any investment, whether profes-
the great fortune of having a general manager who sional or personal.
allowed me to run “my” shop, but was quick to make As a responsible manager you need to analyze
me face the tough questions and justify to him and thoroughly before you consider making a major
the owner why I wanted to make changes or major investment. Careful research is required. This will
expenditures. In my enthusiasm as a new, young lead you to make a sound decision and a plan to gen-
manager, I excitedly told him about the new align- erate a return on any new investment that makes it a
ment machine that we “just had to have.” He calmly, good business decision. It is important to realize that
but seriously, looked me directly in the eyes and in many cases, the cost of an investment in fixed
asked, “What can you do with this equipment that assets (tools, equipment, additional space) is the tip-
we cannot do now?” He followed that by a second, ping point that transforms a previously profitable
and more pointed, question, “How much additional operation into a money-losing one.
19
SUMMARY
After a general overview of the many and varied resources that An efficient repair facility, however, is more than a build-
are essential to start up and operate an automotive repair shop, ing and land. It is not functional until it is outfitted with
it is clear that from the physical resources viewpoint an auto- sophisticated technical equipment and tools required to repair
motive repair shop is a complex business. Significant invest- vehicles. Further, additional equipment and tools must be
ment is required to provide and adequately equip the facilities added to allow the service support personnel to do their jobs
required to succeed in today’s highly competitive automotive effectively.
service industry. Much care and consideration must be given to All these factors must be carefully considered and
make business decisions in these important areas. planned for to build an efficiently functioning and competi-
The physical facilities of an automotive service business tive shop in today’s marketplace. Each resource must be pro-
require a well-thought-out and planned combination of build- vided in the right amounts to meet the market needs without
ings and land. These facilities must then be built or modified overbuilding and overspending. The investment required to
to provide adequate space for repairing cars and for other pur- build or rent and properly equip a shop is substantial. The cost
poses. Providing space for the essential nonrepair support serv- to equip the shop further adds to that investment. The finan-
ices must also be a part of the plan. cial risk involved is substantial.
1. A typically sized shop repair stall is c. a good shop drainage system.

a. 200 square feet. d. a clean service drive-thru area.
b. 300 square feet. 6. Which of the following could you possibly eliminate to
c. 400 square feet. save money?
d 500 square feet.
a. some of the overhead doors.
2. Along with the technical tools and equipment needed in b. a customer entrance.
a shop, you must also have which of the following to be c. a parts storage area.
able to function in today’s market d. all of the above.
a. phones, computers, copiers, fax machines. 7. You cannot fail to plan for which of the following pieces
b. guard dogs, security police, fire engines. of equipment in a shop?
c. tools and equipment.
a. an alignment rack.
d. all of the above.
b. a diagnostic scope.
e. none of the above.
c. a car wash.
3. Those essential functions that must be performed above d. an exhaust system.
and beyond actually working on cars are called
8. If you were looking to open an eight-bay shop in your
a. business expenses. town, what is the minimum size of building (square feet)
b. nonproductive workers. that you would need to fit the repair area only?
c. lot boys.
d. support functions. 9. Based on Question 8, what is the minimum building total
square footage that you would look for to house your
4. Beyond having enough space and doing quality repairs, entire shop operation?
a shop should.
10. Your new boss has charged you with coming up with an
a. have curb appeal.
equipment budget for her brand-new two-bay tire store.
b. have adequate signage.
She has told you that the shop will be doing front-end
c. project a professional image.
alignments as well as tire mounting and balancing. Using
the Internet and/or any other sources of your choice,
5. A support area that can require a significant amount of provide an item-by-item budget for the major pieces of
facility space and an investment of financial resources equipment that the shop will need.
but directly helps to speed up the repair process is
a. a good telephone system and fax machine.
b. parts inventory and storage.
20
C H A P T E R
3
Manpower Resources
CHAPTER OBJECTIVES
■ To define the different job positions that are ■ To distinguish the unique combination of knowl-
needed in the service shop edge and skills needed to perform each of the
■ To explain the job responsibilities of each of the service jobs.
service employees
KEY TERMS
service cashier service advisor customer relations specialist

dispatcher lead technician service manager
claims administrator porter service director
flat-rate manuals parts specialist
shop foreman technicians
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Introduction
The most valuable resource of any company is its people. The automotive
service industry is no exception to this rule. Although the owner must make
a substantial investment in facilities, equipment, and tools, the product of the
service shop—labor sales—is not generated without a host of qualified, moti-
vated employees. In this section we will look at the different job responsibilities
that people must perform in an efficient automotive repair shop. To gain a bet-
ter understanding of the diversity of talents and skills that are required in the
automotive service shop, we will hone in on the varied responsibilities that
employees in each of the jobs must shoulder and the types of knowledge and
skills that they must possess to effectively perform their respective jobs.
Not all shops can afford to have one or more people doing each of these
individual jobs. The job titles and descriptions listed in this chapter are an
example of how the work may be distributed in a large automotive service
operation. Depending on the size of the organization, the number of people
performing the different jobs within the service shop will vary greatly. In a
small, two-bay service station there may be a total of only three employees. In
a mega-dealership service department there may be 80 to 100 employees. No
matter how large or small the size of the shop, however, all of these job
responsibilities must be performed for a shop to compete in the marketplace.
In a small shop, individuals need to be flexible and perform a variety of
different jobs. In a large shop, there will be one or more individuals assigned
to do each separate task. In some companies, large or small, the job respon-
sibilities may be recombined in different ways. All these tasks, however, must
be assigned and completed in all service shops, small or large. As you will
learn, service is not simply a matter of fixing cars.
Service Cashier
Job Responsibilities
Service Cashier The service cashier carries out some very important functions in the service
Person responsible for operation. The general responsibilities of the service cashier are to
collecting payment from • Review and calculate the service invoice
customers upon completion • Notify customers once the repairs are completed
of repairs and for the final • Maintain a filing system for paperwork
processing of payments and • Greet the customers when they arrive to pick up their vehicles
repair records. • Process payment for the repairs
• Provide the customer with copies of service records and a receipt for
payment
The service cashier is extremely important to the success of the service
operation. The cashier has face-to-face contact with customers. Therefore the
impression of professionalism and caring that the cashier leaves with the cus-
tomer strongly influences the impression the customer has of the entire
service organization. Because the cashier’s meeting with the customer is the
final step of the service process, the cashier has the unique responsibility for
leaving the last impression on the customer. The outcome of this encounter
can strongly influence overall customer satisfaction and markedly affect the
customer’s decision to return for service in the future.
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Manpower Resources ■ CHAPTER 3
Skills and Abilities Required

As indicated by the list of tasks given earlier, the service cashier must possess a
wide range of skills to be effective. These skills include those in the fields of
accounting, filing, organization of paperwork, cashiering, and direct customer
communications.
Dispatcher
The dispatcher is the one who manages the daily workflow in the shop and is Dispatcher
responsible for the distribution of work throughout the shop. In a typical Evaluates repair order
shop environment the repair orders, when written up by the service advisors, information and assigns the
are forwarded to the dispatcher. The dispatcher is held accountable to know repairs to technicians with
what work has been promised, the number of technicians available and the the goals of meeting stated
skills they possess, and the available amount of time each technician has deadlines and making the
available. Ultimately, he is responsible to get all the work out correctly and on best use of the available
time every day. technical skills.
The dispatcher’s ability to assign the right work to the right people at
the right time has a profound impact on the productivity of the shop and of the
individual technicians. The shop’s entire workload—the paperwork and the
demands of the customers, the technicians, and the managers—funnels
through him. Even though few customers ever come in direct contact with a dis-
patcher or even know that such a job exists, their satisfaction and the ultimate
success of the shop lie in the dispatcher’s hands.
The dispatcher must also think on his feet. More often than not, situa-
tions change unexpectedly in the shop. Some of the situations a dispatcher
may face on a typical workday include: the technician that the shop is count-
ing on becomes ill, the job that should have been simple turns out to take
three times than what was originally anticipated, the parts that are usually in
stock have to be purchased and delivered from across town on short notice.
The dispatcher’s success and, ultimately, the shop’s success depend on his
readiness and willingness to adjust on the fly and make the necessary changes
in the work schedule to make the best out of what resources he has available.

The dispatcher must be highly organized. He touches and significantly affects
every single transaction that goes through the shop daily. His decision-making
ability determines how efficiently the shop runs and, therefore, the shop’s
productivity.
Although the dispatcher does not have to be an expert technician, he
needs to have a good working knowledge of the technical aspects of automo-
biles. Only with this knowledge, and a clear understanding of the capabilities
and skills of each of the shop’s technicians, can he effectively decide what to
prioritize and how to distribute the work to maximize shop efficiency. In addi-
tion to this technical knowledge, he also needs to possess a keen ability to
organize, reorganize, and adapt to changing situations.
The dispatcher needs to maintain his composure and ability to think logi-
cally under pressure. Because of the high likelihood of changing situations
and encountering unexpected delays, he needs the focus of a chess player—to
23
think many moves in advance and willingly accept the challenge when an
unexpected situation arises.
Claims Administrator (Booker)

Claims The claims administrator is responsible for evaluating the repair order and
Administrator determining what the technician should be paid for the repairs. In some orga-
Person responsible for nizations the term “booker” is used as the description of this job because the
determining the proper primary task of a claims administrator is to evaluate the repairs done and pay
labor operation codes, the technician by making out a pay slip that goes on the technician’s weekly
assigning flat-rate times payroll record (book).
to a repair order, and This job is very complex because the administrator does not normally
processing technician pay have face-to-face contact with the customer, who identifies her service
based on the explanation requirements; the service advisor, who has written the repair order stating
provided on the repair what needs to be done; or the technician, who actually performs the repairs.
document. Claims administrators must depend solely on the repair order documentation.
Through reviewing the written explanation of the customer’s repair require-
ments, the notations from the advisor for the work that was approved, and
the technician’s explanation of what was done, the claims administrator has
to evaluate the facts and make decisions. What was requested? What was
authorized? What was done? How much is the repair worth (in labor hours)?
At this point the assignment of labor hours may sound arbitrary, but it is not.
The service administrator has several tools to help him in his decision-making
process.
Automotive repair shops depend upon independent authorities to provide
them with books of labor standards time guides that they can use to make sure
that they are charging the customers a fair and consistent price for a needed or
requested repair. This ensures that the customer is charged a fee that is related
to the actual time that the repair will take and is comparable to what other
customers will be charged there or at another competitive shop in the area.
Further, these labor standards assure technicians that the amount that they
will be paid is fair and consistent.
There are several labor standards time guides. Every shop will have one
set of these guides to establish the average time to be charged and paid for all
customer-paid labor operations. If the shop also performs warranty work
(dealership or fleet), the manufacturers will require the shop to use a unique
set of manufacturer-produced guides that is specific to their products.
Flat-Rate Manuals The labor standards time guides, often referred to as flat-rate manuals, are
Books that provide labor job complex and cover thousands of repair operations with unique sets of labor
descriptions and standard times for various vehicle makes and models. These guides provide make- and
times allowed to perform model-specific information because the design of different vehicles, and there-
those repair operations for fore the time required to access and service systems on those vehicles, varies
most common repairs. greatly. Each of these manuals is comparable in size and complexity to a large
dictionary. Because of their continued growth in size many companies now
also offer these time guides in CD or DVD format. To be effective at claims
administration, the administrator must be very comfortable using these manu-
als quickly and accurately.
The ability of the claims administrator to effectively perform this task is
essential to the success of the service shop. If the administrator is not thorough
24
in his research and in proper assignment of labor operation codes (especially in

warranty reimbursement claims), the claim payment will likely be rejected.
Further, if his documentation is not thorough, the amount of labor that the
shop can legitimately claim and therefore charge the customer or manufac-
turer will be reduced. This will cause the shop and the technician to earn less
than they have rightfully earned for the services performed.

The claims administrator requires an individual who is very detail oriented.
Although the administrator must be fluent in his understanding of the sys-
tems of a vehicle, he is not required to be a technician. His responsibilities are
first, to read and understand the information received from the customer,
service advisor, and technician. Then, he has to search through the flat-rate
manuals and, if necessary, technical bulletins to identify repair operations
that best match up with what was done.
The ability to accurately and thorough research the manuals for every claim
presented to him is essential. The administrator must be willing and able to
spend time learning to completely understand the flat-rate manual information
system, so that he is comfortable with doing research in these publications. The
claims administrator is responsible for assigning labor times and operation
numbers for every vehicle that passes through the shop. In order to process this
volume of paperwork daily, the administrator must quickly look up and deci-
pher information and then post it completely and accurately. The skills needed
closely parallel those required by a librarian (research), service advisor (technical
understanding), and accountant (working with numbers and preparing precise
documents).
Shop Foreman
The shop foreman is the on-the-field coordinator of the day-to-day activities Shop Foreman
in the repair shop. The foreman works with the technicians in the shop, assisting Responsible for overall
them with diagnosis of difficult problems. He provides guidance and additional technical supervision of
brainpower and a second set of hands to assist experienced technicians. He pro- shop operations including
vides on-the-job training for younger, less experienced technicians. The fore- assisting in diagnosis and
man works with service advisors to help verify and pinpoint the cause of repairs across the shop as
customer complaints to assist them in developing a reasonable estimate of the needed.
cost of repairs. He often is actively involved in the most difficult technical prob-
lems that the others in the shop are unable to resolve. Overall, he assists in the
coordination of the resources in the shop to keep repairs moving and ensure
that employees are productive. Finally, in many cases, he is responsible for
double-checking repairs before a car is returned to the customer to verify (qual-
ity check) that the repairs have been completed correctly. In a shop working
under a team system or support group structure, the function of the shop fore-
man may be performed by a team leader or lead technician of each work group.

The shop foreman must possess a very high level of technical skills. Further,
he needs not only to know how to perform repairs accurately and completely
25
but also to have an in-depth understanding of the why of repairs, an under-

standing of the underlying theory of operation of the various systems. He
does not necessarily have to be the fastest at performing repairs but must be
the best at fixing them right the first time. A great deal of his time is spent
assisting others in doing this and then verifying that this goal has been
accomplished.
The shop foreman must be a good communicator. He must know more
than how to make the repairs and why; he must clearly and consistently
help others to learn these principles. To do this, he must be a good teacher.
He must demonstrate how to do the job the right way. His reputation for
thoroughness, accuracy, and excellence has a profound effect on the quality of
the overall production of the shop. He must be the living example of these
attributes.
Service Advisor
Service Advisor The service advisor is the front line employee and the face of the company in
The main customer contact the automotive service shop. He is the one that the customer contacts and
in the service department works most directly with throughout the repair process. He is the company in
responsible for determining the eyes of the customer. The service advisor’s major job responsibilities are to
customer needs and wants • Respond to customer inquiries on the telephone, online, and in person
and preparing the repair • Schedule appointments based on the availability of resources to per-
order document. form the repairs
• Write up repair orders to accurately reflect the customers’ concerns and
requests
• Perform general diagnosis of complaints through observation and ques-
tioning
• Recommend needed services to customer based on time, mileage, and
observation
• Prepare accurate repair estimates and obtain customer approval to pro-
ceed with repairs
• Notify the customer of repair progress
• Verify the completion and accuracy of repairs and bills
The service advisor must possess a wide range of skills and abilities in
order to perform all of these tasks. The most important of these skills is the
ability to be highly organized and to communicate clearly and concisely with
customers and fellow employees. The service advisor must have a good work-
ing knowledge of automotive systems.
The advisor is often called upon to be a translator of sorts. He is required
to communicate with the customers in a level of technical language that
they can understand. This ability enables him to probe the customer for
important details that will assist in verifying and pinpointing the real con-
cerns and needed repair issues. He must communicate in more technical terms
to the technician, providing general guidance on what needs to be repaired.
Further, once the root cause of the complaint has been identified, he is again
responsible to translate the technical information from the technician back
into layman’s terms so that he can explain to the customer what is needed
and why.
26
In addition to the technical knowledge, the advisor must also possess

a great deal of sales and marketing skills. He is the main contact point for
suggesting and selling needed maintenance items to the customer. He is also
responsible for putting together an estimate for repairs to address the cus-
tomer’s concerns and calling the customer to explain the expected cost of
repairs and obtain approval to proceed with the work. This often takes a great
deal of customer relations skills and salesmanship skills.

The advisor’s job requires him to perform a wide range of functions. Because
of the range of activities that he must consistently perform, the service advisor
must possess organizational and time management skills. The typical advisor
will interact with 30 to 40 customers each day and write up, follow up, and
process about 20 repair orders each day. This requires that he be very orga-
nized and able to multitask.
Lead Technician
The lead technician is the normally the most qualified master technician in Lead Technician
the shop. Depending on the organizational structure, the shop may not have Technician responsible for
a lead technician but rely solely on the shop foreman to perform the lead resolving the most difficult
technician’s responsibilities. Whereas in a shop that pays each technician concerns and directing the
based on individual performance there may be one lead technician, in shops efforts of less experienced
working under a team system or support group structure there will generally technicians.
be one lead technician per group or team. In a team or support group shop,
the person in this position may also be referred to as the “team leader.”
The lead technician is the jack of all trades and an ace at accurately diag-
nosing a wide range of problems. He typically works with two sets of respon-
sibilities: resolving the most difficult problems and guiding and directing
others within his work group to efficiently resolve the more simple problems.

The lead technician must possess a great deal of technical expertise. He also
generally has extensive industry experience that gives him real-life knowledge
to complement his theoretical understanding of the principles and practices
of automotive repair. It is rare for anyone to be selected as lead technician
unless he or she is ASE Master Certified and has a minimum of five years of
full-time field experience. Further, the lead technician is typically the most
heavily trained individual in the shop, having been selected to attend and
pass most of the update training seminars supported by the repair shop or
manufacturer.
A high level of knowledge and skills are essential to be a lead technician,
but unless he is capable of sharing that knowledge with others, he is ineffec-
tive. He needs to be a leader. He needs to lead the team by setting an example
of dedication and high work standards. He also needs to have the ability and
willingness to help provide local training to fellow employees that will
improve their productivity and that of the entire organization.
27
Porter
Porter Although the responsibilities of a service porter may vary from shop to shop,
Moves and cleans vehicles the service porter is typically responsible for performing tasks such as
and assists in general • Shuttling customer vehicles from the service write-up area back to the
upkeep of vehicles and storage lot
the shop as directed. • Providing rides to customers to get them to work or home while their car
is being repaired and bringing them back to the shop once the repairs are
completed
• Cleaning and/or detailing customer vehicles after repairs and new
vehicles before retail delivery
• Shuttling customer vehicles back to the service pick-up area from the
storage lot when the customer arrives to pick up the vehicle
• Running errands to pick up customers, parts, tools, and equipment as
needed to support the overall flow of work in the shop
• Doing miscellaneous chores around the shop, including housekeeping
duties

Although the porter’s job does not require a great deal of previous training or
education, it is, nonetheless, a very important part of assuring the smooth flow
of production in the shop, the timely completion of work, and the positive atti-
tude of customers about being properly cared for when they come in for service.
To do this wide variety of tasks well, the porter must have a good driving record,
a pleasant personality to deal with co-workers and customers, and the ability to
be a self-directed worker. He has to be an individual with multiple abilities and a
desire to follow tasks through to a successful completion.
Parts Specialist
Although not all shops have an internal parts department, all automotive
service shops need to have access to parts to perform many common repairs

Many shops, unfortunately, view the position of someone that you know who has already demon-
porter as a dead-end job. It is, therefore, also the strated some basic employability skills through his
position in a shop where management spends the attendance and positive attitude?
most time and effort addressing attendance issues What a shop typically wants when they decide to
and in dealing with high employee turnover. grow their own employees are individuals with the
Fortunately, shops that are more progressive have ability to learn, the desire to get ahead, the com-
found out that the porter position is not a dead-end mitment to show up consistently on time ready to
job; it is a good steppingstone from which to cultivate work, and who are dedicated to long-term employ-
long-term employees. After all, if you are looking to ment in the organization. Who is better qualified to
have to train someone in-house to do the right things have demonstrated these characteristics than your
the way that you want them done, why not start with porter?
28
and, therefore, often employ a parts specialist. The parts department may Parts Specialist
range from someone who simply contacts local parts stores to identify parts Identifies, locates, provides,
and may, on occasion, run to pick up parts to a full-scale parts operation that and properly prices out
inventories hundreds of thousands of dollars of mechanical and collision parts as needed by the
repair parts and is, in its own right, a profit center within the company. In the service technician.
case of the complete internal parts department, parts specialists are respon-
sible not only for identifying and providing the proper parts, but also for fore-
casting the needs so that the company’s inventory is able to fill most of the
needs of the service department.
In general, the function of the parts specialist is to assist in identifying
what parts are needed to perform the repairs for a specific application and to
have them available in a timely manner. Without accurate identification of
the right part and availability at the right time, the amount of delays that are
likely to occur will cost the shop profit and, very likely result in the loss of
many customers.

The parts specialist must be detail oriented. The ability to consistently identify
the correct part to fit the right vehicle requires thoroughness and accuracy. He
needs to research parts manuals very quickly to consistently pinpoint the
right part. He must then locate the part and provide it at a reasonable price in
a timely manner. Causing delays in providing the parts will cost the shop
income because of unproductive waiting time and may ultimately result in
the loss of the job and/or the customer.
In a shop that has an internal parts operation, the parts specialist must
develop and maintain a real-time system of inventory control. This system not
only organizes the parts by location so that they are easily found, it maintains a
dynamic database of demand and availability that is an essential management
tool to keep the inventory up-to-date so that it can meet current shop
demands. The parts specialist must possess business analysis and accounting
skills because there is a significant investment that is tied up in the parts on the
shelves. Unless he or she is able to regularly analyze and evaluate the inventory
patterns and make changes to keep the inventory relevant to the shop’s needs,
the inventory will become obsolete resulting in a significant financial loss to
the organization.
Technician
The automotive technicians in the shop are the heart of the shop. They are the Technicians
only productive employees in the shop. Now, before you get defensive about Individuals responsible for
this statement, please understand its intent. Because the service technicians verifying customer
are the only ones who are directly responsible for producing the sole major prod- concerns, pinpointing the
uct that the service shop sells—labor—they are the only productive employees. cause, and resolving the
The primary responsibility of the service technicians is to perform specific customer automotive repair
diagnosis to verify the complaint and pinpoint the cause. Based on this infor- concerns in a safe and
mation he is responsible for developing an estimate of cost and time needed timely manner.
to resolve the concerns. Upon receiving approval, he performs the necessary
repairs, verifies that the work completed has resolved the customer concerns,
29
produces a detailed written record of what was done on the vehicle, and
makes sure that the vehicle is returned to its original condition of cleanliness.

Most shops require that technicians possess a minimum of high-school tech-
nical training or its equivalent in direct industry experience before being
hired. The best preparation to become a service technician, as endorsed by all
the major automotive manufacturers and the U.S. Department of Labor, is the
completion of a post–high-school automotive technical program of technical
and academic training.
Many individual shops require that technicians earn ASE certification in
the repair specialties that they work in and then keep those certifications up to
date. Further, because of the rapid and constantly changing technology in the
automotive industry, technicians are expected to attend annual training pro-
vided by manufacturers, tool and equipment providers, and outside training
organizations to maintain knowledge of current and emerging vehicle sys-
tems. The willingness and commitment to lifelong learning is an essential
ingredient to the long-term career success of the service technician.
Customer Relations Specialist

Customer satisfaction is a key to repeat sales and the ultimate success of any
service operation. Therefore, many service shops contact customers after a
service visit to ensure that they had a satisfactory experience and to identify
and resolve any problems. This function may be performed internally or per-
formed by an outside service.
Customer Relations The customer relations specialist takes a proactive approach to assuring
Specialist customer satisfaction. This is in contrast to the old-school philosophy where
Contacts customers after satisfaction was assumed unless a complaint was received. Shops have learned
they have picked up vehicles that by taking a proactive approach, they can head off most major problems and
from service department to learn about and resolve minor ones that might never have been reported but
assure that they are satisfied that could have resulted in the end of a relationship with a valued customer.
with their service experience
and resolves or refers Skills and Abilities Required
upward any questions or
concerns. The customer satisfaction specialist will generally contact customers using the
telephone. Also, she is likely to occasionally encounter an upset customer who
may even be verbally abusive. Therefore, essential skills for an individual in
this role are excellent people skills, customer complaint handling skills, and
general telephone etiquette and communication skills.
Service Manager
Service Manager Job Responsibilities
Supervises, motivates, and The service manager is responsible for the smooth coordination of all of
directs all personnel in the the jobs and functions in the repair shop. Unlike what occurs in most Fortune
service repair department. 500 companies, management of a service department is not handled by a
30

The value of performing proactive customer relations On the other hand, if the local shop has created an
activities, such as customer service follow-up con- environment where the customer feels that the shop
tacts, cannot be overstated. Experience from both has reached out to identify the problems and is will-
the wholesale (manufacturer) viewpoint and the ing to resolve them, the customer perception of the
retail (dealer or service shop) viewpoint indicates that shop is much different.
when a customer is dissatisfied and seeks a resolu- Rather than this incident being an indictment
tion, it is important who the customer perceives that the shop is incompetent and uncaring, it can be
as the one making the efforts to resolve his or her changed to one of “we all make mistakes” and result
concerns. in the customer’s willingness to give the shop a sec-
If the customer feels that he has to go to an out- ond chance. Because repeat customers and their
side agency (such as manufacturer, Better Business good will and person-to-person testimonials about
Bureau, or local TV station) to get the proper atten- your company are the best advertising, you can get
tion to his concerns, he will have strong positive feel- great value by instituting activities that resolve cus-
ings about that agency but most likely will abandon tomer concerns and leave them with a positive per-
the shop that caused his problem once it is resolved. ception of your company.
group of specialized managers who each has a narrow field of expertise and
responsibilities.
The automotive service manager is not a specialist; he is required to be a gen-
eralist. He is responsible for possessing and exercising a variety of skills that span
the entire range of managerial talents and abilities. The service manager’s main
functions are coordination, motivation, and leadership. He is the head coach,
and, in many organizations, upper management expects the service manager to
be, in effect, operating his department as a company within a company.

Unlike large corporations, where the various management tasks are clearly
divided among a crew of managers that work in narrow job responsibilities
(such as customer relations, marketing, sales, financial planning), the service
manager, in effect, likes the sole proprietor of a small business. He must pos-
sess a wide range of skills and abilities to perform a variety of tasks on a daily
basis. These tasks include, but are not limited to
• Operational and strategic planning
• General management and leadership
• Financial measurement and analysis
• Organization and time management
• Customer relations and complaint handling
• Employee relations, hiring, discipline, and firing
• Marketing, merchandising, and sales
• Workplace safety and other legal issues
Service Director Service Director

Supervises, motivates, and
Job Responsibilities directs all personnel in the
The title and responsibilities of service director often only occur in larger service department, body
repair shops and dealerships. The responsibilities of the service director are, in shop, and parts department.
31
many ways, similar to that of the service manager. The major difference, how-
ever, is in the scope of responsibility. Whereas the service manager is only
responsible for one profit center, the service department or repair shop, the
service director is responsible for the oversight and operation of three distinct
and very unique profit centers: the service repair shop, the parts department,
and the body shop.

The knowledge, skills, and abilities of the service director include all those
identified for the service manager. He has to do everything the service man-
ager does, but on a larger scale. In addition, regardless of his previous area of
expertise that has allowed him to rise to this level of management, he must
develop and maintain a solid working knowledge of the unique characteristics
and finer points of the three different departments under his control. He
needs to be an excellent leader and mediator to maintain a sense of fairness
and balance between the operations and the egos present in all these opera-
tions. Finally, he needs to possess the political savvy and discretion to interact
with the other directors and supervisors within the organization and with the
owners to advocate on behalf of his departments.
SUMMARY
The service repair department is a very complex system. To run requests when they arrive. Similar to the advisor, who is the
efficiently, it requires personnel with a wide variety of skills public face of the service operation, those providing the other
and abilities. Although the service technicians are the only essential support services are as essential in making the
ones in the shop who actually produce the “product” of the service experience positive and profitable.
service shop—that is, labor sales—the skills of the technicians Every shop needs to provide this entire range of ser-
must be supplemented by a supporting cast that can perform vices to remain competitive. Although in small shops several
the other needed tasks. of the jobs listed may be combined and performed by a
Even with the best technicians ready, willing, and able to single person, they, nonetheless, must be done. Every shop,
perform the repairs, very little happens in a shop unless the no matter how large or small, needs to be customer friendly
support activities are effectively conducted. Service advisors and efficient in order to be successful. It takes the entire
need to be there to answer phone inquiries, to make appoint- range of jobs and skills discussed to ensure that it happens
ments, and to greet the customers and write up their repair consistently.
1. The owner of the company has received a customer 2. When questioned about her overall customer satisfaction,
complaint indicating that the cost for her recent repairs the owner says “I really do not know for sure, but I very
was far more than the initial estimate. Which service rarely receive any calls from upset customers.” Which of
employee is responsible for preparing a complete and these statements is most likely to be true?
accurate estimate? a. The shop has a very high level of customer satis-
a. the service advisor. faction.
b. the service manager. b. The shop does not have anyone doing customer
c. the technician. follow-up contacts.
32
c. The service manager is doing a good job of hiding c. customers usually will not tell you if they are unhappy,
the customer complaints. they just go somewhere else and tell their friends.
d. Two of the above choices listed above are likely to be d. you need to be sure that most of your customers are
true. not satisfied.
3. Joe, the lead technician, is very dissatisfied. He storms in 5. The service director needs to possess a wide range of
to see Ralph, the owner. “I am underpaid and underap- skills including
preciated. I am the only productive employee around a. a working understanding of the three departments
here and yet you say that you cannot afford to pay me under his control.
more. Why don’t you just get rid of some of the other b. being a highly skilled diagnostic technician.
nonproductive people and just pay me what they earn?” c. ability to handle the most difficult customer and
A likely response from Ralph should be employee concerns.
a. “Joe, I need those other people to help do all of the d. both B and C.
other work that needs to be done besides simply e. both A and C.
fixing cars.”
In Questions 1–5 match the job titles with the description that
b. “Joe, I agree that you are the only one producing
best fits their job duties and indicate your choice on the line
labor sales, but without the others there would be
provided to the left of the job title.
very few cars here for you to work on.”
c. “Joe, you can make yourself a raise faster than I can ____ 6. Dispatcher a. distributes work
by simply producing a few more flat-rate hours each to shop
day and that will make us both happy.” ____ 7. Customer relations b. processes final
d. All of the above. specialist payment for services
____ 8. Automotive c. contacts customers
4. Every service shop should have someone responsible for
technician to assure satisfaction
customer satisfaction follow-up contacts because
____ 9. Service advisor d. performs service
a. you have got to have some sort of job in the shop for
repairs
the owner’s son to do.
____10. Cashier e. prepares the
b. customers usually tell you when they are not happy
customer repair order
with their repairs or their bill.
33
C H A P T E R
4
The Service
Workflow
CHAPTER OBJECTIVES
■ To define the traditional management view of ■ To differentiate the steps in the repair process
the service operation ■ To develop and chart the flow of work as it pro-
■ To explain the service operation when viewed as ceeds through the service operation
a system
KEY TERMS
traditional view repair process warranty administrator

systems view appointment delivery
inputs reception cashiering
process work distribution follow-up
outputs work performance flowcharting
feedback quality assurance
systems thinking invoicing
34
The Service Workflow ■ CHAPTER 4
Introduction
If you ask an automotive repair shop employee to describe the shop’s organi-
zation and how the shop works, he would probably start off by giving you a
list of all the employees and their job titles, who reports to whom, and who is
in charge of what. That very typical viewpoint of the organization is based on
the traditional organization chart. In this chapter we will look beyond names
and titles so that you can begin to see a much more exciting way of looking at
the organization, as a living, operating system. We can then expand on that
idea by diagramming the typical workflow of a service transaction. Viewing
things in this manner, I hope that you will develop a different view of how the
organization actually works and how to better monitor it, manage it, lead it,
and assure its success.
Traditional Management View

When someone asks you to explain your company or the department you work
for, your first response would likely be to explain in terms of its organizational
chain of command. In an automotive service repair shop (such as a dealer-
ship service department), you might describe the department as shown in
Figure 4-1. In the traditional view, an organization is defined by its organiza- Traditional View
tional chart, which is a necessary tool for defining the hierarchy and politics of Looking at the organization
an organization. It outlines the basic chain of command within the company’s based on its organizational
structure. It graphically portrays the path of authority and how decisions and chart and job titles within
authority flow down through the management hierarchy to the workers on the organization.
the floor.
The organizational chart does very little to explain the day-to-day opera-
tions of an organization, however. Knowing the organizational chart may
Dealer Principal
General Manager
Service Director General Sales Manager Business Manager
Service Manager
Shop Foreman Service Advisor Parts Manager Body Shop Manager Service Cashier
Technician
Service Advisor Parts Counterman
Technician
Technician
Technician
Technician
Technician
Figure 4-1 Traditional service department organizational chart
35
help you to know whom you, or a customer, should go to complain to

next if you are dissatisfied, but it does nothing to help unravel the mystery
of why things did not, or do not, work properly. Because the organizational
chart does not explain how work actually gets done it is really of little value in
helping you to problem solve and correct performance problems within the
organization.
This most commonly used management view has one additional weak-
ness: it is solely focused on people. This is not meant to imply that the people
are unimportant. People are the most valuable asset any company has. It is
shortsighted, however, when any organization looks at the operation based
only on people. When a company sees itself and its performance as solely a
function of the people that it has, there can be some really great news—or
there can be some really bad news. If the company succeeds all of the credit is
given to the employees (generally the supervisors who led the team), but
when it fails, the blame falls solely on the employees.
Let us look at this management approach a little bit more closely. Is it
really fair? Have you ever been in a situation where you were blamed for some-
thing that was beyond your control? If the situation was beyond your control
and was really nobody else’s fault, how could it have happened? Why were
you held accountable? The answer is that in the traditional view of manage-
ment, people are viewed as the solution—and also the sole cause of every
problem. In this management approach, failure to perform is always a people
problem. Here is an example.
Joe has just been hired as service advisor at Mel’s Service. He is one of two
advisors working at this shop that employs 24 technicians. During his first few
days on the job, he notices that work seems to be very slow. He is only getting
about ten customers to write up each day, and the technicians seem to be
grumbling constantly about the lack of work. They are all sitting on their tool-
boxes after lunch with nothing to do. Each time the boss comes by Joe sees the
disgusted look on his face. He hardly says a word to anyone. Joe asks his fellow
advisor if he treats all the advisors like this. She indicates that she has only
been there for a month.
Finally, Joe’s feelings of job insecurity get to him. He asks the boss to sit
down during his lunch break to talk about “things.” Joe very cautiously
approaches the topic of his concerns with the low morale and low performance
of the shop. It does not take long for the boss to get Joe’s message. He responds,
“Well, that’s why I hired you. I’ve been through five service advisors in the last
year trying to finally find someone who can really sell service and get this shop
back to running the way it did in the past. I believe you’re the man to turn it
around, Joe. I hope you agree. Now get back to work!”
Based on this example it appears that Joe’s boss may be using a traditional
management approach; he believes that all successes or failures are people
issues. It sounds like he has tried over and over again to fix the problem (five
advisors in one year)—or, at least, he has tried the only thing that he knows
how to do. He clearly believes that failure to perform is a people problem. His
pattern of behavior also indicates that his first rule of management is “Get the
job done, or else!” What other possibilities are there?
As we have previously discussed, the traditional view of the organization
and the traditional style of management that often accompanies it are based
solely on the performance of individuals. Is there another way? In the remain-
der of this chapter we will explore a different management viewpoint and phi-
losophy that takes into account factors that go beyond mere personalities and
36
personal skills. It views the operation as a system and considers the fact that
some of the problems that occur may go beyond people issues.
The Systems View of an Organization

The systems view looks at the organization of a department by how work Systems View
flows through the department. It is not based on the management hierarchy. It Looking at the organization
is based on the belief that although people play important roles in the system, based on the workflows
the way things are organized and the way the work flows (or fails to flow) have within the organization and
a profound effect on overall performance. taking into account the
An example of this can be seen on an automobile assembly line. inputs, processes, and
All of the parts flow in from various points and join up with the cars as they outputs of these workflows.
slowly but smoothly progress down the line. Each worker performs his indi-
vidual task, such as bolting on the mirrors or installing the seats, and all of
these individuals work in concert. It is like a symphony with everyone playing
his or her part—until something goes wrong. Because all the work flows down
one well-defined path—the assembly line—a blockage or delay at any point
from start to finish can stop “the music.” All it takes is for the worker at station
number 250 to run out of the proper lug nuts to fasten the right front wheel
onto the car. The car cannot continue down the line and drive off of the end
of the line with only three wheels on it!
In the previous example, the traditional management approach would be

to blame the people first. After all, they are the ones responsible for making
things happen. Using this type of management logic, the blame game could
easily follow down the line as follows:
• It starts out as the assembly line worker’s fault: “Why didn’t he put the
lugs on, it is his job?”
• Once it is determined that the assembly line worker was not at fault, the
blame would be passed on to the person who was designated to keep
the parts stocked at the workstation: “Why didn’t he stock up the lug
nut supply box on time?”
• Oh, you say that there were none left in the plant, then: “Why didn’t
the truck driver arrive on time to deliver more lugs?”
• The shipment was late: “Why didn’t the supplier’s dispatcher send the
shipment sooner?”
• There was a shortage of stock at the plant. Well, then, “Why weren’t the
supplier’s workers able to produce lug nuts faster to keep up with our
demand?” and “Why did we choose him as our supplier?”
This example is a bit simplified, of course. However, it does make clear a
very important point. What is the common link between all of these “rea-
sons” for failure? Look at the italicized words for the answer. The answer lies
in the fact that in every case the blame is placed first on the individuals (he,
she, the truck driver, the dispatcher, the workers, and the supplier). Never has any
consideration been given to the possibility that the cause goes beyond the
individuals involved. In this case, even if it was learned that the supplier’s
truck had broken down, the next question would have been something like
“Who was responsible for doing the maintenance on that truck?” Again, it is a
100 percent people-focused trail of accountability and blame.
In this scenario do you see any possibilities that the line coming to a halt
was caused by something other than the workers? Are there other factors that
37
might have prevented this stoppage? Is it possible that with some better plan-
ning a method might have been devised to allow work to keep on flowing
down the production line?
Looking at operations in a much broader sense as a complex system that
includes people, other resources, and even the way that the resources are orga-
nized attempts to take into account all of the factors that can affect perfor-
mance. It is often called a systems approach, or systems viewpoint.
Let us take a look at what a simple system looks like. The basic systems
model presented in Figure 4-2 shows the major components of any system.
Any operation, whether it is an automotive service shop, a production line, a
bank, or a college can be viewed as a system.
By looking at an operation or even a complex organization not by how it
is structured but rather by how it gets work done, it is clear how things actu-
ally operate to produce the products and/or services that are the lifeblood of
the organization. There are three basic components of every system. Let us
take a brief look at what they are.
Inputs Processes Outputs
Figure 4-2 Basic systems model
Inputs
Inputs Inputs are all of the resources that are required for the system to be able to
All of the resources that are function. Look at the automobile assembly line example again to get a better
required for a system to be view of inputs. The raw ingredients, the 20,000 component parts of the car,
able to function. the tools, the specialized equipment, the assembly line itself, the electricity to
power the plant, and the manpower needed to assemble the car are inputs
into this system. A shortage of any of these inputs will have an effect on the
efficiency of the process—building a car.
The automotive repair process is a bit less complicated than the automo-
tive assembly line. It does operate as a system, however, and requires that the
proper inputs (resources) must be available if the repair process is to go for-
ward and we are to produce anything of value. Efficient management strives
to assure that the right resources are present in the right quantities at the right
time, so the entire operation is more productive and profitable. Later in this
chapter we use another management tool, flowcharting, to help you better
understand the process and how to analyze and improve it.
Processes
Process Building an automobile is not a simple process. However, if you look at the
The series of actions and simple systems model in Figure 4-2, you can see that from the big-picture
operations necessary to do viewpoint that this example follows the basic systems model. When you con-
work (produce a product or sider the hundreds of employees involved on the assembly line, the many out-
service). side vendors used to build the parts, and all of the employees and vendors that
are involved in getting 20,000 parts to the same location and properly
installed in the right place at the right time on the right vehicle, it is more
than just a system, it is a miracle.
38
If you take the time to break down each of the activities at each of the
places that all come together on the assembly line, you would see that every
one of them can be described separately as a system. Each of these simple sys-
tems is, in turn, part of a larger, more complex system, which results in the
largest system—the assembly plant system.
Outputs
The outputs of a system are the products or services that the system provides. In Outputs
the example of the automobile assembly line the obvious product is new cars. All of the products, services,
Every system has an output. The output is the system’s reason for existence. and/or information
Automotive repair shops do not build anything. They do not produce a produced by a system.
product. So what is their output? Their output is service. It is repairing vehicles
to meet customers’ requirements. Whether it is a satisfactory 30-minute oil
change in 25 minutes or an overhauled engine that runs properly and is back
on the road, as promised, in 10 days, both are examples of automotive service
shop output.
Advanced Systems
The advanced system model (Figure 4-3) should look familiar to you. The
core of the model is the basic systems model discussed earlier and shown in
Figure 4-2. There is only one addition to the basic model, the addition of a
feedback loop. This feedback, which is often overlooked, is an essential ingre-
dient of continuous improvement. Let us discuss feedback a bit further.
Inputs Processes Outputs
Feedback
Figure 4-3 Advanced systems model
Feedback
You cannot make things better unless you know that they are not good. This is
simple to say, but difficult to do. Many companies believe that they address
this concern adequately: after all, they have a well-marked and well-lit cus-
tomer service desk. Unfortunately, waiting for customers to verbally complain
is not the only, or most efficient, way to find out what you need to change to
provide quality products and services and, therefore, have satisfied customers.
We will discuss this topic in greater depth in Chapter 19.
The idea of adding a feedback loop to the system takes the information Feedback
gathered from being a by-product of the system that rarely occurs and is more Information generated as
rarely acknowledged into being information that is expected, counted on, an output of the process
and valued. Along with producing the intended product or service, you will that is used as an input for
also receive some form of feedback about whether you met the customer’s future work.
expectations.
39
By intentionally taking this output (feedback) and funneling it back into

the system as an additional input (information), you create an environment
where you can constantly and consistently make things better each time
through the cycle. The feedback may be positive, which reaffirms that you
should continue doing things exactly the way you are currently doing them. It
might be dissatisfaction that indicates that there are serious flaws in your pro-
cesses. By acknowledging these problems and rapidly resolving them, you can
save countless customers and countless dollars in warranty claims, returned
products, and bad press. Actively seeking and using feedback is the best strat-
egy to improve efficiency and overall customer satisfaction.
Systems Thinking
The beauty of looking at things as systems is that this method of looking oper-
ations and processes can be universally applied across a wide range of activities
and industries. Further, and more important, by including all the resources that
come into play, not just people, this perspective helps us view operations from
a broader perspective. It gives us the opportunity to identify and fix the root
cause of performance problems.
A foundational principle of systems thinking is that 80 percent of all prob-
lems are systems problems and only 20 percent are people problems. Using
traditional management and organizational viewpoints, our only approach to
improving performance is dealing 100 percent with a minor cause (20 per-
Systems Thinking cent), people. Systems thinking is a more holistic approach to viewing opera-
An approach to viewing tions and performance. It allows you to improve existing systems and design
operations and performance new ones that will flow smoothly and increase productivity. It is based on
based on workflows and the looking at the organizational workflows and the resources required to make
resources needed to make the processes within them flow smoothly, not just at the people who work
them work, not just the within them.
people who work in them. The optimum goal of the systems approach is to provide a workflow that
will allow our systems and our people to be successful. It provides valuable
insights to help us move in the right direction and stay on course to make sure
that we reach our objectives and prevents us from destroying our most valu-
able asset, our employees.
THEORY INTO PRACTICE 4-1
CASE 1. You decide

As a technician and then the shop foreman at a local Based on the information provided in this chapter,
shop, you have seen the shop go through five service what do you think is the reason the shop has had a
managers in the past 31⁄2 years. In each and every case high turnover of service managers?
the story is the same: “He came to us highly regarded 2. You decide
but he just could not get the job done so we are going
Based on the information presented earlier, what
to have to replace him.” The owner then turns to you
would you want to see changed before you could feel
and asks, “I would like to see you take over the job
comfortable taking the job as service manager?
here as service manager. Interested?”
40
The Repair Process

In Chapter 3 we discussed the different people who must come together with
a variety of skills and abilities to make the automotive repair service operation
work. Now we will move a step further and look at automotive repair as a pro-
cess. The repair process takes into account each of the steps that must be Repair Process
completed to move from the start, where the customer determines that he The series of steps or tasks
needs or wants service, to the end, where we made sure that the repairs were necessary to resolve a
done correctly and the customer is satisfied. In its simplest form the repair request for service.
process goes through the following steps:
• Appointment
• Reception
• Work distribution
• Work performance
• Quality assurance
• Invoicing
• Delivery
• Cashiering
• Follow-up
Let us briefly discuss each of these steps to ensure that we understand their
importance.
Appointment
Most repair shops work primarily on an appointment basis. This is done so Appointment
that the shop can be certain that they have the resources available to quickly A prearranged date and
and efficiently provide services once the customer has arrived. Once the cus- time to have service
tomer has determined that there is a need or desire for a service or repair, his performed.
or her first action is to contact the service shop to arrange a convenient time
to have services performed. The majority of appointments are made by phone.
However, some customers still prefer to come by to make an appointment
face-to-face. Further, as Web-based communication continues to become
more widespread, many shops are beginning to offer online appointment
scheduling. Because we continue to move toward a more “wired” society, this
trend is sure to continue to grow.
Reception
At the prearranged date and time, the customer arrives at the shop for the
service appointment. During the reception, the responsible shop employee Reception
meets and greets the customer and gathers necessary information about The meeting, greeting, and
needed services and repairs. This step in the process is important for customer initial contact between the
satisfaction because it is during this (typically) face-to-face meeting that customer and the service
service personnel have the opportunity to discuss the requested services department in which the
directly with the customer, verifying that they have an accurate and thorough concerns and other requests
understanding of what the customer needs and wants. Further, and no less for service are verified and
important, it is at this time that the shop and the customer come to an initial an initial estimate provided.
agreement about what the cost for repairs will be and when the repairs
are expected to be completed. All of this information is documented on the
repair order.
41
Work Distribution
Once the repair order has been generated, it is passed on to be evaluated and
Work Distribution assigned. The work distribution step in an efficiently operated shop is much
Scheduling and assignment more than merely handing out the next repair in the stack of orders. The qual-
of repair jobs to specific ity and quantity of repairs that the shop is able to perform each day is directly
technicians based on careful related to management’s ability to maximize their resources. This means that
evaluation of priorities and they intentionally plan to match up their people, their time, and their space
available physical and so that they can achieve maximum productivity.
personnel resources. In an automotive service shop work distribution may be done manually,
using a dedicated work-routing system or may be done using an automated
system. In either case, it is done by striving to assign each technician to the
work he does best. As a result, technicians produce more work in a day with
fewer errors, the shop sells more service in a day, and the customers are more
satisfied because they get their cars back sooner and with greater assurance
that they are fixed right the first time.
Work Performance
Now that we have gone through the preparatory work, it is finally time for some-
thing productive to occur. It is time for the technician to finally do what the shop
Work Performance is in business to do—fix cars. During the work performance stage of the process,
The process of verifying the technician, using the repair order as a guide, verifies the customer’s concerns,
customer concerns, diagnoses the vehicle to verify the cause, and performs the needed repairs.
performing specific Although the technician is the one primarily responsible for performing
diagnosis, and performing repairs, they rarely do this in isolation. Often the technician will require exter-
repairs to resolve the nal information, parts, equipment, or additional approval from the customer
customer’s concerns. to quickly and accurately complete the repair. Once the repair is completed,
the technician is responsible for verifying that the customer’s concerns have
been resolved. Finally, he must write up a detailed explanation of what he
found and what he did to resolve the customer’s concern before he passes the
repair order on for processing.
Quality Assurance Quality Assurance

The act of verifying that the Before the customer is notified that the repairs are completed, it is customary
customer’s concerns were that the shop verifies that the work completed has addressed the customer’s
addressed and resolved and concerns. The technician performing the repairs typically starts this process
that the vehicle is in proper by double-checking his work before he turns in the repair order as complete.
condition to be returned to Once he has done this, the repair order, complete with his comments, is
the customer. routed for verification of the repairs.
Depending on the structure and size of the shop, the verification of repairs
may be done by the advisor who wrote up the repair order or by a shop fore-
man or quality assurance technician. The function of quality assurance is to
Invoicing verify that the repairs have successfully resolved the customer’s concerns and
Complete and accurate that the vehicle has been returned to the condition in which it was received.
documenting of what was
done including explana-
Invoicing
tions, assignment of
operation codes (as There is an old adage that holds true in the automotive repair business: “The
needed), and final pricing of job is not complete until the paperwork is done.” Invoicing includes three
the repair order. main operations that are required to accurately and completely prepare the
42
paperwork: reporting what was done, assigning repair operation numbers, and
calculating the final bill.
Documenting what was done to repair each of the customer’s concerns or
requests is started by the technician, who writes his explanation. He is not,
however, the one responsible for determining the value (charges) that are
assigned to his efforts. In an effort to assure fairness and consistency of pric-
ing, another service employee is generally responsible for looking in the flat-
rate manual and assigning the job’s flat-rate time.
If the repairs are done under manufacturer warranty, then invoicing
includes looking up and coding the order with specific operation numbers
required by the manufacturer to obtain reimbursement for the repairs.
Because the difficulty and precision required in looking up and accurately
preparing documentation for warranty reimbursement are high, large dealer-
ships that perform a large volume of warranty repairs may employ a specialist, Warranty
typically called a warranty administrator, who has sole responsibility for Administrator
looking up and properly assigning warranty labor operations and then track- Individual responsible for
ing warranty claims for payment. looking up and properly
Once the labor operations and labor times have been established and doc- assigning warranty labor
umented, it is necessary to prepare a pay ticket that will pay the technician for operations and tracking
his or her time and completely price out the labor, parts, and other supplies warranty claims for
that the customer is to be charged for the repairs. Finally, the charges are com- payment.
pared against the approved estimate to be sure that they fall within the
amount approved.
Delivery
Delivery Reviewing with the
customer that vehicle
The delivery step may sound like it is out of sequence, but it is not. It is critical
repairs are completed, what
for customer satisfaction that the customer clearly understands what has been
has been done to address
done, what has been approved, and what the charges are before she is asked to
their concerns, the price for
settle up the bill. Once the work is completed and the charges calculated, the
those repairs, and making
shop should notify the customer that the car is ready to be picked up and
final arrangements for pick-
review the work done and the total charges due at pick-up. If there are any
up of the vehicle.
misunderstandings or concerns, these should be resolved before the customer
arrives to pick up the vehicle and pay the bill.
Cashiering
Cashiering Providing customer with a
Cashiering is the last face-to-face step of the transaction. Having already copy of the bill and an
reviewed the repairs and charges with the shop, the customer arrives to pick explanation of services
up the vehicle and settle the bill. She is given copies of all repair documents performed, handling
detailing her requests and concerns, what was done to address each one, and a payment and issuing a
detailed cost breakdown for each item along with a receipt for payment. receipt for payment.
Follow-up Follow-up
Follow-up is a post-repair activity that is intended to verify that the customer is Contacting customers after
satisfied with the repairs. This step is typically performed one to three days after completion of repairs and
the customer has picked up the car from the repair shop. Having given the cus- customer pick-up to verify
tomer adequate time to drive the car to verify that the repairs are satisfactory, that they are satisfied with
the repair shop contacts the customer (usually by phone) to assure that she is the services provided and
satisfied. If there are any concerns or questions, the follow-up information is making arrangements to
then channeled back to the shop immediately, so that the shop can make resolve any questions or
arrangements to address the concerns. concerns, if they exist.
43
CASE money.” Based on the information provided in the

last section
As a service manager you have a top technician
who has a great deal of difficulty getting along with 1. You decide
the other workers in the department. She is Is she just complaining, or is she right? Why?
constantly complaining that she is underpaid and
that she is “the only one who really produces 2. You decide
any work around there and makes the shop any How might you approach her to improve her attitude?

As a manager it is your job to get things done. Many As a manager and leader, you are responsible not
managers take the traditional approach of winning, just to get things done but to provide an environ-
and losing, with people. The shortcoming of this ment where things can be done. This includes not
viewpoint is that it makes one big assumption—that only having the right people on the staff but also
all results, good or bad, are caused by people. There- providing them with a good work system and the
fore, it is reasonable to blame poor performance tools necessary to succeed.
on people and punish them accordingly. Did you You do win with people, but, as a manager, failure
ever feel that you were in a situation where the to perform is most often your responsibility, not theirs.
results were beyond your control? Was it because of You are responsible for creating the proper environ-
someone else above you? Was it because of a lack of ment, providing the necessary tools, and inspiring your
information or resources or time? How did it make people to perform. If your department fails to reach its
you feel? goals you are the one who is ultimately accountable.
Charting the Workflow

In Chapter 3 we reviewed the manpower requirements of the repair service
shop. In this chapter we just looked at the repair process and the individual
steps that each repair transaction must go through from start to finish. To
further our understanding of how all the resources come together and how a
typical shop actually operates, we will now move forward and use the person-
nel and repair steps to chart a typical transaction. This can be done using a
Flowcharting graphic-based method called flowcharting.
A graphical representation Why flowchart the system? Most of us in the automotive repair field think
of the flow of work as it better and learn better when we can see something, touch it, feel it, and, ulti-
progresses through the mately, understand it. It is the way that our brains work. The whole idea
major steps involved in a behind flowcharting the repair process is to help you “see” how it works. Once
workflow. you can “see it” in action, it should help you to better understand it and be
able to identify possible problem areas and make the changes necessary to
improve them.
Flowcharting helps to analyze how the work actually gets done in the sys-
tem. It diagrams the flow of work from person to person and task to task as the
transaction moves through the process, from the customer’s first contact with
44
the shop to the end of the follow-up call that verifies that the customer is very
satisfied with the quality of the repairs.
Graphically portraying the flow of work helps to identify and analyze
problem areas. It should help you to see areas where the flow is slowed or
comes to a stop. These bottlenecks may be caused by a lack of people perform-
ing an important task or simply by timing. If too many customers, too many
cars, too many repair orders, and too many bills all arrive at the same place in
the shop at the same time, the flow of work slows down dramatically. Identify-
ing these bottlenecks is the first step in helping to resolve them to improve the
flow and productivity of the shop.
Flowcharting Basics
Before we flowchart the service transaction, we should understand the com-
mon symbols used for flowcharting. These symbols are the universal language
of flowcharting. Just like words in any language, they are commonly accepted
symbols that everyone using flowcharts accepts as having a specific meaning.
The basic symbols are (Figure 4-4)
Step
Decision
Flow
Loop
Output
Figure 4-4 Flowcharting basics
• Step—A step is designated by a rectangular box. This box represents a

specific action that takes place in the process. An example of a step in
the repair process would be road testing the car to verify that the repairs
were completed correctly.
• Decision—A decision is designated by a diamond-shaped box. This box
represents a point where the flow can go in two or more directions
depending on the results. An example in the repair process would be: Is
the car fixed? Y/N. The proper next step would be different depending
on the answer to that question.
• Flow—The movement through the process is indicated by lines with an
arrow at their end. The line represents the process moving from step to
step, decision to decision, and the point at the end of the arrow desig-
nates the direction of the workflow. An example in the repair process
would be anytime when the repair order moves, such as when the order
is written up and moves from the service advisor and is given to the
dispatcher.
• Loop—A loop is a line combined with an arrow heading back toward
any previous step of the workflow. Any time that we need to double
back to repeat a step again, a loop is required. An example in the repair
service process would be when the repairs are quality checked and
found to be incomplete and the car needs to be returned to the techni-
cian for further repairs.
45
• Output—The symbol for an output is an oval or rectangle with rounded

corners. This indicates an ending point or a product. In the repair pro-
cess an output would be the successful completion of the repair.
Now that we have a basic understanding of the language of flowcharting,
where do we put them? The answer is simple. We put them on a chart. The
chart is a matrix that shows the job titles down its left side and the individual
steps in the repair process across the top (Figure 4-5).
Task Work Work Quality

Employee Appointment Reception Distribution Performance Assurance Invoicing Delivery Cashiering Follow-up
Service Advisor
Dispatcher
Technician
Parts Specialist
Shop Foreman
Cashier
Figure 4-5 Workflow chart
Now that gathered all the tools together, it is time to chart a service trans-
action. Here is the scenario.
Marge Jones calls in and makes an appointment to bring her car into the shop
on Tuesday for an oil change and to check out a strange noise that happens
every time she applies the brakes. On Tuesday morning she arrives on time
and speaks to Hannah, the service advisor. Hannah greets Ms. Jones and
verifies that she wants an oil change and that the noise appears to be coming
from the right front of the car and only happens on hard braking, but it seems
that the car stops fine with no pulling to either side. After writing up the
repair, Hannah gets Ms. Jones to verify that the information is correct and
complete and gives her a preliminary estimate for the oil change and tells her
that because her car is only five months old with only 4,360 miles on it, that
the repair to the noise should be covered under her manufacturer’s warranty.
Hannah then sends the completed paperwork on to Dave, who dispatches the
shop’s work. Dave assigns the car to Heather to check out the noise and per-
form the oil change. Heather verifies the complaint and finds that there is a
broken retainer clip on the right front brake pad. Because this is a faulty part,
it is covered under warranty. Heather gets the parts from Fred in the parts
department and replaces the defective pad. She also completes the oil change
and road tests the car. She then completes the paperwork. When the com-
pleted repair order returns to Hannah for her to call Ms. Jones, she calls over
Jerry, the shop foreman, and asks if he can road test the car again to be sure
everything is all right, because Ms. Jones is one of their best customers. After
his road test Jerry comes in and notifies Hannah that the car is fine and
Hannah prepares the paperwork. She calls Ms. Jones and gives her the good
news that the noise is fixed and that the only charge is for the oil change. Ms.
Jones can come and pick up the car any time before 7 P.M. Ms. Jones arrives at
5:30 P.M. to pick up the car, pays the cashier, gets her receipt, and drives home.
46
On Wednesday afternoon the cashier calls Ms. Jones to make sure she is satis-
fied. She is satisfied.
You have the entire sequence of events. The first task in flowcharting is to
break down the sequence of events into the individual steps that occur.
Sequence of steps:
1. Ms. Jones calls in and makes an appointment with the advisor, Hannah.
2. Ms. Jones arrives and the advisor, Hannah, writes up her car.
3. The paperwork then goes to the dispatcher, Dave.
4. Dave assigns the work to Heather, the service technician.
5. Heather diagnoses the cause of the problem and needs to get a new
part from the parts department.
6. Heather goes to Fred, the parts specialist, and gets the new brake part.
7. Heather completes the repairs and the oil change and sends the com-
pleted paperwork to Hannah.
8. Hannah reviews the paperwork and asks Jerry, the shop foreman, to
quality control the car.
9. Jerry road tests the car and verifies that the car is fixed and returns the
paperwork to Hannah, who prepares the invoice.
10. Hannah calls Ms. Jones, telling her the good news, the total charges,
and advises her that the car is ready to be picked up.
11. Ms. Jones arrives at the dealership and speaks to the cashier, and pays
her bill, gets her receipt, and drives off with her car.
12. The next day, the cashier calls and verifies that Ms. Jones is satisfied.
13. END—Mrs. Jones is another satisfied customer, who will undoubtedly
return and also tell her friends what a great job the repair shop has done.
That was a pretty simple and straightforward repair and it took a total of
12 steps. Many repairs are not quite so simple. How many steps might they
take? Let us take these 12 steps and chart them in Figure 4-6, to see exactly
how the workflow looks.

1 2 9 10
Service Advisor
3
Dispatcher
5 7
Technician
fixed
66 correctly
Parts Specialist
8
Shop Foreman
11 12 DONE
Cashier
Figure 4-6 An example of a repair workflow
The 12 steps that we have identified for this repair give us a much clearer
picture of how the workflows on a regular basis in the shop. It really tells us
quite a bit about the shop’s operation. Take another look at the chart. It tells
47
us who the essential people are for each service transaction. It tells us the indi-
vidual procedures that we require for each transaction. It tells us who is
responsible for which action.
Before we end this chapter, let us take a brief look at ways that putting the
workflow down on paper might come in handy to help you better manage
your shop. Here are some examples of how the knowledge that you have
gained from charting the workflow can be useful to you:
• Helping you to develop job descriptions that document assigned job
responsibilities
• Identifying potential bottlenecks in the shop where the workflow slows
down, thereby reducing productivity
• Reassigning job tasks and seeing the potential impact on the rest of the
shop
• Creating help wanted advertisements to recruit employees
• Evaluating the possible effect of adding additional people to your shop
CASE You decide

As a service manager you find that customers are Is this a people problem or a systems problem? How
always complaining that when they arrive to pick up would you know?
their cars, the paperwork is not ready.
SUMMARY
In this chapter we have looked at automotive repair as what it document it, look at it, and analyze it so that we understand it
is—a complex system. Fixing cars is a process involving a vari- better. To effectively manage a service operation, you must
ety of resources. We discussed the physical resources in have a clear and thorough understanding of the process and
Chapter 2 and the manpower resources in Chapter 3. Now the flow, so that you can constantly monitor and evaluate the
we have explored how to put all the resources together into system. Through this thorough understanding, you will be
an efficient system. able to make the best decisions to identify and resolve prob-
Because the lifeblood of the service shop is producing lems and to continually improve the system to make it more
labor hours, the essential workflow, or process, in the shop is efficient and productive.
the repair order process. Therefore, we have explored ways to
1. An area where the flow is slowed or even comes to a 2. The step in the repair process where the repairs are
stop is referred to as a verified is called
a. traffic jam. a. quality assurance.
b. plug. b. cashiering.
c. bottleneck. c. bottleneck.
d. corkscrew. d. work performance.
48
3. The step in the repair process where someone notifies the c. parts specialist.
customer what was done, what the charges are going to d. shop foreman.
be, and arranges for them to pick up the vehicle is
8. You have been receiving more complaints lately that the
a. invoicing. phones are not getting answered quickly enough—there
b. cashiering. is too long of a delay to get waited on—and that the
c. delivery. paperwork is never ready on time. You have 18 techni-
d. all of the above. cians and three service advisors. What more can you do?
4. The step in the repair process where the customer is Worst of all, the complaints do not seem to be directed
questioned to verify what their concerns are is toward any one individual but seem to be occurring
throughout your shop. Where do you think the bottle-
a. work performance.
neck is most likely to be occurring?
b. appointment.
c. traffic jam. a. dispatcher.
d. quality assurance. b. service advisor.
c. parts specialist.
Use Figure 4-7 to answer Questions 5–10. d. shop foreman.
5. Who is responsible for the delivery step of the transaction? 9. Using the information in the chart along with what you
a. technician. learned in Question 8, what task might you reassign to
b. dispatcher. someone else? Why?
c. cashier. a. quality control.
d. service advisor. b. work performance.
c. follow-up.
6. Who distributes the repair orders to the technicians? d. work distribution.
a. dispatcher.
b. service advisor. 10. Using the information in the chart along with what you
c. shop foreman. learned in Questions 8 and 9, who would you suggest
d. cashier. perform that task? Why?
a. dispatcher.
7. Who makes the final decision of whether the repairs are b. service advisor.
done correctly? c. shop foreman.
a. dispatcher. d. cashier.
b. service advisor.

1 2 9 10 12
Service Advisor
3
Dispatcher
5 7
Technician
fixed
6 correctly
Parts Specialist
needs
?
Shop Foreman further repairs
11 DONE
Cashier
Figure 4-7 Workflow example for Questions 5–10
49
SECTION
2
MANAGEMENT STYLES
J ust as there is no one person who is the perfect employee, there is no one way for all
people to manage in all situations. This section will begin by providing a background on
the recent history of management philosophies and practices. It will introduce a range of
management styles a manager may adopt to supervise a department. The strengths and
weakness of each style will be presented and discussed. The differing styles will be con-
trasted and compared with the goal of helping the manager identify the style that fits him
or her and the organization the best. Finally, we will explore overarching principles and val-
ues that should guide your actions as a responsible and ethical supervisor.
• CHAPTER 5: Classic Management • CHAPTER 7: The Complex Role of

• CHAPTER 6: Being a Leader Management
• CHAPTER 8: Ethics and Stewardship
C H A P T E R
5
Classic Management
CHAPTER OBJECTIVES
■ To identify the basic philosophies of traditional ■ To analyze the changes that scientific manage-
management ment made to traditional management
■ To examine the role of management in tradi- ■ To identify the management concepts of man-
tional management systems agement by objective (MBO)
■ To examine the role of labor in traditional man-
agement systems
KEY TERMS
traditional management George Odiorne objective oriented

consistency MBO leadership
Frederick Taylor objectives compliance
scientific management task oriented
53
SECTION 2 ■ Management Styles
Introduction
The Merriam-Webster Dictionary defines manage as “to handle or direct with a
degree of skill: to make and keep compliant.” Although this definition may
seem dated, it expresses a concept of the purpose and responsibilities of man-
agement that has existed for centuries. Shepherds, for example, still manage
their flocks using the techniques developed millennia earlier—directing the
sheep to do what the shepherd (manager) feels is in his best interest and, from
his perspective, the best interest of the flock. Modern businesses often use this
same approach when managing unskilled or low-skilled labor. Supervisors tell
the employees what to do (give them direction) and make sure that they comply
with those directions (keep them in line). Is this approach really any different
from the role that a shepherd plays to his flock? In today’s world the skills
required to effectively manage are very different. Let us take a look at how
management has evolved from these simple roots to its current state as we
explore classic management theories and practices.
Traditional Management
Traditional Traditional management theory is an outgrowth of the Industrial Revolution.
Management The major shift in how goods were produced resulted in the need for a change
Management theory in in the way that production was managed. Before this time the majority of
which managers direct and goods were produced in small quantities by highly trained craftsmen. Now, the
make all decisions and introduction of factories that could produce goods in mass using low-skilled
employees are additional workers changed the work environment, and management, forever.
hands, feet, and bodies to The general management principles of traditional management can be
assist management. traced back to the late 1600s. However, although he did not invent the con-
cept, it is Adam Smith who is given credit as the person responsible for defin-
ing the principles and practices and making them widely available. He did this
when he published his analysis of modern capitalism “The Wealth of Nations”
(Smith, 1776).
Traditional management theory creates distinct divisions between the
roles and responsibilities of labor and management. Labor performs the role of
the extra hands, extra legs, extra strong backs that, when directed toward a
specific task, multiply the productive capacity of effective managers. This the-
ory proposes that coordinating and directing the work of large numbers of
people, a manager can produce a great deal more work than he could possibly
achieve alone, and the collective work will be of the same quality as work
done by a single talented individual. The key principle is working through
others: the effective manager becomes the brains of the entire workgroup, and
the employees become extensions of the manager. Managers do not consider
employee ideas or suggestions as part of this process; often they discourage
such input. Although management in this model considers employees inca-
pable of making sound decisions, it assumes they will develop into productive
bodies under the careful guidance of a skillful manager.
Traditional management principles limit the employee’s responsibility to
producing and/or delivering the company’s product by doing their assigned tasks
as directed by a manager. In a traditional assembly line, for example, the man-
ager’s goal is to produce workers who can consistently perform very simple repet-
itive tasks over and over again. This approach enables the manager to train a
large number of people in a short period of time. For an assembly line worker
54
Classic Management ■ CHAPTER 5

The automotive industry that we work in today is, the process into these small bits, Ford was able to
to a great part, based upon the implementation of dramatically lower costs and build a car that the
traditional management principles. Henry Ford used average American could afford. Were it not for this
these principles to develop his assembly line system, innovative approach, automobiles might still be only
build the Model T, and forever change the future of affordable to the very wealthy.
the automotive industry. The assembly line produc- Although the assembly line is a graphic example
tion system that he pioneered not only improved of how the traditional system worked, you can apply
consistency but also lowered the skill requirements, the same example to someone who is selling a prod-
so that the assembly workers no longer needed to be uct or answering a phone. If people do not see the
craftsmen with a wide range of skills, just additional relationship between their part in the process and the
sets of hands and legs that could learn to perform results, they will not feel responsible for producing
one repetitive task. As a result of breaking down quality results. After all, it is not their job.
in a 1970s auto manufacturing plant, this might mean doing nothing except
installing the lower screw on both headlight bezels of every car or truck that
came down the line. Although the work was not difficult and paid quite well, few
employees found it satisfying or fulfilling. Because each employee performed one
small, unskilled task out of the thousands required to produce a car, few felt
much accountability for the overall quality of the finished product. Reflecting
traditional management theory, early auto manufacturers assigned managers the
responsibility for judging the quality of the finished product. Inspectors strategi-
cally placed along the line oversaw each process and, to the best of their ability,
decided which processes were acceptable and which were not.
Fears of the Traditional Manager

Those who have grown and developed in a traditional management environ-
ment have learned to live in a situation in which they are responsible for
everything. They, therefore, are expected to take all the credit when things go
well and take all the blame when things go badly. Therefore, under the more
basic approaches to traditional management, it is common to find supervisors
who are concerned about power and accountability. These supervisors are
worried that they will lose their power if things do not go well. If all goes well
they are proud of their accomplishments . . . if things fail they likely will feel
that it is the fault of their employees that they directed “perfectly” but who
just did not “seem to get it.” It does not seem fair, does it?
There are three major fallacies of traditional management that reduce the
efficiency of managers under this system. They are summarized in the follow-
ing three questions:
• Delegating: If I delegate responsibility, am I giving up my power?

• Decision making: Am I not the manager because I am most qualified to
make the decisions?
• Controlling: What if one of my employees does it well—will he or she
take my job?
Let us discuss the logic, or illogic, of these three fears.
55
Delegating Traditional managers are very hesitant to delegate responsibility.

Their logic goes something like this: “I am responsible for everything and will
be blamed if things do not go well. If I delegate responsibility to my employ-
ees am I not giving up power? What authority will I have to make sure they do
things correctly and on time if I am powerless to stop them and redirect
them?”
The answer to their concerns is, “Yes, that is true, you will give up some of
your power. However, if you do not share responsibility and trust them, you
will be spending all your time monitoring and watching them, waiting for
them to make a mistake. If all your energies are wrapped up in that type of
close scrutiny, how will you get anything else done? If you are so tied up that
you cannot get anything else done, how is your managing them any more effi-
cient than you simply doing the job yourself?”
Decision Making It is hoped that the manager has a unique combination of

training, intellectual capacity, and previous experience that make him best qual-
ified to direct the group. This, however, does not indicate that the employees
have no ideas. Going back to the extreme case of classic management (remem-
ber the shepherd?), this might be true in some cases. However, in most business
cases the employees have a unique perspective on operations, opportunities,
and efficiencies. Further, they do not feel respected or fully engaged in their
work unless their involvement is at a much higher level than that of being
merely an extra set of hands.
Getting input from employees provides fresh perspectives. It provides dif-
fering viewpoints that either support and validate the current direction or give
rise to new and improved ways to avoid errors and improve efficiencies.
Finally, simply by the act of asking for input, employees feel more appreciated
and are, therefore, more likely to feel more involved and motivated to help
achieve organizational goals.
Controlling If you involve employees, it is inevitable that some may rise to

the top and become successful. They may even show the potential to become
better managers than their current manager has been. However, rather than
being a drawback, this is really a strength.
An innovative and strong manager begins his work by looking diligently to
train his replacement. By doing so, he engages his workers and inspires them to
reach to new heights of involvement. As a result the productivity of the entire
operation is maximized. When the operation becomes exemplary, the manager
is the prime candidate within the larger organization to be promoted, leaving
his successor to take his old position. It is not a win-lose, but clearly a win-win
strategy for mutual success.
Traditional Management in Automotive

In the automotive repair industry, as has historically been the case in many
technical fields, the best producer in the shop is often elevated to the position
of manager. The goal of the business is production, satisfied customers, and,
most important, profitability. Therefore, this line of reasoning makes perfect
sense. The supervisor or owner sees someone in the shop that produces the
most and the best quality, and wonders, “What would it be like if all my
employees were like him?” Being practical, however, the owner realizes that it
56
would be too difficult to find and hire all the top technicians in the town.
“After all,” he reasons, “even if I did, the cost would be astronomical. Is there
another way to achieve the same goals?” In response to this dream, the owner
reasons that although he cannot clone his “top gun,” maybe he can spread
the wealth by having him share his knowledge, skills, motivation, and desire
with the others: “Let me put him in charge!”
Scientific Management
Frederick Taylor was a mechanical engineer in the early 1900s who was passion- Frederick Taylor
ate about finding new and better ways to improve efficiency and consistency in The father of the scientific
manufacturing. The value of his findings was not limited to manufacturing. They management theory.
also could be applied to other areas of business. As a result, his writings were
widely read and accepted. Because of his contribution to the theories of manage-
ment, Taylor has been acknowledged as the “father of scientific management.” Scientific
His principles of management continue to be widely applied to management in Management
every aspect of business today worldwide. A more scientific and
Frederick Taylor aimed to increase efficiency and consistency in the work- systematic approach to
place and create a new environment that would bring greater prosperity for breaking down the work
both employers and employees. He identified several key problems with the process, making sure that
traditional work environment and argued that more scientific and systematic every employee knows their
management could overcome them. Taylor summarized the common work- small part in it and then
place concerns that he felt were at the root of inefficiency: managing to assure that
• Laborers’ concern that working too hard would lead to increases in pro- work is consistently
ductivity that would put many of them out of work performed.
• Defective systems of management that encouraged employees to work
slowly (a phenomenon known as soldiering) to protect their common
financial interests
• Unscientific rule-of-thumb methods—arbitrary rules based on past prac-
tice, not scientific evidence, that were accepted in every trade—that
reduced the efficiency of the workforce
Taylor confidently predicted that increased productivity would result not in
unemployment but rather in increased prosperity. Further he felt that managers
could boost productivity with a minimum of additional effort by placing a
greater emphasis on increasing the efficiency and consistency of the workplace. Consistency
Achieving greater consistency required changing the role and approach of man- Results are the same or with
agement. This change was a more scientific and systematic approach to break- very little variation from the
ing down the work process, ensuring that every employee knew their small part established standard.
in it, and then managing to assure that it was consistently performed.
A major obstacle that Taylor identified, soldiering, refers to the observation
that productivity in a workplace tends to find and maintain a natural balance if
all employees are paid at the same rate. If slower workers get paid the same as
faster workers, it does not take long until faster workers, seeing that they receive
the same pay, same benefits, and same recognition as the slower workers, begin
to realize there is no incentive to work harder. Although management might
hope that the example set by the faster workers would inspire slower workers to
push harder, the opposite consistently occurs. The productivity of the faster
workers declines until the entire group achieves a single pace at which they can
all work together, like a column of soldiers marching at the same pace.
57
Finally, Taylor believed that management asked employees to do too

much. He asserted that most of the employees did not have the knowledge or
skills to do their jobs completely or consistently. Therefore, one should expect
their work habits and the consistency of their production to be less than opti-
mal, because they lacked the capacity to do all that management asked of
them. In his book The Principles of Scientific Management (1911), Taylor wrote:
“great gain, both to employers and employees, which results from the substi-
tution of scientific for rule-of-thumb methods in even the smallest details of
the work of every trade. The enormous saving of time and therefore increase
in the output which it is possible to effect through eliminating unnecessary
motions and substituting fast for slow and inefficient motions for the men
working in any of our trades can be fully realized only after one has personally
seen the improvement which results from a thorough motion and time study,
made by a competent man.”
Frederick Taylor believed that a solution existed to cure all of these ills of
the workplace, which appeared to be universal across all types of businesses
and locations. He saw a more systematic and scientific approach to manage-
ment as the solution to these problems. In many ways, his proposed solution
was elegantly simple. He proposed that managers reduce employee expecta-
tions about the variety of responsibilities and tasks they would perform and
assign them only those tasks that fell within their limited capacity. Manage-
ment should limit each employee’s activity to performing only those tasks for
which the worker was hired. Managers should also assume responsibility for
making all other business decisions and arrangements and for addressing any
issues or difficulties that arise.
Taylor’s organizational concept envisions the workplace as a large orches-
tra, with employees playing the roles of the musicians under the leadership of
a conductor, who represents management. The conductor sets the pace, starts
and stops the play of each of the instruments, and makes decisions about
who plays what, when, and how. The musicians accept the conductor as the
person solely responsible for making all of these decisions. This allows the
musicians to concentrate on what they do best—playing their unique instru-
ments to the best of their ability. The result is a symphony of consistently
beautiful music made possible by creating an environment where both man-
agement and labor can excel. As Taylor stated, “No great man can (with the
old system of personal management) hope to compete with a number of ordi-
nary men who have been properly organized so as efficiently to cooperate”
(Taylor, 1911).
Using this orchestral metaphor, Taylor’s scientific management philos-
ophy sought to create a harmonious work environment, as each worker had a
clearly defined small part to play, and improved efficiency occurred through
the ability of all the workers to play their small parts consistently. This
method made a major contribution to the achievement of consistent quality
and productivity. However, by breaking down each employee’s role into such
a small, simple, and finite part of the whole process, employee morale was
severely compromised. No longer did employees act as craftsmen who could
clearly see the results of the many hours that they spent plying their trade.
They were now just an interchangeable part in the process with limited ability
to even appreciate the value that each individual added to the final product.
Whereas Taylor’s theory markedly improved efficiency, it failed to improve on
the low employee morale that was a carryover from traditional management
practices. Instead, it increased it.
58
Management by Objective
George Odiorne, one of the strongest proponents of management by objec- George Odiorne
tive (MBO), defines MBO as “a strategy of planning and getting results in the A major proponent of the
direction that management wishes and needs to take while meeting the goals management by objective
and satisfaction of its participants” (Odiorne, 1965). In its most general sense, (MBO) theory of
MBO functions as a plan to help both management and employees achieve management.
their goals. Odiorne adds that MBO requires “a blending of individual plans
and needs of managers toward a large-scale accomplishment within a specific
MBO
period of time” (Ibid., 1965). Therefore, MBO not only aims to meet mutual
goals, but also involves setting up a system that clearly defines a specific A management system
timetable for achieving accomplishments along this path. based primarily on outputs
According to MBO theory, everyone within an organization must commit that blends individual plans
to a focus on the following items: and needs of managers
toward a large scale
• Objectives—MBO focuses primarily on outputs. The system requires accomplishment within a
clearly defined objectives and a universal commitment by all employ- specific period of time.
ees to achieve the stated organizational objectives.
• Time strategy—Employees must achieve objectives within the stipulated
time limitations without exception. Objectives
• Total management—Managers must coordinate the efforts of individuals Well-defined aims or goals.
to achieve common goals. Success depends upon clearly communicat-
ing goals and objectives and obtaining employee commitment to sup-
porting them. Sharing a common understanding of goals and objectives
helps to reduce frustration and minimize lost effort while the organiza-
tion strives to achieve maximum productive capacity.
• Individual motivation—Although the core objectives in an MBO system
focus on the needs and desires of the organization, managers seek
employee input and consider the needs and goals of the employees
when planning objectives. In return, the organization expects employ-
ees to support organizational goals and commit to carrying them out.
Comparing Management Approaches

Management by objective and scientific management share many common
traits. Both systems try to minimize lost motion and lost efforts. Both try to
systematize the work by assuring that everyone is doing things the one right
way. MBO, however, deals directly with one of the major drawbacks of scien-
tific management—lowered employee morale. Let us discuss this and other dif-
ferences between the two methodologies in more detail.
Scientific management and MBO differ dramatically in their approach
toward individual employee involvement in the planning and execution of
the management plan. Taylor’s foundational philosophy is that the employ-
ees should not be expected to make decisions about what to do and how to do
it because they are not capable, and therefore they are purposefully excluded
from any planning processes. Employees are carefully instructed what to do
and when. In MBO the employees are intentionally and actively involved in
developing objectives and timelines. In doing so, this philosophy expects a
higher level of commitment to these shared goals and therefore higher levels
of consistent performance.
Although MBO’s primary focus is to identify organizational goals based on
the needs and objectives of management, it purposefully solicits input from
59
employees to assure that their needs are met. This method seeks to ensure the
long-term success of employer and employee alike, by defining goals and
objectives and by setting up a structured process for defining, pursuing, and
achieving operational goals along the way. This assures the ultimate success of
the overarching organizational goals. As a result, in an MBO system manage-
ment can reasonably expect the following:
• Employees are more motivated because they have participated in plan-
ning and carrying out the plan.
• Fixed timelines will increase the likelihood of completing projects by
their deadlines.
• Employees clearly understand the goals and objectives of the company.
• Morale is higher throughout the organization.
Let us consider how scientific management and MBO might differ when
applied in the real world. A traditional manager using the scientific manage-
ment approach likely expects the following:
• The manager will clearly and very specifically define the individual tasks
employees will perform.
• All employees will carry out these tasks in exactly the same manner.
• Employees will not deviate in any way from the specific directions they
receive.
• Employees will not question or try to improvise upon the assigned
directions.
• All employees will work as interchangeable parts in a complex system.
The hallmark of this approach is consistency.
In addition, the manager in the scientific management system does not
expect employees to be involved in any way in the development of objectives:
developing and assigning tasks is solely the responsibility of management.
Whenever the actual production varies from the intended output in either
volume or quality, it is the responsibility of management to identify the varia-
tion, determine the cause, and take proper corrective action. In this model the
employees are extra sets of hands to help extend the abilities of the manager
to produce more of what he or she would produce. The manager controls all
activities and is responsible for all activities and results. This is clearly an envi-
ronment where the responsibility of management is vast and that of labor is
minimal. Management sees its role as the one making all the decisions and
being accountable for all results (good or bad), and its relationship with the
employees as one of simply pushing them to work harder/faster/more effi-
Task Oriented ciently. Employee responsibility remains solely task oriented.
Focusing on the completion In the work environment using MBO, the approach and responsibilities of
of specific tasks within the management toward their job, the organization, and the employees would be
work process. dramatically different. Although the overarching goals and objectives of the
company still come from top management, developing strategies, objectives,
and timelines to consistently meet these goals is achieved through the involve-
ment of the employees with management. The hallmark of this system is that
both management and employees are involved in the development of an
Objective Oriented objective-oriented strategy to achieve consistent and lasting success.
Focusing on broader Because both the manager and the employees understand and feel a sense
objectives rather than on of responsibility for achieving the goals and deadlines, the work environment is
the details. more one of mutual gains than of management versus labor. Employees begin
to feel a vested interest in the success of the operation. After all, they helped to
60
define the objectives. Their level of involvement in the organization as a whole

has risen to a higher level because now they are valued as being more than an
additional set of hands. Their minds, their concerns, their needs, and their
expertise have all been considered in developing a plan that they share with
management. Although management still guides, directs, and assigns tasks to
assure consistency and is ultimately responsible for achieving objectives and
deadlines, this responsibility is now more shared throughout the organization.
Leadership (Goal Orientation)

Whereas a manager using Taylor’s scientific management is task oriented and a
manager using Odiorne’s MBO is objective oriented, a manager who is a leader
is goal oriented. A leader not only assigns tasks or delegates them, he or she also
delegates the responsibility that goes along with the task. Leadership has Leadership
become the focus of a great deal of the evolution of management theory over A management theory
the past 20 years. based on a higher level of
A leader sets himself apart because he involvement of employees in
• not only delegates tasks but also delegates responsibilities the management process,
• not only involves employees in planning by getting their input, but delegating tasks but also
involves them in the ongoing decision-making process delegating authority and
• knows that a key to success is to get “buy-in” (commitment) from responsibility.
employees for any action or plan
• gets others to do what is needed, by being a living example—he walks
the talk
• not only encourages, but expects employees to be involved
We will spend more time investigating the principles of leadership in Compliance
Chapter 6. Strict adherence to rigid
rules or specifications.
SUMMARY
Traditional management principles date back far before the the consistency of work performance and the resulting out-
twentieth century. Many businesses still operate using this put could be improved from traditional methods. Scientific
theory of management. The traditional approach defines management was a huge success and was eventually
management as providing expectations and rules and then adopted by a wide range of businesses.
monitoring performance. The shepherd who leads his flock by Management by objective (MBO) took the evolution of
making all the decisions for the entire herd is the classic management theory further by involving employees in plan-
model of the traditional manager. ning. In the broadest sense, MBO focused on setting clear
In the early twentieth century Frederick Taylor, through goals and specific deadlines and improving efficiency by
his scientific management theory, made sweeping changes to adhering to well-defined performance objectives. Its allowance
the classic management philosophies, as he tried to improve for employee input was an enhancement to previous manage-
consistency of operations, planning, and results by instituting ment approaches, where managers manage and workers work
controls and deadlines. Taylor attributed inconsistent work and generated increased employee support for institutional
performance to the belief that workers lacked the capacity for goals.
decision making. He believed that management needed to We closed the chapter with a brief introduction to the
provide employees more specific guidance to correct this principles of a leadership-based approach to management.
shortcoming. Scientific management theory proposed that This most recent stage in the ongoing evolution of manage-
the entire burden of decision making must rest on management theory continues to spread and forms the basis of much
ment. However, by providing clear and consistent direction of the current wave of new management styles. We will
and requiring rigid compliance based on scientific principles, explore leadership in greater depth in Chapter 6.
61
In Questions 1–3 match the management theory with the ori- 8. The management system that expects employees to be
entation that best defines it. involved in the decision-making process is
_____ 1. scientific management a. goal oriented a. management by objective.
_____ 2. MBO b. objective oriented b. leadership.
_____ 3. leadership c. task oriented c. scientific management.
In Questions 4–6 match the management theory with the
individual that is most closely tied to that approach. 9. MBO is
_____ 4. traditional management a. Frederick Taylor a. a structured output-focused strategy.
_____ 5. MBO b. Adam Smith b. based on management making all the decisions alone.
_____ 6. scientific management c. George Odiorne c. a system in which objectives are expected to be met
all the time, on time, every time.
7. If you were managing in a shop using the (MBO)
d. both a and c.
approach you would expect your people to
a. carry out all tasks in exactly the same manner. 10. The major event in history that resulted in the need for
b. not vary in any way from the specific directions the development of traditional management is
given. a. the French Connection.
c. not question or improvise upon the assigned b. the Industrial Revolution.
directions. c. the Italian Connection.
d. none of the above. d. the Dark Ages.
REFERENCES
Adam Smith, An Inquiry into the Nature and Causes of George S. Odiorne, Management by Objectives (New
the Wealth of Nations, 1776. York: Pitman, 1965), 55.
Frederick W. Taylor, The Principles of Scientific Manage-
ment (New York: Harper Bros., 1911), 5–29.
62
C H A P T E R
6
Being a Leader
CHAPTER OBJECTIVES
■ To compare the differences between manage- ■ To assess the benefits of building upon strengths
ment and leadership as a leadership strategy to help anyone reach his
■ To examine the key characteristics of leaders or her potential
■ To recognize the importance of building rela-
tionships
KEY TERMS
manager lead by example commitment

leader credibility motivation
authentic respect
63
Introduction
There is a major movement in the theory of management that encourages super-
Manager visors to become more than managers—to become leaders. The question,
One who directs the actions however, is not whether to be a manager or a leader, but how to become both.
of a group, primarily Traditional management theories that were discussed earlier (see Chapter 5)
through orders and teach that the supervisor must manage people and physical resources to maxi-
instructions. mize production and profitability. However, more recent theories of manage-
ment broadly support the notion that people respond much better to being led
rather than being managed. Thus, an effective supervisor in today’s marketplace
Leader must have the dual skills of managing resources and leading people. We will
One who guides a group, explore the concept of leadership in more depth in this chapter.
primarily through influence
and positive example.
What Is Leadership?
Leadership is not a set of principles or practices that is only practiced by man-
agement. Throughout our lives we have all seen many examples of formal and
informal leadership . . . and very likely followed them. Although each of our
experiences has been different, here are some of the common leadership expe-
riences that you may have encountered from the early stages of your life:
• The person on the playground who was able to get you to play on the
slide rather than on the swings.
• The person who got the group together to play a pick-up game of base-
ball or to go bowling.
• A member of the swimming team, track team, or football team who
encouraged you to join the team.
• The person who was pursuing an education to prepare for a career and
encouraged you to do the same.
Have you ever experienced something like this in your lifetime? What was
different about these people and about what they did? These people did not try
to bribe you or sell you something that they were not interested in themselves.
Rather, they were enthusiastic and committed to a particular direction and
action. It was this enthusiasm that you found exciting. It helped you to decide
that you wanted to be a part of it. When the group decided to go along and play
on the slide or play baseball, this person was right there with you, shoulder to
shoulder, playing and enjoying the experience. By their presence and enthusi-
asm, they made the experience more fun. By inspiring the team members it is
likely that you all achieved more than you would have otherwise. These people
were not managers, bullies, salesmen, or even adults—they were leaders.
Even though leadership is a highly desirable trait for effective managers, it
does not come with, nor require, position. The examples described earlier
demonstrate this clearly. Leadership is not limited to, or by, position. Anyone
can be a leader, and we all should aspire to provide leadership in those areas
where we have a passion and commitment. Let us take a deeper look at this
very important trait.
Management versus Leadership

As we discussed in previous chapters, classic management is highly task oriented.
It focuses on guiding and directing. Leadership is a much more goal-oriented
64
Being a Leader ■ CHAPTER 6
approach. The following examples compare and contrast some of the key
differences between the two approaches:
• A manager assigns tasks. A leader delegates responsibility.
• A manager makes decisions and tells the employees what to do. A leader
involves people in the decision-making process, and they do it together.
• A manager makes decisions. A leader builds buy-in and, thus, motivates
employees to want to achieve mutual goals.
• A manager says, “Do what I say.” A leader says, “Do what I do.”
• A manager expects people to comply because he or she SAID so. A leader
expects people to see the vision and inspires them to do what they can
to further it.
As you can see from this comparison, management refers to guiding and
directing actions and tasks and allocating resources. It is for this reason that we
must learn to take supervision to a higher level. We need to understand and
practice the key principle that: we must learn to manage resources and lead people.
Leadership Traits
Becoming a leader requires more than learning and practicing a variety of skills.
In order to effectively and consistently lead people you must be
• Authentic
• Credible
• Exemplary
• Respectful
• Motivational
• Inspirational
Building on Strengths
Anyone who is intentionally motivated toward getting ahead and maximizing
his potential will take a hard look at self-improvement. This is a quest to look
inward and better understand who you are and what your strengths and weak-
nesses are. There are many seminars you can attend, and there are many evalua-
tion tools that will help you to identify your strengths and weaknesses. You
have probably already heard about the Myers–Briggs type indicator1 and DiSC®2
as two of the most commonly used personality type assessments.
It is important to know yourself so that you can understand how others
see you. You cannot relate well to other people if you are unaware of how they
perceive you, your actions, and your motives. Further, you need to become
committed being aware of and adapting to your shortcomings that may become
major obstacles to building positive relationships with others.
Beyond knowing who you are and what your strengths and weaknesses
are, it is important to determine what you do with this knowledge. Armed
with an improved awareness of their strengths and weaknesses, many people
set out to focus the majority of their efforts on how to cover up their weak-
nesses. They may even expend a great deal of time and effort in trying to build
up those areas, hopeful of turning their weaknesses into strengths. This atten-
tion to self-improvement is certainly superior to doing nothing, but it just
may not be the best use of your time and energy.
The best use of your time in becoming self-aware and improving your per-
formance can be found in identifying your strengths and using them. This
65
strategy is the exact opposite of the more traditional approach of working on

your weaknesses but deserves serious consideration. You have probably heard
of Gallup, the organization that conducts polls on everything from who will
be the next president to where the best place to live is. Their 25 years of
research of successful leaders and managers (Buckingham and Clifton, 2001)
indicates that your strengths are your strengths and your weaknesses are your
weaknesses. What? Your strengths are your strengths? Your strengths are more
than abstract concepts, they are who you are. Each of us possesses innate
strengths. This research further indicates that those who are the most success-
ful and the most satisfied know their strengths and learn to maximize them
and to use them to their advantage. They work to their strengths rather than
spending their time and effort covering up their weaknesses.
It is not that addressing your weaknesses is unimportant. You do need to be
aware of your shortcomings and try to minimize them so that you can keep
them from becoming handicaps to building relationships. However, rather than
trying to make yourself into what you are not, the best use of your time and
energy is to maximize what you are.
This is very much like what any very successful athlete does. Although
you can train and practice to become better at anything, it probably is not the
best use of your time as a 56 adult to spend all of your time learning to dunk
a basketball if your goal is to play in the NBA. Although you may succeed, put-
ting all your efforts into a skill that you will rarely be able to use in a game and
that will not earn you a position on a team is not the best use of your time and
energy. Rather, identifying and developing your strengths such as your vision,
your speed, your ability to shoot a jump shot would be more likely to help you
to achieve your goal (playing in the NBA). Practicing hard to improve your
three-point shot, your passing and dribbling skills, or your ability to identify
defenses and call plays will help you to maximize your strengths. By doing so
you are far more likely to raise your performance significantly to a level where
you are one of the best in your areas of expertise.
Having said all of this about knowing yourself and building upon your
strengths, you might ask, “But what does this have to do with being a leader?”
Authentic Actually it has major implications in developing your ability to be authentic,
Having consistency between genuine, and to lead by example. But the most important use of this knowl-
your words and your edge is its application to those with whom you work.
actions. As a leader and a manager, your success is ultimately dependent on your
ability to get the most out of your people. Certainly for people to work to their
potential, they have to be in an environment where they are willing and able
Lead by Example to push to their limits. They need to be given the proper tools so that they can
Inspiring others to follow by get the most out of their abilities. The best way to help them to get the
demonstrating the desired most out of their abilities, to get the most out of themselves, and to feel the
traits or actions. greatest amount of satisfaction is for you to help them identify and use their
strengths.
Just as in the example of the 56 basketball player, your employees can
expend their efforts either at trying to be what they are not or at recognizing
what they are. Your goal as a leader is to help to unlock their potential, and
you can best do this by developing your ability to see their strengths, helping
them to see those abilities, and then, together, doing whatever you can to
help them play to their strengths. Then you need to help them to make the
connection between their abilities, their desires, their motivations, and your
(mutual) work.
66

In the automotive shop the key measure of success is his performance goals are the same as the customer’s.
in the ability of the team to produce the maximum The only difference is in the rewards. Both the cus-
amount of repair work, done right the first time, con- tomer and the technician want accuracy and speed.
sistently. Proper distribution of work (who does which The technician is not as concerned about affordability
jobs) is essential to achieve maximum shop productiv- but, in the long run, wants the customer to feel that
ity. Shops vary greatly in how they distribute work. she received a good value so that she will come back
Some do it in the simplest form, in which the next for future repairs; so the technician wants to ensure
job that comes in goes to the next technician that is that cost of repairs is competitive. Based on these crite-
available. ria, do we know that just because this technician was
This system may seem the fairest to the customer next in line he is likely to achieve these three goals?
and the technician. After all, this customer came in Not necessarily. Now, let us look at the big picture.
first; therefore her car should be the next in line, right? In the scenario just described, the method for
And, from the perspective of the technician, that tech- handing out the work does not provide any assurances
nician is the next one who needs work to do, so it is the that it will meet either the customer’s or the techni-
fairest to give the job to him, right? Let us consider cian’s needs. However, this approach is not uncommon
whether this is really the best for both, or even either, and is still in practice in many shops. It is the classic
of the two parties involved. method that many shops have operated with for many
When a customer brings her car for repairs, she years.
has three goals in mind: get it done right, at the low- To better assure that the criteria of accuracy,
est possible cost, and as quickly as possible. In other affordability, and speed are consistently met, the shop
words, her goals are accuracy, affordability, and speed. does have some choices. If the shop management is
To test whether the simplest form of the system is the keenly aware of the strengths (skills/knowledge/
best for the customer we need to test the results abilities) of each of its technicians, it can improve shop
against these three criteria: 1) Out of all the techni- performance by matching up these strengths to the
cians in the shop, do we know that the first available needs of the particular repair job. Thus, the shop
technician is capable of performing the repair cor- assigns the work to the technician who is most
rectly (accuracy)? 2) Do we know that this technician capable of making the repair quickly and accurately
has the knowledge and skills to accurately diagnose and in a timely manner.
the cause the first time, thereby reducing the chance This approach makes this customer, and all their
for unneeded repairs or parts, or lost time (afford- customers, happy because it increases the likelihood
ability)? 3) Do we know that this technician can get that all (or most) customers will reach all three of
the repair done the fastest (speed)? Answers to the their goals. It also satisfies the technicians because
question “Is this the best course of action?” may they are able to fix more cars, feel more satisfied and
range from “I’m sure” to “absolutely not.” Let us look confident in their ability, and make more money.
at the issue from the technician’s viewpoint. Finally, it is the best overall solution for the shop
When the repair order is given to the technician, because it assures satisfied customers and the contin-
what are his goals? He is there to earn a living. He ued flow of customers, which will keep the shop busy
does this by being able to accurately diagnose and and profitable well into the future.
repair vehicles in as little time as possible. Realistically,
Building Relationships
Leadership is a two-way relationship. You may choose to lead, but you are not a
leader unless you have followers. Those who follow must choose to do so and
must be comfortable in accepting you as the leader. Without commitment at
both ends leadership does not happen.
67
Leadership is an informal agreement among all parties that they feel a

level of comfort and mutual benefit to proceed in a certain manner. It is not
dependent upon position but upon credibility, respect, and commitment.
As described at the outset of this chapter, we have all chosen to defer to the
lead of someone else at some point in our lives. However, within the frame-
work of the supervisor–employee relationship the goal is to cultivate and
develop an ongoing relationship and informal agreement that allows the
interaction between you, your employees, and co-workers to transcend the
limitations of management and reach new levels of performance and mutual
satisfaction.
For people to trust a leader, they must consistently see that individual
Credibility demonstrate attributes that earn their respect and trust. Credibility is an essen-
Acting in a consistent tial attribute that is the foundation of building this type of relationship. The
manner that allows others only true way to build credibility is through sustained and consistent action.
to believe or have faith People must see that you mean what you say. The best way for them to see this
in you. is to observe what you do in your everyday life. The term commonly used in
quality improvement to describe that you do what you say is to “walk the talk.”
That is, what you do is consistent with what you say you believe. This consis-
tent agreement between your words and your actions helps people to build
confidence that you really mean what you say.
Once people know who you are and where you are really coming from,
they begin to relax and feel comfortable with making a personal judgment
Respect regarding your actions and values. Do they respect those beliefs, values, and
Holding in high regard or attitudes? It is important to understand that this leadership is not a religion.
a rank of honor. They do not have to “convert” and give up their beliefs. They do not have
to become one of you. However, it is essential that between the positive
attributes and actions and the consistency you demonstrate that they respect
your position. This is essential because they must respect you in order to trust
you and will not truly allow you to lead them until you have earned their
trust.
Commitment The final step in the process is obtaining commitment. Because leader-
A firm agreement to ship is a voluntary relationship, those involved in traveling the path together
completing a task or must willingly submit and consent to be a part of the team. Through building
adhering to a principle credibility and earning their respect and trust, your employees and co-workers
or rule. know what they can expect then they can decide that it is something that they
can willingly embrace. Not until this point is reached can they finally make a
wholehearted commitment. You may wonder, “Well, that’s really nice in an
ideal setting, but who can wait that long to build voluntary commitment?
I have to get things done today. This is just too idealistic.” Whereas I fully
understand your impatience and frustration in considering this as the only way
to lead, rest assured that whenever and wherever possible it is the best way in
the long run to guide and direct any operation.
It is important to understand, however, that some situations do not allow
you to build consensus and commitment. The obvious example is the unex-
pected “fire.” Whether physical or symbolic, if the shop is on fire, this is not
the time to discuss and gain input, to consult, and to build commitment. It is
the time to get out of the building! However, even in this extreme case, you
would hope that you have built sufficient credibility with the employees that
when you walk out of your office screaming “There’s a fire! Get out of the
building now!” your employees believe you and follow your lead without
questioning your motives and, thus, hesitating to act.
68
Inspiring People to Action

The goal as a leader is to go beyond—having people await your direction for
each step. The ultimate goal is to gain their wholehearted commitment and to
inspire them to act. Once they have achieved this level of trust, your perfor-
mance as a leader is virtually unlimited and will very likely exceed your wildest
dreams. This is the true path to achieving excellence and performing at the
leading edge, being seen as the living, breathing example that others turn to
as the benchmark of performance and excellence.
Leading at this level is called “higher ground leadership” (Secretan, 2004).
Reaching this level of leadership requires that you inspire your people by
appealing to a higher purpose—their higher purpose—their hearts and souls.
This may sound all too idealistic, but it does make practical sense.
Think about your work. Have you ever had a day when you worked a really
long day and came home tired but, at the same time, felt pumped up and exhil-
arated? On the other hand, do you recall days when you did not work nearly so
hard but left at the end of the day feeling drained, like someone had simply
pulled the plug and let out all of your energy? What is the difference? In the
first case, what did you do? Chances are very good that you spent all, or at least
most, of your time doing something that you felt good about, something that
you felt was important, something that made you feel good about yourself. You
did meaningful work that made you feel as though you had a purpose and had
done something of real and lasting value.
Now, think of the other day. Many workers can easily share more examples
of the latter than they can of the former. If you consider what you did on a day
when you felt completely exhausted, it was probably something that seemed
tedious and uninspiring. You put in the effort and met the goal but did not feel
it was really important.
Now, wouldn’t it be great if you could feel like all of the time and effort that
you put in, every day of your working life was exhilarating? Do you think that
all of your employees (or at least most of them) would choose to work that way
too? Well, then, do it! Although there will always be a need to do busy work,
becoming an inspiring leader and fostering a group of inspired workers who see
enough value in what they do so that they choose to put their best effort into it
consistently is the ultimate goal. Give people more than a reason to work—give
them a passion to work.
What About Those “Who Won’t Be Led”?

It should always be your goal to provide an environment where each employee
has the opportunity to succeed and to be inspired and dedicated. However,
in spite of your best efforts to lead, guide, counsel, and inspire, the perfor-
mance of an individual just may not meet your requirements at times. What
should you do then? You can let everyone else pitch in to help, but is that
really fair? You can dismiss the individual in question, but is that really the best
solution?
It is unfair, in the long run, to allow someone to continue to fail and bring
down the organization. It does nothing for their morale or their future to
allow them to wallow in failure. It is unfair to sentence the rest of the crew to
having to work harder and overproduce to compensate for the shortcomings
of a colleague. It is not that he or she a bad person; he is in the wrong place
69
and you owe it to him and the organization to do what you can to get him out
of this bad situation.
Jim Collins, in his book Good to Great (Collins, 2001), uses a powerful anal-
ogy of getting the right people “on the bus” to provide us with inspiration
about how to deal with these types of personnel issues. As a manager and
leader you are responsible to the organization and to your co-workers for get-
ting the right people on the bus. That is, to hire and retain the people with the
right knowledge, skills, abilities, and attitudes to help maximize the produc-
tivity, profitability, and overall success of the organization.
Beyond getting the right people on the job, it is critical that you work to
get the right people in the right role. It is critical that you know your people
and your operational needs well enough, to be able to consistently match up
the right people with the right jobs and responsibilities.
However, occasionally you find that you have the wrong person in place.
Is it that you misjudged him in the first place? Did you hire the wrong person?
Did you put him in the wrong position? Or did he change? In the final analy-
sis the cause is not important. What is most important is that you recognize
that a problem exists and that you do something to resolve it.
The most difficult part is acknowledging the problem. Once you have over-
come this hurdle, the problem becomes one of determining the proper course
of action. The best course of action in all but the severest personnel problem
situations is to advance through a consistent and steady process of progressive
discipline.
Progressive discipline, as the name suggests, is not limited to a set path-
way to punish. It is, in contrast, a system that provides for and assures that a
consistent and fair approach is taken to communicate with employees. The
goal of this approach is to provide every opportunity to rectify substandard
performance. It is, clearly, more of a plan for corrective action than for contin-
ued discipline. Additional discipline, up to and including dismissal, exists only
as the last resort. We will look at this very important personnel management
process in depth in Chapter 24.

You may believe that people cannot be motivated always some tasks that are necessary but not fun. The
and do not want to work. Maybe you are missing the best way to deal with this problem has always been
point of resistance. Maybe it is not that they will not, to dole them out evenly across the board and let
possibly it is a combination that they cannot (do not everyone share the tedious tasks. That is the fairest
feel capable and will not admit it), or they are simply way, isn’t it?
resistant because they do not feel they have a choice. Based on informal conversations with employees
The following real-life story illustrates this point. he sensed that possibly those “tedious” tasks were
The manager of a department noticed that not really so troublesome for everyone. Perhaps they
although his team worked well together and had a were more of a problem for some than they were
commitment to the overall operation of the depart- for others. If this were true, maybe it was possible to
ment, at times some assignments just did not get find a better way to approach this. He decided to
done or if they got done they were done reluctantly include his employees in the process and try a new
and halfheartedly. After all, he reasoned, there are approach.
70
At their annual planning meeting, he decided items. The manager turned again to the group, saying,
to try a different approach this year. He started by “Does anyone here believe that I can do all of these
conducting an open brainstorming session. He asked things?” They somewhat reluctantly acknowledged
the employees to list all of the important tasks that that this was impossible. He then asked, “Let’s go item
the department needed to accomplish during the by item and make a decision about the remaining
coming year to be successful. The manager stayed in tasks. If no one thinks that a certain task is essential,
the background, writing down the tasks on the chalk- then we will just cross it off the list. If you think it is
board. When it appeared that they had exhausted essential, we will decide together who is willing to
their supply of ideas, the manager stopped, looked at take it on.”
the board, and said, “You realize that this is a pretty The end result of this exercise was that the
big list and that the only ones who can do these tasks department was more aware of what needed to be
are the people here in this room.” done, helped to develop the priorities of the depart-
The manager then asked the employees to go ment, and had a say in selecting how they would be
around the room, choosing the tasks that they were of service. They all felt better about their ability to
willing to accept responsibility to accomplish. After choose and to be able to do what they were most
everyone had volunteered for as many items as he or comfortable contributing. The final result was the
she felt comfortable doing, there remained a signifi- most productive and smooth-running year in recent
cantly smaller, yet still substantial, list of unclaimed memory for all concerned.
Leading 24/7
Leadership is more than an action; it is an entire philosophy of operation. Not
limited to size or stature, position or rank, it is a frame of mind. It springs from
an individual’s dedication to a strong set of beliefs and their internal motivation Motivation
to do all that they can to carry these beliefs forward. You cannot fake it, you The guidance, principle, or
must be it. People will know the difference. That is why people rally around belief that causes a person
the genuine and credible inspirational leaders and shy away from the paper to act.
tigers.
Leadership permeates one’s entire being. It cannot be put on or taken off
like a suit jacket or tie. Being a true and complete leader means that this phi-
losophy, this approach to life, permeates all that you do, both personally and
professionally.
The truly effective leader’s belief system is so strong and such an integral
part of who he or she is that it guides his actions in his personal life, whether
dealing with personal life issues or in interactions with friends and family.
Further, in the work environment it affects management style and the means
and methods of interacting with co-workers. It has a profound influence on all
decisions that will affect the current and future operations and initiatives of
the organization.
After all, everything and everyone that we interact with are to some
degree intertwined. We cannot totally compartmentalize our private life, our
personal life, or our work life. Because all of our actions are based upon our
beliefs, values, and passions, these common threads show forth in all that we
do. People see us mostly by what we do, not what we say. It is by these proofs
that they choose who they trust and who they will follow. Because being led is
a voluntary act, it is only by setting a living example that others will allow us
to achieve an effective leadership role.
71
SUMMARY
Leadership is a philosophy for guiding and directing the The key rule to follow to raise your level of supervision from
future of an activity, a department, or an organization and is management to that of leadership is to remember to manage
distinctively different than that used in traditional manage- resources and lead people.
ment. Leadership is an action, not a job title or position. It Finally, the road to effective leadership is built upon
is an effort to guide, direct, motivate, and inspire others to developing relationships with co-workers. It is imperative that
willingly participate in the initiative at hand. Leadership can you understand who they are and appreciate their potential
just as easily come from within the ranks as it does from and their inner motivations if you are to successfully engage
supervisors. them in the work. With this knowledge, it is possible to work
Most important, people often feel that they have no together to maximize their strengths and, get the best out of
choice whether or not to be managed. However, they must everyone, for their self-worth and satisfaction and for the ulti-
freely choose to be led, and by whom. The dynamics of lead- mate positive effects that it will have on their performance
ership are substantially different than those of management. and that of the organization.
In Questions 1–6 match the job titles with the description that 8. Learning to identify and build upon existing strengths is
best fits their job duties and indicate your choice on the line most likely to result in
provided to the left of the job title: a. lower employee morale.
_____1. Manage a. inspire others to b. confused and unmotivated employees.
action c. poor quality products and services.
_____2. Lead b. genuine d. none of the above.
_____3. Credible c. demonstrating
9. The best methods to inspire others to action are to
desired traits
_____4. Exemplary d. the reason to act a. rule with a firm hand.
_____5. Motivation e. direct to take action b. be a living example.
_____6. Authentic f. believable/consistent c. earn their respect.
d. assign very specific tasks only.
7. Toby, the service manager at Pyramid Motors, tends to e. both b and c are correct.
be an old-school manager. He feels that he is the boss f. both a and d are correct.
and that his job is to tell his employees what to do and to
make sure that they do it right, and do it now. Which of 10. You can get the best out of your fellow employees if
the following characteristics most closely fit Toby? a. you get them to do what you want them to do.
a. inspirational leader. b. you get them to want to do what is needed.
b. leads by example. c. you get them to stop thinking and just do it.
c. traditional manager. d. you do it all yourself.
NOTES
1. Myers–Briggs Type Indicator, Myers Briggs, MBTI, and States and other countries. Contact the foundation at
STEP III are trademarks or registered trademarks of coordinator@myersbriggs.org.
the Myers–Briggs Type Indicator Trust in the United 2. DiSC® is a registered trademark of Inscape Publishing, Inc.
72
REFERENCES
Buckingham, M. and Clifton, D., Now, Discover Your Secretan, L., Inspire: What Great Leaders Do (Hoboken,
Strengths (New York: The Free Press, 2001). NJ: John Wiley & Sons, Inc., 2004).
Collins, J., Good to Great: Why Some Companies Make
the Leap . . . and Others Don’t (New York: Harper
Business, 2001).
73
C H A P T E R
7
The Complex Role
of Management
CHAPTER OBJECTIVES
■ To define the major roles of the manager as ■ To value the importance of delegating tasks,
being a position holder, judge, and conduit within responsibility, and accountability
the organization and to the outside world
■ To identify the qualities of a respected manager
and an efficient manager
KEY TERMS
position holder respect responsibility

judge efficient accountability
conduit delegate
74
The Complex Role of Management ■ CHAPTER 7
Introduction
Many lectures have been delivered and articles and books written on the sub-
ject of management. A majority include how-to solutions on the best way to
manage. Some even promote a twelve step canned recipe: “just mix these ingre-
dients, add water, and stir.” A few reluctantly admit that they cannot cover the
entire range of management theory and, therefore, provide tips and tricks on
how to do one part of the job better. However, there are no two management
scholars, advisors, or practitioners who wholeheartedly agree on how to com-
pletely define and do management. Even if they could come to some form of
agreement, they would still be highly unlikely to practice it the same way. This,
I believe, is because of two very important truths:
1. Management is a very complex and ever-changing enterprise, because

it is focused on working with the most unpredictable, and constantly
changing ingredient known to man—other men and women.
2. Management is inexact, and good management better resembles a
work of art than a science project.
In response to these two truths, in this chapter we will explore and discuss
some of the major areas of activity and responsibility that comprise manage-
ment. This will help you build a better frame of reference of the wide range of
knowledge, skills, and actions that you need to effectively exercise to become
a successful manager.
An Ever-Changing Enterprise
Unlike the stability of working on a finite piece of machinery, working with
people, in the marketplace, and in our society is changeable. For example,
even though a fuel injection system may be highly complicated, with many
interacting parts, it has what I would call constancy. Each part on various
systems of a particular make and model is designed to fulfill the same func-
tion, operate in the same manner, and interact with the other parts in the
assembly in the same way. For that reason it is possible to learn the compo-
nents and functions of the system and, thus, be trained to troubleshoot, diag-
nose, and repair the system consistently. This does not imply that the repair is
simple. However, although there may be a variety of symptoms and resulting
causes that generate a system failure, they are predictable. Because the system
and its parts follow very specific and predictable rules and roles, the system
has constancy.
Dealing with people management, the major skill set of service manage-
ment, however, is highly inconsistent. Unlike the fuel injection system, the
“component parts” are all unique. That is why we call them individuals. Not
only are they each unique with complex values, attitudes, and life experiences,
they are constantly changing in response to external influences. These factors,
such as their personal and professional relationships, and what is happening in
the world around them, are unpredictable. Although you may be able to antici-
pate some changes, very often we are at the mercy of random, unexpected acts
and circumstances that we could not possibly foresee.
75
More Art than Science

In Chapter 5, we explored some basic management philosophies. One of them
was the scientific management movement of Frederick Taylor. Because of his
frustration with the inconsistency of management and, therefore, operation
of organizations, he attempted to break management down into a scientific,
consistent, and repeatable system. With his principles he helped people to
realize that through systematic approach, management and the organization’s
production could be made more stable. However, although scientific manage-
ment was able to result in a more consistent approach, it was not able to con-
trol the environment.
The dynamic changing environment that you live and manage in requires
that you have a broad knowledge base and are perceptive, energetic, and flex-
ible if you want to succeed. You have to be able to see what is in front of you,
identify it, choose the proper tool, and then respond appropriately. Unlike the
technician who sees an identical fuel injection system to the one that he saw
yesterday, you are more like the painter who goes to paint a landscape. Even
though you may have chosen the location and know the general surroundings,
you cannot predict the clouds, the color of the sky, the exact weather, the birds
and animals in advance. That is, there are many variables that you cannot
anticipate or control. Rather, to be successful and accurate in depicting this
scene, you have to bring your entire palette of colors and assortment of brushes
and then be prepared to use the proper tools and paints to respond to “what
is.” It is for this reason management is said to be part science, part magic, and
requires a lot of hard work and good luck.
The Major Management Roles

Managers function in several realms of activity every day and at every moment.
A manager is a position holder, a judge, and a conduit. Managers continuously
function to fulfill one or more of these three roles. They must remain flexible in
understanding the importance of and the distinction between these three
major areas of responsibility and be willing and able to fluidly move from one
to another at a moment’s notice. Let us briefly explore these three unique roles.
Position Holder
The manager’s position, or job title, tells everyone, both inside and outside
of the organization, that he is the person accountable for a well-defined area
of the total operations. A manager is more to employer, employees, and the pub-
lic than the individual that holds the title. The manager holds a vital role in the
Position Holder operation and success of the enterprise. As a position holder of authority and
An individual as described responsibility within the organization, the manager hopes to command the
by the official rank within respect of his co-workers by the merit of his character and behavior. However,
the hierarchy of the organi- the position that he holds carries with it a requirement of positional respect. It is
zation that he or she hoped that people will respect the manager as both an individual and a position
occupies. holder. However, it is absolutely essential that all involved respect the manager
for his positional power. Without this respect, the manager becomes totally
impotent and unable to effectively guide and direct the operation.
Upper management looks to the manager as the one who is able to put
management’s plans into action and guide those on the frontlines to successfully
76

After taking on the new role as service director in I am your friend, and I am your boss. I would
a large dealership, I quickly understood that there hope that we can continue to be friends and that
was some discomfort in sorting out the relationship we can continue to respect each other as
between the employees and the new manager. I had individuals. However, things have changed now
previously worked with these employees for five years that I am your boss. As your boss I expect and
as their district manager representing the manufac- require that you respect my position within the
turer. This was a collaborative relationship, and many organization. I hope that you can continue to
of us had become friends as we worked together to respect me as an individual. However, you need
resolve difficult technical problems. Now the roles to clearly understand that I am your boss, first
had changed, and I was their supervisor. The question and foremost. That is not an option.
became “What is the proper way to deal with our
relationship?” In so doing, I set down clear guidelines that posi-
After much soul-searching, I sat down with the tional respect was a mandate and personal respect
technicians and had a short heart-to-heart with each was desired. The guidelines put into clear focus the
of them during their evaluations. I expressed my con- expectations that I had for the behavior of the employ-
cerns about the growing discomfort that both sides ees, and to this day many of us continue to be good
were feeling with this new relationship. I summed up friends long after we have moved on into other posi-
my concerns as follows: tions and career paths.
implement that plan. The manager has been put in this position because of
his unique knowledge of this particular grassroots operation within the orga-
nization. Because of this knowledge, he is expected to fully understand how
the business works, how it should work, and how to keep it running most
effectively. The manager is also expected to be best capable of translating the
needs and desires of upper management into operational decisions that will
further those requirements within the specific unit.
The employees look to the manager as both their guide and their advo-
cate. As a guide the manager is an example. Further, the employees look to the
manager to direct their efforts so that they do the right things the right way,
resulting in success and positive results for all.
One of the most important roles of the manager is as the advocate of his
workers to upper management. They expect the manager to communicate with
management on their behalf, making sure that their department receives the
proper resources and support that it needs. Thus, the manager’s role allows
them to keep on doing what they do best while the manager makes sure that
their needs are met and their concerns are heard.
To the public, the manager is the company. When dealing with the man-
ager, customers expect that the manager is able to make decisions, cause
actions, and get results. They expect that the manager is their direct line into
the company and that he possesses the ability to commit the organization and
its resources and to mobilize those resources to address customers’ issues and
concerns. Just as they see the manager as the mouthpiece of the company,
they also see him as the visible example of what the company is and what it
stands for. Based on their perception of the manager and the impressions that
he conveys to them, the customers make wide-ranging decisions about how
77
they deal with the company and even whether to continue their relationship
with the company.
Judge
Work units frequently call upon their managers to make decisions—small and
Judge large—on their behalf. This role is much like the role of a judge in court. The
The role of being relied skills necessary to consider the facts and consistently make right decisions are
upon by others (employees) fundamental to being an effective manager. Managers are called upon to be
to make decisions on behalf umpires, referees, and even fortune-tellers. They are expected to make the cor-
of the group. rect decision on a moment’s notice, and to get it right every time. Seems
unreasonable, doesn’t it? Yes, these expectations may be unreasonable, but are
often expected and are a good reason to be prepared. Thus managers must
develop proper skills and knowledge to maximize the accuracy and consis-
tency of decision-making ability.

Through more than 30 years in a variety of manage- A word of caution is, however, in order. By this
ment positions in corporate settings, in dealerships, very meaningful example, I do not mean in any way
and in education, I believe that one of the best that you need to rush to judgment, making speed
management training courses that I ever took was more important than accuracy. Business decisions are
spending a few summers as a Little League umpire. a bit more complicated than whether the ball is over
What does that have to do with managing a service the plate and between the letters and the knees.
department? A lot more than you might expect. It often may take a bit longer to make the correct
People, whether they are your bosses, employees, decision.
or customers, expect you to be decisive. When they However, you can, and should, follow the two
come to you for a decision, they expect that you will rules of umpiring.
quickly and confidently make the call—the right call—
Rule 1: Make the simple calls on the spot and the
in a timely manner. If you balk at making a decision,
harder ones as soon as you are confident that
they think you are unsure about making decisions. Is it
you have enough information.
because you do not know? Or is it because you do not
have the authority to make a decision? Or are you Rule 2: Let your decision go once it is made. Try not
simply afraid to take risks? to make up for mistakes of the past by adjust-
As I indicated earlier, the best training and ing future decisions the other way. If you do,
repeated practice that I experienced to help me you will be spending more time trying to
along this way was umpiring. Go ahead, try it. Stand remember how you need to adjust your next
behind home plate some day and call the balls and call to even out things rather than focusing
strikes, whether it is for five-year-olds or for major what is really important—what is the right
leaguers. It doesn’t matter. You will learn two things. decision for this situation, this time.
First, everyone involved expects a speedy and accu- If you are serious about improving your skills as a
rate decision. Your worst enemy in this situation is manager, I encourage you, if time and opportunity
indecision. Second, and probably most important, permit, to volunteer as an umpire. Whether you do it
once you have made the call, you need to let it go for a day, a week, or a lifetime, I am confident you
and not let it influence your future calls. You will not will find it to be a valuable training experience for
always be 100 percent right, but if you try to make up your career in management and a good community
for a bad call you will just follow one error with an service along the way.
endless string of additional ones.
78
Although there are many situations where the manager’s decision-making

skills are tested, three major areas, although different, are integral parts of
management responsibility: planning and allocating resources, negotiating,
and problem solving.
It is doubtful that you will ever work in an organization that has unlim-
ited possibilities, unlimited potential, and unlimited resources. Therefore, an
important skill set of the manager is the ability to make decisions on where to
best use the limited, and sometimes even scarce, financial and human resources to
the organization’s best advantage. Decisions of this type are forward-thinking
decisions that will help the organization to set the right direction and then con-
sistently make the small decisions that keep the organization on this path to
ultimate success. We will discuss long- and short-range planning and decision
making to learn more about the principles governing this type of decision mak-
ing in Chapters 9 and 10.
When things do not go as planned, whether because of errors or unforeseen
events, it generally becomes the responsibility of the manager to identify, investi-
gate, and develop a course of action to resolve the concern. This role as a key
problem solver requires the manager to be able to investigate the situation
uncovering all the relevant facts while being able to sort out and disregard unnec-
essary information. The manager should identify the different possible courses of
action and determine the best one. The manager has to do this keeping in mind
the short- and long-range goals of the department and the organization.
In many organizations, effective planning and a philosophy of proactive
continuous process improvement do not exist. In such organizations the man-
ager can be find himself in the position much like that of a fireman. That is,
spending unreasonably high amounts of time putting out fires. That is, making
temporary fixes to problems that could have, and should have, been resolved.
Until the organization invests time and resources to anticipate problems and
continuously improve processes, these situations will continue to occur. Later,
in Chapter 12: “Continuous Improvement,” we will explore this topic in more
depth.
Effective negotiation is a foundational skill that is regularly called upon
in every manager. These skills are used in interactions with your supervisor,
managers of other departments, your employees, your suppliers, and your cus-
tomers. As long as resources are limited and people have differing opinions and
goals, negotiation will always be an essential skill. Negotiating is the ability to
find a mutually acceptable solution that meets the different needs of all the
parties involved. It requires listening, understanding, and the willingness
to compromise, with the objective of finding a win-win solution whenever
possible. More detailed examples of some of the strategies that are useful in
successful negotiation are presented later in Section 6, Customer Relations.
Although being a decision maker is an essential part of being a manager,
taking on the role of being the decision maker is a dangerous trap that every
manager must be careful to avoid. There is a large difference between the two.
Even though you will always find employees who are ready to second-guess
your decisions and criticize the results, it is very likely that you will find that
many of these employees are reluctant, when given the chance, to make the
decision themselves. Why is this so? Because they do not want to take the
responsibility that goes with making a decision. Everyone wants to be a hero,
but few want to be held accountable.
Many are just not willing to accept the responsibility for their decisions.
You, as a manager, are required to accept that responsibility. You should not
79
allow employees to abdicate responsibility for their actions, coming to you

every time for even the smallest decision. If employees are to be effective and
productive in their roles, you, the manager, should be able to delegate not only
tasks but the decision-making power and accountability that go with that role,
so that employees have the resources they need to do the whole job. You can-
not “sort of delegate” or “partially delegate.” You have to totally delegate both
the responsibility and the accountability, and with this delegation goes the
expectation that employees will make the small decisions along the way.
Those with big egos might find it fascinating that their employees circle
around them to make every minor decision. They might even have the miscon-
ception that this shows how indispensable they are to the department and the
organization. Little could be further from the truth. For, it is not until you are
able to have your employees understand and embrace taking full responsibility
and accountability for their jobs, that you will be able to effectively manage.
Conduit
Conduit What is a conduit? It is a pipeline that assures that something of value gets from
The role of communicating one place to its intended destination. Just as a physical conduit protects the
information to other places wiring, assuring that the electricity gets from one end to the other consistently
and areas within the and without loss, so an effective manager acts as a conduit for communication
organization. taking the responsibility, on a regular basis, for communicating up, down, and
across the organization. The manager regularly takes in, transfers, and distrib-
utes information on behalf of the company and its employees both internally
and externally.
There is a great deal of activity that happens within the organization, the
industry, and the market that it operates in every day. The manager plays an
important role in monitoring current events within the organization as well
as industry trends and changes to assure that the organization as a whole and
the individual employees are best prepared to gain maximum benefit from
these opportunities.
The manager has to disseminate to the frontlines the information he gath-
ered through meetings with management about the current status of the orga-
nization and plans for the future. This is essential for keeping the operations
and the direction of the department clearly aligned with the strategic direction
of the organization (see Chapters 9 and 10). Without clear and consistent com-
munication of this information, the department can easily become out of
alignment with the direction of the company. They may be making ground but
wasting their energy heading in the wrong direction. As the old adage goes, “If
you do not know where you’re headed, be careful, you just might get there!”
Not all the rank-and-file employees attend all the meetings and informal
discussions with other departments and with upper management. That would
be terribly inefficient. Who would do the work if everybody was tied up in
meetings all day, every day? The department manager has, as part of his role, to
be the spokesperson of the department. In doing so, he plays an essential role
in communicating upward the needs and concerns of the employees. The
employees expect him to advocate on their behalf to assure that their needs are
fairly considered and addressed. The manager also advocates to upper manage-
ment, assuring that the department receives a fair share of scarce resources.
Finally, he communicates the management directives down to the department,
representing upper management, making sure that any important information
is passed down to each employee of the organization.
80
A very important piece of guidance on being an effective conduit of upper

management to the frontline employees is ownership. That is, as a manager you
are part of management. Therefore, your superiors and your employees expect
that when you serve in the role of communicating management directives, you
do so as the mouthpiece of management, not as a third party. There is a signifi-
cant distinction between saying “my boss said we have to . . .” and saying “I’ve
discussed this with the rest of the management team and we have decided that
we have to. . . .” In the second example, the manager is speaking on behalf of
management; in the first one he is speaking about management. Similarly, when
the manager takes issues up the ladder to his supervisors, his employees expect
the same courtesy and commitment that he is willing to advocate on their behalf
and as part of their team, not as a neutral third party who is just the messenger.
Finally, just as the conduit protects and isolates the wires from the outside
environment, so the manager does this on behalf of his employees. The front-
line workers, technicians for example, have a specific job to do—they fix cars.
Anything that diverts their attention and energies from performing this job
considerably reduces their productivity and, thus, the ultimate capacity of the
organization to produce. As a conduit, the manager protects and isolates the
employees from unimportant and unnecessary distractions. This important
action helps to maintain high employee morale, preserve their ability to stay
focused on their primary task, and, ultimately results in consistently high pro-
ductivity and profitability.
Qualities of a Manager
Regardless of the industry, the size of company, or the overarching management
philosophy, there are some universal qualities that separate well-respected and
successful managers from the rest. No matter what the business setting is, for a
manager to succeed he or she must earn the respect of co-workers. In addition,
with the many and varying responsibilities that exist in all management roles,
he or she must be efficient to get the best use out of the most limited resource,
time. We will now discuss these two qualities in more detail.
Qualities of a Respected Manager

A manager who enjoys the respect of his employees is better able to get the Respect
most out of them and to foster a more pleasant and positive working environ- Holding or being held in
ment. It is through respect for their supervisors in the organization that high regard or esteem.
employees feel they are valued and important. When employees can look to
supervisors as a living example of the values and ideals of the organization,
they can much more easily buy in to the organizational philosophy. This
makes it more than mere words, it becomes very real. Thus, respect for the
manager helps to foster greater employee commitment to the organization.
This type of positive environment encourages employees to feel comfortable
in the work environment, to put forward their best efforts, and to make a
greater contribution to the success of the operation.
A manager must possess a number of attributes in order to gain the employ-
ees’ respect regardless of his management philosophy or that of the company as
a whole. The ideal manager exhibits the following attributes:
• Hard working—Employees do not seem to mind working hard and going
above and beyond the call of duty when they feel that the manager is
81
willing to do the same. If the manager is unwilling to put forth at least

the same level of effort and commitment that he demands of his
employees, they will be less likely to work hard for him.
• Pleasant—Employees respond best to a manager that is encouraging,
upbeat, and enthusiastic. Being pleasant helps to “pump up” the employ-
ees and encourage them to want to perform. Employees in a positive
work environment often look to their supervisor for encouragement
and direction. When the going gets rough, they look to their manager
for that inner strength that allows them to keep the faith and, as a
result, helps them to muster up the energy to persist.
• Honest and upright—Most employees prefer to work for a manager who
establishes clear ethical guidelines and adheres to them consistently.
Employees need to know their manager will never ask them to do any-
thing they consider dishonest or expect them to bend the rules to suc-
ceed. Even slight differences between the employees’ expectations and
the manager’s standards can create an environment of distrust.
• Dependable—Employees look to their manager as the company’s accepted
model of behavior and performance. They expect the manager to be level-
headed; someone they can count on in even the most difficult situations.
Managers are also the intermediaries between employees and the remain-
der of the organization, and an employee’s future in the company rests
largely in the manager’s hands. Because managers wield such influence,
employees must trust their managers and know what to expect of them.
• Consistent—A manager can build trust among his employees by treating
them all in a similar manner, avoiding any hint of preferential treat-
ment. Employees must trust that the manager’s decisions are all based
on performance and principle, not on personality.
• Firm—Employees realize that managers are responsible for getting the
job done. Good managers clearly and consistently communicate what
they consider important and what they expect of employees. A less
direct and firm approach, with vaguely defined expectations, goals, and
objectives, too often leads to misunderstandings and general employee
dissatisfaction.
• Organized—Employees expect their supervisor to serve as a source of
guidance, information, and stability within the department. They expect
that their manager is keenly aware of organizational, departmental, and
individual priorities at all times. They expect that the manager is able to
multitask—that is, that he is organized enough to keep track of all the
tasks and challenges at hand, at any moment in time, and can deal with
all of them simultaneously.
• Fair—Both reward and discipline exists within the workplace as tools to
help to encourage positive performance and curb negative performance.
Employees expect to see both of these methods used, but they need to see
that the rewards and discipline are used fairly across all circumstances and
all employees using the same standards. Simply put, the reasonable expecta-
tion is that the rewards fit the performance and that punishments fit the
crime.
Qualities of an Efficient Manager

Efficiency is one of the foundational traits of a consistently high-performing
manager. Efficiency speaks of your ability to be an example to your employees
82
of how to consistently get the most out of yourself and provide them a living
example of how they can do the same. After all, they all are looking for a good
example to follow that will make them more successful too. An efficient man-
ager is characterized by having the following attributes:
• Goal oriented—Efficient use of time, energy, and resources starts with
having a clear vision of where you are headed and why: establishing
clearly defined goals and staying on task to accomplish them.
• Disciplined—Staying on task consistently demonstrates an efficiency of
motion and effort that is needed to maximize the results of your efforts.
An efficient manager concentrates on achieving his goals and minimizes
distractions that slow down his momentum or waste energy or time.
• Self-motivated—A self-motivated individual knows where he is going and
focuses on getting there as soon as possible. The self-starter needs no
prods or reminders to spring into motion; he typically hits the ground
running and does not stop. His inner drive serves as a strong example
and inspiration for those around him.
• Nose for the goal line—The old phrase “When the going gets tough, the
tough get going” is the hallmark of the efficient manager. His motivation,
discipline, and goal orientation keep him pushing until he reaches or sur-
passes his goal. The efficient manager possesses a clear vision of the goal
that helps him overcome difficulties and obstacles that frustrate less effi-
cient employees and keep him from reaching his goal and his potential.
• Trusting—Typically characterized as the eternal optimist, the efficient
manager knows he can count on others. Because he believes this, he
helps motivate and inspire others to live up to these expectations. He is
thus able to count on more support from employees to aid him in
achieving goals and objectives.
• Seeks input—The successful goal-oriented manager is not a one-man show
or an egomaniac. The efficient manager realizes that he is the leader of a
team that can only win if everyone is motivated to pull together. To build
a true working partnership with employees, the efficient manager regu-
larly discusses goals and plans with co-workers, solicits their input, builds
consensus for team goals, and helps bolster employee commitment. Get-
ting input and then going in a different direction is not efficient, or effec- Efficient
tive. An efficient manager creates a work environment that is open to Being able to produce
input and suggestions, up and down the line. Everyone knows that they the desired results with a
are more than just another set of hands, that their input is valuable, and minimum of wasted time,
that their commitment is essential for success. energy, or other resources.
• Willing to let go—Delegating assignments and activities to workers is
necessary in all management environments. A manager can only truly
achieve efficiency when he is comfortable delegating both the task and
the responsibility for its completion and trusts that the employees will
do their best to accomplish the task. Only when the manager is able to
let go can he move on completely to his next responsibility and make
the most efficient use his time and energy.
Delegating Delegate
One of the most fundamental skills needed to effectively manage is the ability To give someone the power
to delegate. If the manager was able to do everything, there would be no need and authority to act on
for workers and no one to manage and lead. In its simplest sense, delegation is behalf of others.
83

One of the great fallacies of management is that “the and learning to understand, a well-known maxim,
boss knows best.” Many new managers struggle to often called, “The Golden Rule of Management.” Sim-
understand why employees question their decisions; ply, it states
from their perspective, they do not seem to “get it.”
People do things for their reasons, not yours!
I know I did. After all, I was chosen for the position
because I was best qualified. If you are interested in becoming a successful
However, the first step toward becoming an effi- manager, I encourage you to write this down, remem-
cient manager begins when you realize that you are ber it, and remind yourself of it every time you are
not managing yourself, you are managing others. You making a decision. It will help you to keep things in
need to be able to see the world through the eyes of the proper perspective and to find win-win solutions
your employees if you hope to appreciate, under- that will earn you loyal customers, happy co-workers,
stand, and meet their needs. One of the biggest aids and ultimate success in whatever business you pursue.
to helping me apply this on a daily basis was learning,
the ability to get others to be an extension of management. If you are able to

direct the efforts of others so that they become extra eyes, hands, and legs,
more work can be completed than you can do alone.
Many managers have risen through the ranks because they were the best at
a particular job. Because of their expertise in doing that work, their standards
are high and, thus, so are their expectations. Because of their skills, abilities,
and their resulting productivity, upper management commonly taps these
individuals for management in the hope that they will be able to guide and
direct others to follow their example. The company dreams that the result will
be a shop full of copies of the manager who will all produce the quality and the
volume of good work that the new supervisor has so consistently produced.
However, because of the high standards of this exemplary worker, who has
now become the manager, the new manager often quickly becomes frustrated
with the workers’ inability to do their jobs as well, as fast, and as efficiently as
they could do it. As a result, being able to resist the temptation to simply say
‘step aside and let me do it’ and learning to delegate is one of the most difficult
and challenging transitions to make. An effective manager gets the workers to
do the job correctly, consistently, and efficiently, thus resulting in the greatest
Responsibility amount of results at the lowest cost.
Being expected to assure Beyond simply learning to delegate (let go) and direct employees to per-
that a task or decision is form the tasks, there are two levels of delegation that are distinctively different:
carried out and achieves delegation of tasks and jobs and delegation of responsibility. By delegating the
its expected outcome. task, you make the employee accountable for getting the activity completed.
By delegating responsibility, you make the employee accountable for the
results and give him the latitude to do what it takes to reach that goal. True del-
egation requires you to let go and delegate the task and the responsibility. For
Accountability delegation to be effective, it is also essential that you demand accountability
Receiving appropriate from the employees for their actions, successful or otherwise. These are essen-
rewards or penalties based tial skills that every manager must possess to allow him or her the freedom to
on the results of your actions. address the many and varied broader responsibilities that go along with any
supervisory position.
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SUMMARY
Management is not only a skill; it is more than that. It is a com- there is time and resources to do them all. Therefore, the effi-
bination of knowledge and skills applied at the right moment in cient manager is aware of and judiciously chooses how to best
the right combination. When done well, it is more like a work use the resources and his efforts to get the best possible results.
of art than like applying a set recipe. Managers are expected to With the many duties and responsibilities that a manager
constantly juggle multiple roles. Their managers, their peers, is called upon to address it is not possible for any manager to
and their subordinates all look to them. Their role as a position do everything that is demanded of him or her. For that reason
holder, judge, and conduit of information is essential to the an essential skill is learning how to identify and prioritize the
smooth operation of their department and, as a result, the demands put upon the manager and to consciously decide
organization as a whole. As a result of these high expectations which ones will have the most impact and, therefore, where
and varied responsibilities, there is always more to do than to concentrate effort and attention to get the greatest results.
1. When a manager speaks, customers commonly expect 6. List three characteristics of a respected manager.
him to speak on behalf of
___________________________________________
a. entire industry. ___________________________________________
b. only himself. ___________________________________________
c. the department.
d. the entire organization. 7. List three characteristics of an efficient manager.
___________________________________________
2. Acting as a conduit within the organization, the effective ___________________________________________
manager ___________________________________________
a. communicates management information to employees.
8. The role of a manager in which customers see him or her
b. advocates to management on behalf of the employees.
as speaking on behalf of the company is
c. isolates the employees from unnecessary information/
interruptions. a. conduit.
d. all of the above. b. judge.
c. position holder.
3. An effective manager is able and willing to delegate d. all of the above.
a. responsibility for assignments. 9. Which statement does not fit with the others?
b. accountability for the results.
c. tasks only; the manager is the one who is responsible. a. Managers are always expected to be a conduit of
d. a and b. information to their employees.
b. Managers are always expected to provide informa-
4. If your supervisor determines the amount of your next tion freely to the press.
raise based on your performance, you are __________ c. Managers are expected to communicate employee
for your actions. needs to upper management.
d. Managers advocate on behalf of their department
a. accountable.
with other departments.
b. responsible.
c. rewarded. 10. Employees often come to their managers for decisions
d. all of the above. because they think that
a. they are not sure what to do and do not want to take
5. A key principle in understanding and motivating employ- the risk.
ees is that b. if the manager makes the decision, then the employ-
a. people do things for their reason, not yours. ees cannot be held responsible.
b. people do things for no apparent reason. c. if the employees make the decision, they might be
c. people do things for your reasons, not theirs. held accountable for the results.
d. people always want to make their boss unhappy. d. all of the above are possible correct answers.
85
C H A P T E R
8
Ethics and
Stewardship
CHAPTER OBJECTIVES
■ To assess the importance of applying ethical stan- ■ To recognize the stewardship responsibility of a
dards to the management of an organization manager toward the organization, co-workers,
■ To examine some of the fundamental ethical and customers
principles that relate to working with people
KEY TERMS
ethics truthfulness stewardship

applied ethics honesty reputation
responsibility integrity
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Ethics and Stewardship ■ CHAPTER 8
Introduction
We have explored a variety of principles and practices to guide you as a manager
to do things right. But how do you know you are doing the right things? That is
where values and ethics come into play. A dramatic example of an ethical
dilemma is the use of atomic energy. I have this powerful resource available to
me. Now, the question is: Do I use it to kill people (the bomb) or save people
(medicine)? This is an ethical dilemma.
In this chapter we will explore the general concepts of ethics. What are
ethics? And, more important, how do they affect me as an individual, a manager,
and a leader? These are some of the questions that you will need to grapple with
as you move into a supervisory position. Finally, we will discuss an important
opportunity to apply ethics—stewardship.
What Is Ethics?
Everyone makes decisions in his or her life. How do you decide what to do?
How do you make decisions in your life? Some decisions may be simple and
may not appear to be major issues; some may involve complex issues of
morals and values. However, a common factor is that all of the decisions that
you make are based on your beliefs and standards. Even decisions as simple as
answering the question: What do you want for dinner? may be dependent
upon your standards. Because of your personal beliefs, you may not eat certain
foods. Although this is a very simple example, it implies that underlying your
actions are your values and your fundamental code of ethics.
Ethics is applying your principles and values to your decisions and actions. Ethics
It goes far beyond justifying any specific action. Developing a code of ethics is a An individual’s application
process of determining a code of conduct and the principles underlying that of his or her principles or
code and then acting in a consistent manner based on those standards. This values in decisions and
becomes a firm foundation that helps to guide and support all of your deci- actions.
sions. Further, knowing why you choose those principles and values as the
foundation of your actions, you can defend and recommend those rules and
principles as guidance for proper behavior to others.
If you know where you stand on a particular subject or topic, that stance is
based upon some fundamental beliefs that you hold dear. Although some of
your ethical values may be based on your religious beliefs, your ethics are not
based solely on religious rules or doctrines. Your ethical values are a compre-
hensive set of values that you have developed over time that create the guid-
ing principles underlying what you believe in and, therefore, are the driving
force in the major decision-making process in your life. They are not an exter-
nal set of rules, such as a street sign that you should obey or a church rule that
you’re supposed to follow; they are internal principles and beliefs that are a
part of your core being.
For example, if you strongly value diversity, then all of your behavior and
decisions will be in agreement with that value. You would make a point to
assure that in your hiring practices that you provide open and equal access to all
people. In fact, you would most likely be sensitive enough to the issue to make
a point to intentionally reach out to a diverse population in the community.
This same value would also be demonstrated in your daily interactions with
co-workers and friends. Your circle of close friends would likely mirror your
values as we all tend to gravitate naturally toward those who share our values.
87
Your ethical values may come from a variety of sources. If you have been
raised in a family that is actively involved in religious practice, the values,
moral principles, and rules espoused by your church may be foundational to
your personal ethics. However, a formal religion is not the only source for
these basic principles. Just because you were taught principles and were
required to adhere to them does not mean that you truly believe in them, and
that is the true test of your core values. Your values may evolve as you
encounter and take a stand on matters of conscience, respect, consequences,
or justice. Taking into account all of the thoughts, experiences, and external
advice that you have encountered in your life, you formulate a stand on
many issues. The foundation underlying the decision to take a stand is your
values.
Although it may seem odd, your ability and willingness to take a stand can
help you to better understand yourself and what you really believe in. Many
of us do not take the time to examine our values. We are too busy living our
daily lives to get too philosophical. However, when you absolutely must take a
stand on an issue, it is a good time to stop and take stock of why you made
your decision. If you made an intentional decision, then the underlying
thoughts, principles, and values deep down inside of you were very likely the
determining factors in your knowing what was the right thing to do. There-
fore, developing self-awareness and, in doing so, an awareness of the value
system and ethics that are the foundation to your actions is an important part
of your personal and professional growth.
Applied Ethics
Now, you might be thinking that sounds all well and good and so ideal and
lofty, but what about dealing with this in the real world? Although you believe
in being truthful and want to live your life that way, if a customer asks you
what you paid your technician or what your actual cost is for the tires you are
trying to sell him, being totally truthful and giving him that information is
not in your best interest. What, then, is the appropriate use of these prin-
ciples, values, and ethics?
Ethical behavior implies that you live by a higher standard. Doing what
you can get away with is not enough. You feel an inner drive for your behavior
and your beliefs to agree. However, there are times when you might apply the
rules differently in different situations. How can you reconcile not being
totally rigid and allow for some flexibility?
In an ideal world, everything would be so consistent that decision making
would be simple. Life, however, is not simple. Neither is decision making.
Many of the decisions that we need to make are very complex. It is difficult to
apply one standard or one decision universally. We need to consider and make
Applied Ethics decisions on a case-by-case basis. Applied ethics is the real-world application
The real-world application of your core values and principles to the wide range of very different situa-
of a person’s core values tions that you encounter every day. It is not how you would or should apply
and principles to a wide them in an ideal situation; it is not how you would apply each particular value
range of different situations. in theory. It is how you decide in the complex situations you encounter daily
that often involve a complex interplay of many factors and many values all at
once. Your ability to apply your ethical values consistently and with convic-
tion is the true test of your core beliefs.
88
CASE a. Hire one of your employee’s daughters so you can

avoid wasting time and money advertising and
As a very busy manager in a large shop you have
interviewing many people.
learned that hiring a porter is always a time-consuming
task. It is so difficult sifting through the applicants b. Run ads in the local paper and be satisfied that
whenever you publicly announce an opening for low- whatever response you get is good enough.
skilled positions. However, as a person that values c. Advertise until you are convinced that you have a
diversity, you want to ensure that you are providing an diverse pool of candidates to interview and con-
opportunity for every qualified applicant. After all, you sider for the position.
cannot discriminate. d. Take your friend’s advice and hire one of his
You decide acquaintances who is a female minority, thereby
showing that you support diversity.
In this case, which of the following choices would be
your best option?
CASE that the word has gotten around the shop and that
everyone is waiting to see how you are going to treat
It has just been reported to you that your best techni-
this employee, who is taking supplies from the shop.
cian has been taking home some shop supplies
There appears to be more at stake than usual. You
(cleaners, lubricants, fluids) for personal use on some
are, with reason, concerned about the impact of your
jobs that he is doing after hours. You have always
response in this case. What would you do?
made it clear to your employees that all parts and
supplies are the property of either the company or a. Give him a stern warning making it clear that you
the customer and that the employees have no right cannot give him preferential treatment.
to use or take any of them for personal use. In fact, b. Make an example out of this technician by
you even reprimanded and fired an employee about severely punishing him for this infraction.
a year ago for stealing company supplies. However,
c. Tell him in private that although you would nor-
you give your employees the benefit of the doubt
mally write anyone else up for this, you are not
and normally give them several warnings before you
going to do anything this time because he is your
resort to stern punishment.
best technician.
You decide d. Because you know that other employees are
What do you do? He is your best technician and this is aware of the situation, reprimand him publicly
the first time that this has happened. Yet, you know and suspend him for three days without pay.
Ethical Leadership
Let us explore several key ethical principles. These are core values that every man-
ager should strive to demonstrate in every action and decision. Through know-
ing, understanding, and exemplifying these values, a good manager can build an
ethical foundation for his or her team. Therefore these ethical principles are very
likely to guide the actions that your entire organization will exemplify.
89
In Chapter 6 we discussed that people choose to follow a leader. You may

be able to manage and require compliance, but you cannot lead people with-
out their consent and their willing participation. We also saw that one of the
most important principles of leadership was to walk the talk. There is a need
to lead by example if we expect others to respect us as a leader. This alignment
between what we say and what we do demonstrates one of the most profound
attributes of a leader—credibility.
People are willing to make a commitment, take risks, and go beyond the
minimum required when they believe in a cause. Their belief in a cause is
dependent on the feeling that they are entering into a two-way trust relation-
ship. They can best reach this higher level of commitment when they see total
agreement between the words and the actions of the leader that they have
chosen to follow. You are credible when your words and your actions agree.
A second major value that underlies a strong management ethical system
Responsibility is responsibility. Responsibility is the willingness to take the praise or blame
Willingness to take the for the consequences of your actions. To be truly responsible, you need to rec-
praise or blame for the ognize that when you have authority you will be held accountable for making
consequences of one’s decisions that will affect you and others. Risk and reward are a part of any
actions.

As the service manager at a large dealership I received advisor that the customer needed, that’s what he
several complaints about cars that had returned called the customer and sold her, and that is what
within three months with repeat problems after you got paid to do!” He argued that what he did was
transmission overhauls. Because the technician who what he thought was best. I explained to him, “This is
performed the original repairs was on vacation, a dif- far more than a matter of a proper repair—it is a
ferent technician did the second repair (at the cost of matter of honesty. Our customers depend on us to
the shop). In two cases I found that the gaskets that give them the proper recommendations, and then
had failed were old gaskets; yet both customers had perform the work that we have recommended and
been charged for a complete transmission overhaul, stand behind it. We did not do that in this case.” He
and their bills indicated that they paid for a complete said, ‘Well, you can check around the shop and you
overhaul kit including all new seals and gaskets. How will find that other techs do stuff like this every day!’
could this be? We fixed the cars at no charge and The result was that we had a shop meeting in
apologized to the customers. which I clearly explained to everyone that we had an
Upon the transmission technician’s return, I con- ethical dilemma. I made it a strict policy that we
fronted him with what had happened. Without hesi- needed to be completely open and honest with our
tation he said that whenever he had to disassemble a customers. If we sold them a complete overhaul, we
transmission to repair a leaking seal or gasket he got needed to do a complete overhaul. If we, on the
a complete kit but only replaced the parts that he other hand, felt that a simpler replacement was
could see had failed. I asked, “What do you do with needed and we needed to buy more parts than were
the rest of the parts?” He responded that he kept used (such as having to purchase a seal kit or over-
them in his toolbox as spare parts for the future. haul kit), we were not to keep the unused parts.
I was very upset. I felt that this was dishonest and Those parts were the property of the customer and
unethical. I asked, “The customer paid for a complete should be returned to the customer along with all the
transmission overhaul, which includes replacement of replaced parts.
all seals and gaskets and all you did was to replace This was a matter of being open and honest with
one seal and a few gaskets?” He said, “Yes, why our customers about what they needed and what we
should I mess with parts that were not broken?” I were doing. And, even though it might be difficult at
responded, “Because that is what you told the service times, we were not going to hide the truth.
90
business environment. Without risk you will wallow in mediocrity. However,

you should take calculated risks while considering the potential impact on
yourself and others. Only when these factors have been taken into account
and you feel justified that the action plan is in the best interest of all parties
can you responsibly make weighty and important decisions.
Contrary to popular belief, there is no such thing as a harmless lie.
Truthfulness is an essential quality if you expect to command the respect and Truthfulness
commitment of employees and customers. Before they choose to follow your Providing only real and
direction and guidance they must believe that you will be truthful in the face factual information.
of any situation. Your reputation depends on it. They will only be willing to
consistently take risks if they are absolutely certain that you are telling it to
them straight.
A value that may at times be confused with truthfulness is the much more
expansive principle of honesty. Honesty implies a refusal to lie, steal, or deceive Honesty
in any way. It goes far beyond what you say; it involves what you say, what you Refusal to lie, steal,
do, and the intent underlying your actions. It requires that you make every or deceive in any way.
attempt to do the right thing.
Ultimately, when you are able to consistently demonstrate through your
words and behavior that you are credible, responsible, truthful, and honest,
you have achieved integrity. A person that others see as having integrity is one
who is able to demonstrate his values openly and consistently to the point
that others see him as being wholly incapable and unwilling to waver on these
values. This is one of the highest compliments for someone who is striving to
achieve and live an ethical life.
CASE $80 and do not say anything more about the fact
that you only need to replace one $3 seal so that
You are the service manager of a small transmission
you do not get her upset.
shop. Your technician comes to you and indicates
that the problem with Mrs. Jones’ car is that there is b. Install all the parts in the kit because you are
an internal leak in the automatic transmission that is going to charge Mrs. Jones for them, so that she
causing it to slip in first gear. Because the parts are will have all new gaskets and seals in her
available only as a complete gasket and seal set, and transmission.
although Mrs. Jones needs only one seal you are c. Explain the cost of labor and parts and very apolo-
going to have to sell her the labor plus an entire seal getically explain Mrs. Jones that the parts are only
kit for $80. available as a kit and that you will be giving her
the remaining new parts separately because she
You decide
has paid for them.
You know that Mrs. Jones is going to be upset when
d. Give Mrs. Jones a total estimate, replace the seal,
you tell her about the needed repairs and especially
and put the rest of the gaskets in your toolbox
that it is going to cost her $80 for a seal set when all
along with all the others that you have saved over
that she really needs is a little O-ring that is worth
time so that you can use them in the future if you
about $3. Which of the following would you do?
need them.
a. Explain to Mrs. Jones that the transmission needs e. More than one of the above answers is correct.
completely overhauled and that the cost of parts is
91
The Importance of Ethics

Anyone may believe in the values that we have discussed and demonstrate
some degree of success in living these values from time to time. However, it is
not until you become aware of these values, acknowledge their importance to
you, and make a conscious commitment to use them as guidance for your
actions that your actions will consistently reflect your values. This increased
awareness of and reliance on these values as a consistent foundation for your
actions results in your ability to use these important principles as the founda-
tion of all that you do. This is ethical behavior.
As a manager you are constantly under the microscope as both your co-
workers and your customers look to you to evaluate your ethics and standards.
Employees and customers alike look for something and someone to believe in.
They measure whether you fit that standard based on the values and attitudes
that they see you demonstrate on a consistent basis. The foundation of these val-
ues and attitudes is your internal awareness of your code of ethics and the degree
to which you demonstrate that consistently in your behaviors and actions.
Co-workers, whether they report to you or work in other departments reg-
ularly look for guidance, direction, and inspiration. To make a real commit-
ment to the organization, they look for a leader they can choose to follow.
Further, as they go beyond merely accepting you as a leader and look for inspi-
ration, they expect that your actions match their high standards and values.
Your visible and consistently applied high ethical standards will be essential in
helping them to raise their level of commitment to you and to the company.
Customers and external partners, as well, choose to work with someone that
they believe has integrity. They expect that they are respected and that they will
Integrity always be dealt with fairly and honestly. Integrity implies that the values are so
Behavior that upholds a much a part of you that they are an integral part of who you are and are con-
high standard of moral and stant and unwavering. Because you are the company in the eyes of the vendors
ethical values. and customers that you deal directly with, you have to be the indicator of
whether the company is credible and has integrity. If they cannot see integrity
in the company’s actions, their relationship will be tentative at best. They will
feel insecure and be wary of getting mistreated. They will not be able to develop
and maintain a comfort level in dealing with you and your company unless and
until they can feel that you have demonstrated these attributes.
Core values and ethics are not limited to the handful of key concepts and
principles that we have presented. These broad principles can and should
become the source for you to begin to reflect, consider, and analyze your val-
ues and your standards, and in so doing become clearer in understanding your
ethical values.
Stewardship
In recent years there has been a growing focus in the business world on the
use and abuse of power by managers. The blatant disregard of some employees
for those resources that have been put at their disposal has resulted in some of
the most momentous cases of fraud, theft in office, and embezzlement that we
Stewardship have ever witnessed.
Taking appropriate care for These recent developments have resulted in a heightened interest and sensi-
resources or assets that are tivity of stewardship. Stewardship is the act of taking appropriate care for some-
under your care and one else’s resources or assets that have been put in your care and custody. Every
custody. manager, by the nature of his or her position, acts on behalf of a supervisor, the
92
owner, and/or the board of trustees in this fashion. The very nature of the orga-
nization delegating responsibility and authority downward to subordinates,
ranging from vice presidents down to coordinators and group leaders, carries
with it not only the power to make and enforce decisions, but also responsibility
and authority. Stewardship is a major responsibility of every manager.
Because you are a manager, your supervisor or the organization has put at
your disposal various assets of the organization with the expectation that you
will utilize them to the best benefit of the organization. There are three major
areas of stewardship responsibility. The most common is financial stewardship,
but your responsibility extends beyond merely watching the money. A second,
yet just as important, stewardship responsibility is the responsibility for main-
taining the reputation and good name of the organization. Finally, as the
supervisor and advocate for your subordinates, you also have a stewardship
responsibility for the careers and future of your employees and their families.
Financial Stewardship
Some of the most tangible assets that you have stewardship responsibilities
over are the physical resources (shop, tools, equipment) and the budget (com-
pany funds) that you can access and use within your judgment as a manager.
If you ask about this responsibility, any manager will quickly acknowledge
that he or she is responsible and held accountable for the bottom line of their
department or operation. But stewardship goes beyond a responsibility for the
“bottom line”; it also includes the reasonable and ethical use of resources to
achieve that bottom line.
Some of the well-publicized trials of business executives have resulted
from managers who were trying to maximize the bottom line. That’s their job,
right? Yes, but the ethical use of the resources in their care and custody is also
their responsibility. That is stewardship. No manager has the right to do what-
ever it takes. No manager has the right to disregard the rules to achieve suc-
cess. This is true with their own money and, even more important, with the
money and assets of others.
As a responsible manager you are expected to provide direction and use
those financial and physical resources that have been put at your disposal in a
manner consistent with the guidelines and direction of your supervisors and
your organization. You need to manage every resource in a manner that you
believe your supervisors would agree with if they were to be making the deci-
sions themselves. This requires that you clearly understand the organizations
goals and values to guide you.
How does this set a higher standard beyond strictly staying legal and
improving the bottom line? It requires you do not take for granted, waste, or
in other ways bend the rules even if the likelihood of getting caught is mini-
mal. “Would the owner approve this if he knew about it?” or “Would the
board of trustees approve?” should be the test of your actions. Even further,
you might ask yourself, “How would I feel if this was reported on the front
page of tomorrow morning’s newspaper?”
Just because you can take a few shortcuts does not mean that it is OK to do
so. Just because no one will know if I use the company car for personal busi-
ness or “borrow” some of the shop tools to do some work at home does not
make it proper stewardship. Appropriate financial stewardship requires that
you exercise the fair and reasonable use of those resources that the company
has put at your disposal and under your care and custody.
93
Reputation Stewardship
Reputation Successful organizations are built upon their public reputations. These repu-
The commonly held tations are earned over a long period of time based on years of consistent per-
perception of a person’s formance. In the view of customers you, as a manager, are the company. For
character and values based that reason your words and actions represent the company and you are per-
on their past actions and ceived as acting on behalf of the company. Customers expect that whatever
behavior. you say or do is a clear indication of the company’s values and beliefs.
If a customer sees a behavior that enhances her perception of the company,
you have improved your company’s reputation. Conversely, anything that you
do or say that lowers a customer’s perception can significantly and perma-
nently damage the reputation of the company. Your stewardship of the com-
pany’s reputation as a frontline representative of the company, therefore, is a
responsibility that you must acknowledge and take very seriously. Although it
may appear more subtle than mismanaging financial assets, it can have a
greater impact on the company’s success or failure than the loss or waste of a
small amount of money. Stewardship in this regard requires that you take
proper care of the trust and goodwill of the good name of the company.
Employee Stewardship
The third and final area of stewardship that you must carefully exercise is that
over the well-being of the employees under your guidance as their manager.
This area is the one most often ignored. As a manager you are responsible
to upper management and the shareholders for the success of your depart-
ment. When your department meets or exceeds expectations, you and your
people receive rewards and accolades. When your department falls below
expectations, especially in the long term, it results in upper management deci-
sions that directly affect you personally. The consequences may include
increased hours, being passed over for promotions, cuts in pay, and even layoff
or termination.
These benefits and consequences not only directly affect you, but also
affect the people working under your guidance. Layoffs, reduction in benefits,
lack of raises, and even getting passed over for new tools and equipment may
all be the result of poor departmental performance. These actions may cause
problems ranging from disappointment to a career crisis for your employees.
It is not uncommon to think about how the performance of your employ-
ees can either make or break your success as a manager. Because you cannot do
everything, to be successful, you depend on their performance. Conversely, as
their manager, leader, and coach, your employees’ future is in your hands. The
decisions that you make directly affect the working environment within
which they operate.
You are the steward of the working environment for those employees that
you supervise. Global decisions such as pricing, advertising, promotions,
pay rates, work distribution, and hiring of other employees can create, alter, or
hamper opportunities for them to be successful. Employees work for you
and your company and trust that you have their best interest in mind. In
return you expect them to feel and act the same way toward you and the com-
pany. Your responsibility toward your employees is not to be taken lightly
because it can dramatically affect their success at your company and may, in
the long run, have a major impact on their entire career, their well-being, and
that of their family.
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SUMMARY
Ethical behavior is critical to the ongoing success of anyone in Stewardship adds a new dimension to the entire issue of
business. However, the majority of time and effort are too responsibility. It is for this reason that many employees, upon
often so focused on what needs to be done that little con- considering the amount of responsibilities that they have to
scious effort is ever put into considering why things need to others and to the organization, decide to remain as workers
be done. The ethical values of any individual or any organiza- rather than as a manager. However, although the power and
tion build the foundation for why they do what they do. authority of managing may sound attractive you cannot use
Ethics are more than doctrines or principles. They are authority alone. There are three major areas of stewardship
your core beliefs. They are how you put your principles and that all managers must address: financial, reputation, and
values into action and they provide a solid base for every deci- employee stewardship. With authority comes responsibility,
sion that you make. and stewardship is a major responsibility of every manager.
1. As a manager you have some degree of responsibility for c. you do whatever it takes to make them money.
the financial resources and reputation of the company d. none of the above.
along with the future of your subordinates. This is called
5. The application of your principles and values is
a. stewardship.
a. empathy.
b. accountability.
b. consistency.
c. unreasonable demands.
c. ethics.
d. leadership.
d. inconsideration.
2. Ethics is based upon
In Questions 6–10 match the definition with the term. Indicate
a. long-held personal beliefs. your letter choice on the space to the left of the definition.
b. those things that are important to you.
c. what your religion teaches. _____ 6. Values are an integral part of a. credibility
d. all of the above. who you are
_____ 7. You are able to walk the talk b. integrity
3. Using ethics in a variety of every day situations is called _____ 8. You tell it to them straight c. honesty
a. being a hypocrite. _____ 9. Willing to take praise or blame d. truthfulness
b. applied ethics. for your actions
c. living the dream. _____ 10. Refusal to lie or deceive in any e. responsibility
d. none of the above. way
4. Being a good steward of your employer’s resources
means that
a. you are careful not to get caught.
b. you do not care about their reputation.
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SECTION
3
MANAGEMENT STRATEGIES
P lanning and goal setting are essential to obtaining the greatest results from the
resources that any organization has at its disposal. Meaningful and reasonable goals
and objectives help to keep the entire operation headed in the same direction––the right
direction. Building a continuously growing, continuously improving organization is essen-
tial to fend off competition and ensure long-term success. With these principles in mind
we will explore the multiple levels of planning that are essential to building a clear and
comprehensive strategy to achieve your goals. Finally, we will discuss those principles that
can help a successful organization to continue to thrive and strive to be better every day.
• CHAPTER 9: Long-Range Planning • CHAPTER 11: Decision Making

• CHAPTER 10: Strategic and Short-Range • CHAPTER 12: Quality and Continuous
Planning Improvement
C H A P T E R
9
Long-Range Planning
CHAPTER OBJECTIVES
■ To identify the foundational principles of long- ■ To be able to understand the importance of

range planning short-term planning and activities in relation to
■ To examine the importance of a vision and mis- long-range goals
sion in the direction of an organization
KEY TERMS
vision values
mission goals
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SECTION 3 ■ Management Strategies
Introduction
Successful individuals share the common traits of being both focused and
committed to a well-defined direction and objectives. Whether it is a business
leader, a minister, an educator, or an athlete they all share a passion for what
they do and maintain a clear focus of where they are headed. They are, in fact,
living their dream. This is a statement you have probably heard a thousand
times. But, have you ever stopped to ask yourself: What is my dream? Clarity
of direction and purpose is an essential trait of successful individuals . . . and
also successful businesses.
In this chapter we will explore how to clarify the overall dream of your
department or organization. Once this has been established we will discuss
how to methodically translate this dream into reality as you learn to break it
down into practical directions, goals, and actions so that all of your efforts can
be directed to accomplish it.
The main components in building the big picture future for any organiza-
tion are in identifying its vision, mission, values, and goals. Once these are
clearly defined we will then need to take a look at the day-to-day means to plan
and carry out the activities and actions that will assure this reality is achieved.
Many highly motivated people are in too big of a hurry to dig in and get
started with the work at hand without considering their ultimate direction.
Where are we really trying to go in the long term? What is our final goal and
destination? Without a clear vision and picture of the long-term objectives it
is very possible that the short-term activities may be taking you, and your
organization, in the wrong direction. Long-term planning and the roadmap to
success that it provides will help guide all of your actions.
It is essential to step back and take the time to develop this plan first.
Long-range planning comes first. Figure 9-1 is a planning funnel that illus-
trates how these important planning activities relate to each other.
Vision – The dream of who you want to be VISION
Mission – clarifying your direction and MISSION

purpose
VALUES
Values – what you hold to be important
Goals – what you plan to achieve GOALS
Figure 9-1 Planning funnel
Vision
Vision Your vision is the dream of what it would be like if everything worked out just
The dream of the future the way that you want it to be. Yes, I agree that it sounds very idealistic. Yes,
that you desire. you might say to someone with such a vision that he has his head in the clouds.
Actually, to create a vision your head has to be above the clouds . . . it is more
100
Long-Range Planning ■ CHAPTER 9
like the view of the organization from space! Warren Bennis, management guru,
defines a vision in this manner
To choose a direction, an executive must have developed a mental image of
the possible and desirable future state of the organization. This image, which
we call a vision, may be as vague as a dream or as precise as a goal or a mission
statement. (Bennis, 1985)
Those who are more action oriented may want to argue that it is a waste of
time to be dwelling on dreams. However, the idea of this big picture is not to do
the business of the company but rather to be the company’s guiding light. The
vision creates a framework that can answer the question, If I could build the
company from scratch today to be the biggest and best in the world, what
would it look like? Only with this type of vision of the possibilities it is possible
to align all of your energy and resources toward the ultimate achievement of
that dream.
The vision is a dream of what reality could be if there were no obstacles.
Why look at it that way? Until you are able to look at the possibilities and see
beyond the limitations you will not be able to break through those limiting
factors that are holding you back. It would be too easy to set your sights on the
easily achievable objectives. However, the true trendsetters, the breakthrough
organizations, are those that have learned to see beyond the obstacles and are
able to envision clearly how they could be . . . and then muster up the energy
to find a way to get there despite the obstacles. Creating a vision requires that
you stretch beyond what is easy and achievable.
A vision statement can be as short as a phrase or as long as a paragraph.
Usually the vision statement is brief because its goal is to create an image that
explains the company’s dream. Some examples of a vision statement are
• To be the people’s choice of (location) to meet all of their automotive
service and repair needs.
• Providing the best solutions to meet the needs of the motoring public.
• (Company Name) strives every day to be the best automotive service
company. We do so by living by the old-fashioned values that too many
companies have forgotten: providing you with courteous, friendly, and
affordable service. We want to become the one-stop solution to all of
your automotive service needs.
• When people in (city) think of service, they think of __________
Automotive Service Centers.

Have you ever been to a company picnic? Whether it drawn on the ground. Each group takes its end of the
was as a child along with your parents or more rope and the goal is to pull hard enough to pull the
recently as an adult it is likely that you’ve been to one other team over the line. What is the key to success in
or more in your lifetime. One of the oldest and most tug-of-war? Everyone on the team must have a clear
common team activities that you’re likely to see— vision of what the ideal result is and then be commit-
and be encouraged to participate in —is the depart- ted to combining all of their energy to pull as hard as
ment tug-of-war. they can in the exact same direction. The team that is
The object of tug-of-war is very simple. All you the best at achieving a shared vision is likely to be the
need are a rope, two groups of people, and a line victor.
101
This would be a good time to take a few minutes before you read on to go
on the Internet and spend a few minutes searching for vision statements of a
variety of well-known companies. Just do a simple Web search. Enter the
phrase “vision statement” along with the name of a major corporation.
Reviewing others’ statements should help better understand the purpose and
structure of an effective vision statement.
The vision, then, becomes the guiding dream of the organization. It can
be a powerful tool to inspire everyone. It can also be instrumental in helping
to ensure that both current and new employees share that common dream; if
they don’t, they will not be willing to make the efforts to make the dream a
reality.
A clear vision reinforces to everyone in the organization that their efforts
are headed in the right direction. It should be a source of encouragement and
reassurance when they feel the need to be reminded why they’re doing what
they’re doing. It can also be used to answer the question, Should we be doing
this? to assure that their efforts stay on track.
There is a problem, however, with a vision or a dream. You need to have
one, you want to achieve one, but you can’t do one. A vision is far too broad,
too long-term, and too general to implement. It, therefore, requires that you
break it down into smaller, more focused bite-sized chunks so it can be
achieved. The first step in breaking the vision down into more manageable
components is the development of a mission.
CASE You decide

You have just come into an inheritance that will As a foundation to building this dream into a reality
allow you to live your dream. You have worked for you realize that you need to have a clear vision of
the past 15 years in the automotive service business what you want to achieve. After taking some time to
and have always dreamed of the opportunity to open think about how you would approach this if you had
your own small independent repair shop in your the opportunity, and drawing on the information
hometown. You now have the seed money to do just above on vision statements, please develop a short
that! You can afford to purchase a piece of property paragraph that best describes your vision for your
and build an eight service bay shop right on that spe- new service shop. Once you have written the para-
cial corner in town that you’ve had your eye on. graph, narrow those thoughts further into a vision
statement for your new company.
Mission
Mission The mission is a clarification of the direction and purpose (vision) of an orga-
The current direction and nization. Although it hoped that all employees can easily share the vision of
purpose of an organization. the organization, it is far too lofty and vague to easily translate into action. It is,
therefore, important to be able to begin to break the vision down into bite-
sized pieces that can help answer the question of how that vision is going to
affect and guide the actions of the organization and its people now. If you refer
back to Figure 9-1, the funnel, you can see that as we move from the nebulous
102
vision process into developing the mission it is a matter of narrowing down

and more closely focusing and defining just who we are and what we do.
If you know what your dream (vision) is, what are you going to do about
it? What direction should you head in in order to be sure that you arrive at
this destination? As you move from defining your vision to establishing your
mission, you are moving toward breaking down the vision to make it real and
achievable and to act as a guide for all of your current and future efforts. Thus,
the mission is a clarification of who you are, what you do, what direction
you’re headed in.
Although it is uncommon for anyone to put their vision on a billboard or
widely share it with the world, once the vision has been distilled down to a
mission it often takes on the role of being the public announcement of who
you are and what you do. It is a long-standing commitment to yourself, your
employees, and the world about you. It is a statement of purpose that you
gladly and openly express to tell everyone what they can expect from your
organization. In fact, if you search for the Web site of any large organization
you’re likely to easily locate their mission statement.
Mission Statements
As you might guess from the discussion in the previous section, if the mission
is something that you’re going to use to tell everyone, employees and public,
who you are and what you stand for, it is really important that you make it
clear. As a result, developing a mission statement is a very difficult task, yet a
very important one. The major difficulty is in being precise enough to select
just the right words that accurately tell who we are and what makes us unique.
Let’s discuss how to go about developing one.
A mission statement is generally a short paragraph (no more than three to
four sentences) that clearly defines the big goal for your existence. (Note: It is
probably not a good idea to publicize a mission that says “I want to get incred-
ibly rich and retire.”) Although it may be used for marketing purposes, it is
more than a slogan. It is, therefore, important to carefully select the words so
that they convey the meaning that you intend. Use of marketing jargon is
strongly discouraged.
Because the mission statement is the standard by which your organization
will be judged, its development should be taken very seriously. All of your
employees will be expected to live by it, therefore, it is highly recommended
that you get significant involvement from all employees in the development
of the statement. After all, you’ll expect them to know it, believe it, live by it,
and demonstrate it with their everyday performance. (Note: In many highly
successful, driven organizations employees can recite the mission statement
on demand.) This may seem like a lot to ask, but your customers will expect
no less than this since you’ve publicly declared your mission to be your reason
for being.
The mission statement is a logical next step from the vision statement. For
example, in the section on vision we were working for the company that had
developed the vision statement: “When people in (city) think of service, they
think of __________ Automotive Service Centers.” Assuming that their vision
statement is an accurate reflection of their dreams and aspirations as an orga-
nization, their mission statement should, then, logically flow from that vision
down into a statement of what they intend to do (big picture) to make that
103
vision a reality. In the vision statement the scope of their market was defined
as the city that they reside in. The company further indicated that the test of
achieving its vision was: when people . . . think of service. Therefore, being
first in the minds of the customers is essential. In addition, providing service
that will make the company’s name the first that comes to mind is also essen-
tial. Service, however, appears to be a focal point of the vision and, therefore,
is very likely to be the area to better define, describe, and expand upon in the
mission statement.
Working to develop a mission statement from this vision statement would
require, then, that you further define how you intend to become this vision.
Service can be defined from several different values: quality service, rapid
service, high-tech service, friendly service, affordable service, convenient service,
and many combinations of these attributes. The question then becomes how
to break down the dream of the vision statement into a group of statements
that answer the question How are we going to be the vision? What statements
are we willing to make that will best explain what sets us apart from the com-
petition? Here are some possible examples
• We will provide consistent, high-quality, affordable service that is

unmatched in the marketplace.
• We will maintain competitive prices and convenient service hours to
meet your every service need.
• You can count on the fact that all of your services will be provided by
certified technicians.
• All of our services are backed by a lifetime no-questions asked warranty.
These promises could then be blended together into a mission statement

that goes something like this
__________ Automotive Service Centers commit to provide unmatched,
affordable service to our customers. We commit to do so by providing quality
service performed by certified technicians in our state-of-the art facilities, at a
competitive price and with convenient service hours that will meet your
service needs. Finally, we back up these promises with an unprecedented life-
time no-questions-asked warranty on all services.
Again, I recommend that you take a few minutes now to surf the Web
to view a variety of mission statements for some well-known companies. It
will help you to get some ideas about how to build your own mission
statements.
CASE You decide

Based upon the vision statement for your new shop Using the vision statement in Theory into Practice 9-1
in Theory into Practice 9-1, it is time to move on to as a basis, and using the directions provided in this
better understand how to define that vision and put section on mission statements, construct a mission
it into action. statement for your new automotive service business.
104
Values
Values are the guiding principles that keep all of your actions and initiatives Values
aligned with your organization. They are, simply put, what is important to Guiding principles of the
your organization. These values will be aligned with your ethics, a topic that organization.
we explored in greater detail in Chapter 8. They are standards that are impor-
tant to you and ones that your customers can count on you to uphold. The
illustration in the Planning funnel (Figure 9-1) shows that the values further
focus the planning so that the resulting goals are aligned with the organiza-
tion’s core values.
Many organizations approach the same problem or issue. They provide
similar products and/or services. The core values of any organization are some
of the most important factors in setting them apart from the competition.
That is what gives them a unique edge in the marketplace. After all, that is
what open-market competition is all about, differentiating yourself in a mar-
ket where customers can choose from many, yet slightly different, alternatives
to meet their wants and needs.
Value statements answer the question What do we stand for? They help to
clarify all the guiding principles you operate under. An organization that val-
ues diversity and has an open-door policy for employees to encourage open
communication across all levels is highly likely to openly communicate these
values to potential and current employees and to customers alike. This sets the
standards for the company so that employees and customers know how they
will be treated under all conditions.
Value statements are, unlike, the vision and mission, generally a short list
of statements (sentences) that describe a core value of the organization. We’ve
just covered two possibilities: diversity and open communication. The follow-
ing is a list of some possible value statements that you might find and/or
consider:
• We value truthfulness and honesty. We would rather admit our mis-
takes to each other and to our customers and use them as a source of
learning and growth than to ever condone hiding from the truth.
• We value our employees as our greatest asset. Therefore, we commit to
aggressively invest in their professional and personal development to
help them to reach their goals and dreams, and, in so doing, make us a
better company and a better place to work.
• We value the rich resource of open communication as a tool for all of us
to grow and thrive. Therefore, we provide multiple methods to keep
these communication lines open and encourage all to actively and
openly participate without fear of consequence in the future direction
of the organization.
• We value excellence. As such, we strive to hire, develop, and consis-
tently reward those who continue to reach new levels of excellence and,
in so doing, set high standards for their co-workers and for the industry
at large.
Value statements can be created as a simple list of principles that the orga-
nization commits to uphold. The formally published values presented above
might be shortened to just include the initial broad concepts as follows.
• We value truthfulness and honesty.
• We value our employees as our greatest asset.
105
• We value the rich resource of open communication.

• We value excellence.
Another example of how a company might use the brief ‘list style’ in pub-
licizing their values might look something like this:
__________________ Service Center values
• Inclusion and diversity
• Honesty and integrity
• Human capacity development
• Recognition of achievement
• The need to be a leader in the community
Value statements are an acknowledgment of broad underlying principles

that guide all of the actions of the company. Many of the value statements may
be focused more on the relationship between the company and its employees.
This is a good time for you to surf the Web and explore some of the wide variety
of value statements that companies that you work with or highly respect
express as their core values—what sets them apart from the rest.
CASE develop a set of core values that best reflect your

style and your values. This will help clarify what
Based upon the vision and mission statement for your
makes your business different from the rest of the
new automotive service shop in activities 9-A and
industry. With this in mind, please prepare a brief list
9-B, it is time to personalize the direction of your
and/or a short statement that expresses the core
company.
values of an organization that you would be proud
You decide to own. Remember that value statements may be
You want to make your new service shop a true directed toward your relationship with either employ-
reflection of who you are and what you truly value. ees or the public.
Therefore, it is important that you take the time to
Long-Range Goals
Once the organization has a dream (vision) and a direction and purpose (mis-
sion) and has further clarified who it is (values) it is essential to take the next
step toward developing a plan of action. into something more specific. You
can’t do a vision or a mission. You can and should believe in your core values,
but at some point you need to put all of this into motion. When you sit back
and think, OK, I agree that this is who we are and where we need to go now
what do we plan to do to get us there? It is time to move toward developing
goals.
Goals Goals are practical, measurable, and achievable actions. In developing
Practical, measurable, and goals it is important that just as we have moved carefully and deliberately
achievable actions. from the broadest view of the organization (vision) to further clarify it, the
106
types of goals that we are speaking about at this point are big-picture goals.
They are broad commitments of what we are going to do to further our vision,
mission, and values. There are many courses of action that we can undertake
to further these broad concepts. Our long-term goals are those broad actions
that we believe are the best way to focus our efforts at this point.
No matter how ambitious we are, we simply can’t do everything all at
once. If we tried to do that we’d scatter our energy in so many directions that
we’d accomplish little and feel like we worked hard and got nowhere. There-
fore, we need to prioritize our efforts. We need to decide what the most impor-
tant things are that we can focus on in the foreseeable future that will best
help us to move us forward. These are our long-range goals.
In order for goals to be effective they need to be specific enough so that
they become a source for evaluating each of our actions. We should be able to
compare our actions to our stated long-range goals to see if we are doing the
right things. That is, for example, if we are considering a new initiative, we
need to first consider if it is something that we should be involved in. Clearly,
if the initiative does not align with our vision, mission and values, it is not
who we are and we should not be pursuing it. However, even if it does support
vision, mission, and values if it does not support one of our current long-range
goals then we should redirect our efforts to something that will support those
goals that we have decided are our priorities for now.
Our long-range goals act as a mechanism to help us continually focus
and refocus our energies and actions to assure that we are keeping an eye on
what we have determined is important at present. The goals of any organiza-
tion are bound to change over time, but the current goals provide a struc-
tured roadmap to guide our current activities. Therefore, they provide the
standard against which all of our proposed actions can be tested and deter-
mined worthy.
Some examples of long-term goals might the following:
• Be the recognized leader in customer satisfaction of all comparable-
sized service shops in the market.
• Achieve and maintain 100 percent industry certification of all technicians
within the organization.
Because long-term goals follow from the mission, vision, and values of the
organization, an organization with these two goals would be one that has a
strong vision of customer satisfaction and quality of repairs. These goals are a
statement of two of the actions that they believe will best help them to
achieve their vision. This must be so since, even if the goals were worthy in
and of themselves, they are not proper goals if they do not directly support
the vision and mission of the organization. We will now talk a little bit further
about some guidelines to help develop goals.
Setting Goals
Visions are dreams, missions are lofty, but goals are achievable. Two key fac-
tors to keep in mind in setting long-range goals are (1) You can’t do everything
all at once and (2) Your goals must be reasonable and achievable.
When setting up long-term goals it is important that you consider all of
the possible goals and then narrow them down to a short list of top priorities.
It is not that all of the goals that come to mind are not important and not, at
107
some point, necessary. It is that you can’t do it all at one time. Remember, you
have to prioritize. You should answer the question, What is the best use of my
efforts now? Deciding which of your potential goals are most important to
tackle now will help you determine which make it to the final list.
As you think of all of the possible goals that you could choose you might
identify some that must be completed before others on your list can even be
started. Those would very likely rise to the top of your list as priorities to start
on right away. Others may just be at the opportune time and may rise to
the surface because you have the chance to take advantage of a unique oppor-
tunity that may pass. In either case, you need to keep the list manageable so
that everyone can feel that they are going to be expected to stretch yet still feel
that they can achieve those goals.
That leads us to the second key issue, reasonable and achievable. If the
goals are set too low they will meet both tests, but will not help you and your
organization to grow as much as you possibly can. On the other hand, overly
ambitious goals can be poison to morale and productivity. If the employees
know in their hearts from day one that the goals can never be reached they
will result in low morale and poor performance. Therefore, reach high—but
not too high.
Finally, no goal is achievable if it is a secret! Clear and open communica-
tion to all involved is essential to get buy-in, commitment, support, and max-
imum effort toward achieving all goals. We need to be sure that we are all
pulling in the same direction with the same level of effort and commitment if
we are to reach our mutual goals.
CASE following tests: (a) they are reasonable, (b) they

are achievable, and (c) they are measurable. Please
Based upon the first three activities that we’ve com-
provide the three goals and briefly explain how you
pleted in this chapter it is now time to start working
will know that they are reasonable, achievable, and
on goals.
how you will measure progress toward their
You decide completion.
Please develop three long-term goals for your new
company. Please make sure that the goals meet the
Tracking Progress
Failure to measure and regularly track progress toward the ultimate comple-
tion of any goal, long-range or short-range, is almost certain to doom that
goal to failure. Therefore, it is essential that you are able to break down every
goal into language that allows you to regularly measure progress toward com-
pletion, make the mid-course corrections needed to keep on track and/or get it
back on track, and finally, know when to celebrate ultimate achievement. The
long-range goals that you select should be the starting point from which you
start your shorter-range planning.
108
SUMMARY
Long-range planning is an essential, yet often neglected, pro- The final step in the long-range planning process is dis-
cess necessary to set a clear direction for any organization. tilling down the vision, mission, and values into long-range
This big-picture planning helps you to identify and communi- goals. These goals help determine what the most important
cate to employees and customers your dream (vision), direc- major initiatives are that the company intends to undertake
tion and purpose (mission), and who you are (values). This in the foreseeable future. These goals then form the founda-
planning assures that your employees know what your tion upon which shorter-range planning and activities can
company is all about and where it is headed. Further, it be built. We will discuss the three forms of medium to short-
makes a clear statement to the public about what makes you range planning, strategic, operation, and tactical planning,
unique. in depth in the next chapter.
1. The vision of a company or department describes c. a term only used by NASA and Star Trek.
a. their specific goals for the next three years. d. all of the above.
b. your dream for how you’d like it to be. 5. Along with a vision and mission it is always important
c. unreasonable expectations for the future. that you state your values because they
d. more than one of the above is correct.
a. are a restatement of your core beliefs.
2. Long-range planning is b. are never influenced by your ethics.
a. essential yet often neglected. c. are a way to make people think that you have morals.
b. a total waste of everyone’s time and effort. d. all of the above.
c. prioritizing efforts for the next six months. 6. Long-range goals
d. a process that must be done without employee
a. help us to focus and refocus our energies.
interference.
b. must be reasonable and achievable.
3. Which of the following statements is incorrect? c. are priorities items to direct our actions and efforts.
a. Your ethics do not influence your company values. d. All of the above.
b. Your mission is often used public statement of purpose In Questions 7–10 match the definition with the term. Indicate
and direction. your letter choice on the space to the left of the definition
c. A vision statement is very broad and idealistic.
____ 7. Direction and purpose b. vision
d. Our vision is the view of the organization “from outer
space.” ____ 8. Principles you hold dear c. mission
____ 9. Your dream d. long-term goals
4. A mission statement is
____ 10. High priority objectives e. values
a. the next logical step from a vision statement.
b. an explanation of your dream as a company.
REFERENCES
Bennis, W., Leaders: The Strategies for Taking Charge

(New York: Harper & Row, 1985).
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C H A P T E R
10
Strategic and Short-
Range Planning
CHAPTER OBJECTIVES
■ To recognize the importance of medium- and ■ To recognize the value of operational planning
short-range planning activities in providing flexible support to the overall
■ To locate where middle- and short-range plan- strategic plan
ning fit in the overall planning process ■ To explain how tactical planning can help us
■ To examine the strategic planning process adjust our short-term focus and redirect our
resources to achieve our goals
KEY TERMS
strategic planning focus group operational planning

stakeholders SWOT analysis tactical planning
environmental scan core competencies
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Strategic and Short-Range Planning ■ CHAPTER 10
Introduction
The importance of planning your future direction cannot be overstated. The
old adage, Be careful, if you don’t know where you’re going you just might get
there! makes clear that if you want to work smarter and not just harder you
must clarify your intended direction. Once that has been established, it is pos-
sible to make sure that all of your efforts, and those of our employees, are
aligned. In this chapter we will explore the major levels of middle- and short-
range planning and discuss tools, tips, and techniques to help use these plan-
ning efforts to build a clear roadmap to future success.
In Chapter 9 we talked about the real big-picture issues of answering the
questions as an organization of what we want to be (vision), what our plan is
to help us become that (mission), and what the specific objectives (goals) are
that we will focus on in support of becoming what we want to be as an organi-
zation. Now we will take it down to the level of middle- and short-range plan-
ning. This is planning from the three- to five-year level down to that for a year
or less. We will look at systematic ways to formulate new goals to support the
overall vision and mission and to help make the adjustments needed to keep
on pace and on track.
Levels of Planning
Just about every organization does some sort of planning. Unfortunately,
many plan on the fly. That is, the tendency is that while all organizations plan
activities, fewer expend the effort to plan a year in advance, and very few con-
sistently develop a long-range plan. This seems normal because we all know
that we’re often so busy with day-to-day responsibilities and problems that we
simply don’t have the time to think further than the present. Unfortunately,
failure to think ahead results in the high likelihood that the present will con-
tinue. It has been said that the true definition of insanity is continuing to do
the same thing over and over again while expecting different results. If you
don’t take the time to sit back and plan for the future to be different it is very
likely that it won’t be!
Rather than work from the most common planning, short-term, to the
more uncommon mid-range planning, we will explore the three levels of
planning as they should ideally be practiced. That is, we will first discuss
building a strategic plan to set the future direction of the organization for the
next three to five years and then move to operational planning (one year) to
work toward those strategic goals. Finally, we’ll discuss the shortest-range
component, tactical planning, to discuss the small decisions and mid-course
corrections that need to be made on a regular basis to keep us headed toward
our longer-range objectives. Figure 10-1 shows how these three levels of plan-
ning relate to our everyday actions.
One last factor that you must remember is that strategic planning is not
truly the beginning of planning. It is based upon the long-range planning that
we discussed in Chapter 9. We need to have vision, mission, values, and long-
term goals that define who we are and what we want to be. These long-term
ideals and values are implemented through periodic middle- and short-range
planning. Planning and adjusting our course in these shorter timeframes
allows us to be responsive to a changing world and a changing market while
remaining on the long-term course of working to achieve our true vision.
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3–5 years Strategic Plan
Operational
6–12 months Plan
Tactical
0–3 months Plan
Figure 10-1 Planning model
Strategic Planning
Strategic Planning Strategic planning is a mid-range planning process that should be conducted
A formal planning process on a systematic basis every three to five years. Its purpose is to assess the orga-
of breaking down the nization’s position and identify key goals and initiatives that will best help
overall vision, mission, and them move forward during this next period of time, usually three to five years,
long-range goals into a set toward achieving long-term goals. We all know that things change and people
of specific strategies and change. In many cases when we look at the world around us we look back and
goals that are the focus of realize we could never have anticipated many of the changes that have
activities for the next period occurred. One of the primary purposes of strategic planning is to allow the
of time, typically three to organization to take the time to sit back and look at what has changed over
five years. the past several years, to evaluate how those changes have affected the com-
pany and its market position, and to be able to take those new circumstances
into consideration in making a plan for the near future. At the same time it
allows the organization to also adjust to internal changes that have occurred
over that time span.
A second, and very important, reason for strategic planning is really
spelled out in the term itself, strategic planning. Along with evaluating and
accounting for changes in the world, the industry, and the market, it is impor-
tant not to try to do too much. It is not possible to do everything at once.
Resources and money are limited. Therefore, it is essential that care is taken to
make conscious decisions about where these scarce resources can best be put
to use to have the maximum positive effect on company performance. This is
the strategic use of these resources. That is, actions are taken with a strategy in
mind that we believe will use our resources to our best advantage.
Effective strategic planning is not done in isolation. It is not commonly
done by one individual, whether that is the owner, CEO, or service manager. It
is not a process of sitting down, taking an educated guess about where the
company stands, and then making a plan for the future. Along with recogniz-
ing that this effort needs to be strategic, care and an investment of time and
effort needs to go into making sure that the knowledge that we have as an
organization about the state of the economy, the market, our company, and
our expectations for the near future is sound and is the best projection that
we can make at this time. Remember, the strategic plan is the roadmap for our
direction and activities for this period. Therefore, failure to do our research
and to map out a strategy might result in ending up in the wrong place—and
looking back we realize that we wasted a great deal of time and effort and are
no closer to our real long-term goals.
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The questions that you need to answer in order to develop an effective

strategic plan are
• Situation—What is the current status of the organization and how did
we get to this point?
• Objective—Where are we trying to go and what are our ongoing long-
term goals?
• Path—What is the best route to take to help us to move the furthest
from our current situation toward achieving our objectives within this
timeframe?
Because of the high stakes involved, it is important to be very methodical
in developing a strategic plan. It should intentionally draw upon the collec-
tive knowledge of as many stakeholders as possible. Every organization has
both internal and external stakeholders. Stakeholders are people who have a Stakeholders
vested interest in the success or failure of the company. They are your employ- Those people or
ees, the banker who holds your building mortgage, your customers, your sup- organizations that have a
pliers, your stockholders, your neighbors, your family, and many more. Let’s specific, vested interest in
learn about two major tools that are essential underpinnings of developing a the success or failure of
strategic plan—environmental scans and the SWOT analysis. some event, action, or
organization.
Environmental Scan
At first look this sounds like it might be a weather report. Actually, an
environmental scan is very similar to a weather forecast. Environmental scans
are of two types, internal and external. Their intent is to examine the ques- Environmental Scan
tion, What is the state (climate) of the environment that we live and work in An assessment of the
right now? surrounding conditions and
The internal scan takes a look at the current state of the organization. situations that are likely to
Questions must be asked regarding the financial health of the company. Has affect or have an impact on
the company been making a profit? What is the trend over the past several an organization and its
years? What major problems or obstacles does the company currently face? Is future activities.
the company in a strong position to move forward? What are the pressing
needs? The data needed to complete the internal scan is done by gathering
information from the employees themselves. Most commonly a great deal of
this information is collected from middle management. This should then,
however, be verified if possible by gathering input from the workers on the
floor to corroborate this data.
The external scan looks at a very different question. Its purpose is to ask
what the state of the market is that we are in and plan to be in. In many cases,
companies rely upon their employees to answer this all-important question.
Although involving employees in this process is necessary, limiting the data to
employee input is a big mistake. The point is to know what is going on in the
market, not to just think you know what is going on in the market. There is a
critical difference between the two. It is important to validate the company’s
internal vision of what is going on in the marketplace by gathering input from
stakeholders external to the company. Your banker, your landlord, your cham-
ber of commerce, your industry association, your suppliers, and your cus-
tomers would be likely candidates to provide input and guidance in gathering
this data.
External environmental scans are commonly done through the use of
existing industry panels such as an advisory board. If no such standing
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committee exists, focus groups can be convened specifically for the purpose of
Focus Group obtaining external data. A focus group is a small group of individuals that are
A small group of individuals invited to attend a meeting or group of meetings with the specific purpose of
intentionally selected to obtaining certain information. In the case of strategic planning, groups from
represent the broader different community or business groups would most likely be invited to
population who are brought participate. The goal would be to get a cross-section of input on the local busi-
together to obtain their ness climate as well as the perceptions of different customer groups in the
opinions about a specific market.
situation, production, or
proposed action.
SWOT Analysis
Although the name may seem quite foreign, it is actually a very appropriate
SWOT Analysis acronym for its component parts. A SWOT analysis is an evaluation of the
A formal process that helps Strengths, Weaknesses, Opportunities, and Threats facing the organization,
to define the current department, or individual. Using the information obtained in the internal
strengths, weaknesses, and external environmental scans as a background, this analysis helps those
opportunities, and threats involved in the planning process to focus in more detail on these four dimen-
facing an organization, sions of the organization. By answering the questions that arise from these
department, or individual. four major topics, the organization can more effectively determine where to
focus their efforts and resources for maximum effect. Let’s take a few minutes
to explore each of these areas in more depth.
Strengths
One of the first questions that any organization should ask is very simply:
What are we good at? or What do we do well? No one or no organization can
be all things to all people. To successfully compete in the marketplace it is very
important to determine what makes your business different from the competi-
tion. What is it that you can or will be able to do better than the others that
will help set you apart in the minds of the customers so that they will make a
conscious choice to do business with you.
The strengths of the organization or of the product or service that you sell
should be an important focus of your efforts to differentiate yourself from the
competition. It is very likely to contribute strongly to successes that you’ve
had to date. Therefore, it should not be forgotten. If a particular strength is,
indeed, one of the reasons why people have chosen you in the past then it is
something that you need to be sure to celebrate, promote, and maintain to
assure your future success.
Weaknesses
In contrast to strengths, this area examines the much more difficult questions
of what are we doing poorly? or what is the competition doing much better
than we are? Weaknesses may be areas that you are not capable of addressing.
They may be unchangeable or too expensive to change. An example would be
the location of your shop. Regardless of whether or not identified weaknesses
can and should be focused on to improve your performance, they must be
acknowledged and addressed and considered.
It has been argued over and over whether it is better to invest your energy
in resources to overcome your weaknesses or to invest energy in continuing to
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build upon your strengths. This can be argued either way. It is important,
however, in all instances to be aware of your weaknesses, to acknowledge
them, and to consider whether or not you need to focus on them. Failure to
acknowledge your weaknesses leaves you vulnerable to attack by the competi-
tion. Acknowledgement of your weaknesses makes you a more aware and
worthy competitor.
Opportunities
Based upon what you know about your company, your industry, and your
market it is important to ask the question of what unique opportunities cur-
rently exist that are likely to be the most productive. Whether that is new
markets, new products, new customers, or just increased business in your
existing markets this is an educated guess at the most likely directions that
will yield the greatest results.
Thinking strategically, you don’t have unlimited time or other resources
so it is important to evaluate the environment and make a conscious choice
on where to put your efforts. Therefore, to increase the chances of maximizing
the return on your investment you draw upon the information obtained in
the environmental scans to make a conscious choice about where those
resources would be best invested.
Threats
The last, yet still very important, question that must be asked is, What factors
or events threaten our continued success. Your past successes do not guarantee,
on their own merit, that future successes are guaranteed. The world and the
market continue to change. Therefore, it is important to account for as many of
these changes as possible.
It is always helpful to have the comfort level that you have been successful
for a long time and that you can always count on your foundational business
to keep you afloat. But can you? Common threats that must be acknowledged
and addressed may be as uncontrollable as the weather or the current econ-
omy. They may be more local issues like changes in local demand for your
product or the recent entry of several very powerful competitors. Regardless of
how much or how little control you have over these threats it is essential that
you take them into account when you do your planning for they will certainly
have some affect on your results.
Core Competencies
Once all of the external and internal background data has been collected and
analyzed it is important to do one more step before you start to write your plan.
You need to refocus yourself on your core competencies. Your core competen- Core Competencies
cies are the unique strengths and characteristics of your organization that allow Unique characteristics and
it to do some things better or different than anyone else. Revisiting these strengths of an individual or
innate strengths reminds you to use those assets you do have to your best organization.
advantage. It further serves to redirect you from putting an inordinate amount
of effort into trying to become something that you are not.
115
Writing the Plan

Finally, after doing all of this extensive preparation it is time to sit down and
write the plan. At this point it is important to recall the purpose of a strategic
plan. It is to provide a three- to five-year roadmap to focus your efforts toward
your ultimate goals and objectives, your organization’s vision and mission.
As is the case with any type of planning, there is no guarantee that what
you found in the environmental scan and the SWOT analysis is foolproof. No
one can see that clearly into the future. In the months following the launch of
your plan changes that you did not foresee could alter your future. That is why
it is important to draw upon the strategic plan to make even more specific and
short-term plans, operational and tactical plans. These further planning steps
allow you to make the mid-course corrections that will be essential for you to
reach your final destination.
Tracking Progress
As is the case with all plans, it is more than just dreaming. Every plan, especially
a strategic plan, requires monitoring and reporting. Each of the goals and objec-
tives must be measurable and definable. That is, you must be able to clearly
specify how you are going to measure progress toward accomplishment of your
goal. You must also have a clear measure that will allow you to know when the
goal has been achieved. This is done by breaking the goal down into an opera-
tional definition. An operational goal has three key parts. You will know that the
goal is accomplished when a specific result (1—the goal) has been achieved (2—
by what time) as measured by what result (3—specific target). Based on this you
can continue to track progress toward completion of your goal.
No plan is flawless. However, methodical planning sure beats the alterna-
tive, failure to plan at all. It is important to remember that failure to plan is
planning to fail.
Operational
Planning
Operational Planning
A process of setting shorter-
range goals to support the An operational plan is a short-range (typically one-year) plan that answers
current strategic plan, the question, What am I going to do this year to support my strategic goals? It
typically for the next year. is a further clarification of the business strategies and initiatives that you

No matter how thoughtfully you plan and how hard they planned, had considered the likelihood of such
you work to make that plan a reality there are always an event in their forecasting and planning processes?
situations and events totally beyond your control In a more practical sense, if you were a small local
that may interfere with your best-laid plans. It is for auto repair shop, what would the impact be if tomor-
this reason that strategic planning is essential. It row’s newspaper announced that one of the largest
allows you to make mid-course corrections to adjust independent service conglomerates had just pur-
for unforeseen circumstances. chased the vacant lot directly across the street? It is
Do you think that you are immune to unforeseen something that you could not have known, some-
events? Don’t kid yourself. What affect do you think thing that you very likely could not have predicted.
that 9/11 had on the American economy? Was it Yet, it is definitely a factor that would alter your
expected? How many businesses, no matter how well planning from this moment forward!
116
believe will best help you to work toward your longer term goals and can be
accomplished within twelve months or less. As was the case in strategic plan-
ning, the shorter the timeframe of your planning, the more practical and con-
crete the planning is.
Whereas establishing vision, mission, and goals and then moving on to
strategic planning are formal processes that involve a great deal of external
input, operational planning is generally done as an internal process within
the different units of the organization. This is generally done through an
informal report requested by supervisors to identify what each employee
believes goals and key initiatives are for the coming year. It then allows the
supervisors to review the goals, support them, and report them to top man-
agement. Furthermore, it gives them an objective basis upon which they can
evaluate individual and group efforts for the year.
The real test of the value of any operational plan is the degree to which
you can tie its success to the goals of your strategic plan. From this short-term
viewpoint you are more capable of breaking the big-picture plan down into
very definable activities and initiatives. This becomes the foundation for
establishing your annual staffing plan and your annual budget. If an item on
your budget does not support your operational plan, then it does not need to
be spent or invested.
Much like the strategic plan, the operational plan asks and answers four
main questions
1. What is our current status? (Situation)
2. Where do we want to be within the next 12 months? (Objective)
3. What are the best strategies to get there? (Path)
4. How will we know when we’ve arrived? (Operational Goals)
As you can see, operational planning is moving clearly toward more prac-
tical and measurable outcomes. It is at this point where you need to start fine
tuning your activities and implementing mid-course corrections to assure that
your strategic plan goals are accomplished.
It is important to remember that your operational plan is commonly used
as the basis for your annual goals and objectives and is therefore subject to
close scrutiny from upper management. Therefore it must maintain a careful
balance between being aggressive and optimistic without being unrealistic
and unachievable. It is at this level that it becomes very clear and measurable
not just what you hope to accomplish but what you are really doing to
achieve your goals.
Tactical Planning
Tactical planning is the down-in-the-trenches planning that maps out very Tactical Planning
specific actions and activities to assure that all of the goals that you’ve set The process of mapping out
become a reality. Using a military metaphor, while strategic planning may be very specific and short-term
the objective of winning the war and operational planning the plan of which actions and activities to
battles you need to fight, tactical planning is the specific and detailed troop support the operational and
movements and daily battle plans that will win the battles and, in the long strategic plans.
run, the war.
Operational planning allows for a much greater degree of mid-course cor-
rections to assure success of the strategic plan than the other planning modes.
Tactical planning, then, as the day-to-day short-term planning for allocating
117
and reallocating resources, is the constant and dynamic tweaking of your spe-
cific actions. How do you know how to make the decisions of what and when
to tweak the system?
In order to make effective tactical decisions you must have data. This data
is drawn from your operational and strategic planning. Now you must con-
stantly review and use that data to look for telltale signs of the areas that are
doing well and those that are missing the mark. By these measures you then
can take action to get back on track and stay there.
A common example of a tactical planning initiative would be the
manager’s response to a report indicating that sales of oil and filter changes
were well below forecast. After evaluating the data and taking a look at the
immediate market conditions the manager can decide to reallocate resources to
make a very specific push to try to bring this up to standards. In this case, a spe-
cial ad, some in-house merchandising, or even a short-term drop in price might
be utilized to stimulate the market and get the performance back on track.
The manager’s ability to be aware of the current situation and to rapidly
and appropriately respond will significantly increase the chances of success
and attainment of short- and long-term goals. Effective tactical planning
assures that the company and the department can be responsive to unex-
pected changes in the market and successfully deal with them. Without an
intentional focus on making these types of daily evaluations and short-term
adjustments, any surprise changes in the marketplace would have major
effects (likely very negative ones) on the success and profitability of the
department with little hope of correcting them.

As a result of tracking monthly sales data the service However, after two weeks he finds that the
manager has recognized that overall customer labor results are not enough to raise the sales up to the
and parts sales are lagging about 10 percent behind intended goals. Therefore, he decides to add a draw-
his forecast (operational goals) for the year. Upon ing for prizes for his technicians for every additional
further review of the information available he deter- service item that they sell as a result of doing a free
mines that although the total sales are down, the vehicle inspection. This action, combined with the ini-
total number of customers who have come in for tial one, results in sales that now exceed the depart-
service are actually a bit ahead of his forecast. Based mental goals.
on this information he decides that running ads in Through the use of these two tactics the man-
the newspaper is probably not his best strategy. After ager was able to take effective short-term actions
all, he has enough customers, but the numbers indi- that addressed shortfalls in department perfor-
cate that they’re not selling enough service per visit mance. One objective of these short-term efforts was
to those customers who are coming in. Therefore, he to get the shop energized and to get the sales up to
decides that rather than running an ad that he will par. However, a greater expectation was that even
put together an internal program of incentives for his when the incentives were gone that the service
service employees. He will give them bonuses for employees had learned better how to maintain this
each additional maintenance or service item that momentum and, therefore, would continue to meet
service advisors identify and successfully sell for every or exceed the annual and strategic sales goals.
car that comes into the shop. His data indicates
clearly that he does not need more customers; he
needs higher sales per customer.
118
SUMMARY
Building upon the long-range planning that was discussed in In addition to exploring the planning models we also
Chapter 9, in this chapter we discussed the importance of identified some tools and techniques that assist in the plan-
planning in a three- to five-year timeframe (strategic planning process. The most notable of these is the SWOT Analysis,
ning) as well as planning every year (operational planning). which helps us to identify and build upon those Strengths,
However, even with all of this longer-range planning in place Weaknesses, Opportunities, and Threats that we see both in
being able to plan in one- to three-month periods (tactical the marketplace and within the organization.
planning) remains essential to ultimate success.
1. Two types of scans should be done before strategic c. You should always consider your core competencies
planning. They are when planning.
a. external and advisory group scans. d. Short-range planning helps you to adjust when unex-
b. political environment and market scans. pected events occur.
c. internal and external environmental scans. In Questions 4–10 match the definition with the term. Indicate
d. virus and junk mail scans. your letter choice on the space to the left of the definition
2. Medium-range planning typically done for three to five ____ 4. Competition or other a. path
years is called negative factors
a. a total waste of everyone’s time and effort. ____ 5. what you do better than b. objective
b. operational planning. the competition
c. tactical planning. ____ 6. Things that you don’t do c. weaknesses
d. strategic planning. very well
____ 7. Chances to do something d. opportunities
3. Which of the following statements is incorrect? special or better
a. Tactical planning is commonly the source for your ____ 8. A roadmap to success e. situation
annual goals and objectives. ____ 9. your ultimate goal f. threats
b. Strategic planning is based on long-term organiza- ____10. the current state of business g. strengths
tional goals.
119
C H A P T E R
11
Decision Making
CHAPTER OBJECTIVES
■ To recognize the common tools and methods ■ To identify the different operating levels within an
used to make consistent decisions organization and how it affects decision making
■ To assess how to make decisions based on evalu- ■ To formulate decision-making efforts at the
ating benefits and drawbacks appropriate organizational level that will result
in lasting change
KEY TERMS
return on investment—ROI three realms organization level

Franklin decision model span of control process level
reward sphere of influence job/performer level
risk locus of control
120
Decision Making ■ CHAPTER 11
Introduction
Whether you look at the service operations from the standpoint of the owner,
manager, or technician there are some concerns that they all share. A primary
question that must be answered is what return they will realize on the invest-
ment that they have made. A fundamental way of measuring is based on the
financial results, profit or loss. Many sound business, as well as personal, deci-
sions have further reaching implications and consequences.
In this section we begin with a brief example of how this decision-making
process applies to all individuals, no matter what their position. Since these
issues apply to you as well as to your supervisors and your employees, you must
become very familiar with methods that can help you to make consistent,
sound decisions. Several methods and principles are described in the following
chapter that should help you to make these decisions.
Is It Worth It to Me?
From the viewpoint of the owner, who can be anything from a third-party
investor to a graduate technician who wants to go out on his or her own, the
concern in making any decision is, What’s in it for me? Simply, if I put all of
my time, energy, and financial resources into this service shop and then risk
my future by borrowing a substantial amount of money to rent and purchase
the equipment and facilities, will it all be worth it? Will I get enough back to
make it financially rewarding? Could I have made just as much or more as an
individual without taking all of these risks? Why does doing this make sense?
From the viewpoint of the manager who is primarily responsible for the
day-to-day decisions of the operation the risks and rewards are similar but dif-
ferent. The manager is not generally going to be the one producing the work in
the shop. He has to leave that up to his technicians. However, his financial suc-
cess or failure and even his job security lie in the hands of the performance of
those technicians. The pay plan for a manager is often based to some degree on
the performance of the shop. This can range from a salary plus performance
bonus on up to being strictly paid a percentage of the net profits. Like the
owner, he, too, has to assess the situation to determine whether he is taking a
good risk by taking this job. He needs to decide, Is it worth it to me?
The technician is the productive member of the repair shop team. He is the
one who ultimately produces the primary product that the shop sells, labor.
Even though his view of the question, Is it worth it to me? looks different to
him than it does to the manager or owner, he has to answer the question to
decide whether this is the right job to take or the right one to stay in. The tech-
nician’s decision is a bit more clearly defined since it primarily focuses on his
own individual ability, motivation, and drive to succeed. Although his success
or failure may be affected by some outside conditions (weather, the economy,
and the location of the shop) he has the greatest degree of control over his suc-
cess or failure. After all, he is the productive member of the shop and his pay is
based on his own performance. Nevertheless, he is risking his financial welfare
and that of his family with this decision. Therefore, it is not a decision that
should be taken lightly.
We have briefly explored the importance of this question to all involved
in the shop. Now that we understand the question (Is it worth it to me?), we
need to explore methods that will help us to accurately and consistently
121
answer it. Time and time again you will find that some form of the answer
to this question is the primary motivation behind most, if not all, of the busi-
ness decisions that are made within any organization, from the mom and pop
gas station up to the mega-conglomerate dealer group. Let’s explore some
tools and methods to help us make more effective and consistent business
decisions.
Return on Investment (ROI)

The process of deciding whether any investment is worthwhile is essential in
helping the investor make the decision to buy or sell. This is true, as discussed
earlier, regardless of the size of the company or your place within it. We all go
through a similar decision-making process to determine what to do, why, and
the implications of that decision. One of the simplest and most commonly
used tools used to help make this decision is to answer the following questions:
• What is my investment in this activity (cost)?
• What will I get (return) if I participate?
Return on • Will I get enough back to make it worthwhile (return on investment—
Investment (ROI) ROI)?
A common financial
You can put these questions into a formula to help you calculate ROI. There are
management measurement
many formulas for return on investment. In the simplest form the formula is:
that is determined by
comparing the amount of R C ROI
benefits that you receive 1return 2 1cost2 1return on investment2
from any action to the This formula provides a quick reference that answers the question: How much
amount that you initially do I get back beyond my original investment to justify the risk? A slightly
invested. more complex formula of ROI is broadly applied in the business world to mea-
sure the worth of investing in everything from savings accounts to large cor-
porate mergers and acquisitions. Rather than resulting in an answer in dollars
it finds the percentage of return that is generated by the investment. This ROI
Percentage formula is:
1R>C2 100 ROI%
1return>cost2 100 Return On Investment percentage
It is important to realize that there are situations where all of the factors
involved in calculating return on investment are easily measured in dollars and
cents. That certainly makes the calculations easy and, therefore, the decision
very clear cut. Let’s look at a simple example and use the ROI formulas to
address it. You are considering whether or not to purchase a new transmission
flushing machine that costs $2,000. You are sure that and you will be able to sell
100 transmission flushes per year for $70 labor apiece as a result of having this
new capability. Using the first ROI formula your justification for purchasing the
equipment is:
R C ROI
$70 100 $7,000 $2,000 $5,000
(return) (cost) (return on investment)
Using the ROI % formula your justification would be:
1R>C2 100 ROI%
11$70 100 $7,000 2 $2,0002 100 ROI%
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Or
1$5,000 $2,000 2 100 ROI%
Therefore
2.5 100 250%
1return 2 1cost2 1return on investment2
In this example for an initial investment of $2,000 you would receive a $5,000
profit which is a 250% return on your initial investment.
One important factor to consider in using this as the sole method for deci-
sion making is that not all costs or all benefits can be simply reduced to mone-
tary terms. This does not make them any less important, it just makes them
harder to calculate. It is essential when determining the true ROI that all factors,
monetary or non-monetary, are taken into account so that the best long-term
decision is reached while taking into account the overall impact of that decision.
CASE would be like to be on his own. He recently heard

about a shop about three miles away that is up for sale.
Ralph is currently working as manager at Silver Service.
It is in the same community and is very similar in many
He feels that he is treated well there as an employee
ways to the shop that he currently works in. Ralph
and is well respected by both his supervisors and his
wonders if this might be the chance of a lifetime.
employees. He has been there now for five years. Busi-
ness at the shop is very steady because the shop has a You decide
very solid reputation and it is expected to stay strong As Ralph’s best friend, he comes to you and relays the
through the coming years. story about this great opportunity. What advice do
Although there is no reason why Ralph needs to you give him?
consider a change, he has always wondered what it
CASE not as successful as Silver Service, has had a net profit

of $90,000 per year over the past three years. After
After your talk Ralph does some thinking and calcu-
speaking with a financial advisor and a banker Ralph
lates the benefits of his current position and the
knows that in order to open the shop he’ll have to
potential income if he opens the shop. He knows that
take out a $100,000 business loan to get the new
his total earnings for the past three years (salary +
company started.
benefits) have averaged $100,000 per year and have
remained steady. He has done his homework about You decide
the costs and benefits of being a shop owner and has What would Ralph’s ROI be over five years by taking
found out that the owner of the shop where he is this opportunity based on the information that we
currently employed has earned a net profit of currently have in dollars? What is the ROI percent-
$150,000 each of the past three years. Further, he has age? Based on this information, what would you rec-
found out that the shop that is up for sale, although ommend Ralph do? Why?
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The Ben Franklin Decision Model

It has been said that Benjamin Franklin, one of the founding fathers of our
nation, was a very intelligent, thoughtful, and logical man. Along with his
involvement in the American Revolution and the formation of the United States
of America he was also a very prolific inventor and scientist. He had a burning
desire to understand how and why things worked the way that they did. Because
of this curiosity he was also acknowledged as being a very logical and depend-
able decision maker. When confronted with difficult decisions, it is said that
Franklin had a very simple, yet useful, approach to determining the best choice
Franklin Decision that he used. This has become known as the Franklin decision model.
Model In his decision-making model, Benjamin Franklin took a blank sheet of
A simple tool to assist in paper and drew a straight line down the center of the paper from top to bot-
decision making that is tom. On the left side he wrote down every reason that he could think of why
done by creating two lists, he should take the action that he was considering. On the right side of the
one of benefits (pros) and page he listed all of the reasons why he should not take the action. Being a
one of drawbacks (cons) of very thoughtful and thorough man, he would list as many positives and nega-
a particular course of tives as possible. Even though he might be leaning toward the pros or cons he
action. Used in its simplest would make a conscious effort to try to come up with as many arguments for
form, the final decision can the other side of the ledger as he could. When he finally ran out of items for
be made by adding up the his two lists he would take the last, and most important, step: he would sim-
lists and choosing the one ply add up the number of items listed on the left side and then do the same for
with more entries. the items on the right. Whichever list had the most items was the choice that
he would make. Figure 11-1 illustrates the Franklin decision model.
Possible factors to consider:
In Favor (pros) Against (cons)
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
6. 6.
. .
. .
. .
Figure 11-1 Franklin decision model
The true value of this model, although simple in design, is not just one to
help you decide by counting up the votes for or against any decision. Rather,
the essence of the model is to force you to thoughtfully and thoroughly con-
sider both sides of an issue. You must earnestly struggle to identify both the
pros and the cons to help you uncover the underlying impact that the deci-
sion will have no matter which decision you ultimately decide to make.
Using the Franklin decision model often helps you to realize that you
didn’t fully consider the other side of the argument. Therefore, it helps you to
see that you may be entering into a decision on a more emotional than logical
basis without having fully weighed the options. It is not uncommon that after
sincerely exploring this simple approach that the resulting decision is either
altered or, at least, tempered because you can now enter into that decision
with a more complete understanding of all of the possible results.
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CASE You decide

Ralph’s decision to start his own shop has been further Ralph has decided he wants to make his move now.
complicated. A good customer who considers Ralph as He asks your advice in helping him to decide whether
his mechanic has heard through the grapevine that to go out 100 percent on his own or to do it with the
Ralph is considering leaving Silver Service to start his silent partner.. Build a Ben Franklin decision model
own shop. He has offered to put up all of the funds to listing all of the factors in favor of the two choices.
back Ralph’s new shop as a silent partner in return for Which did you recommend to Ralph? Why?
one-third of the net profits of the new venture.
Risk versus Reward

As you have probably noticed from the previous section on ROI, there is a lot at
stake in making a decision. In most cases, however, the decision is not quite as
simple as the one listed above for Ralph where it can be made based strictly on
dollars and cents. Along with the money that can be gained or lost there are often
many other factors that need to be weighed to make an informed decision. Eval-
uating this information to come up with the best decision for you should be
based on weighing the potential rewards compared with the potential risks.
Reward is what you stand to gain by taking a particular action. Risk is Reward
what you potentially stand to lose if the action does not work out as planned. What you stand to gain by
Although it is not a clear-cut scientific method, looking at decisions by weigh- taking a particular action.
ing risk against reward helps to make sure that you take into account the
entire situation and can then make the decision that is best for you. Whereas
the approach of ROI is more focused on the direct rewards, benefits, and costs Risk
the concept of risk versus reward asks you to consider a bit further those intan- What you potentially stand
gible results that aren’t easily directly measured. You might not see the impact to lose if a particular action
of those risks for some time. However, they are no less real and can have a does not work out as
greater long-term effect on your success than the short-term ROI costs. planned.
It takes time and some real thought to identify all of the things that might
be changed, to the good or to the bad, by an action that you take. But it is a
necessity for you to make good decisions. Many times the indirect conse-
quences of a hastily executed decision can have extreme costs. Many of these
risks may not immediate financial ones, but what is the real risk to the organi-
zation if you alienate your steady customers, reduce employee loyalty, possi-
bly lose some long-standing employees, or negatively affect a long-standing
relationship with a supplier, your banker, or your manufacturer? All of these
risks should be carefully weighed before making decisions.

University Imports, a local large automotive dealer- as a service shop and has one of the most decorated
ship operation, has had a stellar long-term reputation and stable service workforces in the entire region.
(Continued )
125
Because their work continues to grow, Brad, their expand without adding more personnel—it’s a clear
general manager, is concerned that they might not winner. Can I have your OK to order the equipment
be able to keep up with the fast pace of incoming today?”
requests for service work. After attending a recent To his surprise, Brad’s dealer principal is scowling.
dealer convention he returns with the idea of switch- He responds, “Brad, it sounds to me like you haven’t
ing all of his appointment and service scheduling done all of your homework here. Yes, I agree that on
over to an online self-paced system where the cus- the surface the cost of the system and the savings on
tomers can go online and schedule their own personnel costs appear, at first blush, to be a major
appointments 24/7. The cost for the new system is sig- savings. Tell me, how is this layoff going to affect
nificant, but he reasons that it will make the opera- morale? You know that we’re like a big family
tion so much more efficient that he can reduce the around here. Have you taken into consideration the
number of service advisors by two, which will save fact the effect that it may have on our remaining
more than the cost of the new equipment. Brad’s pro- employees? . . . and another thing while we’re at it . . .
posal to the owner is a simple one as he states, “Boss, what about those old-time customers of ours who
this is a no-brainer. The cost of the system will be aren’t comfortable with “those new-fangled com-
$50, 000 per year and the resulting savings in salaries puter systems”? Will we lose some customers if we
and benefits by laying off two of our existing service switch to a fully computerized system? Sounds like
advisors will be $75,000 per year. The Return on you need to do more research on the true costs and
Investment will be $25,000 per year plus the ability to benefits and then get back to me.”
CASE You decide

You promised your friend that you would meet him If you decide to drive over the speed limit to get there
for lunch in the middle of your work day at Master on time there is a chance that you’ll get a ticket or,
Motors. You are given an hour for lunch every day even worse, get in an accident. Is it a good risk to
and your boss is ‘a stickler’ for being on time. As you speed so that you can make it there on time and avoid
are finishing lunch with your friend you just realized the risk of being reprimanded by the boss? What do
that you have to be back to work in 10 minutes, and you stand to lose by speeding? What are the benefits
you are have a 15-minute drive to get back to work. of getting there on time? What would you do?
CASE home to raise the children. They have a large mort-

gage on their home ($150,000). Although their
Ralph is still trying to decide whether or not he
finances are tight they have been able to make ends
should leave his job at Silver Service and open his
meet based on his current income.
own shop. He is 35 years old and in good health. He
has a wife and three small children (ages 1, 3, and 8). You decide
Ralph and his family just moved a year ago into a What risks does Ralph need to consider if he decides
larger home in the suburbs that would fit his growing to follow his dream and take this opportunity to
family. Because of the children he and his wife, open his own shop? What are the rewards? What
Peggy, have decided that it is best for her to stay at would you do?
126
Control, Influence, and Frustration

One of the most frustrating situations you encounter in your personal or pro-
fessional life is that feeling of helplessness when something bad happens and
you can’t do anything to stop it. As a manager, you will often find yourself in
this situation. The wise manager, however, learns over time how to conserve
his energy and direct his attention toward those things that he can change.
Steven Covey, author of The Seven Habits of Highly Effective People (Covey,
1989), has effectively summarized and provided guidance on dealing with this
abstract concept. He notes that everything that you try to manage or control
falls into one of three realms: those that are within your span of control, those Three Realms
that are within your sphere of influence, and those that are out of your locus of The three major categories
control. Let us explore these concepts. Understanding them will help you to that everything you try to
decide where to put your efforts and energies to have maximum impact. manage or control falls
As a manager you do not have the time to do everything. Therefore, you within: span of control,
must become effective in directing your attention and energy toward those sphere of influence, and
activities that will most likely produce the maximum results. It is important, locus of control.
then, to develop an understanding of what business factors you can control,
which ones you can affect (influence), and which are immovable objects.
Then, and only then, can you direct the maximum amount of your energy
toward actions that will yield results.
Things that are within your span of control are things you can change. Span of Control
Whether this change happens by changing yourself or doing it yourself, they Those situations, events, or
do not require you to engage external forces. Deciding to make a daily to-do plans that you can control
list is clearly within your span of control. It does not take anyone else to do or change through your
this. You can make the decision and implement it, plain and simple. This prin- own direct efforts.
ciple could also be true within the work group that you supervise. You can
make a decision on which car is to be worked on next, and the decision is
implemented without hesitation. We all face many situations in our personal
and professional lives where we make minute-to-minute decisions and take
actions that are clearly within our span of control.
Things that are within your sphere of influence are a bit more complex. Sphere of Influence
Once something requires external resources, it starts to move from the realm Situations, events, or plans
of span of control to sphere of influence. After all, you do not have control whose direction you cannot
over other people, over other activities, or over other resources. You have to change alone but only
depend upon them to act as you want them to act. Therefore, in exercising through the assistance or
management in this realm, you are likely to need to influence and/or persuade cooperation of others.
people. As a result, although you can affect the result, you cannot produce the
result yourself. This is the realm that managers spend most of their time and
effort living in. Therefore, it is essential that they clearly understand it and can
function smoothly in this realm.
Let’s explore the idea of span of control and sphere of influence in a little
more depth. A very simple example is being able to get to work on time. There
are some things that you have full control over that affect your ability to
achieve this goal. These factors are within your span of control. Getting to bed
early enough to get sufficient rest, setting your alarm clock to wake you up,
leaving for work early enough to provide sufficient drive time are all factors
that are within your span of control. They are things that you can do yourself
that will directly contribute to your success in achieving your goal.
In this same example there are many factors that, although you do not
directly control, you can affect. These are those things that are within your
sphere of influence. An example of this would be coordinating your wakeup
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time with the others in your household so that you are sure that you will not
be waiting long for your turn to take a shower. Another factor that you can
influence is reminding your son not to park in the driveway behind your car so
he doesn’t block your car and prevent you from heading out to work on time.
The last, yet extremely important, group is those things that are beyond
Locus of Control your locus of control. These are things that you cannot do yourself and upon
Situations, events, or plans which you can have little or no effect. The 10-ton boulder that just fell into
for which you can alter the the road in front of your car is a good example. There it is and it is blocking
results through control or your way. You did not put it there and even though you might try, you very
influence. likely cannot move it or significantly change it. So what are you to do? The
best choice is to recognize the immovable obstacle, acknowledge it, and devise
a plan to work around it. Just as the physical boulder, you are bound to face
many obstacles in your quest to get your way as a manager. Learning to iden-
tify the roadblocks early and often is a key to success.
Two common examples of events that fall in this realm are an unexpected
power outage and an overnight snowstorm. Even though you set your alarm
(span of control), you could not have known that the power would go out and,
as a result, that your alarm would not wake you up. You provided for reason-
able drive time to work (span of control) and made sure your son did not park
behind you (sphere of influence) but could not have expected a snowstorm
that even the 11–P.M. weather forecast on the news did not predict!
It is important to recognize that those things beyond your control will
happen. That doesn’t change the fact that you are ultimately responsible for
achieving your goals, however. It is essential that you consider the possibilities
and, when possible, take proactive measures to minimize their effect.
The discussion of the three realms is intended to help you to direct your
energies where they will provide the maximum return on your efforts. As we
have already discussed, you cannot possibly do everything. Thus, the better
you are able to plan ahead and decide where the best place is for you to put
your efforts, the more likely you will be to succeed. Accepting that there will
always be some things that you cannot change and that you are better off
identifying them early and navigating around them is a far better use of your
energy than trying to move that boulder in the middle-of-the road.

Phoebe’s automotive service department has been Make sure that she has enough people on staff to pro-
inconsistent in reaching its sales goals. However, she duce enough work to exceed the monthly goals
has taken a new approach and has committed to her Make sure her employees are all aware of the new
boss to do everything that she can to influence to push to meet or exceed the goal
assure that they make their goals this month. In order
to do this she has a plan. The major components of Provide the technicians and service advisors new
her plan are to incentives for up selling service
Schedule enough work into the shop so there is
Check out prices of local competitors to make sure
enough work to reach or exceed the goal.
that her prices are a good value
Advertise in the local paper and on the radio to make All of the activities listed are reasonable ones for
sure that potential customers are aware that Phoebe to pursue. By doing so she is creating an
their service is a good value environment where they can succeed. Further, she is
128
focusing her efforts on factors that are within her succeeds even if something that is beyond her control
span of control and sphere of influence. In fact, it or influence happens to occur . . . such as a few cus-
appears that she has tried to over-plan, that is, to tomers canceling their appointments the last minute!
plan for more than she needs just in case. By doing so That is a good use of Phoebe’s time, her resources,
she is providing a cushion that will assure that she and her efforts.
CASE You decide

Ralph is still trying to decide whether or not to Is Ralph’s ability to produce more flat-rate hours
change jobs. He learns that Max Mechanix has one within his control? How would knowing this help him
technician who is producing 70 hours per week. He to make a decision to accept or reject the job at Max
reasons that if this tech can turn that many hours the Mechanix?
potential must be there for him to do so, too.
CASE is somewhat timid about selling some services

that Ralph is capable of performing.
Ralph has settled in at his new job at Max Mechanix.
He’s a bit frustrated, however, after four weeks of 3. Because it is back to school time business at the
work that his paychecks aren’t quite up to his old shop, and elsewhere around town, has been
standard. He sits down and analyzes his situation and slower than usual for the past month.
identifies three things that concern him.
You decide
1. He seems to be having a hard time getting to
Please categorize the three issues (span of control/
work on time and he knows that he is losing out
sphere of influence/out of control). If you were
on some great jobs first thing in the morning.
Ralph, which item would you work on first? Second?
2. The service advisor that he is working with is Last? Why?
unfamiliar with Ralph’s capabilities and therefore
The Three Levels of Performance

There is one more important factor that you must consider in effective decision
making if you want your decisions to be lasting. When you see a problem occur
you need to evaluate: is that really the problem that you see; or is it simply a
symptom? What is the difference?
Poor performance, difficulties, failures are most often not isolated inci-
dents. The ‘root cause’ is often something beyond the incident that we ini-
tially observe. If you want to keep the same incident from occurring again and
again, it is very likely that you will have to identify the root cause and make
129
changes to resolve the root cause. Without doing so the problem is bound to
occur again at that level. You may have to make decisions that cause changes
at the appropriate level within the organization.
Let us briefly look at the organization and the three major levels of perfor-
mance within it. An organization’s structure can be illustrated as shown in
Figure 11-2.
Organization
Process
Job / Performer
Figure 11-2 The three levels of performance
Organization Level
Organization Level The organization level of any company typically is removed from the day-to-
The upper management of day operations. This is the executive level where the big-picture decisions are
a company or department made that determine the direction of the organization. Regardless of what is
that is responsible for happening on the front lines daily, the business’s long-term direction is driven
setting broad mission and by top management’s mission, goals, strategies, and expectations. The way
goals. resources are allocated, whether it is the assignment of personnel, space, or
money, are all a result of the big-picture goals and aspirations for the company.
It is important that operations from top to bottom are aligned with the
goals and strategies coming from the organizational level. If they are not,
there will be confusion and a great deal of energy and resources may be misdi-
rected. If the entire operation is not trying to pull together with the same goal
in mind, inefficiency is the best result that can be expected. Many companies
with great potential fail in the marketplace due to poor communication of
goals and the confusion and wasted efforts that result.
Process
Process Level The process level of the organization is where the resources are aligned to
The level within an create an efficient and effective system that gets the greatest results for the
organization or department investment made (in manpower, space, andresources). The process level is
where systems and where the systems and workflows are set up and the resources allocated to
workflows are determined assure that all processes can effectively operate.
and resources are allocated. The process of producing the goods and/or services that are in demand
by customers is where value is created. Value is what the customer purchases.
The perceived value of your product or service makes the difference between a
130
satisfied repeat customer and one that is lost forever to the competition. You
might want to glance back at systems theory as described in Chapter 4 to
review this concept again.
The effectiveness and efficiency of the processes and workflow will deter-
mine the ultimate success of any organization. If a company is to maximize its
resources, its processes must be aligned with and clearly support the organiza-
tion’s goals. Efficient processes provide an environment where employees can
succeed, and thrive, and consistently produce a quality product. Inefficiency
results in waste, poor quality, dissatisfied employees, high turnover, and, in the
end, loss of revenues and repeat business.
Job/Performer
The job/performer level is where the work is actually done. For example, in Job/Performer Level
an automotive service department the job/performer level is the service tech- The level within an
nician repairing cars. It is where the productive employees function every day. organization or
Who are the productive employees? They are those employees who produce department where the
the products or services of the company. In an automotive service operation, primary production or work
the productive employees in the shop are the technicians. of the company is done.
Nonproductive employees are not to be confused with non-essential or
unimportant employees. All of the support personnel in an automotive repair
shop are essential. As we saw in Chapter 3, it takes many people with a wide
range of skills and abilities to staff an efficient and profitable automotive service
operation.
The job/performer level is where the issues directly related to the frontline
employees occur. These issues range from establishing and maintaining
acceptable salary and benefits to providing a suitable working environment.
All of these issues assure satisfied and stable employees, and stable employees
are more productive employees. Providing clear direction, guidance, and feed-
back to frontline employees is also important. After all, if the employees don’t
know what top management wants, it is highly unlikely that the employees
will produce it consistently. That is true in an assembly plant, a service shop,
or a grocery store.
Changing Performance
Where is this all going, you ask? You understand that there are three levels in
the organization. Each of them serves a different function within the organi-
zation and they are all essential. The key to understanding the function and
value of each of the three levels occurs when you make decisions. Knowing
the unique traits of each level will aid you to direct your efforts at the level
necessary to make the most lasting changes to the organization. The guiding
principle for changing performance is:
First rule for changing performance: In order to effectively change perfor-
mance, it is necessary to approach the problem at least one level above where
the problem is observed.
The point here is that you can learn all of the techniques to make decisions, but
if you keep on addressing the symptom rather than the problem it will keep
cropping up continuously. When you realize fully that these three levels are
interdependent and that what happens on the front lines (job/performer) is
131
influenced by systems (processes) and priorities (organization), you be able to

make effective decisions for lasting improvements. Keeping this principle in
mind and directing your efforts accordingly will have a significant impact on
the ultimate success of your operation.
Practical Principles
Whatever the situation that you find yourself in there are some overarching
principles that will help you to improve your decision-making process.
Whether you are making a life-changing decision or a routine daily one, use
these principles as a checklist to confirm that you are on the right track.
• Start with an open mind. There is a big difference between having an
opinion and having a closed mind. You need to be able to consider all of
the possibilities, consider them seriously, and discuss them openly.
• Don’t take sides. Sound management decisions are those that choose
the principle or practice that will best serve the organization. In order to
do this it is critical to be able to separate ideas from individuals.
• Acknowledge your bias. It is important for you to start by doing some
soul-searching so that you can acknowledge where you stand and make
sure that you don’t try to force fit your idea as the only viable solution.
• Make decisions based on facts, not politics. Effective decision-making
is not based on personalities or politics. Letting those issues cloud the
process can lead to unfair decisions.
• Consider all options. Full and frank discussion is necessary to uncover all
of the possibilities and work toward the best one. Often the best solution
is not obvious. Be patient; don’t try to jump to an immediate solution.
• Consider short- and long-term effects. Many options offer a quick fix
yet leave lasting damage. Take the time to consider the implications in
both the immediate and the long-term future so that you make the
choice that yields the best results.
• Don’t be too hard line or too wishy-washy. The role of a manager in
decision making is as a facilitator, not a dictator. Although you may be
ultimately charged with making the final call, it is essential that you get
as much input and involvement from your employees as possible to
inform that decision. You must create an atmosphere where your
employees are willing to share and in turn feel that their opinions are
valued and taken seriously.

It is all too common for management to address fix this problem they have gone through seven service
disappointing results by firing the person in charge. managers. Every six to nine months when the quar-
We see it happen every day in pro sports. The team terly customer satisfaction results come back from the
flounders, and the coach gets fired. Unfortunately, manufacturer and the shop still is the lowest in the
similar situations are all too common in business. region, the owner calls the service manager to his
Take, for example, the automotive service depart- office and fires him, and a new one hired in his place.
ment that has had a track record for dismal customer This happens commonly in organizations where
satisfaction over the past five years. In an effort to upper management has little knowledge of the inner
132
workings of the service operation. It is a classic case as service manager is doomed to failure. Doomed to
where the processes (one level above the job/ failure, that is, until someone in the organization
performer level) or even possibly the organization identifies the true root cause and makes the changes
(two levels above the job/performer level) are creat- necessary to fix the problem.
ing an environment where whoever takes on the title
SUMMARY
Although you can find many tools to help you in making

take serious risks with your health and well-being. In like
sound decisions, there is no one easy answer. We are all differ-
manner, confirming your business decisions by using multiple
ent and have different personalities, needs, and tolerances for
analysis methods increases the likelihood that any decision
pressure and risk. This is why a universal right answer does not
you make will be a sound one.
exist. Even with reams of evidence to the contrary you’ll find
Making decisions, though, is not enough. It is essential
someone who will intentionally make what appears to be a
that decisions are well-thought-out, well planned, and prop-
bad choice. How otherwise could you explain someone pur-
erly directed. Properly directed means that those decisions
chasing a brand new lime green Porsche Carrera or a loud
need to be focused at the organizational level, where they will
plaid suit?
remedy the root cause of performance problems and ensure
The best defense against making poor decisions is careful
the potential for success in the future. This is most likely to
analysis. This is best done by using multiple methods to ana-
have lasting impact and to create an environment where
lyze the facts. You would also use this method when you are
employees have the opportunity to do their jobs and be suc-
faced with major surgery. Getting a second opinion from
cessful. In the long run, this assures mutual success.
another expert doctor is a reasonable approach before you
1. ROI is a common decision-making tool that measures 4. The level within the organization where the systems of
a. reasonable on interest. operation occur is the
b. realistic options for investment. a. job/performer level.
c. return of interest. b. process level.
d. return on investment. c. organization level.
2. A simple process in which you develop two lists, one of
the pros and one listing all of the cons to help you make 5. An effective manager directs his efforts toward those
a decision is called things that are
a. the Ben Fuller approach. a. within his sphere of influence.
b. risk versus reward. b. beyond his control.
c. ROI. c. within his span of control.
d. none of the above. d. more than one of the above answers is correct.
3. If you want to change the root cause of a performance 6. Technician A says that he is always late because traffic is
problem you must do so so heavy on the freeway. The heavy traffic is
a. at least three levels above where the symptom is a. a valid excuse for him being late every day.
observed. b. within his span of control.
b. with a sterilized, very sharp scalpel. c. beyond his control or influence.
c. one or two levels below where the symptom is d. within his sphere of influence.
observed.
d. none of the above.
133
7. Factors like low pay and a poor benefits package can easily sell them for $125 each plus installation cost.
a. must be addressed at the organization level of the What is Joe’s ROI per radio?
company. a. $175.
b. affect the job performance of the employees. b. $75.
c. will negatively affect employee morale. c. $50.
d. all of the above. d. $125.
8. If I wanted to weigh all of the possible consequences for 10. Horace has been told by his general manager that he
a proposed decision, whether long-term or short-term, needs to paint the shop. He has the painter lined up to
financial or otherwise, I’d be trying to evaluate do the job. He only has one more decision to make.
a. Franklin decision model. What color? Which of these decision tools would be best
b. risk versus reward. suited to help him with this decision?
c. ROI. a. Franklin decision model.
d. all of the above. b. risk versus reward.
9. Joe has located a supplier where he can purchase brand c. ROI.
new AM/FM/CD radio units for $50. He knows that he d. all of the above.
REFERENCE
Covey, S., The Seven Habits of Highly Effective People

(New York: Free Press, 1989).
134
C H A P T E R
12
Quality and
Continuous
Improvement
CHAPTER OBJECTIVES
■ To explore the history of the quality movement ■ To evaluate the cost of quality and the cost of
■ To recognize key figures and key principles poor quality
underlying quality management philosophies ■ To choose the appropriate actions and activities
■ To apply principles of quality and continuous needed to maintain an environment of continu-
improvement ous improvement
KEY TERMS
quality J. M. Juran zero defects concept

quality assurance statistical process control conformance to requirements
continuous improvement 80/20 principle prevention
W. Edwards Deming Philip B. Crosby cost of quality
135
Introduction
Since the end of WWII in the mid-1940s, the underlying philosophy that
guides business operations has evolved dramatically. This is especially evident
in manufacturing but has reached into everything we do from building to
sales, service, and education. The traditional management theories that had
been developed after the Industrial Revolution and were still widely practiced
up to that time taught managers how to organize employees and ensure con-
sistent performance through dividing job tasks down into their smallest, sim-
plest components. As we discussed in depth in Chapter 5, they used these
management philosophies based on directing the efforts of employees while
maintaining full control and responsibility. In the post–World War II era the
rebuilding of many of the world’s economies also spawned the birth of new
philosophies of work and management. Of these new philosophies the one
that has had the most far-reaching impact has been the quality movement,
often referred to also as the continuous improvement movement.
The quality movement of W. Edwards Deming and those that have fol-
lowed after him has changed that the way that work is done and managed in
very profound ways. In today’s work environment everyone is responsible for
the end product and ensuring that it is done right the first time, every time. In
this chapter we will examine the philosophies and practices underlying this
important backbone of the world economic engine.
Quality
Quality The quality movement is not just a set of management principles but a differ-
A product or service that ent philosophy of looking at how and why a business operates and, therefore,
meets or exceeds the the way operations must be managed. The dramatic change in philosophy
customer’s requirements from that of traditional management theory can best be summarized by the
or expectations. way that managers and employees would see their role in addressing the fol-
lowing issues:
1. What is quality?
2. How do you know when you have achieved quality?
3. Once you have achieved quality what do you do next?
4. Who is responsible for the quality of the product and/or service that
you provide?
Until all employees can answer these four questions, see that they play an
essential role in assuring quality, and assume responsibility for their part in
Quality Assurance quality assurance, this philosophy has not taken hold. This is a dramatically
A proactive approach to different way of looking at doing business than in a traditional management
obtaining results that meet philosophy in which most employees had no role in quality. This was reserved
or exceed expectations as the right and responsibility of management. inspectors and management
through involving all were the only ones responsible for the end product.
employees rather than The first step in changing the work process requires considering the ques-
through post-production tion, Who is really responsible for turning out a quality product or delivering
inspection. a quality service? The simple answer can be determined by looking at it from
the end (the output in a system) back to the inputs and resulting process (for a
refresher on systems theory you may want to refer back to Chapter 4). Who
will be affected by poor quality?
136
Quality and Continuous Improvement ■ CHAPTER 12
It is not difficult to see that everyone in the business organization will be

affected by poor quality. Customers whose expectations are not fully met will
quickly turn away and shop elsewhere. Therefore, everyone is affected by poor
quality (lack of business) and by good quality (high profits, plenty of work, job
security). Thus, it is logical that efforts should be made to assure that everyone
can see the part he or she plays in producing quality and, as a result of this
new awareness, has the opportunity to become actively involved in assuring
that quality occurs?
However, to assure quality it is necessary to go one step further. Because the
product or service is good today does not mean that it will be good enough
tomorrow. Others are out there trying to win over your customers. They are
constantly doing this by lowering prices, improving the quality of their products,
and, in effect, trying to show customers that they will get more value for their
investment from dealing with the competition. If you do not continue to moni-
tor and improve your business practices the day will come when the competition
will slowly take away your business. You must produce a quality product or
service at a reasonable price and daily strive to make it better and better value to
the customer. That is the true meaning of continuous improvement. Continuous
Improvement
The management concept
The Gurus of Quality that states that quality is
not a static target but must
Three of the most influential men in the quality and continuous improvement be constantly improved.
movement, are W. Edwards Deming, J. M. Juran, and Philip B. Crosby. To best
understand the dramatic difference between this philosophy and that of tradi-
tional management we need to look at the contribution of each of these man-
agement theorists to the development of the quality movement.
W. Edwards Deming
W. Edwards Deming is credited as being the father of the quality movement. W. Edwards Deming
An engineer and statistician by trade, Deming openly espoused his theories The primary theorist
about how to consistently improve business operations in the United States. responsible for the
He was initially ignored by U.S. businessmen. During the rebuilding of Japan foundational theories of
after World War II the Japanese became enamored with Deming’s theories on quality and continuous
statistical process control and recognized that he had developed a unique way improvement, commonly
of assuring consistent quality. They invited him to their country and openly credited as being the father
embraced his new vision of quality improvement. The impact of his teachings of the quality movement.
on Japanese business was profound. Deming’s management philosophies
have been credited as the key factor in moving Japan from that of a producer
of low-cost, low-quality products to the higher status that it enjoys today. One
of his books, Elementary Principles of the Statistical Control of Quality (Deming,
1950), published in Tokyo, has been credited as the foundation of the man-
agement philosophy that helped to propel Japanese manufacturing to becom-
ing a leader in producing world-class quality products.
Deming’s philosophy of management is far more than a new method for
counting defects and calculating statistics. Along with providing the technical
tools to help track quality and performance Deming provides an innovative
and far-reaching philosophy of management. He provides a school of thought
that continues to change the way people look at quality: what it is, how to
measure it, who is responsible for it, and its ultimate impact on business sur-
vival and success.
137
Deming begins by demanding that quality should occur by prevention

rather than by inspection. What he really means is that it is no longer acceptable
for any worker to say, It’s not my job. It is everyone’s job to make sure that
a quality product or service is produced consistently. He goes on to propose that
if a company is to succeed in the long run that good enough is not acceptable.
For long-range success businesses needed to adopt a philosophy in which they
commit to improve their processes, services, and products consistently and con-
tinuously. This philosophy of continuous improvement is often cited as the
guiding principle of the modern day quality movement.
Constantly improving products and services is not enough for Deming.
He stresses that to achieve true quality it is essential that the organization con-
stantly strive to improve their systems of operation. This assures the business
constant growth and improvement. In order to foster a climate where all
employees are responsible for and involved in continuous improvement it is
necessary that employees have access to additional knowledge to feed this
cycle of innovation. Therefore, Deming asserts that constant training and
retraining is essential.
The role of management changed dramatically in Deming’s philosophy of
management. In the traditional model, the boss is the brains and the workers
are extra sets of hands that will do exactly what the boss has directed them to
do. In the quality model, everyone is expected to be involved and to engage
their brains, as well as their hands, in the process of delivering high-quality
services and products.
Deming’s way of operating is a learning model. Everyone is involved in
monitoring and reporting and improving, but in order to do this they need to
know what the standards are and must to keep track of their performance. In
doing this they learn what works best. They also learn about what doesn’t
work, and they have the data to back up their decisions. This concept is an
important one that Deming calls profound knowledge. He explained that
whether the results are what we expect or not does not really matter as much
as we are able to measure and document the results and to learn from them.
Therefore, even a failure becomes a source of growth because, if measured and
recorded, a failure helps guide our future actions and increases the chances of
continuous and consistent improvement.
Finally, Deming’s philosophy is a major breakthrough in the overall theory
of how organizations work. As the principles and examples listed above indi-
cate, traditional management was a function of the boss giving orders and the
employees simply following those orders like drone bees. Deming involves
everyone in taking responsibility for the end result, so everyone has a role and
some responsibility in directing (or managing) the outcome.
What, then, is the role of the manager in this setting? The role of the man-
ager becomes one of providing leadership and direction. The manager helps to
facilitate the improvement process and leads by example. Deming’s philos-
ophy is one of the first to propose the concept of leadership as the role of the
supervisor.
J. M. Juran Deming’s overall management philosophy can be summed up by the list
An early theorist who is of key principles shown in Figure 12-1.
credited with adding
statistical foundations and
J. M. Juran
the human dimension to
the quality and continuous J. M. Juran was a contemporary of Deming. He has been credited with adding to
improvement movement. the statistical foundations of quality and adding the human dimension. His work
138
Deming’s 14 Principles
1) Constancy of purpose towards improvement of product and service.
2) Adopt the new philosophy.
3) Cease dependence on inspection to achieve quality.
4) End the practice of awarding business based on price.
5) Improve constantly and forever the system of production and service.
6) Institute training on the job.
7) Institute leadership.
8) Drive out fear so that everyone may work effectively for the company.
9) Break down barriers between departments.
10) Eliminate slogans, exhortations, and targets.
11) Eliminate work standards and substitute leadership.
12) Remove barriers that rob the worker of his right to pride of workmanship.
13) Institute a vigorous program of education and self-improvement.
14) Put everybody in the company to work to accomplish the transformation.
Figure 12-1 Deming’s 14 Principles
was critical to helping the broader society understand the quality concept. This
greatly helped the spread of the quality management philosophy in the West.
Juran promotes three key dimensions of quality: quality planning, quality
control, and quality improvement. He impresses upon others the fact that
quality must be planned into the production of a product and/or service. Cus-
tomer needs must be included in the planning process, resulting in the right
products and processes to meet customer’s needs. Once those needs and
requirements are clearly understood and taken into account in the planning
process, quality control then takes over. Evaluating actual performance, com-
paring to goals, and resolving the differences ensures that the final product
consistently meets customer needs. Through using principles of quality
improvement a business can continue to improve to unprecedented levels.
Even though Juran did try to expand the quality movement beyond mere
statistical analysis, the measurement of performance still remains as a key
underlying principle. As such, he strongly promotes Statistical Process Control Statistical Process
(SPC), a mathematical method of tracking variation of actual performance from Control (SPC)
expected outcome. This key measurement tool provides a practical method for A mathematical method of
any organization to track the actual performance of a process, whether it is pro- tracking and charting
duction of a product or providing a service. Three critical pieces of information variations in actual
are required. performance from expected
1. What is the optimum result? outcomes.
2. What is the acceptable variance from the desired outcome?
3. What is the actual result?
139

A very important part of any automotive service busi- As the data indicates, although Dealer A and
ness is customer satisfaction. Any shop that is unable Dealer B got different results from each customer, on
to maintain a high level of satisfied customers is average they have received identical customer satis-
bound to lose them and will, eventually, find it diffi- faction scores and both have been able to (just
cult to stay in business. For that reason the major barely) qualify for Standards of Excellence.
manufacturers regularly conduct customer satisfac- However, because of differences in their man-
tion surveys of customers who have had warranty agement philosophies what Dealer A and Dealer B do
repairs performed. Dealers are held accountable to with this information differs dramatically. Dealer A is
maintain a specific level of performance on the cus- a traditionally operated store. Therefore, when the
tomer surveys. The following is an example of how dealer reviews the results and meets with his general
the dealer’s response to their customer satisfaction manager the conversation goes something like this:
performance would differ between a dealership Dealer A: I just got our customer satisfaction
using traditional management techniques and one results for January. Congratulations! We’ve qualified
that had embraced Juran’s quality philosophy. for Standards of Excellence with a 90 percent average.
The manufacturer’s customer survey scores for Keep up the good work but, you know, you sort of
January have just been received for both dealerships. scared me by just barely making the grade. Let’s try a
Although the manufacturer would like to achieve little harder next month to move up the scores and
100 percent customer satisfaction, they require that give ourselves a little breathing room. OK?
dealers maintain 90 percent customer satisfaction to Dealer B is committed to quality improvement
qualify for their Standards of Excellence Program, a and has become heavily involved in recent months
recognition that all dealers actively strive to achieve in implementing Juran’s quality measurement tools
and maintain. to help them assure that they will consistently meet
or exceed their quality targets. He also meets with
Customer his general manager, but the conversation is quite
Dealer A Dealer B different:
Number
Dealer B: I just received the customer satisfaction
1 100 94
results for January. The good news is that we’ve
2 79 84
again qualified for Standards of Excellence with a 90
3 84 84
percent average. Keep up the good work, but let’s
4 93 88
take a look at our performance chart to see where
5 94 100
we need to improve.
Total 450 450
Dealer B continues, Even though we were able to
Average 90.00 90.00 reach the Standards of Excellence benchmark, since
we consistently track our own customer satisfaction
This month Dealership A and Dealership B both scores the chart shows us the areas where we need to
received customer survey results from five customers concentrate to help make sure that we continue to
as follows. reach the benchmark. It looks like three of our five
customers gave us ratings that were below the
Customer Satisfaction Ratings benchmark. We need to contact each of those cus-
105 tomers, find out what went wrong, and make the
100 Ideal necessary changes to improve our systems so that it
Performance doesn’t happen again. OK?
Our Score
95
90 Standards of
Excellence
85
Actual
80 Performance
75
1 2 3 4 5
Customer Number
140
Only by tracking actual performance against desired performance and then by

analyzing and taking corrective action to eliminate the cause of every variation
from the desired outcome can quality be achieved.
In the preceding example, which dealership do you think is most likely to
consistently meet or exceed the Standards of Excellence? Why? Because they
track the data, have a standard, and take corrective action every time their per-
formance falls below the standards they are much more likely to consistently
reach the goal. On the other hand, using the traditional approach the other
dealership will simply try to improve with no information to help them know
what they’re doing wrong or what really needs to change so that they can
achieve their goal. This is a classic use of Juran’s SPC process and, despite the
criticisms that quality procedures only work in a manufacturing plant, these
principles work quite well in this service setting.
One of J. M. Juran’s principles that has found lasting value is the Pareto
principle which was first introduced in his book The Quality Control Handbook
(Juran, 1950). This is often referred to as the 80/20 principle. This principle is 80/20 principle
based on what Juran calls the vital few and the trivial many. It states that in The theory in quality
most cases when you analyze a situation you’ll find that only 20 percent of the assurance that indicates
people do 80 percent of the work. Further, he states that 20 percent of the that 20 percent of the
people influence the actions of the remaining 80 percent. The practical appli- people or processes are
cation of this theory is that by identifying those people, those incidents, and responsible for influencing
those systems that comprise the vital few (20%), you can target your efforts the remaining 80 percent.
to have the maximum impact. Therefore, it is the best use of your time and
resources to identify and target your efforts to where they will produce the
greatest desirable results.
A critical application of Juran’s 80/20 principle is in its usefulness to guide
efforts to correct poor performance within an organization. Most traditional
organizations view performance as the sole responsibility of the employees
and, therefore, they are the ones to be held accountable, blamed, and replaced
to correct poor performance.
Juran views performance problems in a wholly different way. He states
that organizations are complex systems and that their performance is bound
by the 80/20 rule. He goes on to propose that 80 percent of performance prob-
lems are the result of poorly designed or operated systems and only 20 percent
of performance problems are people problems. (Please refer back to Chapter 4
where we discussed systems theory in greater detail.) He theorizes that most
people sincerely desire to succeed and produce a quality result. Therefore, he
proposes that if organizations design systems more effectively and provide
people with the processes and tools necessary to succeed that most perfor-
mance problems will be eliminated.
One of Juran’s later and most comprehensive works, Managerial Break-
through (Juran, 1964), is acknowledged as his best presentation of his overall
theories of quality management. It describes in detail his step-by-step sequence
for achieving breakthrough performance and has been credited as the source
from which the widely accepted Six Sigma quality process was born. Six Sigma
continues to be one of the most common quality benchmarking systems used Philip B. Crosby
by world-leading companies in all business sectors. The quality theorist
There are three major principles upon which Juran’s overall theory of responsible for developing
quality and continuous improvement are based. These three key principles and promoting the zero
listed in Figure 12-2 are commonly referred to as Juran’s Trilogy. defect concept.
141
Juran’s Trilogy
Systems Thinking
Management by data
System improvement
Figure 12-2 Juran’s Trilogy
Philip B. Crosby
Zero Defects Philip B. Crosby’s major contribution to quality management is his zero
Concept defects concept. Having worked as an inspector and then as a quality engineer
The quality theory that states in the 1950s, Crosby was familiar with the measurement of performance and the
that any variation from the use of statistical process control to measure quality developed by Deming and
expected is unacceptable Juran. Companies used these tools to track how closely their actual output
and that each instance must matched their standards and tried to minimize errors. However, in a ‘mission
be investigated, addressed, critical area such as the aerospace industry where he was employed, the stakes
and resolved. were very high and the prevailing principles didn’t seem to go quite far enough
to assure quality. He realized that if every part that went into a rocket varied just
a little bit from its intended specifications that the resulting rocket would vary by
a total of all of those variations (the total variance the sum of all of the individ-
ual variances)—and that sum was just unacceptable. He determined that there
Conformance had to be something more. There had to be a way to assure that the end product
to Requirements was more consistent, more reliable. Close was just simply not good enough!
Quality principle that states Crosby’s Zero Defects concept is his answer to how to resolve the dilemma
that quality is not relative of controlling quality variance. Crosby determined that close is not good
but is absolute and can be enough. He developed his Zero Defects principle that redefines quality as
measured by whether or not more than performing within tolerances. It is simply and absolutely defined as
the products, processes, or conformance to requirements. He strongly asserts that this must be the guid-
services meet requirements. ing principle of quality management.

The way that minute variations can all add up to cre- simply front end vibration. It feels like a wheel/tire
ate a huge performance problem is something that is imbalance so you decide to balance the tires. After
experienced on a regular basis in the automotive balancing the tires the problem is somewhat
service business. Since the typical automobile is a com- improved, but it still hasn’t gone away. Why? The rea-
bination of over 22,000 parts produced by over 2,000 son is that there are other components that also
suppliers it is easy to see how it can happen. All 22,000 rotate as part of the complete assembly that is
parts do not directly affect all of the others but many attached to the wheel and tire. The brake rotor, the
of them do work as part of a system. Each of these sys- CV joint, the driveshaft assembly all rotate to turn the
tems is susceptible to problems because of what is wheel and tire. If each of them is a little bit out of
called tolerance stack up. Tolerance stack up is exactly balance—along with the tire and wheel being a little
the problem that Philip Crosby tried to resolve. bit out of balance—it can result in a system imbalance
In the automotive service industry the value of due to tolerance stack up (the sum of each of the indi-
this principle can be illustrated by the cause of a very vidual imbalances) and result in a lot of vibration.
142
As had happened in the first wave of the quality movement, American

industry initially wanted to dismiss Crosby’s theory of absolute quality. It was
not until 1964, when an executive from the Japanese company NEC sought out
Crosby to better understand his philosophy of quality that his principles began
to gain acceptance. Shortly afterward Crosby was hired by ITT to install his qual-
ity system and was able to raise their products and services to become the stan-
dard of quality in their industry based on the use of his approach to quality.
Crosby went on to become one of the second-generation gurus of quality. To
date, Crosby’s organization continues to advise corporate giants in the aerospace,
automotive, computer, and electronics industries to help them to improve the
level and consistency of the quality of their products and services. In his book
Quality Is Free (Crosby, 1979) he introduced three other quality rules to comple-
ment his zero defects principle. Together they make up the core of his philos-
ophy on quality. Crosby’s four key quality principles are shown in Figure 12-3.
Crosby’s Quality Principles
The definition of quality is conformance to requirements.

The system of quality is prevention.
The performance standard is zero defects.
The measurement of quality is the price of non-conformance.
Figure 12-3 Crosby’s Quality Principles
Crosby’s principles are straightforward and easy to understand. Unlike the

statistics-based theories of the earlier quality gurus, Crosby’s principles are eas-
ier to explain and, easy for the rank-and-file employees to understand and use.
We will now briefly review each of these principles.
The Definition of Quality Is Conformance to Requirements Quality is a very
specific goal. In order for us achieve quality we need to be very specific in
defining exactly what it is so that we will know it when we see it. Goals must
be specific. Not only do managers need to know what quality is, they need to
go the extra step of making sure that their quality goals are communicated to
everyone in the operation. Not until everyone clearly knows what the goal is
and is committed to playing his or her part in assuring that it happens will
consistent quality occur.
It is very frustrating working under vague guidance. In producing a qual-
ity service or product it is essential that the goals be clearly stated and that
they are measurable. Finally, it is essential that those goals be attainable. Lofty
goals are important to make us all stretch ourselves, but unrealistic goals are
more likely than not to make us just give up.
The System of Quality Is Prevention Consistent quality services and prod-
ucts are achieved when quality is built into the product. This principle
addresses the change in philosophy from the old method of management Prevention
where production was the job of the employees and quality was the job of the The conscious act of taking
inspector and manager. In the quality philosophy, assuring that it is done cor- active steps to ensure that
rectly is everyone’s job. Errors are prevented rather than found after the fact. desired results occur and
Prevention is an integral part of the process of work. Therefore quality is con- that undesired ones do
tinuous, not just an afterthought. not occur.
143
The Performance Standard Is Zero Defects With this principle in mind,

everyone needs to realize that close is not good enough. Every product or
service that you deliver must meet or exceed the quality standard. More
important, in order to ensure consistency in delivering this level of perfor-
mance it is necessary that every time that the performance fails to meet the
standard that it is dealt with. Only by investigating every failure to meet stan-
dards and using the information obtained to make improvements in the sys-
tem can the performance consistently exceed the quality standard.
The Measurement of Quality Is the Price of Nonconformance Quality is not an

absolute. Some say the only way to have quality would be to make everything
perfect and people aren’t perfect. We can’t afford perfection and our customers
aren’t willing to pay for it. Fortunately, we aren’t striving for the unattainable.
We are trying to achieve and maintain performance that meets or exceeds our
Cost of Quality standards. In order to do this we need to determine the cost of quality. We need
The total investment to know how much it will cost to do it right and, conversely, how much it will
required to ensure that the cost if we do it wrong!
product or service meets or Crosby has developed a very simple formula to analyze the true cost of
exceeds customer quality. It goes like this—the measurement of quality is the Price of Non-
expectations. Conformance. As such, we can determine what it costs to do it right. This is
called the Price of Conformance (POC). We can also determine what it costs to
repair it or do it over. This is called the Price of Nonconformance (PONC).
With this information the true Cost of Quality (COQ) for any situation can be
figured by using the following formula:
COST OF QUALITY
POC PONC COQ
You’ve probably heard the old adages that anything worth doing is worth
doing well and probably even more often that if you can’t afford to do it right,
you can’t afford to do it twice. The cost of quality formula is a way to identify
the cost in doing poor work. As such, even though it may cost a little more to
do it right the first time, in the long run it is less costly, both financially and in
terms of customer satisfaction.
CASE their work, their operation, and their customer satis-

faction.
Ralph has worked as a manager for Herman, the
General Manager, in a traditionally managed shop You decide
for 15 years. As such, he is accustomed to things not In the past, when Ralph’s boss, Herman, received the
going as planned but he has, in general, had a solid daily quality scores he filed them away, waiting for
reputation for turning out good work and has main- the monthly report. As long as the monthly average
tained an acceptable level of satisfied customers. met the company standards he was satisfied. How do
However, Ralph and his General Manager have you think that that will change now that this new
just returned from training at the Crosby Quality philosophy has been adopted? What should they do
College. It is their dealer’s intention that they install the next time they get a low score from one of their
Crosby’s quality system in their shop to improve customers? Why?
144
Practical Approach to Achieving Consistent Quality

Now that we have established a background on the history of the quality man-
agement movement and have a basic understanding of the quality principles
we will take a look at how we can practically apply them in our operations. In
the following section we’ll explore how we can put them to use.
How do You Know When You Have Achieved Quality?

Even if you understand the philosophy behind continuous improvement and
everyone commits to being involved in producing the best product for the
best price do you know where you really stand? How would you know quality
if you saw it? How would you define it? Take a minute before you read on and
write down your definition of quality.
Definition: _____________________________________________________________
Now, looking at your definition try to answer the following questions:

1. Am I sure that I’d know it if I saw it?
2. Can I clearly define what quality is?
3. Can I measure the degree of quality?

Success in the auto repair business always involved a. Parts cost? The supplier provides a replace-
maintaining the delicate balance between providing ment set at no cost, but you have to send your
quality service and keeping costs under control so parts runner to pick them up, so there is time
that you can stay in business. Many times quality and and gas involved.
cost control appear to be warring factions. If you do b. Labor cost? The cost to redo the job is at no
one then the other suffers. For example, if you are charge and that takes your top tech off-line
trying to decide which ‘quality level’ of brake pad to so that he is not making money for you or
use on your brake jobs you can choose between the himself. The cost of you having to soothe the
one that costs the least but that is more susceptible to angry customer and reassure him that this will
premature failure and a shop comeback (low cost but never happen again and that you’ll have your
low quality) or the one that is the highest quality and porter drive him to work and pick him up
least likely to give problems (high quality and high when the car is done.
cost). How do you decide which is the best choice for c. Value of a satisfied customer? The customer
your shop in the long run? One method is to use may have his car fixed . . . but is a lot less
Crosby’s Cost of Quality formula as your measure. To likely to unreservedly recommend the quality
do so you need to: of your work.
Now, use the formula: COQ POC PONC
1. Determine the Price of Conformance—What is
This may be a difficult decision but you have to
the cost to do the job right?
determine if the consequences for failures cost you
a. Parts cost? The cost of the brake pads
enough in repeat sales, lost time, aggravation, etc. to
b. Labor cost? The time needed to install them
justify using premium pads on every job and giving
c. Value of a satisfied customer? The good PR
up a little bit of your original profit margin. It is a
and repeat business
tough decision, but by using this method of analysis
2. Determine the Cost of Nonconformance—What you can consider all of the facts and consistently
is the cost if the car is a comeback and has to be make the best business decision.
redone?
145
4. Can I achieve the standard for quality that I’ve set?

5. Is it reasonably affordable?
The key principles to making quality consistently achievable in any organiza-
tion are to make it definable, measurable, achievable, and affordable. Without
being able to meet those four tests it is very likely just a dream that few under-
stand, even fewer are committed to making a reality, and almost none ever
achieve in their lifetime!
Definable Earlier we talked about trying to define quality and the concern
that many people have trouble describing it clearly. However, if you don’t
know what quality looks like how will you ever know when you’ve reached it?
How will you know when your product or service has declined in quality?
If any individual, department, or organization intends to consistently pro-
duce high-quality products or services they must first sit down and have a
clear shared vision of what quality is. Until you are able to pinpoint a clear
definition that everyone can understand, accept, and be involved in consis-
tently producing, the likelihood of achieving consistent quality is nil. You
must be able to define quality as a set of very concrete requirements. This
directly relates to Philip Crosby’s principle of conformance to requirements.
Measurable If you have to consistently achieve or conform to a well-defined

set of requirements it is essential that they be set up so they are measurable.
Objective measurement is the best way to be sure that you are at or above the
required standard. This is true whether you are measuring the physical dimen-
sions of a part, the percentage of customers who are satisfied, or the return on
investment that the shareholders receive. Failure to meet those requirements
creates poor quality.
Achievable In order to have any real meaning it is important that the qual-
ity standard be achievable. Why? Why couldn’t we just aim for perfection?
Perfection is not a realistic quality goal. After all, we are not perfect, our mate-
rials are not perfect, the conditions of the world around us are not totally
under our control. Therefore, we need to aim a little bit lower than perfection.
We need to aim for a reasonable and achievable goal.
There is one practical reason for setting a conservative quality goal rather
than an idealistic one. We want all of our employees to be committed to
achieving or exceeding our goal. We want the goal to be something they strive
for and reach for, not something that weighs them down. One of the worst
management strategies is to set goals that are so idealistic that they are clearly
unattainable. The results are that the goals act as a tool to make people give
up. Therefore, not only do goals need to be measurable, they also must be real-
istic enough that everyone involved can visualize and achieve them.
Affordable Some idealists would argue that you should never put a limit or a
price on quality. You either have it or you don’t. However, is that really what
our customers really expect us to do? If the cost of making the improvement
increases the price of our product or service so much that no one is willing to
purchase it, did we achieve quality?
This characteristic of quality is a balancing factor that keeps us from over-
reacting. We need to be competitive, we need to meet or exceed the value that
our competitors produce and our customers expect to be successful in the
146
market. We need to consistently deliver goods and services that meet or

exceed the needs of our customers, but we need to counterbalance that with
keeping these improvements affordable enough so that we can still make a
profit and stay in business!

An example of a physical standard in automotive specification we know that we must replace the
repair would be the thickness of a brake rotor. Each rotors. Why? We need to replace them because they
rotor has a minimum thickness that must be main- will not conform to minimum requirements. If we let
tained so that it can properly dissipate heat and the car go out of our shop having done a brake job
produce the required braking force to stop the car. without replacing the rotor we will be sending out a
This minimum requirement is stamped right on the potentially unsafe vehicle.
rotor. Is that standard measurable? yes: definable? Yes.
Therefore, if a car comes into our shop for a front Therefore, failure to replace the brake rotor in this
brake job and we measure the thickness of the front case is a lack of conformance to requirements and
rotors and they are already below the minimum clearly results in a lack of quality.
CASE Plan A: Provide the service advisor whose group

gets the biggest improvement in their customer satis-
John, the top service advisor at JAX Techs, has just
faction scores for the next month a $100 bonus. Their
been promoted to service manager because of his
score must, however, be at least a 5 percent improve-
enthusiasm and consistent success in being the top
ment over above last month’s very disappointing
service salesman. His boss has told him that he is giving
score of 82 percent.
John this chance to show what he can do. He decides
Plan B: Offer an all-expense paid trip for two to
to have a service meeting of all of his techs and advi-
the Daytona 500 for the service advisor that can
sors and come up with a contest to help improve the
achieve a perfect (100 percent) customer satisfaction
shop’s sagging customer satisfaction scores.
score for the month.
John has formulated two possible incentive plans
and is trying to decide which one he should unveil at You decide
Monday’s meeting. The plans are Which plan would you advise John to choose? Why?
CASE 80 percent customer satisfaction rating, which ranks

right in the middle of shops in the local Shop Owners
Abdul has been a service manager for ten years and
Association (SOA). After a little bit of investigation he
knows very keenly that the key to consistent long-term
finds out that the highest score achieved is 88 percent.
success of his service business at Al’s Service lies in the
Abdul sits down with his employees to voice his
goodwill of past and current customers. In order to
concerns and they brainstorm to decide what they
continue to build business he needs to build his base of
should do.
satisfied customers. Currently his shop is receiving an
(Continued )
147
THEORY INTO PRACTICE 12-3 (Continued )
You decide customers, why mess up a good thing? I don’t

Which is the best idea? Why? Why not? think that we need to go off and do some extra
special stuff and spend more money. We should
1. Nancy indicates that she knows that they are just stay the way we are.”
capable of producing work that is as high in
3. Chris then adds his opinion, “We know that we
quality as the others. “Let’s become Number 1.”
can be Number 1, we’re not that far off! Let’s set
She further says, “If we don’t aim for the stars
our goal of 90 percent customer satisfaction.
we’ll never succeed at all—let’s make our goal
That won’t cost us too much and we can still
100 percent customer satisfaction!”
achieve our goal!”
2. Floyd, who has been there for 26 years speaks
up, saying, “We’ve got a good, loyal group of
CASE 1. Stay with AJB Brakes rebuilt brakes because

switching to other brands would drive up his
Hector is the service manager at a small local indepen-
price by $10 per brake job and he fears that he
dent repair shop. His shop concentrates on doing
may lose some business to his competition
brake jobs, exhaust system work, and general mainte-
nance. The shop stakes its reputation on providing 2. Switch to purchasing slightly higher priced
high-quality repairs locally and affordably. Their cus- remanufactured brake rotors ($20 more per job)
tomer satisfaction goal has always been 85 percent from another supplier that come with a full 100
satisfied customers and the shop has missed this target percent lifetime warranty.
for the past three months. After doing some research, 3. Switch to purchasing only new brake rotors from
they have identified one recurring problem. The area new car dealers at a cost of $50 more per
rebuilt brake rotors that they have been buying from job knowing that by doing so their price will be
AJB Brakes have been failing at an alarming rate of higher than the local dealers, and expect their
two out of every five jobs (40 percent). shop reputation to keep those customers coming
You decide to them.
After checking with several local parts suppliers What would you do? Please discuss your reasoning on
Hector has three alternatives. each of the three choices.
SUMMARY
Once we have determined what quality is, how to define it, It is critical to engage everyone in the process so that they
how to measure it, how to make our goals realistic and attain- understand the role they play in achieving or failing to reach
able whose job is it, really? The underlying principle of contin- acceptable quality. They must see that it is their responsibility
uous improvement is that quality is everybody’s job. It is not to do their part to assure that quality happens. It is essential
an afterthought. The old days of turning out a product and that we instill in them the sense of importance in the process
then determining after it was completed whether or not it that leads them to accept responsibility for quality and the ulti-
was acceptable as judged by an inspector at the end of the mate success of the product and the company.
assembly line simply will not work any more.
148
The quality movement and the principles of Deming, if they plan to be competitive in our highly competitive mar-
Juran, and Crosby provide a rich resource to evaluating and ketplace. Moreover, they provide the foundation to change
improving performance. These continuous improvement prin- the mindset of managers and all employees so that they
ciples are essential guidelines that every business must adopt embrace the process of continuous improvement.
In Questions 1–5 match the key quality management principle 8. Joe is planning on offering an incentive. He needs to
with the proper individual. a. set the goal high enough to make employees strive
_____ 1. Zero defects a. J. M. Juran for excellence.
_____ 2. Institute leadership b. Philip B. Crosby b. be very vague in how he defines the goal.
_____ 3. Statistical process control c. W. Edwards Deming c. make it easy for everybody to win.
_____ 4. 80/20 rule d. Henry Ford d. keep it a secret.
_____ 5. Cease dependence on e. Frederick Taylor
9. In a shop that has embraced Juran’s 80/20 principle they
inspection
know that
6. A key factor in achieving quality goals is that they must be a. only 20 percent of all problems are caused by people.
a. reasonable. b. we can expect 80 percent of the systems to fail.
b. communicated to everyone. c. we should strive to improve our performance to
c. achievable. 80 percent and the other 20 percent will take care of
d. all of the above. itself.
d. people are directly responsible for 80 percent of the
7. The cost of quality is defined as
quality problems.
a. what it costs to do it right.
b. what it costs to fix the comeback. 10. When you’ve reached your quality goals you need to
c. the price of conformance the cost of nonconfor- a. set higher goals so that you can continuously improve.
mance. b. celebrate the achievement with all of the employees.
d. the price of conformance the cost of nonconfor- c. keep it quiet so that it doesn’t cost you any money.
mance. d. both a and b are correct.
REFERENCES
Crosby, P. B., Quality Is Free: The Art of Making Quality Juran, J. M., The Quality Control Handbook (New York:
Certain (New York: McGraw-Hill, 1979). McGraw-Hill, 1951).
Deming, W. E., Elementary Principles of the Statistical Juran, J. M., Managerial Breakthrough (New York:
Control of Quality (Tokyo: Nippon Kagaku Gijutzu McGraw-Hill, 1964).
Remmei, 1950).
149
SECTION
4
FINANCIAL MEASUREMENT
O ne language common to all supervisors in a service operation, from the owner to the
sales manager, the business manager to the service director, is profit and loss. Profit
and loss is the barometer of success or failure. It is essential that all managers be fluent in
the terminology and understand the numbers as a guideline for directing current and future
decisions and actions. In this section we will discuss the major financial measurements used
to evaluate performance and look closely at several major areas where a manager can affect
profitability, compensation, and production planning. We will then discuss how to analyze
this data and how the resulting information can be used to improve shop profitability.
• CHAPTER 13: Income and Expenses • CHAPTER 15: Production Plans

• CHAPTER 14: Compensation Plans • CHAPTER 16: Analysis and Action
C H A P T E R
13
Income and Expenses
CHAPTER OBJECTIVES
■ To examine income and expenses as financial ■ To evaluate profit and the various ways that
measurements profit is measured
■ To explore the various types of expenses, how ■ To apply the principles of income and expenses
they are defined, how they differ, and how they to generate and maintain profitability
can be controlled
KEY TERMS
income fixed expenses profit margin

expenses overhead gross profit
direct expenses variable expenses net profit
indirect expenses profit profit center
153
SECTION 4 ■ Financial Measurement
Introduction
In this chapter we will explore the basic measurements that are used to track
and measure financial success in an automotive service department. The funda-
mental measurements are income, expense, and profit. In the following sections
an explanation and overview of these three critical financial measurements will
illustrate how they apply in the repair shop.
Profit is not a four-letter word. It is the lifeblood of an open-market econ-
omy and the fundamental factor that, alone, can assure that a company can
continue to survive and thrive. In this chapter, we will work together to
understand how to retain the largest possible portion of sales on a consistent
basis and improve profitability of the service operation.
Income
Income Income is the most basic of all financial measurements. We all have a clear
Something of value that you understanding of the concept of income. Income is something of value that
receive in return for services you receive in return for the services and products that you deliver. In the set-
or products that you deliver. ting of an automotive repair shop or dealership service department the primary
item of value that the company has to sell is labor. The service repair shop gen-
erates income when a customer is billed for a satisfactorily completed repair.
Income is not only money received for services rendered but can also include
services or items of value that you receive in exchange for the service that you
provided. Although in the past barter was a common method of purchasing, it
has become rather rare to expect a barter of the family cow in payment for repairs
done to the family’s SUV. There are situations where individuals still trade serv-
ices rather than pay in cash. Therefore, it is important to remember that all items
of value received in return for a service provided are a part of the total income.
CASE 1 mechanic. Harvey gladly pays the bill and leaves the
shop, a satisfied Silver Service customer.
When Harvey comes to pay for the tune-up that Phil
has just done on his car the bill is $156. Harvey is You decide
pleased that he can count on Phil as being his What was the total income on this transaction? How
do you know?
CASE 2 You decide

After double-checking the recently completed repairs What is the total income on this transaction? How do
Harvey has second thoughts and when he sees the you know?
owner of Silver Service in the parking lot on his way out
he stops and hands her a $20 tip for a job well done.
154
Income and Expenses ■ CHAPTER 13
Expenses
The costs or financial outlay involved in doing business are called expenses. Expenses
Expenses come from a variety of different sources. They may be directly related The costs or financial outlay
to a specific transaction. An example would be what the local parts store involved in doing business.
charged for the new brake pads that you needed to do a brake job on Mr. Smith’s
Toyota. Other expenses, although just as real, are not quite so directly related to
your sales. Expenses are generally divided into three major categories. These cat-
egories are direct expenses, indirect expenses, and overhead expenses.
Direct Expense
Costs of items or services that are directly related to a specific transaction are
called direct expenses. They are often also referred to in some business mod- Direct Expenses
els as the cost of goods sold. They include all costs that are specific to this The cost of an item or
transaction and do not include the rest of the business or operational costs of service that is used solely
the company. An example of a direct expense, mentioned previously, is the for a specific transaction.
cost to purchase the brake pads for Mr. Smith’s Toyota so that we can do a
front brake job on his car. These expenses are necessary since we cannot do
the brake job without the parts. They are direct expenses because all of the
costs go 100 percent toward Mr. Smith’s brake job.
Can you think of another possible direct expense that might be related to the
brake job on Mr. Smith’s car? There is one that occurs with every automotive
repair. It is the cost of labor. Phil’s time (whether he works for himself or for the
owner of Silver Service) is the primary item of value that he, or his boss, has to sell
to the customer. Whether Phil is paid by the hour, by flat rate, or by some other
method, he has used up 100 percent of the 1.2 hours that he spent fixing Mr.
Smith’s car. He charges Mr. Smith for that time. Since all of the expense for that
time is only related directly to that transaction, Phil’s time is a direct expense.
A test of whether or not an expense is a direct expense is to simply ask the
question, Does any part of what we received affect anything else in our opera-
tion besides this specific transaction? If the answer is no, then it is a direct
expense. However, a further test must also be applied. That is to ask the ques-
tion, Is all of it completely used only for this transaction? If there is some value
remaining that can be used for other transactions you should not bill the entire
item as a direct expense to this repair. Only the part of its total cost that was
used would be an appropriate billable direct expense. You have to be careful as
you decide whether or not an expense is a direct or an indirect expense as you
work toward understanding the financial basics of business operations.
CASE 1 charged Mr. Jones for the water pump when he picked
up his car Thursday night.
Phil is trying to analyze his income and expenses for
the past week. He comes across an invoice from the You decide
local parts store for a water pump for a 2001 Volvo. Is the water pump a direct expense? How do you
He knows that he needed that water pump and used know?
it to fix Mr. Jones’ car last Tuesday. He’s sure that he
155
CASE 2 You decide

In the process of replacing the water pump on Is the gasket sealant a direct expense? How do you
Mr. Jones’ Volvo he found that he had run out of gas- decide?
ket sealant. Fortunately he caught this in time and
had the parts store send him a can of sealant along
with the water pump that he had ordered.
Indirect Expenses
Unlike the water pump (a direct expense) and the labor to install it (a direct
expense) there are many costs associated with doing business that aren’t quite so
neatly accounted for in daily business. Expenses that are used across a number
Indirect Expenses of transactions or projects are called indirect expenses. These expenses may be
Costs that are used across variable or fixed expenses.
a number of transactions An example of this would be the special tools that Silver Service needs to
or projects. own so that Phil can remove and reinstall the pulley that is pressed onto the
shaft of the water pump of many different vehicles. What are the questions
that you need to ask to determine whether or not the special tools are a direct
expense or an indirect expense?
The puller described above is directly used in the repair. However, it is not
directly used only on this one repair. It does not pass the second test of being a
direct expense because it is not used up and still has substantial value that can
be applied toward future repairs on many other vehicles. Therefore, the spe-
cial puller tool that Phil used in the water pump replacement qualifies as an
indirect expense.
Another good example of an indirect expense is an important part of
Phil’s compensation for working as a technician, his benefits package. Along
with offering competitive wages to all of her employees, the owner of Silver
Service provides every employee with two weeks of paid vacation every year.
Although the cost for these two weeks is just as real an expense to the company
and to the owner as the weekly payroll cost for Phil while he is fixing cars, the
vacation expense cannot be directly connected to any specific transactions.
Therefore, it is by definition an indirect expense.
CASE You decide

In the water pump replacement repair described Were either of these items indirect expenses? Were
earlier in this chapter Phil purchased a water pump the special tools that he used direct expenses? How
and some gasket sealant that needed to do this repair. do you know?
156
Fixed Expenses
Fixed expenses are those that are related to the existence of the company. Fixed Expenses
They do not change in direct relationship to individual transactions. They General costs that occur
continue to occur even if little or no production is occurring. Fixed expenses as a condition of being in
are often referred to as overhead. They are given this name because they are business.
costs that arise from the overall operation of the business. They are not
directly related directly to any specific part of producing or selling the prod-
Overhead
ucts of the company. They are, however, essential to the successful operation
of the company. An expense that arises from
A good example of overhead expenses at Silver Service is the costs for the overall business operations
physical facilities. The building rental and utility bills for heat, lights, and that is not related to any
power are all overhead expenses. specific transaction.
Another fixed expense is the costs related to the business office. For
example, Silver Service has a centralized business office staff that handles all
accounting and business documentation needs for both of their retail opera-
tions, their service shop and their collision repair shop. Even though these
two departments operate independently on a day-to-day basis, the business
office is responsible for handling payroll, taxes, accounting, and recordkeep-
ing for the entire company.
Because fixed expenses do not change in relationship to the work being
performed or products being produced they are the most difficult to control.
The best method for reducing the effect of fixed expenses on net profit is to
maximize the amount of products or services that can be produced. This
spreads out the cost. A simplified example follows.
If a shop has an overhead of $5,000 per month and generates a gross profit
of 50 percent on sales the owners need to sell $10,000 of products or services
in order to break even.
$10,000 50% $5,000 $5,000 $0
Sales Gross profit % Gross profit Overhead Net profit
If they want to generate a profit and know that their overhead will remain
steady their best plan to become profitable is to increase sales.
$10,002 50% $5,001 $5,000 $2
or even
$10,002 50% $5,001 $5,000 $10,000
As you can see, overhead (fixed expenses) does not change. The best way
to reduce its effect on net profit is to distribute it (spread it out) over as large a
volume of sales and gross profit as possible.
Conversely, if you discover that the fixed expenses are so high that it is
impossible to sell enough services or products to cover those expenses your
choices are limited and difficult. You can begin negotiations with your land-
lord to obtain lower rent for the next year or you can find another building
and move your entire operation to another location. Neither of these changes
can made easily or quickly. By their very nature these expenses are virtually
immovable, or fixed.
157
CASE 1 You decide

Johnny is a recently hired service advisor at Silver Is Johnny’s payroll expense a direct expense, an indi-
Service. He has been assigned to Phil’s team of five rect expense, or an overhead expense? How do you
technicians at Silver’s service shop. Johnny gets paid a know?
weekly salary plus a bonus based on the total service
and parts sales of his five-person team.
CASE 2 You decide

Due to increased work volume at both the Silver Is the new payroll clerk’s salary a direct expense, an
Service repair shop and the body shop the owner has indirect expense, or an overhead expense? How do
decided that she needs to add another payroll clerk you know?
to assist in calculating the payroll and getting it out
on time every week.
Variable and Fixed Expenses

Sound management requires that you constantly watch expenses, analyze
them, find ways to keep them under control, and reduce them when and
wherever possible without sacrificing quality. Since we know that fixed
expenses are a condition of being in business and are incurred whether or not
any business is being conducted, we realize that fixed expenses are very diffi-
cult to reduce. Fortunately, there is another broad category of expenses that
we can more effectively control, variable expenses.
Variable Expenses Variable expenses are those expenses directly related to the performance
Expenses that rise or fall of work. Therefore, they rise or fall in direct relationship to the volume of
in direct relationship to work completed and sold. A good example of a variable expense would be the
business that is being pay for Phil, the technician, at Silver Service if he is being paid on a commis-
conducted. sion or flat-rate system. If Phil does not perform any repairs he does not earn
any pay. Therefore, the cost to the company for Phil’s services is directly
related to what work he produces and varies directly with the amount of work
produced.
If Silver Service realizes that it is losing money on every oil change that Phil
performs they have several choices. They can reduce their variable expense in
two ways: reduce Phil’s pay, or have a lower-skilled (and lower-paid) technician
perform the job. As you can see, controlling variable expenses is easier within
the department than reducing fixed expenses. Therefore, as a manager, variable
expenses are the ones you should become very familiar with. They can have a
major impact on the company’s (and your) success.
158
CASE You decide

The owner of Silver Service’s biggest competitor, Max If you were Max, the owner of Max Mechanix, what
Mechanix, has found that his shop is losing money type of expenses would you try to reduce, variable or
and he is in jeopardy of going out of business. He has fixed? Which ones? Why?
tried everything to increase his sales but they remain
constant. Now he is looking at ways to cut expenses
so that he can afford to stay in business.
Profit
Profit is the difference between the amount that you receive for your services Profit
or products (income) and the cost of doing business (expenses). The simple The remainder of what you
formula for profit is: received once all expenses
have been subtracted.
I E P
Income Expense Profit
As you can see from the formula, increasing your profit is possible by
changing either of the factors in the formula that result in profit. You can
increase profit by either increasing your income or reducing your expenses.
You can also increase profit by doing both at the same time.
For example, earlier we discussed how Silver Service was losing money on
oil changes that Phil did. In the profit formula if we only could change
expense we would have to reduce Phil’s pay or find a lower priced technician
in order to make a profit. But what if we could change the other factors? What
else could you change to make a profit? That’s right, you could increase the
income. Making more seems simple. If you want to make more money you
only have three choices
1. Sell more (income)
2. Reduce costs (expense)
3. Do both a and b
Which would you choose?

In an effort to increase profitability the first thing that a business will try is
to increase sales. Unfortunately, profitability is not often quite that easy to
change. You have to consider that in order to increase income (sales) you are
probably going to incur additional expenses. Therefore, you are going to have
to reduce your profit margin and take less profit per transaction to increase Profit Margin
your business. Here is an example of how this might work. The percentage of profit
You decide to run an oil change special to attract new customers. You are that you generate from
going to run an ad in the local newspaper or send out mailers to the local resi- every dollar of sales.
dents. Both of these advertising methods are going to cost you money
(expense). Unless you already have the lowest price in town you are probably
going to have to reduce your price to help interest people in giving your
service shop a try. When you discount the price for this service, you reduce the
amount of money (income) that you receive from the customer for the oil
159
change. However, the cost of the oil and filters (expense) and the pay to the
technician (expense) stays the same. You may increase your sales (income) but
because the profit margin per sale is reduced you’ll have to generate a signifi-
cant increase in sales in order to realize an increase in profits.

Although it is always important to have a quality learn the principles of expense monitoring and con-
product and to advertise, generating all of the sales trol, as your business grows your profits will also
in the world makes little difference if you are unable grow—and your business will not only be bigger, it
to take any of it home at the end of the day. Taking a will be more profitable.
reasonable amount home as a result of your work is Another important term to understand is profit
why you work. Making sure that a fair share of your margin. Profit margin is another way of measuring
income becomes profit is the key to long-term suc- profit. It is the percentage of profit you generate for
cess. Therefore, it is essential that from the outset each dollar of sales. The formula looks like this
you learn how to understand, measure, and control Profit (P )
expenses wherever possible. This control is the only Profit margin (M )
Sales (S)
insurance that you will generate a profit. Once you
CASE 1 You decide

Silver Service sells an oil change for $23. The company What is the company’s profit on an oil change? What
has expenses of $10 for Phil’s labor and $8 for parts is their profit margin?
(oil and filter).
CASE 2 number 2 spot. However, in order to do so you feel

that the best method is to lower your prices 10% on
Your business is very good and your shop is normally
all maintenance and repair items in your shop.
90 percent full each day. You decide that you’d like to
really like to move up from number 3 in service sales
You decide
to number 2. You are sure that if you could just attract
that 10 percent of additional business that your shop Is your strategy for becoming number 2 a good one?
can handle you it would be enough to reach the How would you know?
Gross Profit
Gross Profit
Gross profit is amount left A common measure that service managers deal with is gross profit. Gross
after subtracting direct profit is the sale amount minus the direct costs.
costs (cost of sales) from the S D GP
sale amount. Sales Direct cost Gross profit
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If you were rotating a set of tires (a simple, labor-only operation), another

way to write this formula is
Labor sales Technician pay Gross profit
Direct income Direct expense
Because the price charged for the sale (price of labor and parts) and the
direct costs (cost of labor and parts) are those that are most directly within the
control of the department manager, they are typically the ones the manager is
held most accountable for. Gross profit only takes into account the income
and expenses that are directly involved with individual transactions. No sup-
port staff or other indirect expenses are included. Gross profit is typically
reported on the financial statement of the repair shop or dealership and is a
key indicator of the manager’s performance.
Since gross profit is clearly the most direct relationship of factors that are
under the manager’s control it is often a key element in a service manager’s
pay plan. The pay plan of many service managers is based all or in part on
gross profit. He may be paid a salary plus a bonus for reaching a certain gross
profit level or percentage. He may be paid a salary plus a percentage of the
total gross profit.
The ratio between sales and gross profit, called gross profit percentage, is a
widely used performance indicator that shows if the shop is keeping their
costs in control in relationship to their sales. Gross profit percentage is calcu-
lated as follows:
Gross profit (GP)
Gross profit %
Sales (S)
Gross profit and gross profit percentage are two performance indicators
that you should know well as a manager. The expected gross profit percentage
will vary from company to company ranging from as low as fifty percent to
over eighty percent depending on the conditions and the goals of top man-
agement. Gross profit and gross profit percentage are, however, measures that
you must be very familiar with because they are primary measures by which
your performance as a service manager will be judged.
In some companies where the parts and service operations are operated as
separate departments (typical of new car dealerships) the service department
only gets credit for the one item that it can directly sell (labor) and the only true
direct cost that can be attributed to a specific repair (direct costs). In those
instances the monthly financial statement will indicate gross sales for the month
(income), direct costs (direct expense) and gross profit (income – direct expense).
CASE You decide

Mr. Jackson just came into Silver Service today to What is the gross profit that Silver Service earned on
have the rearview mirror that fell off of his wind- this repair? What is their gross profit percentage?
shield replaced. George looked up the repair price for
replacing that part and it is $10. Phil does the repair
and earns $4 for the repair.
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Net Profit
Whereas gross profit only takes into account those expenses that are directly
related to the sale of the product or service (direct expenses), net profit takes
into account all expenses of the company. These indirect expenses include all
of the variable and fixed expenses of the company that are not directly associ-
ated with individual service transactions. Net profit, then, is figured by sub-
tracting all of the company’s expenses from the total amount of sales.
However, since net profit is commonly shown on a financial statement below
the gross profit calculation, the net profit is calculated by starting with gross
profit and then subtracting indirect costs to yield net profit. The calculation
should looks like this:
GP I NP
Gross profit Indirect expense Net profit
As discussed earlier in this section, indirect costs include such items as the
rent for the facilities and equipment, utilities, taxes, payroll for the owner and
the business office. These expenses are substantial in most organizations. For
the organization to survive and thrive it is necessary that the total income
exceeds the total amount of expenses so that the owner or owners are able to
pay their bills and receive some sort of a return on their investment. Without
a return on investment they will not be able to justify the risk that they have
undertaken by being in business. You may want to refresh your memory on
how ROI is calculated by referring back to Chapter 11.
In an attempt to involve all managers in seeing the big picture of the orga-
nization and be involved in working together to achieve a net profit, many
companies look at an organization’s individual departments as profit centers.
Under this profit center concept they view and evaluate each department as a
company within the company that is responsible for generating sales, a gross
profit, and a net profit. In order to do this fairly the company must divide up
Profit Center
indirect costs between the profit centers (departments). Dividing the indirect
A management approach in costs between departments is called apportionment. By dividing up the indi-
which all costs are allocated rect costs, top management can hold the individual departments responsible
to departments and each for generating sufficient income to cover their direct costs (achieve a reason-
department is responsible able gross profit) and their portion of indirect expenses as if their department
for covering a fair share of was an independent company. The cost center approach to financial manage-
indirect expenses to help ment makes all of the departments keenly aware and intimately involved in
the company achieve working to keep the company profitable.
a net profit.
CASE 1 They were, however, allocated $25,500 in indirect

expenses ( such as rent and utilities).
The service department at Silver Service sold $45,000
in service last month. The total cost to pay their tech- You decide
nicians was $15,000. They were not given credit for What is the gross profit that Silver Service earned last
any parts sales or expenses because that was the month? What was their net profit?
responsibility of their separate parts department.
162
CASE 2 You decide

Fred has done everything that he can do to increase Considering the actions that he has already taken,
sales at his shop and he has reduced employee pay what would you suggest that Fred look at next to
rates to the point where he is concerned that further help his shop become profitable? Why?
cuts may cause a mutiny. However, he is still not con-
sistently making any net profit.
SUMMARY
In this chapter we introduced the fundamental measures of Gross profit is the most common financial measure by
financial health, which are income, expenses, and profit. which the performance of service managers is measured. This
These measures are the indicators that must be understood, is because gross profit is directly tied to those items that the
reviewed, and addressed to assure financial health. After manager can most directly control, labor sales and direct labor
looking at this evaluation of finances we honed in on the expense. Sufficient gross profit must be generated to be able
various types of expenses that regularly occur in service to cover all of the overhead expenses necessary to operate the
operations. Understanding and controlling these expenses is service shop and leave enough so that the owners earn a net
the key to making sure that adequate funds reach the bottom profit. Net profit is the amount remaining after all expenses
line and create a profit. are subtracted from the income generated.
Herman brings his car into Century Service for a tire rotation. $20 per flat-rate hour to perform the repairs. Based on this infor-
The repairs cost $20. The shop pays Hector, their lead techni- mation, please answer the following questions:
cian, one-half hour of flat-rate time to perform the repairs.
4. What is the total income that Geoff’s Garage realizes for
Hector is paid $20 per flat-rate hour. Based on this informa-
this transaction?
tion, please answer the following questions:
1. What is the total income for Century Service? 5. What is the total expense for this transaction?
2. What is their expense for this repair? 6. What is their gross profit on the parts that they used?
3. What is their gross profit on the repair? 7. What is the gross profit on labor sales?
Mr. Burns brings his car in for repairs to Geoff’s Garage. The 8. What is the total gross profit that the shop earns?
repair shop finds out that they need to purchase a new brake
9. What is their overall gross profit percentage on this
rotor and brake pads from the local parts store to complete the
transaction?
repairs on Mr. Burns’ car. The total bill that Mr. Burns pays for the
repairs is $380. This includes charges for four hours of labor at 10. What is the shop’s net profit? How do you arrive at this
$50 per hour and $180 for parts. Heidi, the technician, is paid answer?
163
C H A P T E R
14
Compensation Plans
CHAPTER OBJECTIVES
■ To explain the origins and principles of the flat- ■ To calculate the overall effective rate of a repair
rate labor pricing system shop
■ To distinguish the most common methods of ■ To compare common labor pricing strategies
technician pay
■ To examine fringe benefits and employee com-
pensation packages
KEY TERMS
flat-rate pricing technician levels hourly rate

time study flat-rate pay hourly rate with bonus
hourly rate pricing effective rate fringe benefits
variable rate pricing flat rate with guarantee
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Compensation Plans ■ CHAPTER 14
Introduction
In Chapter 13 we learned that controlling expenses is an essential skill
required of an effective service manager. The expenses that are most within
the manager’s control are variable expenses, those that are directly related to
service sales.
Because the major cost related to selling labor is the payroll costs of the
technicians, we will focus on understanding how technicians are paid. We will
begin by looking at the system that dominates both the pricing of labor and
the pay of technicians in the repair industry, flat rate. We will then look at
common variations of technician pay plans and the effect that they can have
on expense and profitability.
There are multiple methods for establishing the labor charges that the cus-
tomer pays for a specific repair. The two most common systems are the
flat rate and hourly rate systems. The most common method for billing
labor is to charge repairs based on a pre-established number of hours assigned
for common repairs. This system is called the flat-rate system. The next
most popular system for compensation is based on charging customers the
actual clock hours that it takes to complete a repair. This is the hourly rate
system. Each of these systems has unique benefits and drawbacks for the shop
owner, the technician, and the customer. It is important to understand these
systems as they have a very important impact on the profitability of the
service shop.
The Flat-Rate System

In the flat-rate pricing system all customers are charged a predetermined Flat-Rate Pricing
number of hours for a repair. This ensures that all customers pay the same A labor pricing system
price for the same repair. For instance, if the established flat rate for replacing based on a fixed rate for the
the alternator on a particular vehicle is 1.5 hours, then everyone will be billed amount of time that it takes
and pay 1.5 hours for that repair regardless of how long it actually takes the tech- the average experienced
nician to perform the repair. Whether it takes Joe 4 hours or 45 minutes to technician to perform a
replace the alternator he still gets paid the same amount. More important, the specific repair.
customer is charged 1.5 hours regardless of how long it takes Joe to complete
the repairs.
Using the flat-rate system allows the shop to provide accurate and consis-
tent estimates for the actual repair cost before work is started. It allows the cus-
tomer to make a better decision based on knowledge, up front, of exactly what
the repair will cost. It guarantees the technician what he will be paid for doing
this job. We will now discuss the concept of the flat-rate system, its origin, and
its benefits.
The History of the Flat-Rate System

The flat-rate system was originally developed over 60 years ago. The origins of
the system are the result of a depleted workforce in the United States during
World War II. While almost all of America’s young men (the typical mechanics
of the day) were off fighting the war, there was a severe shortage of skilled
workers. This was true in all technical professions from construction workers
to auto mechanics. This labor shortage was filled by those men and women
165
who, although they lacked previous experience or training, were willing and
able to perform these needed services to those who needed them. As a result of
the efforts of these home-front heroes, tanks and torpedoes, cars and trucks,
and boats and bullets were manufactured to supply the needs of the war effort
abroad. At the same time their efforts provided the essential services, such as
automotive repair, to keep the American economy moving and its remaining
workforce rolling to and from work.
The flat-rate system was developed to assure equity in these times of
uncertainty. Since there were few highly trained experienced technicians
available there was little consistency in performing repairs. It might take four
hours for a novice to replace a water pump at one shop and three hours at
another shop, whereas in the past an experienced mechanic could have made
the repair in one hour. Flat rate established a set of standards that defined the
amount of time that it takes the average experienced technician to perform a
specific repair.
By establishing labor charges based on this flat rate, customers were
assured of consistent pricing no matter who did the work and no matter how
long it took. It was an ideal system for making an unstable system fair and
equitable for all. The system worked so well that it became, and still remains,
the general standard of how auto repair pricing is established. How do they
come up with those standard times? Let’s take a look at this very important
question.
Establishing Flat-Rate Standards

The consistency in pricing for common repairs of the flat-rate system is based
on the establishment of a flat-rate manual. A flat-rate manual is a comprehen-
sive listing of the predetermined labor times for performing most common
repairs. Every new vehicle manufacturer publishes its own flat-rate manual to
cover all of its models. These factory flat-rate manuals are used primarily only
to establish the labor times that the manufacturer will reimburse their dealers
for repairs done under warranty. Several independent companies produce flat-
rate manuals more general in scope that cover repairs for just about every
make and model on the road. The most common of these flat-rate guides are
the Chilton Labor Guide Manual, Motor Labor Guide Manual, and Mitchell
Mechanical Labor Estimating Guide. These publishers now also offer this infor-
mation in CD/DVD format and through online subscription services. These
manuals are used by all independent repair shops and dealerships for repairs
done to used cars and those that are beyond manufacturer warranty. Although
these two major sources for flat-rate manuals share the concept of arriving at
fixed, predetermined labor times for common repairs, their approach for arriv-
ing at these rates is quite different.
There are two methods used to establish the times published in flat-rate
manuals. The rates published in aftermarket manuals are established based on
national surveys conducted by the publishers. They randomly select and sur-
vey repair shops nationwide, typically by telephone, asking, How much time
does it take to perform this repair? The responses that they receive to their sur-
veys are averaged and become the published flat-rate labor time for that oper-
ation. It is important to understand that the time estimates for these repairs
are established independently for each make and model, body type, and
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equipment configuration to assure that the flat rate is a reasonable average.

Further, these rates are revised and updated at least annually to include new
makes and models and to address changes to existing ones.
The second method for establishing flat-rate times is a live time study. Time Study
Major automotive manufacturers use this method. The system they have A method for establishing
established is much more scientific than the aftermarket method because they the average time to perform
do not rely on second-hand information, they find out for themselves first- a common repair by
hand. The purpose of a time study is to clearly answer the question how much observing the results of a
time does it take the average experienced auto technician to do this specific number of experienced
repair? In order to collect data, the manufacturers hire technicians to perform technicians performing that
the repairs under controlled conditions. They typically will have three to five task.
technicians perform a particular repair. Once all of the technicians have com-
pleted the repair they average the resulting repair times to arrive at the pub-
lished flat-rate time.
The establishment of a factory flat-rate manual based on time studies
is a very expensive and painstaking process. Every year manufacturers are
required to re-study repairs to assure that the published times remain accurate
for the new or updated models. More important, however, is that they have
a large financial risk since they are responsible for reimbursing all of their
dealers across North America for doing these repairs during their new vehicle
warranty period.
Hourly Rate Pricing

The other commonly used system for determining labor charges is by charg-
ing an hourly rate. This hourly rate is established based on the actual time Hourly Rate Pricing
spent on the repair. In a shop that uses this system as their labor pricing stan- A labor pricing system
dard it is common for technicians to punch a time clock so the actual amount based on the actual amount
of time spent doing repairs can be documented and accounted for. of time that it takes the
Very few shops use the hourly rate method to establish charges for com- technician to perform a
mon or competitive repairs. To ensure that they are pricing their repairs fairly specific repair.
in comparison to their competition most shops price all common repairs
based on one of the recognized flat-rate standards. However, it is widely
accepted for shops to charge customers using hourly rate pricing for uncom-
mon or very complex repairs. Because this type of repair is very difficult to
estimate before repairs begin, the only reasonable way to charge (for the tech-
nician, the shop, and the customer) is by the hour.
As a result, almost all dealership and independent repair shops use a com-
bination of these two labor pricing methods to establish repair prices. Use of
the flat-rate system helps shops ensure that their pricing is competitive. It also
provides them with the ability to rapidly develop estimates of repair costs for
customers. The use of hourly pricing for uncommon jobs, however, allows
them a way to have some assurance of being paid a reasonable fee for those
repairs that are more challenging. This combination of pricing schemes pro-
vides a reasonable level of consistency in pricing to protect the shop owner,
the technician, and the customer. In today’s consumer market, this ability to
guarantee fair pricing is expected and required by law. We will address the
legal implications of labor pricing later in this text. Now we will move on to
discussing how the pricing models affect technician pay and, in turn, the
service shop’s direct labor expenses.
167
CASE 1 You decide

Brenda needs to have an oil leak repaired on her car. Do you think that Silver Service uses the flat-rate
She takes her car to Silver Service and they indicate to system or hourly rate system to price this repair to
her that the problem is just a leaking valve cover gas- customers? How do you know? What should Brenda
ket, which is a common repair. They tell Brenda that the expect to pay for the repairs if it takes longer than
total cost of the repair will be 1.0 hours labor ($75) originally expected? Why?
the cost of the gasket ($15) for a total of $90 plus tax.
They tell her that the car should be done by noon.
CASE 2 just relax he will only be charged for the actual time
that it takes.
Herman has a very similar oil leak problem on his car
to the one that Brenda experienced. However, he has You decide
chosen to take his car to Max Mechanix. The service What labor system is Max Mechanix using? How
advisor looks under the hood and tells Herman that would this make you feel if you were Herman? How
he’ll need an approval to start on the work and that much is Herman’s bill going to be?
they’re really not sure how long it will take . . . but to
Variable Rate Pricing

Historically, both dealership and independent repair shops have operated with
a simple one-rate pricing system. That is, they have one established labor rate
that is used for all repairs that they perform. Under a one-rate system the only
variable in determining the total cost of repairs for the customer is how many
hours of labor the job pays in the flat-rate book.
Variable Rate A recent pricing system that has emerged is variable rate pricing. This
Pricing system has grown in its acceptance and usage over time and is now commonly
A labor pricing system that found in larger shops across North America.
uses multiple hourly labor In a shop using a variable rate system, the hourly labor rate charged for
rates based on the difficulty a repair depends on the difficulty of the repair. Shops using this system classify
of the repair. repairs based on the skills required to perform them and, therefore, the exper-
tise of the technician that is required. Technicians are often classified at differ-
ent levels based on their skills. This closely parallels the reasoning for a variable
rate pricing system.
A shop using variable rate pricing will normally price basic maintenance
and repair services at their lowest hourly rate. A good example of this would be a
tire rotation. A tire rotation is a common repair that can be performed by a wide
range of technicians and shops. It does not require a technician with high skills.
It does not require a shop with highly specialized equipment, tools, or training.
Customers can find ads in the local paper every day listing special prices for this
type of service. In order to attract customers to these highly competitive
168
and widely available services and to keep customers from going elsewhere for
service, shops must price their repairs accordingly. Using a reduced hourly rate
that a variable pricing system allows can help them to do this.
At the other end of the spectrum are very difficult repairs that require
specially trained technicians, special equipment, or proprietary technical
information. Few shops have the expertise to perform these repairs and the
repairs typically require the attention of the most experienced and highest
paid technicians. Therefore, a shop using a variable pricing system would nor-
mally charge a much higher hourly rate for these repairs.
We have discussed the two extremes of the variable pricing system spec-
trum, the highly competitive yet simple maintenance service and the highly
complex and very difficult diagnostic repair. What about the rest of the work?
How do we price it? The simple answer is that it depends. It depends on how
complex a system of labor rates the shop chooses to use. In the very simplest
system they may have three or four labor rates (for example, A, B, C, and D
rates) or they may have as many as 10 to 12 different rates.
CASE 3 You decide

Mystery Motors has been in business for years and What rate should Joe assign for the following
has always operated on a simple one-rate flat-rate repairs . . . and why?
system for pricing their repairs. Based on the advice a. Oil and filter change?
of a consultant, they have just switched over to a
b. Valve cover gasket replacement?
4-tiered pricing system. Their old labor rate was $60
for all repairs. Their new labor rates are $75, $65, $55, c. Diagnosis and repair of an intermittent engine
and $45 per flat-rate hour. Joe, their service manager, miss?
needs to come up with pricing for a variety of differ- d. Replacement of an engine rear main oil seal?
ent repairs under this new pricing system.
Technician Skill Levels

Before we look at how individual technicians are paid, we need to understand
some underlying principles about staffing a repair shop. Technicians, like any
other type of workers, range widely in their technical expertise, productivity,
and ability to produce quality repairs. Due to these differences technicians are
often categorized into technician levels based on these factors. Technician Levels
Those who are highly experienced, highly capable, highly productive, and Technicians are often
produce great quality repairs on a consistent basis are the highest in demand classified into four levels,
and, therefore, command the highest pay. They are the ones who can fix any- A, B, C, and D based on
thing and upon whom the shop depends to repair the really difficult and com- their technical expertise,
plex problem cars. They are often referred to as A techs. productivity, and ability to
A secondary, and larger, level of experienced technicians exists that aren’t produce quality repairs.
quite at the level of the A techs. They are experienced with a wide range of
skills. They are able to fix most problems across a wide range of automotive
systems. However, they aren’t quite up to the technical level of A techs. They
are still valuable to their shops but are paid at a lower rate than the A techs.
169
Based on how close their skills, productivity, and quality are to the A techs
they may be considered to be B or C techs.
The third group of technicians is made up of those who are only able to per-
form the most basic repairs. Whether it is due to lack of experience, confidence,
or knowledge and skills, the work that they can be assigned and expected to
perform correctly is limited. They are normally those technicians who per-
form oil changes and basic repairs such as brake jobs, minor electrical repairs,
and preventative maintenance. Some companies call them maintenance and
light repair technicians. In the shop’s classification system they are D techs.
Both the volume of work that exists in the automotive repair industry and
the difficulty of those individual repairs support a need for a very large num-
ber of technicians with wide-ranging skills. Therefore, there continues to be a
high and constantly growing demand for A, B, C, and D technicians.
The mix of employees that fall into these four classes differs from company
to company. In a shop that is required to provide full service from the most
complex diagnosis to simple maintenance services they are likely to employ
technicians from all four classifications. On the other hand, shops that focus
on light repairs and maintenance would tend to employ more of the C and D
technicians and may have only one A or B technician to handle the occasional
complex diagnostic problems that might arise.
As a manager it is important to realize that as the skill level of the technician
rises, so does the cost of labor. Conversely, as the skill level drops the cost of
labor also drops. Because most service shops use a single hourly labor rate to
establish repair pricing, the gross profit on one hour of labor will decrease as the
shop uses more highly skilled, and higher-paid, technicians to do the work and
will decrease as they use a lower-skilled technician. Management’s job in trying
to control costs while maintaining high productivity and quality is to employ
the right mix of technician classes that allows for maximum profitability.
CASE You decide

Joe, service manager at Mystery Motors, has an unex- As Joe’s consultant, and based on what you’ve just
pected visitor. It is Terri, one of the top diagnostic learned about Terri’s skills, what level of technician
technicians in the region. She has been unhappy with do you believe that she is (A, B, C, or D)? Why?
her current pay and is shopping around to move to a How would the new variable labor rate help you
new shop. She has heard about recent changes at to be able to attract new talent like Terri?
Mystery Motors including Mystery’s new labor rates. What type of work would you be most likely to
She is inquiring to see if they can make her a better give Terri if you were able to hire her? What type of
offer. work would not be given to Terri? Why?
Technician Pay Plans

We have just completed discussing the methods that shops use to determine
how to price repair labor. You will see some terms reappearing again as we dis-
cuss technician pay. It is important to understand that the method used to cal-
culate customer labor prices does not have to be the same as the method used to
pay the technician. We will discuss four methods of paying technicians: flat rate,
flat rate with a guarantee, hourly, and hourly plus a performance bonus.
170
Because technicians are the primary direct expense in the service depart-
ment, the way that they are paid has a large impact on profit and the success
or failure of the shop. Therefore, we need to examine and understand the
most common pay plans for technicians. We need to know how they work
and their benefits and drawbacks for the individual technician. Then we will
explore the impact that they have on shop management.
Flat-Rate Pay
We discussed the concept of the flat-rate system previously. Paying techni-
cians based strictly on flat rate is the most common compensation plan. The
flat-rate system establishes reasonable standards, based on experience, that
indicate how much time it takes the average technician to perform a specific
repair. The technician is paid a predetermined amount for each repair regard-
less of how long it takes him to complete it.
Another important part of the flat-rate system is that technicians who work
on flat rate are paid only for the flat-rate hours that they produce. They do not
receive any pay beyond what they produce in flat-rate hours. They are working
on a straight commission. That is, they only get paid for the jobs that they com-
plete, not for the time that they are at work. If there is no work, they earn no pay.
Flat rate has a large potential benefit to the highly skilled and motivated
technician. If the technician is able to properly perform repairs in less time
than the time that it takes the average experienced technician then he is still
paid the full time listed in the flat-rate manual. For example, Phil is able to
replace the valve cover gasket that pays a flat rate of 1.0 hours in 0.5 hour. Phil
gets paid 1.0 hours, not 0.5 hour. If Phil’s normal hourly flat-rate pay is $20 per
hour he has now earned $20 in one-half hour. His effective rate for that repair
is $40 per hour. Here is that calculation in detail
$20 1.0 $20 0.5 $40
Hourly rate Flat rate for repair Total paid Actual repair time Effective rate
Conversely, a drawback of the flat-rate pay system to the technician is the Flat-Rate Pay
fact that he gets paid the flat rate of 1.0 hour to replace the valve cover gasket Technicians are paid a fixed
even if it takes him 1.5 hours to do the job. In this instance, Phil would have amount of hours for a job
earned $20 but it would have taken him 1.5 hours. Therefore, his effective based on an established
rate that he earned for the repair would be only $13.33. average time to perform the
$20 1.0 $20 1.5 $13.33 repair.
Hourly rate Flat rate for repair Total paid Actual repair time Effective rate
As you can plainly see, the flat-rate system has its own built in system of Effective Rate
rewards and consequences. Technicians paid by the flat-rate system can be The actual hourly rate a
richly rewarded when they perform above and beyond average. At the same technician earns, which is
time, they are penalized each time their performance falls below average. calculated by taking actual
Highly skilled, motivated, and committed technicians welcome the chal- pay and dividing it by the
lenge of being on flat rate. Even though they all occasionally are penalized for actual repair time.
exceeding flat-rate time they are able to equal or beat the flat-rate book time
more often than not. As such, they are able to earn the reward of an increased
effective rate of pay. They earn an instant raise each time they are able to do
this. Under the flat-rate system, it is common for an experienced technician to
be able to earn 50 to 60 hours pay weekly while working a 40-hour work week.
Inexperienced technicians, on the other hand, typically pay a severe
penalty for being paid on the flat-rate system. Since they lack the knowledge,
171
skills, and work habits to work up to the standard of the average experienced
technician it will commonly take them longer to perform a repair than the flat-
rate book allows. As such, they will be penalized for their slowness and often
will produce only 20 to 30 flat-rate hours in a 40-hour week. This reduces their
effective rate by 25 to 50 percent below their stated rate. It is for this reason that
many employers will start new or inexperienced employees on a pay plan that
provides a guaranteed minimum weekly pay. This helps to keep them motivated
as they progress through the learning process so that they can work their way
up to being capable of consistently producing high numbers of flat-rate hours.
There is one last very important characteristic of flat rate that should
never be overlooked. Because flat rate depends on work performed, in order
for a technician to earn a good wage he must be capable of meeting or beating
flat-rate times AND the shop has to have enough work to keep him busy. Lack
of available work can create a problem in retaining a skilled technician
because his production (and his paycheck) will be significantly reduced, by no
fault of his own, if the shop can’t bring in enough work to keep him busy.

CASE You decide
Todd works as a technician and is paid $20 per flat- How much did Todd earn last week? What was his
rate hour. Last week Todd worked 40 hours and pro- effective rate?
duced 32 flat-rate hours.
Flat Rate with a Guarantee

Some automotive service shops will consider blending two pay methods
Flat Rate with resulting in paying technicians flat rate with a guarantee. This is generally
a Guarantee done for one of three reasons. First, it may be done to attract a top-flight tech-
Technicians are paid fixed nician to a new shop or one that is in transition. This is because an experi-
flat-rate times for repairs enced technician may hesitate to move from a shop where he both knows that
with a fixed minimum he can produce and that there is sufficient work. In moving to a new shop he
amount of paid hours per may want some assurances that his pay will not drop due to circumstances
week guaranteed. beyond his control (for example, lack of work coming into the shop).
The second reason a technician might be put on flat rate with a guarantee
would be to slowly help an entry-level technician transition from a fixed pay-
check to flat rate. Most entry-level technicians start out at an hourly rate. This
is generally done to subsidize their orientation period. However, it is common
that the manager or owner will do this for the short term with the intent to
move the technician to flat rate once he gets settled. This pay plan would pro-
vide a way to gently ease the technician into a flat-rate pay plan.
Another example of an employee who might be paid using this plan
would be the shop foreman. Neither the technician nor the owner would
want to keep him from producing as many flat-rate hours as possible. How-
ever, the greater need of the shop is to have someone who can help out less
experienced workers. Therefore, the shop, recognizing this need, may agree to
pay the experienced technician a guarantee so that he can provide this service
and be assured that he won’t be financially penalized.
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CASE 36 hours of pay per week. Last week Daryl worked
40 hours and produced 32 flat-rate hours.
Daryl works as a technician and is paid $20 per flat-
rate hour. Since he works at a new business and the You decide
boss can’t assure Daryl that they can keep him busy, How much did Daryl get paid last week? What was
they have agreed to guarantee him a minimum of his effective rate?
Hourly Rate
Paying technicians at an hourly rate regardless of the amount of work pro-
duced occurs in many shops but is most commonly used for entry-level per-
sonnel or personnel who have other responsibilities in addition to performing
repairs. This fixed hourly rate provides the employee a great degree of stabil- Hourly Rate
ity. He earns a stable income whether or not any work comes in the shop and Technicians are paid the
whether he produces 20 hours of flat-rate labor or 60 hours. The shortcoming actual clock hours that they
of the hourly rate plan is that it does not provide any incentive for the techni- work regardless of the
cian to be more productive. amount of work that they
Another shortcoming of this pay plan is that the management is very produce.
unlikely to be very unsympathetic to an hourly rate employee believed to be
unproductive. Whether this is due to an inability to produce or factors beyond
his control such as lack of work, the employer will generally be very impatient
to end a working relationship when money is being lost. Hourly rate techni-
cians are, for this reason, typically the first ones to be cut during a shop cut-
back and the first layoff during the slow seasons of the year. This pay plan
offers the technician stability, but the potential risks to the shop can be severe.

CASE You decide
Germaine works as a technician and is paid $20 per How much did Germaine earn last week? What was
clock hour. He worked 40 hours and produced 32 flat- his effective rate?
rate hours.

It is essential that you understand that establishing into account not only the hourly rate but, more
technician pay plans and technician pay rates is a important, who is bearing the risk. In the flat-rate
complex endeavor. Paying a technician based on system you and the technician share the risks that
his clock hours or paying that same technician there will be enough business and that he will pro-
based on flat rate can have a dramatically different duce enough hours. If there is no business or he sim-
impact on the shop’s profitability. You must take ply does not produce enough hours, you both earn
(Continued )
173
less. In the hourly rate system you bear all of the risks and pay a lower rate. That way you can hold back a
because he gets the same pay whether or not the little more money just in case business or perfor-
shop is busy and whether or not he produces enough mance does not meet your expectations. This is your
hours. hedge against the risk in this type of investment. On
Therefore, you should take risk into account the other hand, if the technician is willing to share
when determining the rate to pay a technician. If you the risk by working flat rate then it is reasonable to
are bearing all of the risk by guaranteeing a fixed give him a greater share of the rewards by paying
hourly rate then you should be more conservative him a higher hourly rate.
Hourly Rate with

Hourly Rate with Bonus
Bonus The hourly rate with bonus pay plan provides the stability of income of the
Technicians are paid the hourly rate plan. It also carries the potential risks of the hourly rate plan. One
actual clock hours that it of the criticism of hourly rate pay plans is that employees are not motivated to
takes them to perform a produce. Adding a bonus feature to this plan provides employees with an
specific repair with additi- incentive to produce more. As we have learned previously, the only major
onal incentives for reaching product that the shop has to sell is labor, anything that will stimulate an
a preset number of hours. increase in labor hours produced is to the company’s benefit.
CASE 1 You decide

Irving works as a technician and is paid $20 per clock How much did Irving earn last week? What was his
hour plus he receives a performance bonus of $20 effective rate?
if he produces over 30 flat-rate hours. He worked
40 hours and produced 32 flat-rate hours.
CASE 2 Everyone in our shop works a 40-hour week and gets

paid strictly by the hour. We’ll be glad to give you a
Jack is an experienced automotive technician. He has
$3 raise from your current rate to $23 per hour.”
just been recruited by a large local dealership and
they want to sit down with him to negotiate his pay You decide
plan. Jack has been productive at his current shop to
At which shop will Jack make more money based on
be able to produce an average of 50 flat-rate hours
this offer? What are the benefits of staying on his
per week at his pay rate of $20 over the past year. As
current pay plan? What are the benefits of the new
he speaks to his potential new boss, the boss tells
one offered to him? If you were Jack, what would
Jack “Don’t you worry, you won’t have to be con-
you do? Why?.
cerned about the pressures of flat rate anymore.
174
CASE 3 You decide

Jack thinks that he’d be better off getting the bene- Which pay plan could give Jack the benefits of both
fits of flat rate but the security of a steady paycheck systems? Please explain.
that he would receive if he was paid by the hour does
sound interesting. He hates the pressure of being
100 percent on commission, as he is in when working
under the flat-rate system.
Pay Plans for other Service Employees

In an earlier chapter we discussed the staffing needs of a service shop. In addi-
tion to the owner, the manager, and a host of technicians, the typical shop
will have service advisors, cashiers, porters, parts personnel and business office
personnel. Most of the staff are paid hourly or are on a fixed salary.
The most common exception to this fixed pay is for those employees in
the shop whose jobs are directly linked to the shop’s productivity (sales of
labor and parts). Even though service advisors, the parts personnel (if the shop
has an internal parts department), and the service manager don’t actually pro-
duce the flat-rate hours, they have an affect on the labor sales. Therefore, their
pay plan is commonly tied to production.
The service advisor is the link between the customers and the company. In
some organizations the advisor may be called a service salesman. As discussed in
an earlier chapter, the primary responsibilities of the service advisor are to recom-
mend services to the customer, explain the repairs needed to resolve the cus-
tomer’s concerns, prepare an accurate estimate for the total cost of these services,
and then gain the customer’s approval to proceed with the needed repairs. The
advisor’s ability to explain the needed repairs properly, to be knowledgeable
about the regular recommended services, and to be able to explain this informa-
tion to the customer in a way that will encourage the customer to approve the
repairs is critical to the success of the shop. In a nutshell, whatever the service
advisor can’t sell, the technician can’t produce, no matter how skilled he is.
Because of their importance in generating opportunities for technicians to
produce labor sales, service advisors are generally paid a base salary plus a per-
formance incentive. This incentive may be based on total flat-rate hours pro-
duced on the repair orders that he has written. An alternate plan is to pay the
advisor a bonus for reaching or exceeding specific sales goals. The general goal
is to tie the service advisor’s pay to his performance thus providing a positive
incentive for him to excel.
The service manager’s pay plan is almost always tied directly to over-
all shop production. A small number of managers are paid flat salaries
and some are paid totally based on incentives but the most common pay plans
are a blend of the two. Since the main factors that the manager can control are
labor sales and labor expense (technician pay), manager pay plans routinely
include a base salary along with a performance incentive. This performance
incentive may be a percentage of the gross profit of the shop. Managers may
also be paid incentives based on net profit. The percentage of the manager’s
pay that is based on incentives varies from shop to shop.
175

Tying an employee’s pay plan to their performance —Set the objectives high so that employees will have
is common. If done properly it encourages him to to stretch, but never make them unattainable
excel. If done improperly it causes him to become —Do not make incentives all or none. Allow the
discouraged and results in employee dissatisfaction, employees to attain small rewards for small
low morale, and high employee turnover. For a pay increases and large ones for major increases.
plan to be effective it should be address these
—Always be willing to live with the rewards you have
principles
offered—even if the performance far exceeds
—Only tie the incentives to those things that the your expectations and costs you more than you
employee can control or directly influence. had planned.

CASE 1 That’s right. I don’t want any salary, just pay me
40 percent of the total labor sales that I sell and we
Herman is the service manager at Most Motors. How-
can both make a lot of money.”
ever, his department has not been very profitable
lately since they lost their top service advisor. He has You decide
just received a call from Jacques, one of the best advi- Herman is very quiet. He tells Jacques that he needs
sors in the Midwest, who is shopping around for a some time to think about it and that he will get back
‘better work situation’. Herman begins to think that to him by tomorrow. What do you think Herman’s
his prayers are answered. When Herman asks Jacques concerns are? Do you think that he’ll be willing and
what type of salary he is looking for to make the able to hire Jacques? Why or why not?
move, Jacques says, “You won’t have to worry about
that! I’ll come to work for you on straight commission.
Fringe Benefits
Fringe Benefits Most employees receive a fringe benefits package in addition to their weekly
Items of value (such as a or monthly pay. Benefits are an important part of the total compensation
pension or paid vacation) package that employees receive. Although most employees judge their pay
that are given to employees plan on their hourly rate or salary, benefits provide a great deal of security to
in addition to their pay to an employee. They also come at a significant cost to the employer.
ensure their welfare and Some of the most common benefits paid for in part or in total by the
security. employer are: social security, Medicare, health insurance, prescription insurance,
dental insurance, disability insurance, retirement programs, paid vacations, holi-
days, and sick days. Benefits like social security and Medicare are mandated by
the federal government. They are long-term benefits that are paid for jointly by
the employee and the employer. Medical insurance plans (health, dental, eye
care, disability) and retirement accounts are optional plans for which the shares
paid by the employee and employer may vary greatly. Paid vacations, holidays,
and sick days may appear to be no-cost options to the employee; however, the
cost to the employer is substantial since he pays for a day’s wages and at the same
time loses sales and profits due to the absence of an employee for that day.
Many fringe benefits serve as a buffer against unexpected costs (health care
benefits or disability insurance) or long-range costs (retirement benefits/social
security). Their purpose is to create an environment where the employee is
176
unlikely to encounter any unexpected costs that will create a hardship. Providing
this security, it is hoped, will make it easier for the employee to avoid those finan-
cial and emotional stresses and encourage him or her to be a long-term employee.
Whenever comparing different employment opportunities it is best to
compare the entire compensation package, not just the rate of pay. Although
some employees may not feel like the benefits are as important today, they
may make a big difference in the future. Most employers who value long-term
employment relationships with their staff provide very rich benefits pro-
grams. The employee should realize that the value the employer is placing on
him relates to the total amount of money that he is willing to invest to attract
him and this total cost includes pay rate and fringe benefits.
As a manager, you must consider that when you determine the total cost
of an employee, you must include the entire compensation package, not
just the employee’s pay rate. The benefits cost for many companies ranges
from 20 to 30 percent of the employee’s hourly rate. This varies depending on
how many benefits the company offers. Therefore, when hiring a technician
that the company agrees to pay $20 per flat-rate hour, the actual total costs for
that employee are much higher. His actual cost to the company will be $4
to $6 (20 to 30 percent) per hour higher to pay for his benefits package.

CASE 2 You decide
Herman’s goal is to keep his total personnel costs no What is the average hourly rate that Herman must try
higher than 40 percent of sales. His current labor rate to maintain if he wants to keep his costs at or below
is $50 per flat-rate hour and the benefits package 40 percent?
that the company provides for all employees is equal
to 25 percent of their hourly rate.
SUMMARY
In this chapter we began by exploring the different methods affects on both the technician and the shop of the various
that a shop can use to calculate their labor charges. We major pay plans: flat rate, flat rate with guarantee, hourly
reviewed the history and benefits of the most common of rate, and hourly rate with bonus.
these methods, flat rate and hourly rate. We then discussed We concluded by briefly discussing some of the more
the benefits of the multiple labor rate systems that have common pay plans used for service advisors and service
grown in popularity in the auto repair business in recent years. management personnel. We looked at the benefits of incen-
The second major topic that we discussed was technician tives, bonuses, and commissions as motivational tools. We
pay plans. We learned that what affects the final pay for the closed by reviewing the importance of fringe benefits and the
technician is not simply the rate that he is paid, but also the effect that they have on the total compensation plans for
way that the rate is calculated. We explored the multiple employees.

1. A time study is c. a common method for equalizing the time each tech-
a. a method for preparing for your ASE exams. nician gets paid.
b. a method for establishing the actual time it takes to d. all of the above.
perform a repair.
177
2. The item in the following list that would not be a fringe admission, is not great at engine performance and
benefit is heavy diagnostics. However, he has several strong
a. health insurance. recommendations of his ability to perform all mainte-
b. paid vacation. nance and common repairs and services from his past
c. retirement plan. two employers. He’s a bit shy but finally indicates
d. hourly pay. that he isn’t willing to take the risk of working on
flat rate and his past two jobs ended with him
3. Technician levels are earning $15 per hour.
a. ways to identify their various levels of skill and Based on the information provided above please choose
experience. the best answer for the following questions:
b. ways to make all of the technicians perform the same.
c. tools used to check the surface of cylinder heads. 6. I would considering Gomer and Cindy because
d. ways to penalize technicians by reducing their pay. a. Rowdy sounds like a troublemaker.
b. my average cost of sales would be the lowest of the
4. In a shop that uses variable rate pricing
possible choices.
a. the labor rate for common repairs is the lowest. c. Cindy appears to be the most qualified and moti-
b. the labor rate for highly specialized repairs is the vated and Gomer can do the simple jobs.
highest. d. I can’t afford to take the risk of having two employ-
c. several labor rates are used based on difficulty of ees that have guaranteed pay plans in a new shop.
repair and skills required. e. all of the above.
7. If you decided to hire Gomer what pay plan would you
5. The most common method for establishing customer offer him?
labor rates in shops is
a. hourly rate starting at $15.50 per hour.
a. variable rate pricing. b. hourly rate + bonus at $10 per hour.
b. flat-rate pricing. c. flat rate at $17 per hour.
c. hourly rate pricing. d. none of the above.
d. flat rate with a guarantee.
8. Rowdy’s extensive experience makes him a very appeal-
In Questions 6–8, Rogue Repairs is a new shop in town.
ing choice to hire. What concerns might you have based
They’re trying to hire two new technicians to start immedi-
on the facts provided?
ately. The top three candidates are
a. He is pretty demanding and is demanding too high of
Rowdy—21 years experience, ASE Master Certified, has a pay rate.
worked in six different shops in the last three years. b. For some unknown reason he has a hard time keep-
He demands that with his experience and certifica- ing a stable job.
tions he will only work if paid flat rate with a guaran- c. He may not be willing to work very hard since he
tee of 40 hours pay per week. Rowdy drops a strong wants a guarantee.
hint that it will take $20 per flat-rate hour to get him d. All of the above.
to come to work at a new shop.
You decided to hire all three technicians and you were able to
Ginger—A recent graduate of the local college automo- successfully hire Rowdy @ $21 per flat-rate hour, Ginger @
tive program with an Associate Degree, she has $19 per flat-rate hour, and Gomer @ $16 per clock hour.
worked for three years full-time and has earned her Knowing this please answer the following.
ASE Master Certification and completed 14 industry
training courses. She insists on being paid flat rate 9. The first week they all produced exactly 40 hours. What
but says that it will take $22 per hour to get her to would be their effective labor rates for that week?
move from her current position. 10. The second week Gomer only turned 30 hours and all
Gomer—A journeyman technician with 10 years’ experi- three techs worked a full 40 hour week. What is his
ence. Gomer has little formal training and, by his own effective labor rate for week 2?
REFERENCES
Chilton Labor Guide Manual (Clifton Park, NY: Delmar Mitchell Mechanical Labor Estimating Guide (Poway,
Publishers). CA: Mitchell 1).
Motor Labor Guide Manual (Troy, MI: MOTOR Informa-
tion Systems).
178
C H A P T E R
15
Production Plans
CHAPTER OBJECTIVES
■ To identify the three most common methods of ■ To identify the benefits and limitations of
organizing technicians in a repair shop: individ- increasing physical facilities to increase capacity
ual plan, team system, and support group ■ To compare and contrast the benefits and limi-
■ To compare and contrast the benefits and limitations of using extended hours, two shifts, or
tations of individual plan, team system, and sup- six-day rotation to increase production capacity
port group strategies
■ To describe the various methods used to
increase the productive capacity of a repair shop
KEY TERMS
individual plan expanding facilities six-day rotation

team system extended hours
support group second shift
179
Introduction
A solid understanding of financial principles and major cost factors in a repair
shop can help you as a manager to understand the current status of your oper-
ation. However, it often takes a bit more creativity than simply keeping tech-
nician pay in the proper range to be successful. In this chapter we will explore
two major ways where you can substantially change the sales and profit out-
look, by the way that you organize the technicians in the shop and by chang-
ing the production capacity of the shop.
All of the compensation plans discussed earlier are based on a traditionally
organized shop. However, over the past 15 to 20 years there has been an emer-
gence of several other ways to organize the technicians and other shop employ-
ees to maximize efficiencies and, thereby, reduce total shop costs. You are more
likely to find these types of organizational plans in dealerships and most typically
in medium to large-sized ones that employ 10 or more technicians. In this chap-
ter we will explore the three main shop organizational schemes: traditional, team
system, and support group and will focus on the central theme of these schemes,
how they affect technician pay, and shop labor costs.
After looking at the major technician organizational plans we will then
explore another method for increasing production while controlling expenses,
expanding the production capacity of the shop. This can be done by increasing
physical capacity or available work hours, or both. It is important to realize
that while expanding capacity does not change gross profit percentage it helps
to generate more sales while holding the gross profit percentage constant, and
results in a greater bottom line.
Technician Organizational Plans

Individual Plan
Individual Plan The individual plan is the traditional system used since service shops first
A system in which a began repairing vehicles. The vast majority of automotive service shops still
technician’s pay is based subscribe to this method of organizing their shop and paying their employees.
solely on his or her own In a shop using this type of organization, employees are paid on their individ-
production. ual initiative. That is, they are paid for what they produce. Their individual
pay may be based on any of the four pay plans discussed earlier (flat rate, flat
rate with a guarantee, hourly, and hourly plus a performance bonus). The dis-
tinguishing feature of this system is that the technician’s pay is not in any way
affected by others in the shop nor is it shared with others.
Experienced, productive technicians generally prefer to be paid by this
method. The reason is that they worked their way up through the system the
hard way, starting at the bottom with the lowest pay and the lowest produc-
tion level. Now that they have learned and earned their way to the top of the
scale they don’t want to share it with anyone else.
From a shop management standpoint, the strength in maintaining the
individual pay plan system is that experienced technicians prefer this system,
and so it is easier to attract them to a shop with this pay system and keep
them satisfied enough to stay. Shops need expert technicians (and, therefore
high-priced ones) to fix the more difficult vehicle problems. They also need
technicians who have the ability to fix a wide range of different problems with
different systems (again, higher-priced ones). In order to maximize their ability
to meet these two needs service shops that operate with a traditional staffing
180
Production Plans ■ CHAPTER 15
plan tend to hire a high percentage of these A, B, and C techs to staff their
shops. As a result, they have a high degree of expertise available. The only
drawback is that this results in a high cost of sales and reduced gross profit.

CASE You decide
Slick Service Center currently employs six technicians. a) What did each of the six technicians earn last week?
The entire shop is organized to pay the technicians
b) How many flat-rate hours did the entire shop pro-
purely based on the flat-rate hours that they pro-
duce last week?
duce. During the past week all six technicians worked
40 hours each and produced the following number of c) If Slick Service Center charges $60 per flat-rate
flat-rate hours at their individual pay rates: hour for all of their work, what was their gross
labor sales for last week?
Bob—42 hrs. @ $18; Chuck—38 hrs. @ $18; Rod—
d) What was Slick Service Center’s gross profit for last
32 hrs. @ $12
week?
Chet—54 hrs. @ $24; Jan—60 hrs. @ $20; Terri—
e) What was their gross profit percentage for last
56 hrs. @ $22
week?
Team System
The team system is most often found in larger shops. Rather than working Team System
individually the technicians in a team shop are organized into groups. They A system in which
work together and are paid together. For example, instead of a shop with 18 technicians are organized
individual technicians each working separately and with three service advi- into a group of four to
sors that schedule, write up, and sell work for all of them, the team shop is seven members and are
subdivided into three teams. Each team of six technicians is assigned their paid based on the total
own service advisor. They become a shop within the shop. In order to do this amount of hours produced
efficiently, the technicians on each team represent a good cross-section of by the team.
experience and skill levels. This allows the team to be able to handle any type
of repair that may come into the shop. The team’s service advisor works only
for his team, but the difference doesn’t end there.
In a team system shop technicians do not work individually and they are
not paid individually. As work comes into the shop the repairs are assigned to
the team, not to a specific technician. The team leader, typically the senior
and most experienced technician, then divides the work among the team mem-
bers. The work on a particular vehicle may be assigned to just one team mem-
ber but more often is assigned to several of the technicians. The group of
technicians (typically four to seven technicians) on the team is expected to
work as a unit. The lead technician’s responsibility is to help in diagnosis diffi-
cult repairs and to otherwise maximize the productivity of the group. He does
this by keeping each of the technicians doing what he does best. A key
thought behind this method is that if they are able to keep everyone doing
what they do best most of the time the quality of repairs as well as the produc-
tion of the group will be maximized.
Finally, and probably most important, the team technicians are not paid as
individuals for the amount of work that they do. They are paid a share of the
181
total hours produced by the team. This is done by tracking and adding up all of
the hours produced by the team over a pay period (typically a week), then divid-
ing the total hours by the number of technicians on the team. They are then paid
their hourly rate times that number of hours. Please note that this does not mean
that all technicians, regardless of expertise, earn equal pay. Their pay rate is based
on skill level. Therefore, although the higher-skilled technicians are paid the
same number of hours as the rest of the team they are paid a higher hourly rate
and therefore earn a higher weekly income than the inexperienced technicians.
One of the reasons why team systems were developed and have found
favor in many larger shops is their ability to reduce the overall cost of labor. In
shops where technicians work independently it is common that 25 to 40 per-
cent of the technicians in the shop that are hired are A technicians. This
ensures that the service shop has enough technicians available to fix even the
most difficult problems that come into the shop. Although this is good to
assure fast high-quality repairs it does not come without a price. A-level tech-
nicians are the highest paid and, therefore, increase the shop’s cost of labor
and reduce its gross profit. A traditionally organized shop would also staff the
majority of the remaining positions with B or C technicians. They would nor-
mally have one or two D technicians on staff because of their limited skills for
performing other than the simplest maintenance. For example, in a tradition-
ally organized shop it would be typical that out of every 6 technicians you
would find two to three A techs, two to three B or C techs, and only one D
tech. With this high number of mid- to high pay range employees the cost of
labor sales is higher and gross profit is reduced.
In a team shop the team leader is normally the only A technician on the
team. The team depends on him to guide and direct the team and to handle all
of the difficult diagnoses and repairs. In a team of six, for example, there would
be 1 A tech (high pay), two or three out of six that are B or C techs (mid-range
pay), and two or three out of six that are D techs (low pay). This reduction in
highly paid, highly skilled technicians could lead to concerns that the overall
repair capabilities and quality generated by the shop would be reduced. How-
ever, by sharing the team leader’s expertise with his group members the goal is
for him to provide input so that the entire team can produce high-quality
results. He also becomes an in-house trainer for the team, helping to increase
the knowledge and skill levels of all team members at a very affordable price.
From a management perspective, being able to reduce the percentage of
highly paid technicians reduces labor costs and increases gross profit. How-
ever, if reducing the number of highly skilled technicians reduces repair qual-
ity it is probably not worth the savings. In service shops and markets where
this method is an accepted way of doing business the team system has been a
major contributor to increasing profitability.
Unfortunately, the team system has not been widely accepted in many
markets. This is due to the reluctance of many highly skilled technicians to
work under this system. Many A technicians do not want to share the wealth.
They are confident of their ability to meet or exceed flat-rate times for most
repairs and earn premium wages. They do not want to share this with others.
Further, they do not want their pay to be dependent on the consistent perfor-
mance of others. They know that they can make it on their own and would
prefer to work that way.
In markets where technicians can choose to work in a traditional shop or a
team shows most A techs often choose traditional shops. This is a major obstacle
to the widespread acceptance of the team system within that city or town. The
182
resulting move of A techs from team shops to traditional shops reduces the
effectiveness of team systems because shops without a true A tech do not have
the top-notch problem solver and mentor that is needed for an effective team.
This reduces the shop’s technical capabilities as well as its long-term ability to
develop future technicians.

CASE You decide
MaxiMizer Garage currently employs six technicians. a) What did each of the six technicians earn last week?
The shop is organized using the team system approach. b) How many flat-rate hours did the entire shop pro-
During the past week all six technicians on the Gold duce last week?
Team worked 40 hours and the team produced a c) If MaxiMizer Garage charges $60 per flat-rate
total of 282 flat-rate hours. hour for all of their work, what was their gross
The flat-rate pay rates for the team members are labor sales for last week?
Jamal—$16; Mel—$18; Hal—$12 d) What was MaxiMizer Garage’s gross profit for last
Betti—$24; Heidi—$17; Tony—$13 week?
e) What was their gross profit percentage for last
week?
Support Group
A third way to organize shop production is by using the support group sys- Support Group
tem. This is a hybrid of the individual and team system approaches. In a sup- A system in which
port group shop the technicians and service advisors are split into support technicians are organized
groups which look exactly like a team. There are four to seven technicians into a small group and work
grouped with a service advisor. The technicians on a team are grouped together together but are paid based
so that they represent all areas of technical knowledge and experience. Much on their individual
like the team shop there is normally one A tech per group who is the team production.
leader. This team leader is responsible for assigning work, assisting and training
the less-experienced group members and doing the very difficult diagnostic
work. There are, however, several operational differences that set support
groups apart from team systems.
In a support group the technicians are not paid based on their share of the
total team’s production. The technicians each earn the individual hours that
they produce. They may work together on a single vehicle at times but they
are paid for the specific repair that they have completed. For example, if a cus-
tomer brings in a vehicle and requests an oil change and a transmission
service two group technicians may be assigned. However, unlike in the team
system, they will each perform one of the tasks and will be paid only for the
task that they have completed.
In a support group system the group leader is also paid on his individual
production. However, he also receives additional pay for his group supervisory
responsibilities. In addition to his individual pay he receives an override
(a specified amount per hour for each hour produced by the rest of the team)
to reward him for performing those tasks.
183
The support group system has benefits similar to the team system. It pro-
vides a solution for reducing the overall cost of sales in the shop. Even after
paying the lead tech the override on the rest of the team’s hours the overall
cost of labor is still normally lower than in a traditionally organized shop.
One of the most unique benefits of the support group system is its ability
to reduce labor costs while maintaining employee satisfaction and stability.
This system rewards senior technicians for their own production and they
earn extra compensation for sharing their expertise with others. This extra
benefit increases the likelihood that A technicians will not only stay at a sup-
port group shop, they often elect to work in them over any other type of shop.
Because of this, the support group system continues to gain support in a wide
number of markets where team systems are not well accepted.

Each of the production systems has unique benefits ceived as gambling with your employee’s pay and is
and drawbacks. The team system is clearly the most likely to lead to a mutiny. You must have a sound
innovative and most likely to help you reduce your logic behind your plans and be able to clearly demon-
cost of sales and increase your gross profit. Applied in strate that you have considered the interests of your
the wrong situation or without adequate care it is employees.
also most likely to drive you out of business as you Whenever possible, the best strategy is to consult
experience a mass exodus of your long-term highly with one of your top employees in confidence to
skilled technicians. review the proposed strategy. He can help you iden-
Your ability to successfully implement unique tify the strengths and possible weaknesses of your
and innovative strategies is dependent on several strategy and give you clear guidance about the key
important factors, and trust of management among issues that you must address to overcome the objec-
your employees is the most critical of these. Unless tions of the other employees. Further, once he has
you have established a high level of trust from your embraced the change he can be a valuable ally in
employees, making radical changes will often be per- helping to sell the concept to the rest of the shop.

CASE 1 You decide
CostLo Motors’ service department is organized using a) What did each of the six technicians earn last
the support group approach. During the past week week?
all six technicians in the group worked 40 hours.
b) How many flat-rate hours did the entire shop pro-
Because they are on a support group pay plan, Carly,
duce last week?
the team leader, is paid an extra $1 for every flat-rate
hour produced by the entire team for her efforts on c) If CostLo Motors charges $60 per flat-rate hour for
guiding and directing them. all of their work, what was their gross labor sales
The flat-rate hours and flat-rate pay for the tech- for last week?
nicians are d) What was CostLo Motors’ gross profit for last
week?
Al—42 hrs. @ $16; Edgar—38 hrs. @ $18; Ricky—
32 hrs. @ $12 e) What was their gross profit percentage for last
week?
Carl—54 hrs. @ $24; Joe—60 hrs. @ $17; Damian—
56 hrs. @ $13
184

CASE 2 b) How many flat-rate hours did each shop produce
last week?
Please take a look at the three different production
schemes and last week’s results for Slick Service c) At $60 per flat-rate hour what was their gross
Center, MaxiMizer Garage, and CostLo Motors in labor sales last week?
exercises 15-1, 15-2, and 15-3 above. Now let’s com- d) What was the gross profit of each shop last week?
pare the results of the three companies. e) What was the gross profit percentage of each
You decide shop last week?
a) What was the total technician pay last week for

each shop?

CASE 3 you choose for your shop: individual pay, team
system, or support group? Why?
You are the service manager of a new shop in Pleas-
antville, StarService. Your three main competitors are b) What are the strengths and weaknesses of the
Slick Service Center, MaxiMizer Garage, and CostLo plan you chose, considering that there are three
Motors. Using the information that you learned from other strong competitors in your market who will
exercises 15-1, 15-2, 15-3, and 15-4 and expecting constantly try to steal your technicians and out-
business to stay the same as in these exercises, please perform you?
answer the following.
You decide
a) Given free choice to organize your shop however

you wanted to, which production scheme would
Increasing Capacity
Many successful shops eventually reach the point where they are simply too
busy to handle all of the work that is coming their way. When this situation
arises they have to make some very difficult choices. Businesses work too long
and hard to build up a clientele and certainly do not want to lose those cus-
tomers because they cannot provide them the services that they have
requested in a timely manner. So, what are they to do?
In this section we will explore several alternatives that can help a company
address this situation. In order to decide what actions are the best choice you
must first must be able to answer two questions: 1) is the increased demand
temporary or sustained? And, 2) what is the appropriate action to take?
If the increase in demand is temporary then making major changes in
facilities or staffing are most often unwarranted. An example of this would be
a sudden increase in business just before a holiday. Even though everyone
wants to get their car serviced just before taking the long drive to grandma’s
house for Thanksgiving it is a very short-lived increase in demand. Sound
185
management principles indicate that making a major change in operations

(for example hiring more technicians or adding on to the shop) just to meet a
temporary (one week per year) increase in business is a poor management
decision. Although this example is extreme there are often fluctuations in
business because of a variety of external factors that must not be misinterpreted
for a long-term increase. Misinterpreting these signs could easily lead to mak-
ing a poor investment in additional capacity.
However, if the increase in demand appears to be long term the manager
must consider what reasonable actions he can take to meet this increased
demand. There are several actions that the shop can take to address a long-
term increase in demand. These alternatives range from those that are quickly
implemented and can be temporary to those that require a significant invest-
ment. Below we will briefly review four of the most common choices: expand-
ing facilities, extended hours, two shifts, and going to a six-day rotation.
Expanding Facilities
When long-term demand exceeds capacity one approach to addressing this
Expanding Facilities concern is to increase capacity by expanding facilities. Adding on to the
Adding physical space shop, installing more lifts, leasing out another building, or moving to larger
(additional stalls and or quarters are all ways that you can increase your capacity. However, all of these
additional buildings). alternatives come at a price.
If you reflect back to some of the basic economic principles that we
learned in Chapter 13 a very important lesson in understanding expenses is
that overhead is the most difficult expense to control. All of the alternatives
listed earlier to increase capacity increase overhead. This is because when you
add facilities or purchase equipment they will continue to exist and cost you
money whether or not they are needed and fully utilized.
If you decided to add six service stalls to your building to meet a recent
increase in business you need to remember that the extra six service stalls that
you have added will still be there if business slows down. You will have to pay
for the cost of the addition, for the additional utilities, and other related
expenses. Certainly, you can’t unbuild the addition. If things change and you
wish you hadn’t added on you can’t make the costs go away. You’re going to
have to live with them. For this reason, you should approach adding physical
space to your shop very cautiously and only after serious consideration. The
following are three capacity-building alternatives that should be considered
because they will help you to increase capacity without adding overhead.
CASE that there is current demand for 125 percent of current

capacity during the peak months.
As the service manager at Quest Motor Sales you
have noticed that for the past three years you have You decide
had to turn away business during the busy summer Should you seriously consider adding on four addi-
months (June–August). Your records indicate that tional stalls to your current 16-bay facility? Please
you have been operating at 90 percent of capacity explain the reasons for your decision.
the remainder of the year and have strong evidence
186
Extended Hours
The traditional automotive service shop hours of operation are from 8 A.M.
to 5 P.M. Mondays through Fridays. Weekend and evening service hours
were very rare. However, in today’s consumer-driven marketplace, customers
demand convenience. As a result, most shops now offer some form of extended Extended Hours
hours. Increasing the number of
When demand exceeds capacity one of the alternative methods for hours that the shop is open
increasing capacity is to increase available service hours. This will increase to produce repairs beyond
some costs. Among these are increased pay for the extra hours worked by per- the traditional 40-hour
sonnel and increases in utilities costs. work week.
For example, in a shop that has traditionally worked a Monday through
Friday 8 to 5 work week the shop is producing 40 hours per week. By staying
open until 9 P.M. two nights per week (eight additional hours) the shop has
effectively increased its capacity by 20 percent without adding any physical
space. Although there are some additional costs and scheduling becomes a bit
more complicated this is an economical method for increasing capacity.
Because of the complexity of staffing the additional hours many shops
will extend the work weeks of their existing employees on a rotating basis
rather than adding more staff. It must be realized, however, that if the shop
chooses this method to extend service hours and has, for example, all employ-
ees work late every other week the increased shop capacity of the extended
hours is cut in half.
The major additional benefit of extending service hours is the flexibility of
this approach. You can make this change and implement it very quickly
because it does not require any long-term investment. Further, if the demand
drops it is possible to revert back to the previous work schedule with few
residual effects. For this reason, extended hours should be considered as one
of the first alternatives to implement. Even if it is done as a temporary
fix while you are working on a more permanent solution, it allows you to
respond to your customers needs very quickly and this method is very cost
effectively.
Benefits that shops realize from extended service hours are
• The ability to increase hours of operation two to three days per week.
• Increased shop capacity without any additional facilities, equipment, or
tools.
• It is the most flexible alternative to increase capacity without making
any long-term commitments.
CASE You decide

At Quest Motor Sales your service business continues Should you consider extended service hours? As a
to be brisk. Your boss is stalling you on your request temporary fix or as a long-term strategy? Why?
to add more stalls to your shop . . . and, besides,
even if he finally approves it you won’t see the facility
built and opened for at least 18 months.
187
Second Shift
A second alternative to increase capacity without increasing overhead is to put
Second Shift on a second shift. Having two crews working five 40-hour work weeks effec-
Operation of a second tively doubles the capacity of the shop (100 percent increase) without the
eight-hour shift of costs and permanent consequences of adding on to the facilities.
employees daily to double The potential increase in capacity by going to a two-shift system is much
production capacity. greater than can be achieved through extended service hours. However, along
with the capacity comes increased complexity in managing the department.
Having two shifts is much like running two totally separate shops within the
same company. From a staffing standpoint you have to have an entire second
crew, from technicians to service advisors to managers, to staff the second shift.
However, there are also some complications that go above and beyond those
experienced in two separate facilities.
Even though the two-shift approach provides the largest benefit in
increased capacity it also has substantial limitations. From the viewpoint of
the customer, the shop running two shifts is not at all like two shops, it is one
company with longer hours. Customer expectations are that regardless what
time of day they call or stop, they expect to receive consistent service. This
requires a great deal of coordination and intercommunication between the
employees and supervisors working on the two distinct shifts. Finally, since
many of the suppliers that the shop depends on for parts and supplies do not
work a full 16-hour day there are often severe limitations with regard to avail-
ability of parts and supplies. Delays in obtaining these materials can delay
completion of repairs and lower overall productivity. It is also generally much
more difficult to recruit and retain qualified technicians who are willing to
work from 5 P.M. to 2 A.M., especially if that schedule includes Friday nights.
Benefits that shops realize from the second shift are
• The ability to double their hours of operation five days a week

• Doubling their shop capacity (100% increase) without any additional
facilities, equipment, or tools
CASE his labor sales almost overnight without adding on to

his facilities by going to a two-shift operation.
Business has been really great at your dealership, Mil-
lenium Motorcars, and your business has been grow- You decide
ing at a 15 percent rate for the past three years and What information do you need to gather to decide if
you have reached 100 percent of full capacity. Your this is a good strategy for your shop? What concerns
boss has just returned from a national dealer meeting about two-shift operations should you bring up to
and tells you about a fellow dealer who has doubled the boss?
Six-Day Rotation
Just as the team system and support group were developed to address the
need for a creative approach to a staffing concern the development of the
188
six-day rotation was developed to provide a suitable alternative to the prob- Six-Day Rotation
lem of limited capacity. The concept of the six-day rotation falls between that A method of expanding
of extended service hours and a full two-shift operation. Like those strategies available hours by working
it provides for increased capacity without requiring additional facilities, tools, all technicians 4–10 hour
and equipment. days per week and rotating
The six-day rotation approach provides a shop that has traditionally three crews Monday
worked a five-day 40-hour week to increase their overall production capacity through Saturday.
by 50 percent by working one day longer and increasing the work day. At the
same time, it does so without increasing the average work week of the individ-
ual employee. Here’s how it works:
• Instead of working 8 hours per day 5 days per week (40 hours) all shop
employees move to working 4 10-hour days per week.
• The shop’s hours of operation change from being open 8 hours per day
Monday through Friday to being open 10 hours per day Monday
through Saturday.
• In order to coordinate staffing and allow for having 40 hour per week
employees scheduled evenly to cover 60 available hours the shop is gen-
erally organized into three work groups.
• The three work groups work a three-week rotating schedule.
An example of a three-work group schedule is presented in Figure 15-1.
Week 1 Monday Tuesday Wednesday Thursday Friday Saturday

Group A x x x x
Group B x x x x
Group C x x x x

Group A x x x x
Group B x x x x
Group C x x x x

Group A x x x x
Group B x x x x
Group C x x x x
Figure 15-1 Six-day work week rotating schedule
Moving to the six-day rotating schedule shares some of the challenges

with the two-shift schedule. The most common one is that the schedule
requires a greater deal of intercommunication between the work groups. How-
ever, since this schedule does not require that the shop stay open late into the
evening, delays in obtaining parts and supplies are substantially reduced.
Although there is generally an initial reluctance to work a six-day rotating
shift it is not as difficult as finding employees to work a second shift. Even
though there are drawbacks in that all employees have irregular schedules
(not the same every week) and they are required to work Saturdays two out of
189
every three weeks. This system also provides some benefits that will attract
highly qualified employees.
Employees who work on a six-day rotation only work a four-day work
week. Although they do work two Saturdays per rotation they have the added
benefit of having a mini-vacation built into their schedule. Referring back to
Figure 15-1 you can see that, for example, between weeks 1 and 2 of the sched-
ule Group A gets five full days off in a row. This happens for all three work
groups every three weeks. It has actually been observed that in many service
shops that use a six-day rotation, employees ask to work their normally sched-
uled vacations in exchange for the extra pay since they’re already getting a
vacation every three weeks.
Benefits that shops realize from the six-day work week are
• The ability to provide extended hours of operation five days a week
• The ability to provide a full day of Saturday service
• A 50 percent increase in shop capacity without any additional facilities,
equipment, or tools
• Increased employee satisfaction at working a four-day work week
CASE You decide

After evaluating the situation at Millenium Motor- Under these circumstances, what are your short-term
cars more carefully, you acknowledge that your shop and long-term strategies to prepare your company to
is booked beyond capacity right now and due to a capture this market? Please justify your plan and/or
huge boom in the local economy you can easily grow plans.
your business by 20 to 40 percent in the next two
years, and expect to be able to double it in five years.

One of the keys to getting on top and staying on top little permanent after-effects to the shop. Unfortu-
is constant vigilance and creativity. It is not enough to nately, it is not as easy to reverse a physical expansion.
be above average, you must constantly be ahead of Once the investment has been made the increased
the crowd in leading the innovation. To do this you overhead costs remain. This type of strategy limits its
have to be willing to take risks. However, those risks fall-back position. As such, the adage that “brick and
should be carefully calculated and, whenever pos- mortar is the last resort” holds true. Therefore,
sible, leave a reasonable fall-back position in case whether you’re dealing with expanding capacity or
they don’t succeed so losses and future damage to any other major investment in the organization, you
operations are limited. need to be extra careful before you act . . . and make
The production expansion plans that we’ve sure that there isn’t some other more flexible alterna-
discussed (expanded hours, two shifts, and six-day tive that you can try first!
rotation), although creative, can be reversed, leaving
190
SUMMARY
In this chapter we have explored two widely used methods for When you have increased the efficiency of your facilities
changing the complexion of the service shop to increase sales, and your personnel to their absolute maximum and are still
reduce costs, and help us to attain our overall goal: increased striving to keep the momentum moving forward, expansion
profit. These methods are technician organizational plans and of shop capacity is necessary. The two ways that you can
expanded shop capacity. accomplish this is through physical expansion of facilities or
The three different methods of organizing technicians expansion of available hours. The three most common
(individual pay, team system, and support group) demonstrate methods to expand available hours are: extended hours, two
that there are several ways to obtain the most out of your shift operation, and the six-day rotating work week. When
human resources while controlling cost of sales. Each of these trying to decide whether to add on to a facility or to expand
systems has unique benefits and drawbacks. Therefore, the available hours it is important to remember that each of these
organizational plan that will work best in your shop in your alternatives has unique benefits that should be carefully
market should be seriously considered. considered.

In Questions 1–5, match the terms with their definitions: 8. Many technicians love the six-day rotation because
____ 1) Team system a) increasing the size of the a. they have a long weekend every three weeks.
building b. they only work 40 hours per week.
____ 2) Individual plan b) paying technicians for what c. they only have to work four days per week.
they produce d. all of the above.
____ 3) Extended hours c) paying technicians as a group 9. Which of the following technician organization plans
____ 4) Expanded facilities d) increasing the hours of groups the technicians together rather than having them
operation work individually?
____ 5) Support group e) having technicians work in a a. team system.
small group b. individual plan.
6. All of the following are benefits of expanding the size of c. support group.
your shop except d. a and c.
a. increases number of technicians you can have in the
10. Fred Hammer has just changed jobs and is looking at his
shop.
pay from the past two weeks to see if he made a wise
b. increases the available labor hours you can sell.
decision. He worked at Melody Motors last week where
c. increases the overhead of the shop.
he was paid on an individual plan. He produced 50 hours
d. gives the shop room to expand into as business
at an hourly rate of $20 per flat rate hour. This week was
increases.
Fred’s first week at Mac’s Muffler Service where they
7. All of the following are benefits of the team system except work on a team system. He was hired at a rate of $22.
a. reduces average cost of labor. He was excited because his six person team produced
b. reduces the control that top tech’s have on their own 288 hours this week. What is the difference between
pay. what Fred earned last week and this week? Based solely
c. reduces overall shop payroll. on these results do you think that Fred made a wise deci-
d. provides more technical assistance for new technicians. sion to change jobs?
191
C H A P T E R
16
Analysis and Action
CHAPTER OBJECTIVES
■ To identify the major ways to affect profitability ■ To determine the best course of action to
■ To analyze the impact of various methods of increase production and/or reduce expenses,
increasing sales and capacity taking into account the benefits and drawbacks
of the available choices
■ To analyze the impact of various methods
of controlling variable costs
■ To analyze the impact of various methods of
controlling overall costs
KEY TERMS
bottom line break even point

net loss average cost of sales
192
Analysis and Action ■ CHAPTER 16
Introduction
By this point you should have a basic working knowledge of sales, gross profit,
and net profit. In order to be able to effectively manage an automotive service
operation an understanding of these concepts is essential. We have taken
some time to explain the major factors that you, as a manager, can control
and change in your effort to generate an acceptable profit. Now we can begin
to use this information to understand how the decisions that you make can
significantly alter the profit of your shop, your paycheck, and, ultimately,
your job security as a service manager.
Achieving a Net Profit

Companies must earn a profit to survive. If they did not consistently do this
they would quickly be unable to pay their bills and go out of business. As pre-
sented earlier, net profit is the amount that is left after all expenses are
deducted from the total amount of income as follows
Income Expenses Net profit
It is important to remember that the two ingredients of net profit (income and
expense) are not always separate. As you make extra efforts to increase
income, you may incur additional costs for those efforts (increased expenses).
Likewise, as you try to curtail expenses you need to be careful that you do not
trim services or quality that will result in fewer people choosing to purchase
your service (reduced income).
If you want to maintain or increase net profit there are only two factors
that you can change, leaving you with the following three choices:
1. Increase income (sell more).

2. Decrease expenses (lower cost).
3. Do both.
Increasing Income
A great way to increase profitability that should always be strongly considered
is through consistently increasing sales. In Chapters 25 through 28 we will
discuss some of the tools that you can use to stimulate sales, such as advertis-
ing, marketing, and merchandising. Stimulating sales is the best way to make
sure that you are maximizing your use of the resources that you have at your
disposal. However, if increasing sales is the sole focus of your business plan-
ning, it is likely to produce very disappointing results. Without considering
both of the ingredients of profitability, income and expense, you are likely to
work harder, sell more, and file bankruptcy.
Let us explore a bit little further the contribution that increased sales can
have to achieving and maintaining profitability. Increased sales contribute
directly to the bottom line (net profit). This is especially true if increased sales Bottom Line
can be achieved while holding expenses constant. Figure 16-1 demonstrates A common business term
this principle. In this example, the shop starts in January with total monthly meaning net gain or profit.
expenses that are constant but exceed total income.
193
Break even
Net loss Net profit
Net profit
Sales Indirect expenses
Direct expenses
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Figure 16-1 Increasing sales with constant expenses
Net Loss The shop is losing money (net loss). The shop increases sales 5 percent
A common term used to monthly while holding expenses constant. You can see how this increase in
describe a negative net sales helps them to move from a monthly net loss to a monthly net profit.
profit. In this example you can clearly see that with constant expenses and
steadily increasing sales the shop’s financial picture begins to change as the
year progresses. They begin the year where the expenses exceed the sales and
they are generating a monthly net loss (income < expenses). This is true for the
first four months of the year. However, with the steady increases in sales the
loss continues to diminish. In May, they reach the point where income equals
Break Even Point expenses. This is called the break even point. Finally, in June they achieve
The point at which income their first net profit (income > expenses). Then, as the sales continue to
equals expenses. increase, the monthly net profit grows.
If it were always possible to hold all of the factors constant while changing
only one, management would be a much simpler job. However, sales and
income do not typically increase without any increased costs. For example, if
technicians are paid flat rate, an increase in flat-rate hours (sales) also results
in an increase in technician pay (direct expense). Although the profit does
increase, you can see in Figure 16-2 that it takes a little bit longer for the shop
to move from a net loss to a net profit.
Break even
Net profit
Net loss
Net profit
Direct expenses
Figure 16-2 Increasing sales with increasing direct expenses
194
A third possibility is that when you increase sales you are going to increase
both direct expenses (technician pay) and indirect expenses. Here are two
examples of how that might occur. If you aggressively focus on increased sales
as the only means to increase profit you might consider advertising to a wider
audience to bring people into your shop from far away. Unfortunately, in
order to do that you will have to spend more money to advertise (increase
expenses) to let those people outside of your local area know about your serv-
ices and to give them a good reason to travel further to see you, and advertis-
ing is not cheap. Your indirect costs will be increased. So, just as in the
previous example where increased sales have increased direct expenses, in this
situation both your direct and indirect expenses increase. The resulting profit
chart will look something like Figure 16-3.
Net loss Break even
Net profit
Net profit
Direct expenses
Figure 16-3 Increasing sales with increasing direct and indirect expenses
As you can see in this example, sales have continued to increase at a constant
rate. Direct expenses have continued to slowly increase in direct relationship to
the increased sales. Now, when we add a small monthly increase in indirect
expenses to account for a small increase in advertising, the profit picture has
changed again. The break even point is not reached until November and the
shop achieves a net profit for only one month, December, and it is small.
If you are able to attract people from farther away to come to your service
shop, you will reach a point where your shop is too busy to handle all of the
work. Then what will you do? Will you stay open later? You would have to
hire more technicians and more support personnel to staff your shop
(increased expenses). For each small increase to expenses the break even point
moves further and further into the future.
A final example of the possible results of increasing sales would be when you
reach the point where you have to consider moving or adding on to the facilities
just to keep up with the increase in business. When this happens you will be
increasing indirect expenses by a significant amount. You need to remember
also that the expenses for the facility (building costs plus utilities) are overhead
expenses and, by their very nature, the most difficult to control. Once you have
built an addition you cannot easily make it go away. Therefore, the added indi-
rect expenses will continue no matter what happens to your sales. This signifi-
cant and constant increase in indirect expenses is represented in Figure 16-4.
The example shown above demonstrates the effect of a 25 percent increase
in overhead such as one that would occur with a building expansion. As you
195
Net loss Break even NOT reached

18000
16000
14000
Sales 12000
10000
Net loss
8000
Indirect expenses
6000 Direct expenses
4000
2000
0
Figure 16-4 Increasing sales with a 25% increase in overhead
can see, even though all other factors remain the same, the increase in indirect
costs is both significant and immediate. The impact of the change is that the
break even point is pushed further off into the future and the shop does not
achieve its break even point by the end of the year.
Although it is a good way to increase profit, sales growth is not the only
answer. Even the best marketer with the best product finds that there are lim-
its on how much he can sell. Further, there are always external factors beyond
your control that will cause your sales growth to level off or even decline. For
example, if you are selling service in a small town and you have the best
service available it is still very unlikely that you will sell more oil changes than
there are cars in the county this month. There is a limited market and, there-
fore, a limit to the amount that you can sell.
I hope you have noticed that there is a recurring theme in the four
examples presented. It seems that every time you try to increase sales you
have to do something that is going to cost you more money. These examples
are typical and help to explain the reason why focusing on increased sales
alone is not a long-term solution to making a profit. Consistent profitability is
achieved through a combination of increasing income and controlling costs.
Let us talk more about how to control costs.
CASE 1 You decide

Congratulations, due to your marketing efforts your What do you do?
shop business has grown by 40 percent. Unfortu- a. Raise your prices?
nately, you are now experiencing a shortage of space b. Hire more technicians and start extended service
and are starting to lose customers because they have hours?
to wait so long to get an appointment to have you
c. Buy a bigger building and move into it?
work on their car.
d. All of the above.
Please explain the reason behind your choice
196
CASE 2 You decide

Your business has been slowly declining over the past What do you do?
two years. You know that you still have a good reputa- a. Lower your labor rate?
tion in the local community, but things have been
b. Advertise more outside of the local area?
tough in your town due to them closing down two
local manufacturing plants. You are faced with making c. Hire lower cost technicians?
some tough decisions to keep your shop profitable. d. All of the above.
Please explain the reason behind your choice.
Controlling Expenses
In the automotive service shop there are two main areas where expenses can be
controlled. The expenses that are most clearly under the control of the service
manager are the direct expenses. The main source of these expenses is techni-
cian payroll expense. In Chapter 14 we discussed the different methods for
paying technicians. It is suggested that you consider going back to review this
information if you are unclear about the differences between these pay plans.
Since flat rate continues to be the most common pay plan for technicians,
we need to take a look at how this method of pay affects gross profit. The chart
in Figure 16-5 shows the relationship between technicians’ pay and the gross
profit when the technicians are being paid solely on flat rate.
Sales
Gross profit
Direct expenses
Figure 16-5 Relationship of flat-rate pay to gross profit
There is a direct relationship between technician pay and gross profit in the
flat-rate system. This means that if the sales increase, so do the direct expenses.
If the direct expenses are too high, there is only one way to reduce them—
reduce technician pay. This may sound simple but it is definitely not. Due to the
consistently high demand for technicians and the need for qualified technicians
197
to do quality work, it is difficult to recruit and retain technicians. You certainly

cannot expect to recruit and retain qualified technicians by underpaying them.
You cannot afford the consequences of underpaying a highly skilled and
experienced technician. Fortunately, not all work that comes into your shop
requires a high level of skill and experience. The typical repair shop performs a
wide range of maintenance and repair services which require lower levels of
skill and experience. Therefore, it is possible to control the overall direct
expenses by altering the ‘mix’ of technicians. That is, changing the combina-
tion of A, B, C, and D technicians that you have in the shop changes your
average technician pay and your direct expenses. Maintaining the proper bal-
ance of technicians within the shop to meet the needs of the customers is the
solution to controlling direct expenses.
Although it would seem ideal to have a shop full of the top technicians in
the world this would pose more of a problem than it would be a benefit. Top
technicians demand top pay. However, asking a $26 per hour master certified
technician performing $22.95 oil changes is a waste of talent. It is also a waste
of money. It is likely to create employee dissatisfaction by making the techni-
cian feel like he is wasting his skills doing menial tasks. The way to resolve this
problem is to hire personnel with the right skill levels to do the job.
Here is a simple example of how choosing the right technician for the job
can influence the cost of sales and gross profit. A very common service pro-
vided by every service shop is an oil change. It is common to see these repairs
advertised at the price of $22.95. If the shop intends to sell the oil change for
that price and has a total cost for the oil and filter of $5.95, they are earning
$16.00 per oil change in labor. All technicians are paid 0.3 hours to perform
this service. Although the labor sale amount will be the same on every oil
change that they do, the gross profit will change dramatically depending on
which of their four levels of technicians performs the work. Figure 16-6 shows
the gross profit and gross profit percentage generated by these four different
technicians, who are all are capable of doing this very basic service. The only
factor that changes is their hourly flat-rate pay rate.
A Technician B Technician C Technician D Technician

Tech Flate Rate $26.00 $20.00 $14.00 $8.00
Customer Labor Rate $60.00 $60.00 $60.00 $60.00
Labor for Oil Chg. 0.3 0.3 0.3 0.3
Labor Sale $18.00 $18.00 $18.00 $18.00
Cost of Labor $7.80 $6.00 $4.20 $2.40
Gross Profit $10.20 $12.00 $13.80 $15.60
Gross Profit % 57 67 77 87
Figure 16-6 Labor and gross profit for an oil change
Based on this example, the shop can vary its gross profit from 57 percent
up to 87 percent solely based on who does the oil change. Having the proper
mix of different skill levels of technicians is the key. This will allow supervi-
Average Cost of sors to assign work to capable technicians without overpaying an expert to
Sales performing routine work.
The average labor cost for Achieving the proper average cost of sales in a shop so that you can
all repairs performed in the maintain the proper gross profit percentages is essential to achieve profitabil-
shop. ity. You cannot afford to have costs so high that you constantly lose money.
198
Conversely, you have to spend enough money to retain technicians with the
right combination of skills and experience to fix cars right the first time. It is
the delicate balance of these two factors, cost versus expertise, which makes
staffing a repair shop such a difficult challenge.
In Chapter 15 we discussed alternative production plans that can be con-
sidered to deal with the problem of staffing costs, teams, and support groups.
They were created to try to reduce average cost of labor while not sacrificing
overall quality of repairs. Taking into account the possibility that we might be
able to use production plans as a tool to control cost, let’s revisit a scenario
similar to the ones that we have just discussed to consider alternative methods
to address the question of controlling average cost of sales.
Average cost of sales is a very important measurement tool in trying to
control costs. You can calculate average cost of sales by doing the following
three simple steps:
1. Calculate total hours produced by each technician multiplied by their

hourly rate.
2. Add the totals of all technicians together.
3. Divide the total by the number of technicians.
This will give you the actual average cost of sales for the entire shop during a
specific period of time. This average will change as business goes up and down
and as individual technician productivity varies. Therefore, it is an important
measurement to track on a regular basis so that you can monitor your current
cost and gross profit.
It would be easy to manage and control the cost of sales and gross profit if
business was stable. Unfortunately, business never remains constant. As a
manager you cannot assume that the type of work that you are getting in your
shop will be exactly the same every day. Finally, the productivity of your tech-
nicians is dependent on a variety of factors including the type of work that
they get, their level of motivation, their health, and so on. This makes the
decision-making process for properly staffing your shop and maintaining the
required profit margins quite a bit more complex.
As a final exercise in this chapter, we will take another look at a situation simi-
lar to the ones that we have addressed in the previous exercises. However, this time
we are going to add in the fact that not all of your technicians produce exactly the
same amount of work every week, a variable that is a reality in most shops.
CASE 1 You decide

Your goal is to staff your shop with four technicians Using Figure 16-6 as your guide and assuming that
and maintain an average cost of sales that allows you all of the technicians produce exactly the same num-
to earn a gross profit of 72 percent. You run a full- ber of flat-rate hours per week, how many combina-
service shop and need technicians that can do every- tions of technicians out of the four categories can
thing from oil changes to electronic diagnosis. you arrive at that will give you a 72 percent gross
profit? Which of these combinations would you
choose if it was your shop? Why?
199
CASE 2 You decide

You are managing a four-bay shop that is a franchise of Using Figure 16-6 as your guide and assuming that all of
one of the large tire companies. In addition to selling the technicians produce exactly the same number of flat-
and installing tires your shop specializes in front-end rate hours per week, what combination of four techni-
alignments, brake jobs, and preventative maintenance cians would you select to staff your shop? What would
services. You do not do any heavy repairs or electronics be your average cost of sales? Average gross profit per-
diagnostics. You send those back to the dealers. centage? Why did you select this mix of technicians?
CASE 1 You decide

You are trying to track the actual average cost of Using this information, please calculate the average
sales for your service department. You currently have cost of labor if
four technicians working for you. Their information is a. Lisa, Fred, Omar, and Horace all produced 40 hours
as follows: last week.
b. Lisa produced 50 hours, Fred produced 40 hours,
Lisa Fred Omar Horace Omar produced 40 hours, and Horace produced 30
Technician Flat Rate $26.00 $20.00 $14.00 $8.00 hours last week.
c. Lisa produced 60 hours, Fred produced 40 hours,
Omar produced 36 hours, and Horace produced 24
hours last week.
CASE 2 You decide

Your goal is to staff your shop with six technicians and Using the chart as your guide and assuming that all of
maintain an average cost of sales that allows you to the technicians produce exactly the same number of
earn a gross profit of 72 percent. You run a full-service flat-rate hours per week, what combination of techni-
shop and need technicians that can do everything cians from the four classifications would you choose to
from oil changes to electronic diagnosis. achieve an average gross profit of 72 percent or more
using a traditionally organized shop? Please explain
why you chose this combination of technicians.
Technician Flat Rate $26.00 $20.00 $14.00 $8.00

Weekly Hours Produced 56 48 32 24
Gross Profit $34.00 $40.00 $46.00 $52.00
200
CASE 3 You decide

You achieved your goal of a 72% gross profit in the What would be your technician staffing choices if you
last exercise. Your owner has just returned from a were using the team system production plan? What
national conference and tells you that 72% isn’t good gross profit percentage would you achieve using this
enough. He wants you to explore alternative produc- choice? Which technicians would you choose if you
tion plans. were using a support group? What gross profit per-
centage would you achieve using this choice?

It is important as a manager that you achieve a sense consideration will create a great deal of unrest
of balance in your actions. Just because you are suc- among your employees and is likely to cost you a
cessful today it is usually a bad strategy to let things great deal through employee dissatisfaction and a
run the way that they have. You should constantly dramatic increase in employee turnover.
analyze your performance and look for ways to con- You need to strike a balance and carefully keep
sistently improve your operation and increase your track of the data. You need to track it, analyze it, and
profitability. then when you are sure that it is not just a short-term
On the other hand, you cannot afford to make issue you will be prepared to cautiously and thought-
sweeping changes daily. Implementing change fully take appropriate action.
haphazardly without a great deal of thought and
CASE your technicians for the three production types

(traditional/team/support group) if you learned that
Your goal remains to produce a gross profit of
the four technicians consistently produced the num-
72 percent or higher in a shop of six technicians.
ber of hours listed in this chart?
You decide
Using the chart provided, how would the gross profit
results change for the staffing choices that you
made in the previous exercise where you selected
Technician Flat Rate $26.00 $20.00 $14.00 $8.00

Gross Profit $34.00 $40.00 $46.00 $52.00
201
SUMMARY
In this chapter we have explored a variety of scenarios to help We then spent the remainder of the chapter looking at a
you deepen your understanding of the importance of sound variety of different ways that you can bring cost of sales under
financial management. Through the use of these examples we control and keep it under control. We applied some of the
investigated the potential benefits and drawbacks of a variety concepts that we learned in previous chapters to help us
of different actions that have an impact on your bottom line. reduce fixed expenses and, thus, increase gross profit. We
We discussed how increasing income serves as a primary then worked through several exercises that demonstrated
method for increasing net profit. We then discussed how how changing the mix of technicians in the shop and alterna-
increasing income is rarely done without any effect on costs. tive production plans can help you to increase your gross
We looked at several common situations where increasing profit percentage.
income is the cause of increased costs.
1. By reducing the average cost of sales the service man- c. increase fixed expenses.
ager can d. increase labor sales.
a. increase labor hours.
6. If you want to increase your shop’s net profit you can
b. increase gross profit.
a. reduce your overhead expenses.
c. reduce the overhead.
b. increase cost of sales.
d. reduce overall sales.
c. increase fixed expenses.
2. A service manager can reduce cost of sales by d. reduce labor sales.
a. replacing his top technician with a lower paid one.
7. If you want to increase your shop’s gross profit percent-
b. hiring more entry level technicians at a lower rate.
age you can
c. cutting every current technician’s pay.
a. increase your total labor sales.
d. all of the above, although I would not recommend it.
b. increase cost of labor sales.
3. The term average cost of sales refers to c. decrease your fixed expenses.
a. the total hours produced divided by the number of d. decrease average cost of sales.
technicians.
In Questions 8–10 you have two technicians working for you.
b. the normal amount of hours that John turns weekly
Your shop labor rate is $50 per flat-rate hour. Jeremy, who is
every year.
paid $20 per flat-rate hour, turns 60 hours this week and
c. the average pay rate of your technicians divided by
Alfred, who is paid $10 per flat rate per hour, produces only
forty.
30 hours.
8. What is your average cost of sales for the week?
4. A shop achieves the break even point when
a. it finally makes a net profit. 9. What is your total gross profit for the week?
b. gross profit all other expenses 0.
c. income expenses 0. 10. What is your gross profit percentage for the week?
d. more than one choice is correct.
5. If you want to increase your shop’s gross profit you can
a. reduce your overhead expenses.
b. increase cost of sales.
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SECTION
5
ORGANIZING AND
MANAGING YOUR EFFORTS
M ultitasking is not a new concept. Multitasking continues to be the norm for managers
in the automotive repair industry. Automotive managers are expected to possess a
wide array of skills and to be able to use them on a moment’s notice. None of us has an
unlimited amount of time. There are many situations that are beyond our control. Orga-
nizing yourself and prioritizing your efforts to get the most use of your time and energy
plays an important role in determining your success as a manager.
• CHAPTER 17: Managing Yourself and • CHAPTER 18: Organizing Tips and Tools
Your Time
C H A P T E R
17
Managing Yourself
and Your Time
CHAPTER OBJECTIVES
■ To identify what your strengths are and how to ■ To recognize the importance of organization
use them to your advantage and time management in improving productivity
■ To examine basic principles of how to prioritize
efforts to get maximum results
KEY TERMS
strengths prioritizing procrastination

weaknesses multitasking
205
SECTION 5 ■ Organizing and Managing Your Efforts
Introduction
We live in a world where there is abundance. There are so many places to go,
people to see, things to do. There is so much work to get done and so little
time. How do you decide what to do? What to do first? When to say no? Over-
whelmed by the choices and the pressures of today’s world, many people say
that they feel as if their life is out of control. They feel like they are constantly
pushed and pulled in so many directions that they do not feel like they are
really making the decisions.
In the ever-accelerating pace of change, technology, and life the demands
placed on each of us continue to expand. There is little you can do to reduce
the demands. Fortunately, there is something that you can do to help manage
those demands. You must become better at getting the best use out of the most
precious commodity that you have, your time. Most people would be willing to
pay a high price for just a little more time to . . . So, the big question is can you
be different? Can you get control of your time?
In Chapter 18 we will spend some time helping you improve your organi-
zation skills. However, and more important, in this chapter we will discuss the
most important part of getting really organized, deciding what your priorities
are so that you will have a foundation on which to organize your life.
What Do You Do Best?

Most people are multi-talented. We have the ability to do a wide variety of tasks;
we can master and pass courses in a wide range of subjects; do work from cutting
down trees to repairing wiring to writing articles to running. These things have
little in common but they demonstrate the versatility and the wide range of
potential of the human body and spirit. Do you know what you are good at?
Have you ever made a concerted effort to identify what skills and abilities you
really have? If you really tried to make an exhaustive list of all of the things that
you know that you can do it would wear you out. Not what you want to do, not
what you choose to do, not what you prefer to do . . . what you can do.
CASE You decide

Take a blank sheet of paper and for the next three Now that you have completed your list, stop and take
minutes write down as many different things as you a look at the wide range of things that you have
can that you have done in your life. Do not stop and done. It is quite astounding . . . and if you did not get
think too much about it. It does not matter if they too exhausted from writing you could continue com-
were simple, complex, important, or silly, 20 years ing up with more and more things that you have
ago or yesterday, just write as many down as fast as done. That list represents only a small fraction of the
you can. vast array of things that you, as the unique human
being that you are, are capable of doing.
Even though we each have a very wide range of knowledge and skills no one
(that I know of) has been able to be a master of everything possible in our world.
206
Managing Yourself and Your Time ■ CHAPTER 17
So here is one of the first secrets to success: The better that you are able to identify
your talents and abilities, the more likely you are to succeed. It’s almost too simple.
We can’t all do it all. Each of us can do some things better than others and they,
in turn, can do some things better than us. Therefore, it is to our advantage to
take the time to figure out what we do best and work to our strengths. Strengths
You can work harder, practice more, and study longer to try to compensate The areas of your
for your weaknesses. In many cases in your personal or professional life you knowledge, abilities,
will be faced with challenges that draw upon your strengths. However you will or capacity.
also be expected to do things that you are not so good at doing. In those cases
you clearly have to work to minimize or overcome your weaknesses.
Weaknesses
You need to realize that it will take greater effort to overcome your weak-
nesses than doing those things that you naturally do easily and well. For that The areas of your least
reason, it just makes good sense that the better you are able to identify your knowledge, abilities, or
strengths and put yourself in a position where you can draw upon them the capacity.
more likely you will be at the top of your game. Whether it is in your personal
life or your career the better you are able to consistently identify your strengths,
acknowledge them, and direct your efforts to find the niche where your unique
qualities are valued, appreciated, and rewarded the more likely you will be
successful.
CASE The great news about the shop is that the workforce is
very stable. Unfortunately, not all of the technicians
A new manager is hired into an existing import deal- have been able to keep up with the changes in tech-
ership service department. The shop has been around nology. As a result, some of them really struggle when
for many years and has a very loyal customer follow- they run into complex electrical and electronic prob-
ing. Like many small import shops all of the techni- lems. Others have difficulty with the very complicated
cians are full-service technicians. The problem that has new dual overhead-cam 12-cylinder engines or the
resulted in your hire is that the shop has been show- electronically actuated transmissions. Unfortunately
ing a constant decline in productivity and repair the more computer savvy technicians in the shop may
quality. This has reached the point where customer be busy doing oil changes, replacing brake pads, and
complaints have been increasing and even some of doing simple maintenance services.
the most loyal customers are starting to go elsewhere
for their repairs.
After analyzing the situation it becomes appar- You decide
ent that these problems have been growing as the Faced with this situation what solution or possible
vehicles have become more complicated and complex. solutions would you consider? Why?
Doing What Makes You Feel Fulfilled

Identifying your strengths and working to them is a very important ingredient
in making you productive and successful. However, it is not a guarantee that
you’ll be satisfied and happy. Productivity and success are measures of how
much you produce in comparison to others, whereas satisfaction and happi-
ness are measures of something far more intangible—and ultimately far more
important—how it makes you feel about yourself and your self-worth! Can
you be both good at what you do and happy?
207

I was faced with a situation very much like the one in result, a car might require two or three technicians to
the case that you just completed. In that instance I work on it to resolve all of the concerns, but all of the
found that what worked was to identify what each concerns were addressed by the technician most
technician did best and to set up a system with the likely to repair it right the first time and in the least
simple goal of having everyone what they do best amount of time.
most of the time. After evaluating productivity and This major philosophical change in the shop was
training records over time it was easy to determine at first accepted with reservations by the technicians.
what the technical strengths and weaknesses each of I met with the technicians prior to the rollout and
the shop technicians were. Once this was done, a plan maintained an open-door policy to discuss any con-
was devised to change the method of work distri- cerns that they had. I asked them to give me the ben-
bution from the service desk. No longer would a efit of the doubt and to trust me and to try it for 30
technician be assigned a car and be expected to do days. The end result was better quality of repairs,
everything, no matter what it needed, to that vehicle. more shop productivity, and bigger paychecks and
Instead, the dispatcher was expected to assign only higher job satisfaction for the technicians.
specific repair items to individual technicians. As a
Most of us have come home from work after a long day and as we sunk
into the couch we were greeted by the question: How was your day? Some
days you felt totally drained, totally exhausted, you likely reported that you
didn’t feel like you really accomplished much. It was just draining. However,
after working just as hard—and possibly even harder—after another long day
you’ve come home and rather than feeling drained, exhausted, overwhelmed,
you’re energized, happy, upbeat, enthusiastic, and looking forward to some-
one asking how your day was. What was the difference between these two
days?
Was the difference that you got more sleep the night before? Were you in
better health? Was the weather better? Was it sunny outside? Although these
external factors may have had some effect, it is likely that they were minimal.
You can probably easily think of both good and bad days that happen
regardless of your state of sleep, health, or other external factors. So what
was it, really? Here’s a brief exercise that may help you to understand the
difference.
The short exercise that you just completed is not that scientific, not that
complicated, but is intended to point out to you two different things about
what you do every day in your personal life and in your professional life. It
comes as no surprise to you, I’m sure, that there are many things that you spend
your time and energy doing that you don’t feel particularly skilled at doing!
However, even more important, once you have been able to eliminate
those things that you’re not good at, the remaining list still typically
contains a variety of activities that don’t make you feel good. Why not? You
have the knowledge. You have the skills. Yet they don’t satisfy you. Again,
why not?
The simple answer to why not is that although we all possess a wide range
of skills and abilities, just because we can do something does not mean that we
want to do it. In that subtle difference lies the answer to personal and job satis-
faction. The better you are able to make the distinction between what you are
capable of doing and what you are motivated and driven to do the more often
208
you will experience the situation presented earlier where after a hard day you
come home energized, happy, upbeat, enthusiastic. The simple difference is
learning what makes you feel fulfilled and then directing as much of your
efforts as possible at aligning your activities with those tasks.
Certainly, all of us are required to do many things that we do not choose
to do. We are not in total control of our time and our energies. However, the
more often we are able to get our head, our heart, and our energies going in
the same direction, the more likely we are to feel like a success in our work and
in our lives.
CASE Remember there is a 2-minute time limit. Once

you’ve completed your list please do the following:
Take a blank sheet of paper and prepare two lists.
Please go down the list and cross off all of the
Please spend no more than two minutes quickly
things that you had to do but you don’t feel you’re
writing as many things down as you can think of that
good at doing. That narrows the list down to just
answer the following questions. Don’t take the time
your strengths and interests. Now, count up the short
to get into detail. Provide quick information off of
list of your strengths and interests. Then number
the top of your head
each of the items that make you feel the best, start-
ing with your top choice as number 1, your second
You Decide
choice as number 2, and so on.
1. List as many tasks/jobs/events/responsibilities 3. Look at your lists. Based on this information
that you have done at work any time over the what are your strengths?
past two weeks.
2. List as many things as you can that you have done
in your personal time in the past two weeks.
Establishing Your Priorities

It is obvious that no one has time to do everything. We constantly face points
where we have to decide which things get done and which ones we have to
put aside for later. Therefore, if you want to be satisfied, productive, and suc-
cessful, prioritizing your activities helps you determine what matters most to Prioritizing
you and allows you to focus your efforts on those items. The exercises in the Arranging events or
previous two sections should help open your eyes to how to begin that pro- activities in order of
cess. That major decision process will help you to organize and prioritize your importance.
efforts so that you put your time and your effort where it will be most valuable
to help you reach your goals.
Now that you have a better idea of what your skills and abilities are and
what makes you feel self-fulfilled, you can begin the process of translating this
knowledge into a broad roadmap for action. This roadmap can be built by
establishing a set of personal and professional vision, mission, and goals state-
ments. You may want to refer back to Chapter 9 if you’re not clear on these
three items and how to develop them.
On a personal basis, establishing a vision, mission, and goals does not
need to be a long, involved formal process. One of the easiest ways to begin
209
the process is to ask yourself three of the most common questions asked in job
interviews. They are
• What do you want to be doing and where do you want to be in the next
5 years?
• What do you expect to be doing in 10 years?
• How about in 20 years?
Interviewers ask you these questions to see if your professional goals and
that of the current position and the company are aligned. They realize that
both you and they are much more likely to succeed and thrive if you have
mutual interests and goals. You owe it to yourself to know the answers to these
questions. Armed with this knowledge you can build a vision, mission, and
goals so that you can achieve your aspirations for the future.
CASE 2. What will your work life be like 10 years from

now?
Take a few minutes right now and write down the
answers to the following three questions. 3. 20 years from now?
You decide Now that you’ve answered the last three ques-
tions take a few minutes to reflect and make a brief
Close your eyes for a moment and dream about what
list of the things that you need to do to make sure
your work life will look like in the future if every-
that you are ready to take advantage of opportuni-
thing turns out the way that you want it to be. Then,
ties that will help you to achieve these goals.
answer the following:
1. What do you see yourself doing (where you will

you be working, job title) five years from now?
Once you have clarified your aspirations for the future the next step is to
write them down and keep them handy. In this way you can constantly
remind yourself of your intended goal. That will help to assure that you stay
on that path. Remember, you need to be careful: If you don’t know where
you’re headed you just might get there. However, the more clearly you keep
on the path to your intended target the more likely you will be to reach it
faster and with less frustration and lost effort.
Now that you’re clear about your goals and ambitions you need to take
the time to brainstorm about what things you can do to help further your
goals. Do you need to take a class? Attend a seminar? Start associating with
different people? Join a club? Change jobs? You need to answer to the best of
your ability the question: What do I need to know and be able to do if I want
to be best prepared to achieve my goal? Although no one can guarantee you
that just because you are prepared the world will fall at your feet, please be
assured that your best chance for success is to be prepared, ready, and anx-
iously waiting when the door of opportunity opens.
You Choose: Fireman or Fire Prevention Specialist?

You are not a fireman and you do not plan to volunteer to race into a burning
building so, you ask: What does this have to do with me? Everything! Allow
210
me to explain. In the complex world of work and, especially, in the complex

and high-pressure world of automotive customer service it is essential that
you consider how you would answer this important question. If you are cur-
rently working in the service business I’m sure that you know what I’m speak-
ing about. It goes something like the scenario that follows.
You go to work all pumped up and excited about what you hope to accom-
plish only to find out that by the end of the day you’ve never had the time to
get around to your priorities. Instead, you’ve spent your day answering other
people’s questions, solving their problems, being distracted by this and that
and you end the day feeling worn out, exhausted, and disappointed. When
asked how your day went your answer is likely to sound something like this:
“I’m exhausted, but I don’t feel like I really accomplished anything important
today. It seems that I’ve spent the entire time putting out other people’s fires.”
Without a clear vision of your goals and, therefore, your priorities before
you start your day you are likely to get hopelessly sidetracked by the needs or
wants of someone or something else. Without something to help you to refo-
cus your efforts you are likely to give up your quest to complete your goals and
fall into a constant pattern of putting out fires. This is a very common yet cru-
cial difference between those that are successful and those that just put in
their time. It is one of the critical differences between working smart and
working hard.
The highly motivated, dedicated, and directed individual needs to realize
that if he allows himself to slip into the role of spending too much time put-
ting out fires that he is never going to have enough time to change things. It is
not until he can fight against this tendency that he will be able to make
changes so that fewer emergencies occur. Ultimately, it is the ability to fight
against the urge to put out fires and to make changes to prevent fires that will
make you successful.
The purpose of this analogy is to help you see that with the limited time
and resources that all of us are faced with you can’t do it all. Therefore, you
need to make conscious decisions as to how to best use your limited resources.
Do you want to leave things as they are and deal with the symptoms of the
problems in the current system? Or, would it be better to redirect at least some
of your time to improving the system so that you’ve reduced or eliminated the
likelihood of the symptoms occurring? In the final analysis, your choice in
this matter should be a well thought out and intentional one, not something
left to chance.
Focusing Your Efforts and Taking Control of Your Time

We’ve talked about defining what matters to you personally and profession-
ally. Once you know the reason why, you can tap into that for internal energy
and motivation to keep you moving ahead even during the toughest times.
However, even with a large amount of internal drive it is common to find
yourself in situations where you feel things have simply gotten out of control.
With a lack of self-awareness and self-motivation you’d have major difficulties
mustering up the energy to keep on pushing. But even with the highest degree of
motivation, persistence, and the best motives it is impossible to do it all. There-
fore, it is necessary to look at the more practical aspects of getting organized to
help you with the nuts and bolts of your daily existence. Here is a simple three-
step process that can help you organize anything and everything that you do.
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Getting Organized: The Three-Step Process

No matter what types of tools and techniques you use to help you to get orga-
nized, the fundamentals underlying the process are the same. It is a simple
three-step process. The first step is to identify all of those activities and respon-
sibilities that you need to deal with. Once you have identified them all you
need to quickly and efficiently prioritize them. That is, to determine which
ones are really the most important to deal with right now. Finally, you need to
organize them so that you can intentionally and consistently do them in order
of importance and urgency.
Identifying
This first, and most basic step is the one that is often missed. In the process of
being busy, hurried, and stressed it is difficult to stop for a moment to see what
is really going on. In order to correctly identify all the activities and respon-
sibilities that you need to deal with you must at some point do something
very difficult—stop. That’s right, you have to stop doing so that you can pull
back from the situation and take a look at the big picture.
The idea here is to sit down and think about all of the tasks, jobs, and
responsibilities that you have to deal with. The purpose is to help you to gain a
better sense of the overall picture of all of the directions you are pulled in every
day. The ultimate goal here is for you to improve your decision-making skills on
what to do next and why. How can you possibly do that without taking the time
to step back and know what you are really spending your time doing and why?
One of the simplest, yet effective, techniques for doing this is to sit down
with a simple sheet (or pad) of paper and make a list. The goal is to list all of
the things that you are supposed to do tomorrow. Not what you want to do
tomorrow, but what you feel that you are expected to do tomorrow. This can
be focused specifically on just those activities, job responsibilities, and dead-
lines that you know that you’ll have to deal with at work.
CASE surely include the basics like waking up, eating

breakfast, showering, and so forth. It will include
Before you can effectively organize and prioritize
those things that others, your teachers, your parents,
what you do, you need to begin with a basic under-
and/or your bosses expect you to do tomorrow. It will
standing of the activities and responsibilities that you
also hopefully allow for time for you to do the things
have to deal with on a regular basis. An easy way to
that you personally want to do. Take the full time to
begin a personal planning process is to practice by
push yourself to write down as many items as you
looking at just one typical day in your busy life.
possibly can to build the list. When it is completed
You decide review your list one more time to and add anything
Take five to ten minutes and make an exhaustive list that you think you’ll do tomorrow and making sure
of all of the things that you will be doing tomorrow. that you’ve addressed it in your list.
This list should include several groups of items. It will
Stepping back and taking a really hard look at the variety of activities,
deadlines, and other demands that are put on you in just one day should
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begin to give you some perspective of why you feel so tired and overwhelmed.
As you look at your list are you surprised by how many things are on it? Are
they all things that you expected? Are there some items on the list that you
wish you could avoid or eliminate?
Taking a look at your days and, in the bigger sense, at your overall job and
your life is an uncommon activity for most people. Yet, without consciously
knowing what you’re doing and why how is it possible to take control of your
life? And, if you can’t take control of your life, how can you expect to ever be
happy during your life’s unique journey? For this reason, this is the first and
most important step in helping you to get control of your life and how you
spend your most precious commodity, your time.
Prioritizing
Once you have some sense of what you are doing today, tomorrow, and
beyond you need to think about what you are going to do with this new-
found knowledge. It is not time, quite yet, to spring into action. There are a
few more steps that you need to take first.
Before you begin to arm yourself with tools and techniques that will help
you to manage all of the duties, assignments, and responsibilities that are
thrown your way it is essential that you answer one simple question: Why am
I here? This may sound too simple, but try it. The point in this simple exercise,
whether it is related to your overall existence or to your responsibilities and
goals at work, is critical to your ultimate success.
Until you know the answer to the why question you can’t possibly be able
to sort out what. That is, until you know what is important to you it will not
be able to sort through the many things that come your way to determine
which ones are priorities. Not until you are clear on your priorities will you be
able to focus your best efforts on making sure that they always stay first and
foremost in your mind, in your attention, and in your efforts. Finally, not
until you make those issues and items foremost in your efforts will you be able
to be sure that you are putting your best foot forward toward getting them
done.
CASE 2. What are the three most important things that

I am expected to do tomorrow in my job/class?
Before you can decide what to do you need to priori-
tize. The key question that you must answer to be 3. What are the top three factors upon which
able to prioritize is: What is most important? Please my success as an employee/student will be
answer the following few questions based on your measured?
understanding of the way that your boss or your 4. The answers that you have provided are from the
teacher would want you to answer. perspective of your employer or teacher. Now
please answer these same three questions again
You decide
from your own personal perspective based on
Please answer the following: who you are and what you want to become.
1. What are the top three responsibilities that you
have as an employee/student?
213
Once you can see how you would identify what the most important items
are and why they are important you now have the basic knowledge to priori-
tize your activities for an hour, a day, a career, and a lifetime. It is simply a
matter of using this same simple concept and expanding its use in these other
longer-term settings.
In our ever-accelerating world working faster just will not cut it. You need
to be able to prioritize, to work smarter, if you want to succeed. Clearly identi-
fying what is most important to you and to others is the only way to be sure
that you put your best effort into what really matters.
Even if you had the luxury of an unlimited supply of time, you’d feel
much better if you got the important things done and could sit back and be
satisfied with your accomplishments. It is also likely that those who depend
upon you (your boss, your teacher, your family, and friends) would express
their pleasure that you had made it a priority in your life to meet their needs.
With our limitations of time, energy, and effort understanding how to pri-
oritize is essential. No matter how hard you work you simply can’t do it all. If
you allow that to drag you down it can lead to frustration and disappoint-
ment. However, what you can do is focus your efforts into what is most impor-
tant and, in doing so, accomplish most, if not all, of what is really essential.
Your skill in prioritizing provides you the ability to manage your time and
your efforts to your best advantage.
Organizing
It has become very common that we do not live, work, or think about one
thing at a time. In our world it is so common that they (whoever they are)
have invented a new word to describe dealing with this phenomenon. Do you
know what it is? That’s right—multitasking. Believe it or not, as common as
this word is, it is a fairly recent addition to our language and our lives. How-
ever, it is, without a doubt, the way of today and the demand of the future.
Because we are constantly bombarded with input, questions, tasks, and
concerns it is essential that we be able to keep track of all of them. At some
point in our daily routine the combination of multiple ideas bouncing around
in our heads along with those that we see and hear in the world around us
make us reach the point where we can’t absorb it all. Our brains help us to nat-
urally filter out some of the inputs. It is our job, however, if we are intent on
keeping our priorities in order and in mind to make sure that we don’t forget
about those things that are important to us.
We need to find tools to help us to develop a system for us to keep track of
important ideas, important items, and important responsibilities. By tools I don’t
mean that you should go out and purchase the latest PDA, tablet PC, or other
gadget. Although those appliances can be useful they are not, in and of them-
selves, the tools that we need to think about. The methods for keeping track can
range from scraps of paper to sticky notes to pages from a legal tablet to a tablet
PC—the most important thing to remember is that the recording tool is not what
is important—the act of recording it so that we don’t forget it is.
Multitasking Multitasking
The ability to perform Earlier in this chapter I introduced the work world that we live in as the age of
multiple activities at the multitasking. Very simply put, in today’s world we cannot expect that we will
same time. be left alone to do one thing at a time in a calm, orderly, and totally focused
214
fashion. In the automotive service business this is especially true. We can

expect to be interrupted by phone, e-mail, and unplanned visitors that
demand that we stop what we’re doing and address their demands immedi-
ately. How can we do it all effectively? How can we get our priorities accom-
plished yet meet their demands? The answer is: we need to learn how to juggle.
Juggling is a great example of what we need to do every single day. We must
keep our eye on multiple tasks and priorities (just like the 3, 4, or even 5 balls
that the juggler keeps in the air at one time) if we want to be effective. We can’t
afford to focus on only one thing at a time and totally block out the others. If we
do, the others are going to fall. When they fall everything else is out of balance
and we’re likely to drop them all. So, what are we to do? We must learn to mul-
titask effectively. That is, we need to learn to be able to keep multiple projects
and activities going simultaneously without losing sight of any one of them.
Chances are good that you already multitask very successfully. Do you
watch TV while you’re looking up things on your PC? Talk on your cell phone
while you are listening to music? Carry on a conversation while you’re walk-
ing down the hallway? How many of these are you able to do at one time? All
of these are examples of your brain’s ability to allow you to multitask. The key
to success in multitasking is your ability to keep everything in focus, not for-
getting about any of the balls that you have in the air. Using organizational
tools like reminder notes, your trusty to-do list, or even a bookmark can help
you to remember what you were doing, where you left off, and where you
need to restart once this diversion is addressed so that you minimize lost time
and effort when you are sidetracked by other priorities.
Procrastinating
Making the conscious decision to put something off until a later time is
important in keeping your priorities in order. However, making decisions to
put things off is very closely related to its very negative and productivity-
killing cousin, procrastination. If you are to be effective in getting your work Procrastination
accomplished you need to carefully guard against procrastinating. A consistent behavior of
There is a subtle and very important difference between delaying action postponing or putting
and procrastinating. You can delay action on an item due to a conscious deci- off tasks, activities, or
sion that something else is a higher priority. However, procrastination is the responsibilities until a
act of putting things off habitually. That means time and time again you are later time.
faced with this task, objective, or goal and you decide to put it aside. Why? Is
it because you don’t want to do it, because you don’t understand it, because it
is unpleasant? Whichever of these is the case it is essential that you take the
time to make sure that when you put something aside to deal with it later that
you are doing it for the right reasons. The right reasons are only because you
have something that is more important and more urgent to do first. Any other
excuse is a justification to procrastinate.
Procrastinating takes time. Every time you go through your to-do list and
decide not to deal with an item it takes time and energy. This little time robber
may easily have taken you several times the total investment of time and
energy that it would have taken to resolve the issue in wasted time thinking
about how to justifying putting it off. That does not mean that you need to go
to the other extreme and feel the need to deal with each item on your list one
after another in exact order so that you don’t waste time. You still have to prior-
itize your efforts and do what matters most first. This is simply a warning of the
trap that you may catch yourself in if you’re not totally honest with yourself.
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SUMMARY
In this chapter we have discussed the importance of taking general principles and practices that will help you get started
the time to stop and decide what is important before you act. in thinking about how to set up a system that works for
Identifying your priorities both personally and professionally you to get better organized and get better control of your
will help you be more efficient with your time. It will help you environment.
to be able to achieve the old adage work smarter, not harder In the Chapter 18 we will take this process a step further.
and feel much more satisfied that you’ve accomplished things We hope that you now have a better idea of what you want
that you value. to do and why it is important to become more organized.
Once you’ve had a chance to sit back to recognize and With all of that clear direction, organization, and drive we
set your priorities, it is important to start working on the prac- now need to figure out how to help you get the most out of
tical side of getting better organized to squeeze the most pro- your most precious commodity—your time!
ductive use out of your efforts. We have discussed some

1. When there is simply too much to do and you’re won’t c. it is important that you find tools that you will keep
be able to get everything done you should up to date.
a. find a new job. d. all of the above.
b. prioritize your actions.
c. complain to your boss. 7. The three-step process to getting organized requires that
d. work longer and harder. you
a. organize, prioritize, produce.
2. You will feel more satisfied with the work that you do if b. identify, organize, list.
you learn to c. identify, prioritize, organize.
a. identify and work to your strengths. d. prioritize, chart, track progress.
b. learn to hide your weaknesses.
c. work harder and longer. 8. Prioritizing is valuable because it helps you to
d. make believable excuses for your poor productivity. a. put out more fires.
b. go with the flow.
3. Effectively multitasking means that you are able to c. do everybody else’s work first.
a. do several things one thing at a time. d. None of the above.
b. do everything at once.
c. work on several activities and keep them all straight. 9. A common occurrence in today’s world is the need to
d. get several people to do your work for you. juggle more tasks, assignments, and responsibilities at
the same time. The ability to do this effectively is called
4. If you want to be highly productive it is strongly sug- a. working smarter.
gested that you are able to b. multitasking.
a. identify and work to your strengths. c. working harder.
b. get everything done immediately. d. being overworked.
c. be able to find others to do the things you don’t
want to do. 10. One important fact that you need to realize about your
d. prioritize and disorganize your efforts. job and your life, and a major reason why you need to
prioritize your actions, is
5. You’ll feel much worse after a hard day’s work if you’ve a. you have to do it all.
been b. you’d better do it all.
a. working to your strengths and interests. c. you can’t do it all.
b. working in a group that really cares. d. none of the above.
c. working in areas that are your weakest.
d. given a promotion at the end of the day.
6. When trying to organize your activities you need to
remember that
a. there is only one best way to organize your activities.
b. you need to find tools and methods that work best
for you.
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C H A P T E R
18
Organizing Tips and
Tools
CHAPTER OBJECTIVES
■ To identify techniques and tools that can help ■ To develop basic methods to consistently keep
you to get organized track of communications
■ To examine the importance of developing use- ■ To organize the multiple activities that are a
ful tools to track projects and performance part of management
KEY TERMS
timeline to-do list phone log

tracking archiving e-mail
217
Introduction
In this chapter we will discuss several important tips and techniques that
enable you to become better at keeping track of all of the many tasks and
responsibilities that you face every day as a manager. The ultimate goal is to
become more efficient, more effective, and more satisfied with the results that
you are able to consistently produce and the success you achieve as a result.
Is there anyone out there who really feels that life is easier, slower, more
relaxed today than it was yesterday? Three months ago? Three years ago? Do
you feel frazzled by all of the things that keep coming at you moment to
moment? Do you see any end in sight? If you don’t feel that the end of this
hectic existence is in sight you are in good company—all managers deal with
these same issues every day.
In recent years, as the pace of daily life and the responsibilities that go
with it have continued to multiply there have been hundreds of articles, chap-
ters, and self-help books written on the topic of organization and time man-
agement. When people are questioned about the thing in their life that they
lack the most it is not money, it is time. In this chapter you will find some
practical tools and tips that you can use daily to get the most out of your most
precious commodity—time.
Sorting Your Workload

A very simple technique for organizing your activities, whether it is some-
thing as simple as today’s mail or e-mail or as complicated as the many
projects that you have been given is to develop a consistent practice of assign-
ing them a value right away. At first glance you know whether a letter or a
project is critically important or not worth your time. However, it is common
practice to put off making the key decision to assign everything a priority. An
easy way to do this is to organize your work into four piles, or lists. You can
choose which works better for you in your work environment, but the key
part is to do it, do it now, and commit to do it always.
All of your work fits into four categories: (1) items of top importance and
urgency, (2) routine items of importance, (3) low priority assignments/tasks,
(4) trash. The key is to quickly identify each item at first contact and then deal
with it accordingly. You need to become disciplined enough to act just like an
umpire in baseball. You cannot afford to hesitate—it’s taking up your valuable
time and energy. Now that you have started to categorize things at first sight
let us briefly review how you will deal with your newly organized workload.
If you have any aspirations for a long and successful career you can’t
afford to ignore the group 1 items for very long. The group 2 items, although
they will not have as rapid an effect on your career, are a foundational part of
your job responsibilities and probably are those items that you will spend
most of your day working with and on.
Group 3 items are those that you have decided: I will get around to it if
time permits. They do not command your immediate attention or resources
because they are of low value. However, they should be put somewhere where
you can easily access them as their priority could change at any time. For
example, if the boss receives a call from a colleague who is upset about that
group 3 e-mail that you have not replied to it will likely make the leap to
today’s group 1 list.
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Organizing Tips and Tools ■ CHAPTER 18
Finally, there is the fourth group—items that should go directly to the

trash and not be considered any further. This is the daily spam, junk mail, and
other clutter that gets in the way of your ability to be productive and success-
ful. Your best strategy is to identify it quickly and deal with it once and forever
by getting it out of sight and out of mind.
Dealing with Routine Tasks

One way that you can reduce lost time is to handle routine tasks, like paper-
work, only once. When you open the mail or receive an internal notice or
phone call that requires your thoughts and your attention be sure to ask your-
self: How long will it take to handle this now and forever? If it is something
that you can quickly handle now why put it aside to have to deal with it again
at a later date? Which choice is the best use of your time, spending five min-
utes now or spending a minute or two now to decide that you will deal with it
later and then an additional five minutes to re-familiarize yourself with the
issue later and finally address it?
You can save yourself time by realizing that as soon as you pick up those
small tasks, assignments, or decisions that it is probably best not to procrasti-
nate but rather to get closure on them right now, once and forever. In his book
How to Get Control of Your Time and Your Life Alan Lakein strongly urges that
whenever possible you handle paperwork only once (Lakein, 1973). However, as
with everything else we have discussed, you must maintain a balanced approach
to what you do. If you allow yourself to get distracted from your priorities doing
this busy work too much of the time the end result will be that you will be busy,
get much done, but fail to get the important work accomplished. Failure to get
to and accomplish the true priorities is a recipe for disaster.
Dealing with the Big One

Although I am not sure who the original author was of this great piece of phi-
losophy and management wisdom, I believe that at one time or another we
have all heard the following riddle:
Q.: How do you eat an elephant?
A.: Simple. You eat an elephant the same way that you eat a hamburger,
one bite at a time!
This simple piece of wisdom is the key to accomplishing those overwhelm-
ingly large, complex, and time-consuming assignments that we all encounter
regularly. Simply put, we need to learn to break them down into bite size
chunks that we can deal with within the time available in our days and weeks.
In this way we can make slow but steady progress toward ultimate, and timely,
completion of the overall task.
The advice above makes it all sound simple. But it isn’t. It requires careful
planning, organizing, and the skill to keep this task somewhere on your radar
so that working on it is not postponed and/or forgotten. One of the most
common reasons why the big ones do not get accomplished on time is that
those involved waited too long to get started. The excuse is that they simply
did not have a big enough block of time to dig into something so complex.
There are several key components to attacking and completing these large
tasks in a timely and efficient manner. You must have an organized plan to
219
analyze the whole project and break it down into reasonably sized chunks.
Timeline Once you have identified the pieces, you must develop a timeline that priori-
A list of important events tizes those chunks. Then you must be sure to prioritize doing those tasks
and tasks of a large project within the project that require more lead time or need to be done prior to
or process organized in other steps. Otherwise further progress down the line will come to a halt.
chronological order. Finally, you must take great care to identify those tasks that require the help of
people or other resources outside of your area and, as a result, allow more lead
time in your timeline so they can be completed.
Generally the best way to make a working plan to address major assign-
ments is to do a timeline first. The project timeline in Figure 18-1 can be as
simple as putting a list of the smaller tasks on a to-do list with deadline dates
for each one. The task could also be more complex, requiring you to chart the
project and/or even use computer-based project planning software to keep
track of events, deadlines, and overall progress.
Anniversary Sale Project Timeline

1/16 – 2/16 – 3/16 –
Task 1/1 – 1/15 1/31 2/1 – 2/15 2/28 3/1 – 3/15 3/31
Develop materials
Production of materials
Run newspaper advertisements
Set up on-site displays
Dates of anniversary sale
Evaluate results of sale
Figure 18-1 Project timeline
As situations arise that require a timeline for large and complex activities
you need to make sure that you have it available and access it regularly to track
your progress. This may require that you provide a visible spot in your office
area that you reserve to place your chart (on the wall?) and your to-do list (right
next to your computer on your desk?) so that you cannot forget about them
and overlook them. Make access to them convenient and inescapable.
As is the case with any tools, they need to be ones that you feel comfort-
able with and, therefore, you are willing and likely to use on a regular basis.
Failure to use some tools or methods to break down the biggest tasks into
manageable parts is not a viable option. Time and again it has been proven in
a variety of settings that failure to break down complex and time-consuming
projects and develop a detailed plan of action results in missed deadlines and
severe consequences.
Tracking Tools
The world that you live in requires you to multitask. Especially in the work
world, you can expect to be doing one thing, thinking about the other five
you need to do, and then get interrupted 10 times by phone calls, questions,
or other distractions. How can you keep all of this in your head? Should you
be able to?
While you are thinking about organizing why not give your brain a break?
It is totally unreasonable—and unnecessary—for you to be expected to keep
220
juggling all of your ideas, tasks, deadlines, and so on in your head and keep
them all straight! When was the last time that you honestly felt that saying “I
forgot” was enough reason for your boss or a loved one? Therefore, the best
rule of thumb for your actions should be: If you cannot afford to forget it, you
cannot afford not to write it down!
There is a wide range of tools that are readily available to help you with
tracking minor events that you cannot afford to forget. Everything from Tracking
shreds of notebook paper to more formal tools like notepads, microcassette Maintaining a constant and
recorders, PDAs, and PCs. Jotting things down is essential for ensuring that consistent record of
important information is not lost. However, just as in the case with all of the events/activities and
other tools and tips we have talked about, you have to remember that they are progress toward their
just tools. You do not want to become the person who walks in the door at completion.
night and empties out his pockets full of wadded up notes, cards, shreds of
paper, and a PDA. You need to develop a system that works for you and you
need to try to keep it simple and consistent.
Tracking Communications
The majority of communication today is done via e-mail and telephone. If
you are to be effective in keeping track of where you stand on your numerous
assignments it is essential that you able to maintain a simple and easy history
of the communications with others that affect those projects.
The To-Do List The simplest form for keeping all of your activities and prior-
ities in front of you is to build and maintain a to-do list. It does not really To-Do List
matter whether you keep this on your PC, your PDA, or in a notebook. Again, A record of all outstanding
what matters is that you keep track of everything, not what you keep track on! tasks and responsibilities.
One of the most important factors in deciding on how you are going to set
up your to-do list is easy access. The list needs to be somewhere that is conve-
nient and readily available to you at all, or almost all, times. It is intended to
be your steady reminder to keep you from forgetting any of the many respon-
sibilities, assignments, and deadlines that you have. If it is to serve this func-
tion it must, first and foremost, be available.
A word of caution is important here. There are people who can progress
from being disorganized and unable to complete tasks on time to becoming so
well organized that they do not have time to complete tasks. That is, they
become so involved in making and maintaining lists that they do not have
any time left to do productive work. This can often happen when they use the
newest, best, and greatest tool to keep track—and have to spend great amounts
of their time becoming good at using the appliance. Others run into this same
problem because, in their desire to always have the list available, they decide
to maintain multiple lists—one on the office computer, one on the PDA, one
in the planner, one on the home PC, one on the cell phone, and so on. By
doing this the result is that they have four or five lists that never agree. Thus,
they spend huge amounts of time trying to update the other four lists every
time they change the fifth one.
With these warnings in mind, there is no one magic bullet to keeping a to-
do list that works for everybody. You need to find and build a system that
works best for you with these things in mind. My suggestion is that you keep
it as simple as you can so that you do not spend any more time building it and
maintaining it than is required but that you spend enough time to make sure
that it is complete and current and works for you.
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The essential characteristics of a to-do list are simple. Along with being
user friendly, the list needs to be a complete, listing of all of the tasks, respon-
sibilities, and deadlines that you need to accomplish. The list needs to not
only indicate what needs to be done; it also needs to indicate when it should
be finished. In its simplest form it can be a page or two of one-line entries on a
yellow pad that have the following headings: date assigned, assignment, due
date (Figure 18-2). An effective to-do list should be able to quickly remind you
of the answers to the question: What do I need to do and by when to accom-
plish my goal and/or meet my deadline? All of the details surrounding who
assigned it to you, the complexity of the task, and other supporting informa-
tion can and may be recorded as a part of your efforts to accomplish your goal,
but that is too much information to include on the to-do list.
To do list for: _____________________________________ Week of: __________________
Date Date
Assigned Task Deadline Completed
Figure 18-2 To-do list
Some to-do items may be very long, involved, and complex activities or
projects. Because of their complexity you might not feel comfortable with list-
ing them as a one-line entry on your list. You may be concerned that you will
have trouble keeping track of exactly where you stand on an important and
complex assignment. When you find this to be the case, and in an effort to
break those overwhelming tasks down into smaller bits, you may find that
subdividing the single big assignment down into smaller sub goals and sub to-
do items works better for you. This technique is commonly used to help keep
a better handle on these assignments. However, remember to keep in mind
that if you start to spend more time breaking down your to-do list into smaller
and smaller items that you will be spending increased time babysitting your
to-do list and less time getting your work done—so be careful. The purpose of
the to-do list is to be a simple, usable reminder tool that keeps you on track.
Now that you have determined a simple but usable format that works for
you, the last and most important rule is that you need to review your list on a
regular basis and update it. No to-do list is effective if you never use it! It is rec-
ommended that you review your to-do list daily and revise it at least once per
week. Many who use this important organizational tool make sure that it is
easily within sight and reach and will start each day by glancing down and
reviewing their to-do list. This can be valuable as a means of keeping priorities
straight before heading into the day’s activities.
Another useful suggestion for maximizing the value of the to-do list is to
consider setting aside a small amount of time at the end of each week, just
before you leave for the weekend to review and rewrite your to-do list. This
222
can become a powerful tool in reviewing what you have accomplished during
the past week as you can eliminate those tasks and goals that you have com-
pleted. In addition, by writing down all of your open items (or at least reading
them all) it helps to remind you about those items that may have slipped your
mind during the past week and to which you need to recommit your time and
efforts to make sure that they get done correctly and on time.
Here are a few final suggestions on the use of your to-do list. I highly sug-
gest that you follow these four simple rules in working with your list, at least
from the start if you are new at it. Once you get comfortable with your list you
can establish your own rhythm, but these pointers should help you to get off
to a good start
1. Always keep your to-do list within reach.

2. Update your to-do list constantly—whenever you have things to add,
to modify, or to mark as completed.
3. Review your to-do list every day, preferably first thing at the start of
your work day.
4. Rewrite or revise your to-do list at least once a week, preferably as your
last act as you close down for the weekend or first thing Monday
morning.
Theory into Practice 18-1
CASE structure your to-do list (layout, number of headings,

and so on) is totally up to you. It can be as detailed or
We have discussed the importance of the to-do list as
as simple as fits your needs. What is important is that
a tool for organizing your efforts. Your assignment is
will be able to understand and use it on a regular
going to be to make a personal to-do list.
basis. Now finish the assignment by listing the ten
You decide most important items that you need to accomplish
Take out a blank sheet of paper and create a to-do this week on your new to-do list form.
list form. Remember that the way that you set up and
Tracking and Archiving E-Mail E-mail has become the most widely used
method for quick communication and so tracking and archiving e-mail com- Archiving E-Mail
munications is an absolute necessity. Fortunately, most e-mail host programs Storing past e-mails as
provide a method for organizing and storing e-mails. If you do not take the permanent records so that
time to organize your e-mails you will pay dearly with lost e-mails and lost they can be recalled.
time trying to find them when you need them. Failure to take the time to do
so is one of those gifts that keeps on giving as time and again you frantically
search for that essential message that you know is there . . . somewhere.
Organizing e-mails into subfolders requires the same logic and skills that
you’ve used before organizing your drawers and file cabinets. In effect, it is a
digital filing cabinet system that is modeled after the file folders in a physical
file cabinet. Even though this is a simple and familiar task, just like organizing
physical file cabinets, it requires that you take the time to set up a logical set of
file folders that you can use to organize and retrieve all of your important
messages.
223
Phone Log Tracking telephone conversations is just as important. This, how-

ever, requires that you develop and maintain some sort of logging method of
your own. For tracking important phone calls I suggest that writing it down on
a scrap of paper or keeping it in your head may just not be consistent enough.
For that reason, and especially if you are in a situation where you receive a vol-
ume of phone calls daily from a variety of people you may consider the idea of
Phone Log building and maintaining a phone log. A phone log is a list in which you
immediately record the basic information of every phone contact. Information
A basic organizational tool
such as date, time, name and number of caller, brief description of message,
that lists all incoming or
and then a block to record your comments or resolution of the request is
outgoing phone calls to
detailed enough. By maintaining them in a notebook it will allow you, in simi-
maintain a constant record
lar fashion to your e-mail folder system, to go back and reconstruct the history
and enables tracking of
of communications that have occurred in an important situation.
those conversations and
My suggestion is that you keep the log as simple as possible, but that you
their content.
seriously consider keeping one. Figure 18-3 shows a sample of a basic format
that you might consider in setting up your own phone log.
PHONE LOG FOR Name ______________________________________________
Date Time Caller Name Phone Number Message Notes
3/4/06 8:30 Roger Edwards (888)254-1234 Would like to schedule appt. for 30K C/B 9:20 Scheduled
Figure 18-3 Phone log
Organizing Your Surroundings

We have discussed organizing your efforts, but what about your surroundings?
Even though it is not necessary to be a neat freak to be successful it is far less
224
likely that you will be able to produce consistent results amidst disorganization
and chaos. We have all experienced the co-worker who has piles and piles
everywhere. Obviously he is very busy. But as you think about it further, is this
person busier getting work done, or finding where he left things among those
piles? He has lots of information, yet if you try to ask for a simple answer in
most cases you will probably get an answer such as “I will have to get back to
you on that. I have a file on it somewhere. I will just have to find it first.” That
is called lost effort. Lost effort saps our time for productive effort. It makes us
work harder, rather than smarter.
Organization, like a to-do list, is a personal thing. It is just as important
that it works for you as it is that things are organized. The fact remains, how-
ever, that without some consistent organization and maintenance of your
work area you are likely to fall into the same trap as the folks mentioned
earlier. Do not let it happen.
Determine what the right or best place is for all of the tools that you use
regularly. This will reduce lost time because you know where they are and that
they are accessible to you at a moment’s notice. This is one of the best time
savers that you can ever find—and it’s free.
Just as important as getting things in their right place is developing the
habit of keeping them there. It will save you having to look for it when it is
not where you thought you put it. This is simply a matter of having a plan and
sticking to it so that looking for it does not waste your most precious and
scarce commodity, your time.
Finally, you need to remember that organizational tools are simply tools.
They are not the reason why you work or the goal of your job. Therefore, you
need to keep them in perspective and not get obsessed with organization. Yet,
if you take a reasonable amount of care to get organized, stay organized, and
operate in this mode for a while you will see that you reduce lost effort and
frustration. You will find that you have recovered a significant amount of your
previously non-productive time.
SUMMARY
Planning in its essence is an intentional and consistent effort projects, requires a completely different strategy. They should
to identify, prioritize, and organize those things that you do to be broken down into smaller bite size chunks and then set
maximize your results. It is through this simple process of tak- up on a timeline to move from activity to activity through
ing a step back and looking at the big picture and then con- the project in an organized fashion that will assure timely
sciously determining what you need to do and in what order completion.
that you can improve your productivity. You need to develop a A word of warning. Although organizing your activities
plan of action and consistently work that plan. and reviewing your lists regularly are important to improving
You need to find the methods that are comfortable to your productivity, becoming obsessed with the lists can
you so that you are willing and able to commit to using them become counterproductive. The lists and charts are not your
on a regular basis. One of the simplest, yet most effective, goal. Your goal is to regularly and consistently get your work
organizational tools is the to-do list. Regular use of this tool done well and on time. The lists and charts are simply orga-
can ensure that you keep on track and are better able to nizing tools. Like any other tools you use them when you
remember your many activities. need them. Don’t play with them. By that, I mean that if you
A basic rule that can help you to be more productive is to get caught up in writing, and rewriting, and revising your to-
handle paperwork and small projects only one time whenever do list daily just because it looks a bit messy, you may be using
possible. This saves time. On the other end of the spectrum, up time that you could be using for better value—making
dealing with the big ones, the really large and complex progress in completing items on the list!
225
1. One of the most effective ways to handle small tasks like 6. A useful tool to help you to keep track of a string of
mail is to phone conversations and messages is a
a. handle it and deal with it only once. a. road map.
b. ignore it until it is too late. b. phone log.
c. read it, log it in, and then deal with it later. c. to-do list.
d. none of the above. d. project tracking report.
2. A common basic tool to organize your activities is a 7. A simple tool for keeping track of all of your activities
a. flowchart. and deadlines is a
b. timeline. a. calendar.
c. to-do list. b. to-do list.
d. all of the above. c. critical path timeline.
d. detailed financial analysis.
3. One of the biggest reasons why big projects don’t get
done on time is 8. Date, time, name, phone number, and brief message are
a. starting on them too early the basic pieces of information that can be found on a
b. notifying outside partners far in advance a. telephone information system.
c. not breaking the project down into small parts b. to-do list.
d. they are impossible to get done c. project tracking timeline.
d. phone log.
4. A to-do list
a. must be in a specific format. 9. The basic information on an effective to-do list
b. has to have at least 8 columns and be on special a. should be rewritten daily.
forms. b. should be reviewed quarterly
c. needs to list every single thing that you do. c. should be written down and then forgotten.
d. none of the above. d. should be reviewed daily.
5. The most basic form of a to-do list should include what 10. Sitting down and simply listing all of the things you have
information? to do helps you to
a. date assigned, task, date due. a. make a grocery list.
b. date assigned, priority, task, due date, completion b. procrastinate from having to do them.
date, comments. c. have a false sense of accomplishment.
c. whatever information you want it to have. d. identify what you need to do.
d. time, date, location, task.
REFERENCE
Lakein, A., How to Get Control of Your Time and Your

Life (New York: David McKay Co., 1973)
226
SECTION
6
CUSTOMER RELATIONS
E ven if an organization has the best location, the best price, and the best product it is
doomed to failure in the long term if it doesn’t understand and respect the value of its
customers. The number-one responsibility of any automotive service operation is not fixing
cars, it is fixing the customers. Building and maintaining a strong base of customers is one
of the best ways to assure the long-term success of any company. Developing these posi-
tive relationships so customers become vocal advocates and your best advertisements in
the community is one of the best strategies for any service organization.
• CHAPTER 19: The Value of Satisfied • CHAPTER 21: Resolving Customer

Customers Disputes
• CHAPTER 20: Building Basic Communica-
tion Skills
C H A P T E R
19
The Value of Satisfied
Customers
CHAPTER OBJECTIVES
■ To appraise the effect that satisfied and dissatis- ■ To assess the benefits of return and repeat cus-
fied customers have on business success tomers on business
■ To examine the high cost of attracting new ■ To identify some of the fundamental traits of
customers human behavior
KEY TERMS
customer satisfaction silent majority C.S.I.

opportunist 11/4 rule word-of-mouth advertising
229
SECTION 6 ■ Customer Relations
Introduction
Each of us is bombarded every day in every direction that we look by ads, pro-
motions, commercials, and billboards. Why? The reason is clear. No company,
even with the best product or service, can survive without enough customers.
Those companies that have the longest and most consistent track record of
performance have learned that this must be taken one step further; no com-
pany can survive without enough loyal customers. They all know that even if
they have the best product that people have to know about it before they will
buy it. Even when customers know about a great product they must feel good
about the company that provides it. Thus, smart business people know that
their survival hinges on their ability to attract and retain customers.
This chapter is a brief overview of the importance of satisfied customers to
the health of any organization. Further, in it we will discuss some general
principles that you should keep in mind to guide your efforts to build and
maintain a growing base of your most valued commodity, return customers.
Customer Orientation
Customer Very simply put, customer satisfaction is the key to repeat sales. This seems
Satisfaction obvious. None of us chooses to do business with a company that we do not
The intentional practice of trust, that we believe has tried to take advantage of us, or has taken the oppor-
meeting or exceeding tunity to gouge us when they could by charging too much. Yet, each of us con-
customer expectations. tinues to experience situations like this in our daily lives. Why?
Whether it is intentional or due to ignorance, there will always be compa-
nies that are blinded by the opportunity to take advantage of a situation for
Opportunist immediate gain. These companies are called opportunists. After all, they are
A person who intentionally in business to make a profit. The short-term benefits of being an opportunist
takes advantage of a go right to the company’s bottom line. Who can blame them? The answer to
situation. that question is: you can, we can, and, ultimately, we do. Any of us may be
guilty of dealing with a particular company in spite of these bad business prac-
tices but that only holds true when we feel that we have no other choice.
When a vendor is the only source of a product or service that we strongly
desire we will go counter to our best judgment and deal with them in spite of
their practices. We will pay the higher price and/or forego the security that
they will treat us fairly if a problem occurs. We are willing to take the risk. How-
ever, as soon as we find ourselves in the position of having a choice to deal with
a more reputable vendor that we feel will treat us fairly we will switch. That is
the ultimate consequence that the opportunistic company will eventually pay.
It is for this reason that you can easily name several companies that have
risen meteorically to great fame and fortune and then, just as quickly, plunged
into non-existence. They took advantage of the situation on the short term
and then paid the ultimate price in the long term. That is certainly the last
business practice anyone should follow.
It is a far better long-term investment to be very aware and sensitive to cus-
tomer perceptions so as not to, even unintentionally, build the reputation as an
opportunist. The way to steady, long-term success is through striving intention-
ally in everything that you do to build and maintain customer trust, customer
satisfaction, and, thus, customer loyalty. It is the repeat customers and the per-
sonal testimonies and free word-of-mouth advertising that they will provide for
you every day that will be the biggest boon to your ultimate success.
230
The Value of Satisfied Customers ■ CHAPTER 19
The Silent Majority and the 11/4 Rule

There have been numerous studies done, reports generated, and articles
printed that report a variety of data about the importance of satisfied cus-
tomers. Although the numbers cited vary, a common thread in all of them is
that dissatisfied customers are much more outspoken about talking about
their bad experience than satisfied customers are about doing the same. As a
result, one unhappy customer has a much greater affect on your company
than one satisfied customer does. How does this affect me? Why does this
matter? Let us take a closer look.
In the quest to continue to build a greater and greater body of satisfied
customers conventional logic indicates that if your company has 25 percent
customer complaints that they are doing a good job. After all, that means that
they are satisfying 75 percent of the customers and, therefore, as long as they
can get three out of four coming back and telling all of their friends to do the
same the company will continue strong growth. Or will it? Unfortunately this
logic is a bit too simplistic and fails to take into account two big common
principles of customer behavior: the silent majority and the 11/4 rule.
First of all, let us talk about the impact of the silent majority. Just because Silent Majority
only one out of four customers complains does not indicate that three out of A title given to the large
four are satisfied. It only indicates that only one out of four is angry enough to group that, although they
take direct action and complain. Where do the other three really stand? Are are the largest in number,
they very satisfied, satisfied, somewhat dissatisfied, or just too busy or angry to often do not openly and
even bother to complain? The problem is that you really do not know the actively express their
answer. Therefore, it is important that you not assume too much simply from opinion.
the level of vocal complaints from customers. It is typically true that the
majority of dissatisfied customers do not complain, they simply vote with
their feet. That is, they choose to say nothing but decide then and there to do
all future business elsewhere. In addition they are likely to tell their friends
why they changed to another service shop—and encourage them to do like-
wise. You may wonder what you can do about this situation. We will look at
ways to obtain that information in the section on Measuring Customer Satis-
faction C.S.I. (Customer Satisfaction Index).
The second important principle that you need to keep in mind is the 11/4 11/4 Rule
rule. The 11/4 rule of customer satisfaction is Dissatisfied customers will
A dissatisfied customer will tell 11 others about their bad experience while a tell 11 others about their
satisfied customer will tell four others about their good experience. bad experience, whereas
satisfied customers will only
Using the 11/4 rule the impact of just one dissatisfied customer is ampli- tell four others about their
fied. A dissatisfied customer is much more likely to speak out and tell more good experience.
people about his bad experience than a happy customer will do regarding her
good experience. As a result, it only takes a very small percentage of vocal, dis-
satisfied customers to have a major negative impact on your public image and
on the overall perception of your organization.
Taking both of these principles into account let us take a look at a scenario
that demonstrates how these two principles work and why you need to take
them into account when you try to assess where you stand with customer
satisfaction.
A&B Service does not have any formal process in place to measure their cus-
tomer attitudes but has depended for years on their informal measurement of
the number of complaint calls that they have received during a month to
indicate how they are really doing. Based on their last three months business
231
and the number of complaint calls that they have received they feel confident
that they are satisfying 80 percent of their customers. Here is the data for the
past 3 months
Automobiles serviced 100
Customer complaints/returns to shop 20
Satisfied customers 80 (80%)
In addition to that information, they have received five letters or calls

from customers thanking them for their great service. Based on this informa-
tion they believe that they are doing a great job by satisfying 80 percent of
their customers. Or are they?
The logic that A&B is using is based on some assumptions. These assump-
tions are very likely to be faulty. Since they have not directly asked all of their
customers how they really feel they are assuming that if customers did not com-
plain that they are happy. This is not a valid assumption. Based on the principle
of the silent majority we know that most dissatisfied customers will not do any-
thing except quietly go away and never come back. Therefore, how many out of
those 80 percent who did not complain are really happy? Somewhat happy?
Somewhat dissatisfied? Or, just too angry and/or too busy to complain but plan-
ning to go elsewhere? The answer is that we do not know.
Taking into consideration the rule of the silent majority A&B Service may
have some serious customer relations problems to worry about. Based on the
limited information that is available A&B Service believes that they are satisfy-
ing 80 percent of their customers. However, since they have not asked each of
the 80 customers that did not complain whether or not they are really satisfied.
Therefore, they really can not be sure that their estimates are accurate. All that
they are really sure of is that at least 5 percent of their customers are very satis-
fied (the ones who wrote letters). Therefore, their true customer satisfaction
percentage could range anywhere from 5 percent to 80 percent. That is a very
wide range of uncertainty. Without better information A&B Service may be los-
ing a great number of customers each month and by the time that they figure it
out they may be out of business.
Let us now explore some of the effects that the 11/4 rule can have on the
overall customer satisfaction of A&B service in this case. They are fortunate
that they know that at least five of their customers are vocal advocates (the let-
ter writers). Based on the 11/4 rule they know that those five customers will
each tell four friends about their satisfaction with A&B Service and encourage
them to go there for service. That accounts for twenty new potential cus-
tomers for A&B Service. On the surface, it would sound like they just found a
source to replace the twenty dissatisfied customers that they lost last month.
Unfortunately, that is only half of the 11/4 rule. Let us look at the other half.
A&B Service has twenty customers that are dissatisfied. It is possible that if
they do nothing to follow-up with those dissatisfied customers and make their
best effort to turn most of them into satisfied customers they can have a major
negative impact on the company’s future business. Using the 11/4 rule, if all
twenty of those customers are very dissatisfied and they each tell eleven friends
about their poor service experience they will have told two hundred and
twenty customers (more than two times A&B’s monthly total customer base)
about their problems and encouraged them to shop elsewhere for service work.
A&B Service believes that they are satisfying 80 percent of their customers,
a sound foundation for the future of their business operations. However,
232
when you consider the full impact of the 11/4 rule in the above example, in
the worst case scenario A&B Service may have gained twenty new customers
through positive word-of-mouth and then lost two hundred and twenty
potential customers due to negative word-of-mouth. A net loss of two times
their total monthly customer base (200 customers) in one month’s time.
The potential impact of A&B Service’s uncertainty about their true customer
satisfaction rate may be the cause of some serious future problems. Their lack of
certainty about how many of the 80 percent that did not complain has left them
with a false sense of security. Further, the potential negative affect that the 20
percent that complained may have on future business is far greater than A&B
has ever considered.
Measuring Customer Satisfaction

As the previous section clearly indicates, unless you actively seek out the
information to be sure how your customers feel you will have to manage by
best guesses. This is especially important in trying to get a true pulse on the
silent majority, who are most likely to neither praise or complain but, since
they are such a large group, will have a significant impact on your long-term
success or failure. So, what should you do?
In today’s competitive marketplace and with stakes this high you must ask
the question. Satisfied customers are the lifeblood of your organization and
you need to know that they are satisfied. Further, you need to know if and
when they are even mildly dissatisfied. You need to have this data to inform
your future decisions so that you can be sure you are satisfying as many
customers as possible. You need to know your true Customer Satisfaction
Index (C.S.I.). C.S.I.
Whether you are in a dealership, a chain store, or a small local repair shop, Customer Satisfaction Index
C.S.I. is a common measure that just about every company with an eye for the is a formal measure of the
future is concerned about, measures, and uses as a key performance indicator. percentage of customers
Although there are many ways to collect and measure this data the results that are satisfied with their
gained from obtaining customer feedback are a valuable management tool. service or sales experience.
The key is to intentionally and consistently ask all of your customers about
their service experience.
C.S.I. surveying is commonly done via a paper and pencil survey or an
online survey to all service customers. This may vary from a survey handed to
the customer at the time of pickup from service, left in the car for them to mail
back in, or a survey mailed to (or e-mailed to) all owners several days after
service. Although the information obtained is valuable, one shortcoming of the
mail or e-mail method is that many customers fail to take the time to respond.
This still allows for a silent group that may be either satisfied or dissatisfied.
In an attempt to reduce this non-response group, some organizations have
made the additional commitment to conducting live telephone surveys of
their customers. Using this method has several benefits. It not only reduces
the number of non-respondents, it also provides immediate feedback to the
organization about any problems or questions. This immediate feedback gives
the company the opportunity to respond immediately and resolve the prob-
lem. A quick and decisive response from the company is far more likely to
turn a negative situation into a positive one. The ability and willingness to fix
a problem quickly can turn a potential vocal critic into a strong advocate.
233

One of the most telling experiences that I have had in really cared. They knew that we cared. They knew
my industry experience was the positive impact of that we were going to be calling. They looked for-
actively striving for satisfied customers. As the service ward to the regular call from Audrey to check up on
director in a large metropolitan dealership I was them. This was clearly demonstrated when she was
charged with the long-term and sustained growth of unexpectedly off ill for a week and I started receiving
the operation. When our manufacturer came out customer calls asking if she was OK. We had raised
with a program that rewarded and acknowledged the level of our organization in the eyes of our cus-
dealership service excellence, a key required compo- tomers from simply being a company that fixed cars
nent of that award was our performance on the to one that cared about their needs.
monthly C.S.I. (customer satisfaction) surveys. Prior to this initiative we had always been an
Trying to stay one step ahead of the competition above-average dealership in the market. In fact, we
we decided that rather than being reactive and had finished second in the previous year’s district
responding to the customer survey results we would rankings in customer satisfaction. The ultimate result
make an investment in an early detection system by of this was that the dealership was able to set new
hiring a customer relations specialist. The idea was to standards as the highest in C.S.I. rating in the district,
have this person call 100 percent of all customers in the entire zone, and we were nationally recog-
three days after their cars left our service depart- nized as having one of the highest C.S.I. ratings for
ment. Her mission was to find out if they were satis- large dealerships in the nation. I firmly believe that
fied. If they had a problem or a question she was to this one activity was instrumental in helping us to
immediately notify me so that we were able to imme- earn the corporate service excellence award six years
diately make arrangements to resolve their concerns. in a row.
Our new customer relations specialist, Audrey, was The results went far beyond simply receiving a
a retiree who had a great bedside manner and was plaque. We saw a substantial positive affect on our
very satisfied to be able to do this part-time work from bottom line as a result of our customer satisfaction
the dealership and even from her home. As such, we work. We experienced significant and sustained
expected good results. However, the results of this ini- growth of the sales and profitability of the service
tiative far exceeded our wildest dreams. Not only were department. As the word spread, vehicle sales
we able to identify and resolve complaints more effec- increased based on our reputation. Finally, we had a
tively, we actually created a new customer climate. noticeable increase in employees from our competi-
As a result of this personal touch, our customers tion actively seeking to come and work for us.
no longer had any concerns about whether or not we
Not every company has the resources to invest in expensive customer sur-
veying activities. The most important factor, however, is that no company can
afford to ignore the importance of doing what they can to obtain this rich and
essential information. If you want to be successful you need to actively solicit
responses from every customer, to obtain specific data on every service trans-
action, and to provide the company an opportunity to take immediate correc-
tive actions. The data itself is valuable as a management tool to help you
know, for sure, what your true percentage of satisfied customers is.
The satisfaction statistics, although important, are not the most important
benefit. The greatest long-term benefit is providing you the opportunity to
make a rapid response in identifying and addressing the problems of the few
dissatisfied customers that you have. It is through this proactive approach that
you are most likely to be able to save those customers and turn them into sat-
isfied customers rather than quietly allowing them to become part of the
group that tell 11 friends about their bad service experience.
234
The High Cost of Cultivating New Customers

One of the reasons why taking care of your existing customers is so important
is simple economics. It is very expensive to cultivate and attract new cus-
tomers. In order to attract one new customer it is necessary that you take
planned (and expensive) actions to go out and compete with the entire mar-
ket for that customer’s attention, their consideration, their business, and,
most of all, their loyalty. Every customer is constantly bombarded with media
trying to get his or her attention. Competing for a new customer in this open
market means that you have to make a very large investment just to be recog-
nized as one of the potential players.
Advertising costs are exceedingly high. Whether it is television, radio,
newspaper, direct mailers, posters, or billboards, there is no guarantee of the
return on your investment. You have no way to know how many responses
you will get. Remember, that at the same time you are advertising to attract
these new customers everyone else in the market is also advertising to get
them. The more you advertise and start to attract new customers the more the
others will advertise to try to win them back, and so forth and so on. It would
be a lot simpler to invest just a few more minutes of your time and energy in
taking care of the customers that you already have.
You must remember that automotive service is not high on most people’s
list as a fun activity. They only come to you when they have a need. Even with
your extended hours, your polite employees, your exceptional service, it is at
best a major inconvenience for a customer to arrange their day to bring the car
in for service. As a result, just about any customer will do anything within rea-
son to minimize this inconvenience. One of the best ways to minimize incon-
venience is to go with a sure thing. Going somewhere that they know will do
the job right the first time for a fair price. The best source for that is to con-
tinue to deal with people who have proven that they can consistently meet
those standards. As a result, all of the advertising in the world is highly
unlikely to pry away a good and very satisfied customer from you no matter
what claims the competition makes.
The Low Cost of Repeat Business

Attracting new customers is an expensive proposition and there is not an
unlimited supply of new customers. Remember the situation that A&B Service
found themselves in earlier in this chapter? If you continue to lose current
customers and, therefore, have to constantly work to attract a large number of
new ones to replace them you will ultimately run out of potential new cus-
tomers. No market has an unlimited number of customers.
With the high cost of attracting new customers it makes good business
sense to retain all of the current customers possible. Then you will have to
make a much smaller investment in advertising to attract new customers. This
also makes it likely that if you are successful in your advertising you will not
only replace the small number of current customers that you have lost, you
will end up with a net gain in total customers.
The cost of retaining current customers is by far the lowest per customer
cost that any company will encounter. After all, you know for sure that if you
satisfy this customer that they will stay, and that is a 100 percent guarantee
that they will remain if you treat them correctly. Conversely, if you advertise
235
to reach 10,000 customers there is no guarantee that out of that 10,000 any of
them will become your customers. Remember, you cannot be sure that those
who hear your message have a need, have an interest, are not already loyal to
a competitor, and/or have not been wooed away by an even stronger adver-
tisement from a competitor! That is the reason why the odds are stacked
against you to obtain major increases in new customers without constant, per-
sistent, and expensive efforts.
Exceeding Expectations
The low cost and high value of retaining customers is good motivation to be
open and willing to go above and beyond what is required to keep them. Your
existing customers are a captive audience. You could ask, “Why should I give
them more than I have to? They are already happy with what they are getting.”
However, if you are only meeting their minimum requirements so that they do
business with you rather than having to go through the trouble of finding
another shop you may be hanging on to them by a thread. Why not consider
ways to exceed their expectations to reinforce their decision to continue to
choose you?
By making a continuous effort to reinforce your current customers deci-
sion to choose you as their shop you not only are making a good investment
in retaining their current business, you are actually making a strong invest-
ment in obtaining additional business. This additional business can come
from two sources, increased sales from these customers and referral sales from
their friends and associates.
There is clear evidence that the more that any customer deals with an organi-
zation with repeated good results the more likely they are to feel confident to
spend more. A long-term repeat customer is likely to slowly transition from the
customer who initially chose you to provide a service, testing you out to see if
you were worthwhile, to a customer who considers you as their sole source to
advise them and provide solutions for all of their automotive service needs. This
type of loyalty is something that you can only wish to attain. However, even in
today’s highly competitive market instances of strong customer loyalty still exist.

Although you might believe that it is a remnant of a helping out at the service drive I greeted a lady at her
bygone era, in spite of all of the competition in the car. She identified herself and I asked her how I could
automotive market there are still loyal customer/shop be of service. She simply said, “Tom is my mechanic.
relationships out there to be cultivated, nurtured, and Please have him look over my car and call me later to
enjoyed. Based on my work as a manufacturer’s repre- let me know what he thinks it needs.” I was absolutely
sentative, the idea of a lifelong loyal customer was floored. What? In this day and age how could this be
something that I saw with some regularity in the small true? It made me really rethink a lot of assumptions
town shops but never observed through my encounters about customer care in the big city.
in metro dealerships in the several large cities that I Tom was consistently our most productive techni-
had covered. cian. He had worked at this dealership for almost
When I took the position as service director at a 20 years. That day I found out one of the keys to Tom’s
metro dealership the thought never even crossed my consistent status as the number one technician. Along
mind that we could try to cultivate and build these with his technical expertise, his drive, and his motiva-
types of relationships. That was until one day, while tion, he had become “their mechanic” in the eyes of
236
his loyal following of customers. Through his thorough certainly changed my perspective. Further, I was able
yet controlled advising of customers he had been able to use this as a lesson to share with service advisors
to, in spite of the skeptical world around him, nurture and technicians alike at that dealership and also in
and build a loyal customer base that continued to subsequent positions to cause them to pause and
return. Not only did they return, they completely rethink the potential of developing that type of loyal
trusted him as their technician and their expert techni- clientele. As a result others that I worked with began
cal advisor. They were not manufacturer-bound or to work just a little bit harder and smarter to, hope-
dealer-bound, they were Tom’s customers. fully, build a clientele just like Tom’s some day.
Based on the realization that this type of cus-
tomer relationship is still possible in any market, it
Word-of-Mouth Advertising
The benefit of the loyal returning customer goes beyond their trust and their
openness to spend more at your shop. Probably their best benefit to you is
their willingness to provide you with the best advertising that you can get:
word-of-mouth advertising. No other type of advertising has the credibility Word-of-mouth
with the public that in any way compares to that of hearing a genuine, unso- Advertising
licited testimonial from one of your current customers—and the best part is Unsolicited comments that
that the advertising is free. individuals share with
Our potential customers are very busy people. They want and need to have others about their
automotive service as a convenient, trouble-free experience. In an attempt to satisfaction or dissatisfac-
navigate their way through the masses of shops competing for their attention tion with a product or
and their business, they will commonly look for any source of a referral. There company.
is no advertising medium that can assure a potential customer that you actu-
ally meet or exceed what you promise. Yet that is the type of information that
they desperately seek. The only true source of that type of information is
through an unsolicited recommendation from a current customer.
Customer Loyalty
For the reasons mentioned earlier it is important to make every effort to retain
your current customers. However, to be truly successful you must not stop there.
You need to work to move your customers up the ladder of customer satisfaction
(Figure 19-1). You need to make a concerted effort to move them from being a
Vocal advocate
Loyal customer
Repeat customer
One-Time customer
Figure 19-1 Ladder of customer satisfaction
237
one-time customer to being a repeat customer. You do this by meeting or exceeding

their expectations. You do this by treating them as a valued customer.
You then need to move them from being a repeat customer to being a loyal
customer. Your loyal customers are those who think of you first whenever they
have a service question or a service need. This is because they have confidence
that you will be able to address their needs in a competent, fair, and friendly
manner.
Finally, you need to try to move as many of your loyal customers upward
to becoming vocal advocates of your shop. It is when they have reached that
level of positive relationship with your shop that you will begin to earn all of
the long-term benefits of increased sales, trust, and word-of-mouth advertis-
ing that can really help your shop to develop a reputation as being head and
shoulders above the competition.
Fundamentals of Human Behavior

Price, product, and availability are touted by marketing experts as three of the
top reasons why customers choose to buy. However, when you are trying to
build loyalty you need to remember that the focus of this effort is to go
beyond these three reasons. They are what help you to get your foot in the
door so that you have the initial opportunity to serve the customer. Although
they will always remain important, it takes quite a bit more to build a positive
relationship that will retain customers.
After all, your ultimate goal should be to develop the type of relationships
that Tom developed with his customers in the example cited earlier. You need
to constantly strive to become the single-source provider for your customers.
You need to become their automotive consultant, their service expert; the first
person that they think to call to ask “What do I do?” regarding anything auto-
motive. It is through raising the level of your relationship with your customers
to that of a respected consultant from that of a service writer or a mechanic
that you will ultimately succeed. However, building these types of relationships
requires that you are willing and able to keep up your end of the relationship.
There are three basic principles of human behavior that you need to
acknowledge and heed if you want to build a respectful and trusting relation-
ship with your customers. Remember that your goal is to build a relationship
with every customer so they will trust you as their consultant. To do this you
need to become very conscious and sensitive to each individual’s unique needs,
wants, and behaviors. It is through your ability and willingness to see them and
appreciate them as unique individuals that you can build the necessary bonds of
trust. The three key principles of human behavior that you need to consider are
• Respect the differences in people.
• Always treat someone the way you think they want to be treated.
• People want, first and foremost, to be understood.
In building a knowing, trusting relationship it is important that you do
not jump to conclusions and assume that you know what your customers
want and need. It is for this reason that you need to acknowledge and respect
the differences in people. You have to have the patience to learn and under-
stand their ways, their individual quirks, and their motivations. Not until you
have reached that level of understanding can you accurately prescribe the best
solutions to meet their individual needs.
238
Respect is something that is earned. The safest way for you to demonstrate
your respect for others is to always treat someone the way you think he or she
wants to be treated. There is little that can cut a relationship short faster than
when an individual feels talked down to and/or for any reason disrespected.
You need to make a concerted effort to be cautious in your approach to each
customer to avoid offending his or her sensitivities or insecurities. One of the
best ways to do this is to avoid stereotyping individuals and assuming that
you can be sure what they know or do not know, need or do not need without
giving them the respect of listening for clues and asking them.
In order to build a trusting relationship it is essential that customers feel
that you understand where they are coming from. They simply want to be
understood. You may not agree with their position, but it is, nevertheless, nec-
essary that you take the time to hear them out so that you can gain their per-
spective. It is not until you understand where they are at and what they really
want and need that you can begin to do your best work. You can only then
begin to help move them from their condition of frustration and need to one
of comfort and satisfaction—positions that will be rewarded as they become
satisfied and loyal customers.
Quality Customer Service

Although we have spent an entire chapter talking about how important cus-
tomer satisfaction is, providing quality service is not really that complicated.
Once you have the right attitude and commitment all that is needed is persis-
tence and a willingness to continue to keep in mind the following advice. The
foundation of quality customer service can be summed up in four simple prin-
ciples. They are to
• Have a positive attitude.
• Identify the needs of your customer.
• Meet or exceed the needs of your customer.
• Work to ensure that your customer returns.
Having a positive attitude is the most obvious of the four principles. Your
attitude and approach to your customer demonstrates your willingness and com-
mitment to be of service. It shows that you appreciate and value each customer.
Meeting and greeting the customer with a smile, a warm handshake, and giving
your undivided attention helps to communicate that he or she is important to
you. This is the best first step in initiating a positive customer relationship.
There is a subtle, yet dramatic, difference between listening to what the
customer says and what he means. By approaching the customer with an open
mind and trying, first and foremost, to identify the customer’s needs rather
than trying to sell him something you are able to assure that the focus of your
actions is to meet those needs. Identify the customer’s core needs is the ulti-
mate test of whether or not they will be satisfied and trust you now and in the
future. That is the basis for building a positive customer relationship.
Recognizing the difficulties and inconvenience that having their car serv-
iced poses to most customers is very important. Although price is always an
issue, the biggest obstacle to satisfaction is inconvenience because we all
suffer from a shortage of time in our lives. By recognizing this and providing
resources to make the service experience as pleasant as possible, customer frus-
tration can be minimized. Finally, and most important you must address their
239
core needs by resolving their problem the first time so that you can assure
them of no further inconvenience.
Even though you have been pleasant and professional, listening to under-
stand what the customer needs, and fixed the car properly and on a timely basis
this does not guarantee a lifelong customer. Considering the high value that a
loyal, repeat customer brings to any organization there is one last, yet essential
point in quality service that is required so that you can build a loyal following.
You need to exceed the customer’s needs. Some key ideas to consider that can
assist you to consistently provide this superior service experience are to
Provide added value—strive to exceed customers’ expectations, not just to
meet minimum requirements.
Sell the benefits, not the price—work to provide value, not just a low price,
and take the time to make sure the customers see what they are getting
in return for their investment.
Provide more than the competition—promote and remind your customer the
strong points of doing business with you and why you are the best
choice.
Answer “Why would they want to do business with me?”—When trying to
determine what services to provide and focus on customer needs.
Follow-up after the sale—be proactive in attempting to contact all cus-
tomers after the sale to be sure that they are satisfied. Never leave this
to chance.
SUMMARY
The main purpose of this chapter was to explore the value examples highlighted the need to know if your customers are
and importance of satisfied customers to the success and con- truly satisfied. The use of a customer satisfaction survey and an
tinued existence of your business. Two principles that high- active plan to do 100% customer follow-up was highly recom-
lighted the importance of being sure that you know if mended to assist in obtaining this important information.
customers are satisfied are the silent majority principle and To accompany that newfound respect for the value of
the 11/4 rule. They clearly illustrated the significant positive or satisfied customers we concluded with some key concepts to
negative impact that a handful of customers can have on keep in mind that will aid you in improving your interactions
overall customer satisfaction and long-term business success. with customers. Long-term survival and ultimate success in
We discussed the need to make a concerted effort to any customer-based service industry requires that you are
build your existing customer base from being repeat cus- customer focused. This requires a daily focus on customer
tomers to being vocal advocates of your organization. Several satisfaction.
1. Which of the following is not a principle in providing c. people want, first and foremost, to be understood.
quality customer service? d. all of the above.
a. Sell the benefits, not the price. 3. Which statement is not true regarding the value of cus-
b. Provide value-added. tomer satisfaction?
c. Give as little as possible.
a. It is easier to attract new customers than it is to keep
d. Follow up after the sale.
current ones.
2. A key principle of human behavior is b. There is a high cost in cultivating new customers.
a. respect the differences in people. c. Repeat customers can be your best advertisement.
b. always treat someone the way you think they want d. The cost to keep repeat customers is relatively low.
to be treated.
240
4. Measuring C.S.I. helps you to c. most people are too busy to take the time to complain.
a. know how popular this TV show really is. d. all of the above.
b. use forensic evidence to catch felons. In Questions 7–10 please number the four types of customers
c. accurately measure the number of dissatisfied listed from lowest (1) to highest (4) as the rank moving up the
customers. ladder of customer satisfaction
d. win dealership awards.
___ 7. repeat customer.
5. Two factors that you have to take into account to know ___ 8. one-time customer.
your true customer satisfaction are
___ 9. vocal advocate.
a. the silent majority and the 11/4 rule.
___ 10. loyal customer.
b. the 7/11 rule and the vocal minority.
c. the color of money and the value of repeat business.
d. the low cost of repeat customers and the cost of
litigation.
6. When measuring customer satisfaction you need to be
aware of the silent majority because
a. many people that are dissatisfied will not complain.
b. people sometimes do not complain, they just go
away mad.
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C H A P T E R
20
Building Basic
Communication
Skills
CHAPTER OBJECTIVES
■ To identify fundamentals of behavior that affect ■ To examine the influence of body language and
communication gestures on communication
■ To recognize the influence of nonverbal signals ■ To use basic questioning techniques to more
on the message that is received effectively obtain information
■ To examine how tone of voice alters the intent ■ To demonstrate the value of questioning tech-
of your message niques in controlling difficult interactions.
KEY TERMS
tone of voice nonverbal communication open questions

body language questioning techniques closed questions
242
Building Basic Communication Skills ■ CHAPTER 20
Introduction
Sound communication skills have a profound affect on all that we do in our
lives. There are very few days when you are not called upon to use some por-
tion of your skills and abilities to share information and discuss topics. Occa-
sionally you need to draw on your higher-level communication skills when
you find the need to consult with others to problem-solve difficult issues or to
negotiate to overcome impasses between family, friends, or business associ-
ates. Our abilities to clearly and effectively communicate have a profound
effect on our relationships, both personal and professional.
In the business world, and especially in a retail environment, a great por-
tion of your time and a great measure of your ultimate success can be directly
attributed to your ability to effectively communicate with your customers,
your suppliers, and your co-workers. This is even more important as you rise
through the ranks of management. You are often called on to summon your
higher-level communication skills to resolve problems, clear up misunder-
standings, and negotiate solutions to difficult situations.
This chapter is intended to provide you with some general insights on
human behavior so you can better understand and communicate with others
whether they are your bosses, your subordinates, irate customers, or your sig-
nificant others. In addition we will briefly explore two sets of communication
tools: nonverbal communication and basic questioning techniques. These
tools, when properly applied, can increase the likelihood of successful com-
munications. Although the examples will primarily focus on your most diffi-
cult communication situations such as those with dissatisfied and even irate
customers, these tools can be applied to improve your communication at all
levels and with all audiences, both personal and professional.
Basics of Communication
Before you learn about tools and techniques that you can use to become a
more effective communicator it is important that we talk about some of the
basics. At one point in our lives we have all been exposed to people who are
very good at delivering a “canned speech.” They do a great job of saying just
the right things the right way so that they can try to convince those who are
listening to agree with their point of view. Unfortunately, in many cases they
are not able to convert many to their way of thinking. Why is this so? Why do
you not trust them or want to believe them? Most often, it is because although
they are good in their technique, they lack sincerity.
Because effective communication will be one of the major keys to your
success or failure it is, therefore, important that you are skilled at it. You need
to be sure that you are communicating with sincerity. You need to believe
what you are talking about or people will be able to see right through you and
doubt your intentions. More important, if you are to effectively communicate
you need to know your audience. You need to have some understanding of
their needs and values. The better you are able to understand your audience
and acknowledge their needs the easier it will be to establish a trusting rela-
tionship. This trust is essential for both parties to really share information and
openly and honestly work toward agreement.
You must realize that your values and your motives are not shared by every-
one. Each of us is unique. As a result, we all come to the table with different
243
backgrounds, different experiences, and different expectations. The starting

point of any good communication is accepting and appreciating those differ-
ences rather than assuming that everyone thinks like you.
No matter what your background, the idea of treating someone the way
you think they want to be treated seems to be nothing more than common
sense. It even sounds quite a bit like the golden rule “Do unto others as you
would have them do unto you.” Unfortunately, this common sense adage is
not common practice. Sensitivity, care, and consideration are all too often for-
gotten under the guise of the business relationship.
Just as we need to appreciate the differences in others, we need to step
back and assess the other person’s position if we hope to have an effective
interaction. We do not need to feel sorry for them or to show sympathy, but
we do need to appreciate their condition, to show empathy, and acknowledge
that we understand and appreciate them. When we can acknowledge this as a
starting point in our communication and they realize that we appreciate their
feelings and position we can break down barriers of distrust and openly and
freely work toward the best solutions.
Unless you are able to demonstrate to the other person that you under-
stand their position you will not be able to carry on any effective communica-
tion. You can talk, they can listen, but communication will not occur.
Communication indicates sharing of information and little sharing will occur
while the other person is expending all of their energy hanging onto their
position. Have you ever heard an argument where one of the parties involved
keeps on saying “but you just do not understand” over and over again? Most
of us have. This is a classic case where one party feels that he has not been able
to make a point and he is unwilling and unable to move forward in any dis-
cussions until he is sure that someone understands his point.
The foundation for effective communication is your ability to acknowl-
edge and understand others. Techniques will not resolve the problems that
you seek to solve. Making a sincere effort to understand others is the best
foundation for achieving open and effective communication.

Early on in my career as a manager, low-performing hereafter, if you are not here after what I am here
employees really got on my nerves. I was frustrated after, I will be here after you are gone.” He smiled as
that they did not seem motivated or focused enough he said that it was better than just threatening to fire
on getting things done on time. I was growing more them, and he had used this little talk to motivate sev-
and more impatient with their inability and apparent eral of his problem employees.
unwillingness to change. I was excited. I thought that was exactly what I
One day while chatting with an associate he told needed. I was anxious to use this ingenious new tech-
me that it sounded like I needed to have a heart-to- nique the next time I got frustrated and had to deal
heart with my problem employees and tell them with an underperforming employee It sounded like
about the hereafter. “What do you mean?” I said. He such a witty (sarcastic) way to deal with difficult
said that the hereafter was a short explanation that situations in a lighthearted manner. Shortly there-
he used with his employees to get their attention. It after I found just the right opportunity to use the
went something like this: “Working here is like the “hereafter” speech and was very proud of myself.
244
But the results that I had hoped for, better perfor- hereafter. I had to learn to understand, acknowledge,
mance, did not materialize. In fact, it seemed to only and appreciate what others were here after. That
to make things worse. The employee’s performance was, more often than not, different than what I (and
did not improve and his attitude got worse. Why? the company) was there after. Only with that knowl-
I abandoned this little trick but did not immedi- edge could I consistently find a way to motivate
ately understand why it had been such a failure. It was employees to improve their performance. I had to
not until a little bit later through reading and experi- learn what they were here after, what they valued
ence and some more failed attempts to use “canned and what motivated them to action, before I had any
solutions” to fix employee problems that I realized chance of changing their performance or behavior.
that I was the one who really did not understand the
Nonverbal Communication
What you communicate to others is determined by much more than just
the words that you say. Your tone of voice definitely affects the message that Tone of Voice
the hearer receives. Beyond words and tone of voice, there is another major The manner in which the
factor that influences the message that you communicate. It is your body words are expressed
language. including loudness,
The study of nonverbal communication and the connection between emotion, and rhythm.
these gestures and body language to the total message conveyed are not new.
Charles Darwin, the scientist most often cited for his research in genetics and
Body Language
natural selection, is credited as the first scientist to research and report on this
topic in his book The Expression of the Emotions in Man and Animals (Darwin, Body position, movements
1899). The most often quoted contemporary research in nonverbal communi- or gestures that are a part
cations is that of Dr. Albert Mehrabian of UCLA. As a result of his research he of direct communication.
found that nonverbal communication not only has a direct affect on the mes-
sage that is received, it actually plays a more major role in the total message Nonverbal
than either the words said or the tone of voice used. Communication
Mehrabian’s findings are summarized in his 7%-38%-55% Rule which is The part of a message
shown in Figure 20-1 (Mehrabian, 1971). His findings indicate that in face-to- conveyed during a face-to-
face communications the words that are said only contribute 7 percent to the face encounter beyond the
total message that is conveyed. The tone of voice used in stating the message words including posture,
body position, facial
expressions, and voice
inflection.
The 7%-38%-55% Rule of Communication
Spoken Words = 7%
Tone of Voice = 38%
Body Language = 55%
Total = 100%
Figure 20-1 The 7%-38%-55% Rule of Communcation
245
conveys 38 percent of the message. Thus the total affect of the words spoken
only account for 45 percent of the message. The key factor of these findings is
that more than half of the message received by the hearer comes not from
words or tone of voice, but rather from the body language demonstrated by
the person sending the message.
You may think that the 7%-38%-55% Rule is a bit extreme, but there are
many cases where what is said is not nearly as important as the situation
and the way that is said. The key here is that you need to take seriously the
influence that tone of voice and your nonverbal communications can have on
the message that your hearer receives and understands.
Tone of Voice
The tone of voice plays a much larger part in the message communicated than
we realize. Let us look at a few examples that we have probably all encoun-
tered in our daily lives.
While hanging out with a group of friends, one of them makes a crude com-
ment or calls you a name. This is something that would normally cause you to
want to confront the person here and now. Yet, in this case you immediately
brush it off without giving it any more thought. Is it because it was your friend
that said it? Or, was it the way that it was said? Although both factors may
have been involved, it is very likely that simply by the tone of voice you were
able to read into the intent of the message that it was just a joke, not a serious
assault on you.
During a day at work a customer comes up to you who is really upset. After
a few minutes of listening without being able to get a word in, you feel like
this is a personal attack. You feel like this customer is talking down to you,
accusing you, blaming you. In these situations it is likely that the words do
not create the hostile environment, it is the tone of voice.
The effect of tone of voice on the message that is conveyed is not isola-
ted only to irate customers yelling at you as a manager. Tone of voice is an
important ingredient in the message that you communicate every time you
interact with others. Even the calmest communication can leave a lasting, yet
unintended message. Here are some examples of very negative messages
that can be very clearly, yet unintentionally, communicated through tone of
voice:
• Impatient—I do not really have time for this

• Unimportant—Listening but trying to break away and get back to other
things
• Condescending—Making the other person feel unimportant or talked
down to
• Blaming—It is all your fault
• Judgmental—You meant to do this to me
In each of these cases this message can be communicated, whether or

intentional or not, to the hearer. The range of messages that are conveyed by
tone of voice is broad. If you want to be an effective communicator you need
to be sensitive to these unintended messages that you may be sending to
others. To be an effective communicator you need to work to assure that your
total message, verbal and nonverbal, matches your true intent.
246
CASE Very detached and intellectual . . . just reporting the

facts.
Pair up with another student. Take turns with one of
you being the service manager and the other being Very impatient and agitated
the customer. This is an opportunity for you demon- Judgmental and blaming . . . wanting to make some-
strate how the difference in tone of voice affects the body pay for this mistake
message that it communicates and the difference in
how it makes the hearer feel. You decide
First, here are three common statements that a Take turns role playing as service manager and cus-
customer might say: tomer saying each of these three statements as you
think the customers would say them to the service
“You need to fix my problem right now.”
manager under these circumstances.
“You are responsible for this.” Did the different attitudes and approaches result
“What are you going to do about this?” in you receiving a different message? How did it
make you feel?
Now, here are three different scenarios that
describe different customers and their very different
approach to this interaction with the service manager:
Body Language
Just as tone of voice contributes to the total message received, body language
plays a major role in the complete message that the listener receives. Whether or
not the body language is intentional it affects the final results. Body language
includes all of the gestures, body positions, and other mannerisms that the
sender exhibits during a conversation. Being able to understand and control the
body language messages that you send when you are interacting with others can
help you to dramatically improve your ability to communicate clearly. Just as in
the case of tone of voice, the most important first step in maximizing your com-
munication skills through intentional use of these communication methods is
self-awareness. That is, you need to become very aware of the nonverbal mes-
sages that you are sending and how they may be perceived by the listener.
Figure 20-2 provides some common examples of nonverbal communica-
tion signals that can directly affect the message received. As you can see, they
create an environment for the listener that conveys a strong, clear message to
the listener of the speaker’s intent.
Through increased awareness and intentional use of nonverbal communi-
cation tools you can dramatically improve your ability to successfully and
consistently convey your intended message. Here are three tips to keep in
mind that can help remind you every day to maximize the positive impact of
your nonverbal communications.
1. Be vigilant not to let negative nonverbal messages creep into your
conversations that might confuse the hearer or otherwise counter
your intended verbal message.
2. Intentionally use nonverbal signals that support the verbal message
that you are trying to send.
3. Strive to gain more consistent control of your body and your tone of
voice as intentional components of your total message.
247
Category Nonverbal signal Message received
Legs legs crossed defensive
legs relaxed and open friendly, receptive
Arms crossed over chest argumentative
relaxed at sides open
Hands Rubbing chin thoughtful
rubbing nose lightly doubting
rubbing eyes disbelief
hands in pockets dejected
clasped in lap very defensive
Fingers Tapping fingers impatience
pointing intense/frustrated
Eyes Darting/looking away deception/lying
looking down dejected/disappointed
Figure 20-2 Nonverbal communication signals
CASE You decide

Pair up with another student. Take turns with one of Part A: Pull up two chairs and act out the scenario
you playing the role of the service manager and the while you are seated in the service manager’s office.
other as the customer. The customer arrives at the Part B: Re-enact the same scenario again, but this
service drive and tells his story as provided below. time while you are intentionally using nonverbal
Here is the conversation. communications that go along with the following
Customer: “I do not understand how this could attitudes:
have happened. I have done everything in the book Customer—The customer is lying and has been
to take care of this car. I have done all of the pre- out street racing the car every chance she gets. The
scribed maintenance. I come in here regularly to engine actually started making noises two weeks ago
report even the slightest symptoms. I have been a but she was just too busy to waste her time coming in
careful driver and never driven the car recklessly or to have it checked out.
beyond the speed limits—and now this. I was just Service Manager—Although genuinely a trusting
driving down the freeway and all of a sudden ‘clunk, individual, the service manager is late for an impor-
bang’ and the engine just stopped running.” tant meeting with his boss and feels as though he
Service Manager: “Mr. Customer, I really feel bad does not really have time for this right now.
about your situation. I understand your concerns. I am Note to both parties—Remember: use exactly
sure that there is no way that this is your fault. I can the words provided here—the only changes should
assure you that we will do everything in our power to be in nonverbal communications.
get your car fixed and back to you as quickly as possible.”
248
Questioning Techniques
The ability to interact with customers is an integral and very necessary job
responsibility for every service advisor and manager. These communications
can be unexpected. They can be lengthy. They will be important. Your success
in getting your job done depends upon your ability to make these communi-
cations effective.
One of the most valuable sets of basic tools to help you to improve the
efficiency and effectiveness of your communications is your ability to use
proper questioning techniques. Questioning techniques can help you draw Questioning
out the essential information from customers so that you can provide the Techniques
needed background to your technicians to aid them in their efforts to identify The intentional structuring
and resolve customer complaints. Questioning techniques also provide great of questions that affects the
benefit in helping you to guide and maintain control of difficult interactions type of response that they
with irate customers. generate.
The basic premise underlying the intentional use of questioning tech-
niques is that the way that you ask a question can have a profound impact on
both the type and quality of response that you get in return. By making an
effort to carefully construct the way that we ask questions, we can increase the
chances of getting the right information and getting it in the way that will be
of most use. Let us explore the fundamentals of questioning techniques by
looking at the difference between open and closed questions, their value, and
their uses. This will help us to better understand the importance of structuring
our questions to gain maximum value in the minimum time.
Open Questions
Open questions are those questions that are asked in such a way that they Open Questions
draw out a detailed response. Open questions are the essay questions of con- Questions that are asked in
versation. Good examples of open questions are those that include words such such a way that they elicit a
as why, how, what. (For example, Why did you do that? How do you feel? detailed response or
What happened?) The normal response to any of these questions is a detailed answer.
explanation. This explanation will be an open-ended response in which your
listener will try to provide what they believe is all of the important informa-
tion regarding the subject.
Open questions can be very beneficial when you are trying to obtain a lot of
information. They can be helpful when you are trying to get to know someone
better. However, there are potential consequences that come with open ques-
tions. They are a call for the respondent to let out anything and everything that is
on his or her mind on the subject. Although this might be interesting, it may also
be more than you needed or wanted. The key is that you need to know the type of
response that you are going to get before you ask the question. Through inten-
tionally structuring the way that you ask the question, you can ensure that the
type of response will be appropriate to meet the unique needs of the situation.
Let us talk a little about the use of open questions with one of your most dif-
ficult communication encounters, the irate service customer. When an obviously
irate customer approaches you in the service drive you can be pretty sure that
they want to go on and on telling you the harrowing tale of their day and their
difficulties with their “piece of junk” car. As soon as you greet them and ask
“How may I be of service?” (remember, how is an open question word) you will be
greeted with an essay answer. The customer may spend the next 10 minutes
telling you anything and everything that has ever gone wrong with this car.
249
When you encounter this situation, take notes. Somewhere within all of the
information that the customer will let loose will probably be answers to some of
the important questions that you need so that you can help identify and resolve
his car problems. However, all of the information will come spewing out in an
unstructured way and you will have to try your best to pick the treasures out from
among the trash if you hope to get any useful information out of the exchange.
This might seem like a strong argument to never use an open question. It
is not, however, so clear cut. There are many times when you want to and
need to get the details. When those situations arise, open questions are the
best method to obtain that rich information. Still another use of open ques-
tions could be when you want to intentionally allow a customer to vent. At
times customers are so upset, so frustrated, so angry, that they simply need to
release some steam before they can calm down, become more coherent and
logical, and be able to move toward having a constructive conversation. The
key here, though, is that you need to learn to form your questions, so that you
intentionally use open questions. Once you have learned to use them when
you need them and avoid them when they are inappropriate you will be better
equipped to carry on more effective and efficient conversations.
CASE your past encounters with this customer, you realize

that you need to let him vent a little bit before you
There are three simple scenarios provided below. In
will be able to make any headway in solving his prob-
each of these three situations you are trying to obtain
lems.
some detailed information from the other person.
Scenario A: You see one of your technicians just
standing sort of in a daze in the shop. You are con- You decide
cerned about why he is doing this. You know that in each of these situations you need
Scenario B: A customer approaches the service to draw out a detailed response from the people
desk and looks somewhat puzzled and lost. involved. What would be the first question that you
Scenario C: A customer approaches the desk would ask each of these three individuals to begin
and you can see that he is very, very angry. Based on your conversation?
Closed Questions
Closed Questions Closed questions are questions designed to get very specific information.
Questions that are They are asked in such a manner that the response will typically be a short and
structured to illicit short precise answer. This can range from a yes/no response to providing a specific
answers and/or very specific piece of information. Some words that are commonly used in closed questions
information. are: when, who, and where. Closed questions are best used to get directly to
the detailed information.
One benefit of closed questions is that you can focus the discussion in a
structured manner rather than letting the conversation ramble.
In a service setting, some examples of closed questions that might be
asked are
• What is the current mileage on your car?

• How do you spell your last name?
• When was the last time you were in for service?
250
When questions are presented this way they elicit an answer that is short
and to the point.
CASE Scenario C: A customer approaches the desk and

you can see that he is very, very angry. Based on your
Using the same scenarios presented in exercise 20c
past encounters with this customer, you realize that
you are now intentionally trying to get a short and
you need to let him vent a little bit before you will be
specific piece of information from each of the three
able to make any headway in solving his problems.
individuals.
Scenario A: You see one of your technicians just You decide
standing sort of in a daze in the shop. You are con- You want to elicit a yes/no or short and specific answer.
cerned about why he is doing this. What question would you ask in these scenarios that
Scenario B: A customer approaches the service would be an appropriate closed question?
desk and looks somewhat puzzled and lost.
Combined Use
Under most circumstances you will need to use both open and closed ques-
tions in combination to obtain the information and the results that you need.
The important part is being able to maintain control of your speech so that
you can intentionally switch back and forth as the situation demands to get
the best results.
In the service write-up process you require specific information from the
customer. Name, address, phone number, and vehicle mileage are all examples
of specific data that is necessary to create the repair order. All of this informa-
tion is best obtained by asking very pointed and direct closed questions. An
example is: “Mr. Jones, what is the best phone number to reach you at between
10 A.M. and 2 P.M. today?’ However, when you are trying to understand exactly
how the car acts so that you can accurately and completely relay the symptoms
to the technician you will probably need to use open questions. These open
questions will help to draw out the details from the customer. An example of
this is to ask the customer, “Mr. Jones, please explain to me exactly what the car
does when it acts up.”
Through a complete understanding of the benefits of each of these question
types and your ability to select the proper type for every situation you can learn
to effectively shape the questions based on what kind of information you need to
obtain. If you come to the end of the questions listed above and still find a spe-
cific piece of important data is missing (for example, finding out if someone else
has been working on the car for this problem) you can smoothly transition back
to closed questions and ask “Mr. Jones, has the car been worked on recently?”
Conversely, if you are still not sure that you understand the customer’s explana-
tion of the symptoms you can use an open question and ask, “Mr. Jones, so that
we are better able to understand the symptoms, please tell me more about the
driving conditions under which we are most likely to get the car to act up?”
Finally, there is another valuable use for open and closed questions. That
use is controlling the direction and flow of the conversation. This is particularly
valuable when you encounter a difficult or irate customer. As with all customers,
251
you need to obtain several different types of information. With a very irate
customer, however, you may find that communication is difficult and frustrat-
ing for both of you. This could be because the customer is so tense and so
upset that until she is allowed to let it all out the likelihood of carrying on a
productive conversation is nil. In this case you would use an open question to
encourage the customer to speak in detail about her experience. Conversely,
in a situation where the customer continues to insist on rambling on and on
and you are having difficulty picking out the pertinent details you would
move to the use of closed questions. These closed questions will help you to
get the specifics you need and, at the same time, provide you an opportunity
to regain control of the direction of the conversation.
CASE almost like he has rehearsed this speech before he

came in and does not know how to say it any other
In your monthly department meeting you open the
way. What do I do?”
floor to questions. One of your new advisors, Casey,
says that there are several customers that really frus- You decide
trate her. “For example,” she says, “When Mr. Freder- Based on the principles that we have learned about
ickson comes in for service he tends to always ramble questioning techniques what would be your advice
on and on. Every time I ask him a question, he starts to Casey and your other employees about how to
his story all over again just like a broken record. It is deal with this type of difficult situations?
SUMMARY
The focus of this chapter was improving communication. over one-half of the total message that your listener receives
Communication skills are essential in business and this is in a face-to-face interaction. Posture, body position, facial
especially true in retail trades such as automotive service. First expressions, and voice inflection are all important elements of
and foremost, however, before learning techniques that will the nonverbal messages that you send to your hearer.
improve communication, it is necessary to start with the We closed this chapter with an introduction to the
underlying knowledge and understanding needed to guide understanding and use of basic questioning techniques.
your communications with customers, co-workers, and friends. Understanding how the way that you word a question can
You need to have a sincere interest in your customers and affect the resulting response plays an important role in help-
make a concerted effort to understand them if real communi- ing you to communicate more effectively. The features and
cation is to occur. unique benefits of open and closed questions were discussed.
Nonverbal communication plays an important role in the The chapter closed with a brief discussion on how you can
total message that you convey to others. Research has indi- use these simple questioning tools to effectively address diffi-
cated that nonverbal communication actually accounts for cult face-to-face interactions.
1. Which of the following statements is not true regarding d. You need to treat people the way that they want to
effective communication? be treated.
a. People need to listen to you first and foremost.
b. Everyone has different motives. 2. If you want to be able to effectively communicate with
c. You should always communicate with sincerity. others you need to
252
a. realize that they have a need to be understood. 9. Please mark an X on the line before those questions that
b. make them understand your point first and foremost. are closed questions.
c. never attempt to identify their needs. _____ What happened to your car?
d. all of the above. _____ When did this occur?
3. Nonverbal communication includes all of the following _____ Why didn’t you bring it in sooner?
except _____ Who is the owner of the car that ran into you?
a. body language. 10. Please mark an X on the line before those questions that
b. explanations. are open questions
c. tone of voice. _____ What is the current mileage on your car?
d. mannerisms. _____ Did you drive the car very far after the noise started?
In Questions 4–8 please match the nonverbal communication _____ Why didn’t you bring it in sooner?
listed below to the best description of the message that it _____ How did you get your car stuck?
sends from the list on the right.
_____ 4. hands in pockets a. lying/deception
_____ 5. legs crossed b. dejected
_____ 6. tapping fingers c. guarded/defensive
_____ 7. eyes darting/looking away d. thoughtful/considering
_____ 8. rubbing chin e. impatient
REFERENCES
Darwin, C., The expression of the Emotions of Man and Mehrabian, A., Silent Messages (Belmont, CA:
Animals (New York: D. Appleton & Co., 1899) Wadsworth, 1971).
253
C H A P T E R
21
Resolving Customer
Disputes
CHAPTER OBJECTIVES
■ To examine key principles necessary to success- ■ To employ a consistent procedure to assure to

fully resolve customer complaints handle all customer complaint situations
■ To apply the basic principles of negotiating an
agreement
KEY TERMS
the bucket perspective value-added

empathy negotiation win-win
254
Resolving Customer Disputes ■ CHAPTER 21
Introduction
We have already discussed at some length the importance of making and
retaining satisfied customers. Unfortunately, customers do not always begin
and remain satisfied. Success in business is heavily dependent on your ability
to satisfy customers and keep them that way. Resolving customer concerns
can turn potential enemies into your strongest and most vocal advocates.
In this chapter we will address some ideas and methods that can improve
your ability to deal with customer complaints and enable you to become more
effective in reaching positive outcomes. These tips and techniques are
designed to help you as well as provide you with some tools that you can eas-
ily share with your workers so that everyone can become more effective at
resolving customer issues.
The Rules of Complaint Handling

An often ignored, yet very important, aspect of successfully dealing with cus-
tomer problems is taking the time to prepare for the encounter. That is, when-
ever possible, it is important that you take a moment to prepare yourself
mentally and emotionally for what may be a very trying experience. There-
fore, the first rule of customer complaint handling is
Rule number 1—Prepare for the encounter.
In order to prepare for the encounter successfully you need to be able to

put everything else aside and plan to focus 100 percent of your time, energy,
and attention solely on dealing with this situation. This is essential if you are
to fully absorb all of the information coming at you. You will also need to be
emotionally prepared to absorb all of the negative energy, complaints, and
accusations that may be unleashed by an unhappy customer out of frustration
over the situation. Therefore, the second rule of customer complaint handling is
Rule number 2—Focus 100 percent of your energy and attention.
In addition, there is one more essential piece of vital information that you
need to keep in mind to help to guide you in your pending interaction with
the customer. It is not uncommon for a customer who has a complaint to be
unhappy, even visibly angry. In this state of mind it is likely that he or she will
lash out at anyone and everyone. However, it is critically important that you
realize that rarely is that anger or frustration really aimed at you. You are the
target of that anger because you are the customer’s only direct contact with
the company at that point in time.
It is important for you to always begin with the assumption that cus-
tomers are upset over the situation. They are rarely upset with you personally.
Taking this approach is valuable in helping you to keep from taking their
anger as a personal attack on you. Your failure to distance yourself from this
hostility may lead you to respond inappropriately to the customer, which will
only result in an escalating war of words. This is not the pathway towards
achieving a peaceful solution to a problem. Maintaining your self control is
essential.
Your ability to detach yourself so that you do not take the attacks person-
ally will make it much easier for you to remain calm and unaffected by the
customer’s anger. In order to be effective at resolving customer complaints on
255
a consistent basis it is essential that you are able to recognize and avoid the
danger of taking it personally.
Rule number 3—Don’t take it personally.
We’ve just spent time going over three essential rules, and they don’t even
really deal with the actual customer interaction. They are rules to put you in
the right frame of mind to be prepared for the customer encounter. Now,
armed with this very essential background knowledge you are finally ready to
meet and greet the customer.
The first few steps in meeting with an upset customer are very simple, yet
essential to creating an environment that will yield positive results. It is highly
recommended that you always begin every encounter in a customer com-
plaint situation the same way that you should initiate every other customer
interaction—begin with a smile, a warm handshake, and a positive welcome.
If you are hoping for a positive interaction and a positive result it is essen-
tial that you begin by creating a positive environment. In an already emotion-
ally charged situation it is important that the customer sees you as someone
who is willing and able to help him, not as an adversary. Based on the many
horror stories that they have seen and heard in books, newspapers, and on tel-
evision about service problems they are already defensive and fearful. You
must realize that the general public is wary of the perils of the auto repair
industry. They probably don’t know much about cars and because of this lack
of knowledge they feel insecure in their ability to effectively argue their point
with you, the expert. You need to do all that you can to assure them that this
is not a confrontation; it is an opportunity to work together to solve a mutual
concern.
Few small gestures have greater impact than a smile on your face and a
friendly handshake. These simple acts are symbolic of your willingness to
reach out to the other person. They indicate your desire to begin from a posi-
tion of trusting them and hoping that they can, in turn, trust you. The best
way to build trust is to do everything that you can to begin on a positive note.
Therefore, rule number four is
Rule number 4—Always start with a warm, friendly greeting.
Once you have completed the greeting it is important that you begin the
dialogue by allowing the customer to speak first. He, very likely, has quite a bit
on his mind and has thought and re-thought what he wants and needs to say
to you. Give him the opportunity to get it off of his chest.
Even though it may seem hard to believe, the vast majority of difficult cus-
tomers you encounter don’t go around every day lashing out at everyone
about their problems. It is much more likely that this is uncommon territory
for them and they may have had to go to some lengths to get up the courage
to come and confront someone about this very troubling situation. It is not
uncommon that they have thought it through several times on the ride to the
shop trying to script out their presentation in their head so that they get their
The Bucket message across to you in just the right manner to get your attention. So, let
An analogy that explains them vent.
that all people have a
limited capacity to take in
and process information at
The Bucket
any one time based on their Although I am uncertain of its origins, the best analogy that explains why it is
current state of mind. essential to allow the customer to speak first and vent is called the bucket.
256
Each of us has a limited capacity to take in information, process informa-

tion, and communicate information. Even though those capacities may vary
from person to person we each have a finite capacity. Let’s call that capacity
our bucket. We can only hold so much in our bucket.
Now, consider the case of the irate customer. Just like the rest of us, he
may have many other things filling his bucket that are totally unrelated to the
car problems. He has work, family, health, finances, and other concerns that
keeps his bucket pretty full without the additional strain of this unexpected
automotive service concern.
When you add the additional stress, strain, and information of the car
problem to his already nearly full bucket, it is now overflowing. Anything else
that we or others try to put into his bucket will just spill right back out.
Sounds reasonable, doesn’t it?
Therefore, in trying to allow the customer the opportunity to be in the
position of listening and processing any additional information it is first
important that he be given the chance to make room for the new information.
An irate customer needs to be allowed to empty part of his bucket so that he
has capacity to listen and take in new information. The best way to do this is
to allow him to speak first, and to unburden himself of those concerns and
emotions that he is holding inside.
Rule number 5—Allow the customer to empty his or her bucket.
While you are allowing the customer to tell you his story there are several
important techniques that you should employ that will help you to focus and
help calm the customer’s fears and potential for distrust. Often the customer is
busily engaged in not only recounting to you the technical difficulties that
he is experiencing. He is likely to do much more, to try to tell you how it has
made him feel, causing him worry and concern. He wants to be sure that you
understand the full effect that this has had on him. Your ability to let the cus-
tomer know that you can relate to his situation and understand how he feels
goes a long way toward validating his feelings. This helps to leave him open to
considering you as someone who is capable of making the right decisions to
resolve the problem. Rule number 6, then, is
Rule number 6—Listen with empathy.
Empathy is an indication that you can relate to the customer’s situation. Empathy
Unlike sympathy, where you feel sorry for the customer, it is a situation where The ability to be aware of
you indicate that you can understand how he feels. This is a very important and relate to the position
distinction. If you show sympathy, the customer may mistake that you are and situation of another
feeling sorry for him or talking down to him. Empathizing with him, on the person.
other hand, shows that you can relate to his situation and have a personal
interest in wanting to find a reasonable solution.
Along with empathizing with the customer it is essential that you are lis-
tening carefully and that you are making it clear to the customer that you hear
and understand what he is saying. Especially in the heightened emotional
state of a difficult customer complaint situation if the customer does not feel
that he has your undivided attention and that you hear him, the feeling of
disrespect that this will create seriously undermines any chance of a mutually
satisfactory resolution.
One technique that can help is the use of active listening. Periodically ask-
ing the customer questions to verify that you understand what he has said
along with feeding back brief statements of what you understand his issues
257
and concerns are can go a long way to assuring him that you have heard and
understood him. In addition, it shows that you genuinely care about his con-
cerns and his issues. Therefore, the seventh rule of customer complaint
handling is
Rule number 7—Make sure the customer knows you’ve heard him.
You have created an environment that is friendly and accepting. You have
reassured the customer that you care and are listening. Now it is time to begin
fact finding. Even armed with the most sincere intent to make the customer
feel at home, little progress will be made unless you can get the facts. You must
listen to all of the information presented to you, analyze it, and arrive at a
complete understanding of what is wrong and what needs to be resolved to
remedy the situation.
In order to arrive at the best decision it is essential that you are able to sep-
arate emotions from the facts. This is the foundation for making a decision
based on sound logic. By using steps 1 through 7 you have created an environ-
ment that will allow the emotions and personal attacks to be minimized. This
will open the door for you to get to the real issues at hand. Once you begin
fact finding it is essential that you maintain the direction of the conversation
in identifying, clarifying, and addressing the key issues. This will never hap-
pen unless and until you are able to consistently practice rule number 8
Rule number 8—Stick to the facts.
Listening for the core issues and problems is a much more difficult process
than it seems. It would appear that once you are able to strip away the emo-
tions, the anger, and all of the other conflicting motives the real answer would
become apparent. That is often true from your perspective. However, whose
problem are we trying to resolve? Yours? If not, then we need to be able to see
things through the eyes of the one whose problem we are trying to resolve—
the customer’s.
You will not likely be able to see the problem through the eyes of the cus-
tomer until you have allowed him to completely vent and tell his complete
story while you sit back and reserve judgment. You want to allow the customer
to tell his whole story so that you can see what he believes is important,
what he wants, what he expects, what concerns him. This requires that you
resist the strong urge to jump to conclusions and suggest solutions before
you fully understand the customer’s core concerns. It is essential that don’t
only fix the car. It is equally, if not more important, that you fix the customer.
You will only be able to do this if you have a clear idea of what his true con-
cerns and priorities are.
To test the effectiveness of your fact finding you need to check with the
customer to verify that you have a clear understanding of his concerns. Once
that has been confirmed it is important that you reach an agreement on
exactly what the customer’s expectations are for a satisfactory resolution. It is
important not to assume that you know exactly what it takes to make the cus-
tomer happy. You may know full well what it takes to fix the car. However, you
can only assume that you know what is needed to fix the customer. The best
way to gain an understanding of this is to ask.
It is important to realize that at this point if you’ve done your job you
have not yet done anything to fix the problem. You have created an environ-
ment where both parties have developed a level of trust, have communicated
and improved their understanding of the situation, and now are finally
258
willing and able to try to come to a reasonably negotiated solution that will
satisfy the needs of all concerned. You are nearing a conclusion, but before
you can arrive at a workable solution you need to make sure that you have
seen and understood the problem from the customer’s perspective and, there-
fore, can propose alternatives that will speak to his needs. Therefore, do not
jump to solutions until you are sure that you’ve achieved an understanding of
rule number 9
Rule number 9—See and understand what is important from the customer’s
perspective.
CASE Option B: Meet with the customer immediately,

apologizing for the type of scary situation that he has
Mr. Hammond arrives at your shop insisting that he
just been through. Ask him to explain all that has
meet with you, the service manager. He has told your
happened during the time following his last visit to
service advisor that his left front wheel came off of
your shop, and offer to bring the car in the shop
the car one week after you did a brake job. It dam-
immediately for a physical inspection, at no charge of
aged his front fender and the wheel and tire are both
course, where you can both look things over and be
destroyed. He wants you to make it right.
sure, and then go from there.
You decide
Option C: Meet with Mr. Hammond and explain
You are extremely busy and it sounds from what the to him that a week has passed since the repairs that
advisor has told you that his story, although not you did and that, although unfortunate, there is no
proven, is possibly the result of your shop’s work. way that the car could have run fine for a week and
Which of the following alternatives do you think is then had a failure if it was really directly a result of
the best option? his last repair visit. Offer to call his insurance com-
Option A: Send the advisor back out, asking him pany for him.
to apologize to Mr. Hammond and committing to fix
the car and provide him with a free rental car until it Please justify the reasoning behind the choice
is done, no questions asked. that you’ve made.
Armed with the facts, in an environment that is now much less emotionally
charged, it is possible to work toward a negotiated settlement. Negotiated settle-
ment? Why can’t I just fix it? you might ask. The reason is clear. Think back to
the beginning and the unsettled and insecure feelings about auto repair that
your customer is likely to feel. With that in mind, if you chime in with “This is
what we’re going to do for you today!” you’re likely to undo all of the good
foundational work that you’ve done. To be successful in customer handling you
need to be able to see the negotiations from the customer’s perspective, and be Perspective
especially sensitive to and avoid creating any situations that the customer might The unique viewpoint of
perceive as an effort to talk him or her into something. any individual or group
Although situations occasionally arise where fact finding results in a clear based on their position in
understanding by all parties that one of them is 100 percent at fault, this is the situation.
rarely the case. That would just make it too easy. Therefore, it is more com-
mon that an important step in complaint resolution is negotiating a settle-
ment that satisfies the needs of all parties involved. This is rule number 10:
Rule number 10—Negotiate a mutually acceptable solution.
259
Each negotiation will be unique, but there are several key factors to con-
Negotiation sider that you can consistently use as guidelines to help you to arrive at suc-
Working with another cessfully negotiated settlements. The five key factors to negotiating an
person or group to arrive at agreement are to
a mutually agreeable
solution, normally requiring 1. Agree upon the facts.
compromise. 2. Present the alternatives and costs.
3. Discuss responsibility.
4. Propose possible solutions.
5. Negotiate to an acceptable solution.
Not until you have agreement on all of the five points are you likely to
arrive at a mutually satisfying solution.
The last, and probably most important, step in the entire process is to
make sure that once you’ve reached a solution that you follow through to
make that solution a reality. Not until all parties have made good on their
promises can you be assured that the problem is really resolved and that the
benefits that you hope to obtain (for the customer and for the shop) will be
realized. Therefore, the final and eleventh rule is
Rule number 11—Follow through to assure that the complaint is completely
resolved.
The process of complaint handling may seem lengthy and cumbersome.

However, once you consider the possible costs of not arriving at an acceptable
solution (lost customers, bad publicity, legal action) it is an investment of time
and energy that is well worth making.
Some Additional Thoughts

In the beginning of this section we talked about the importance of good cus-
tomer relations. Customer satisfaction is highly dependent on our ability to
turn negative circumstances into opportunities for more satisfied customers. It
has been said that the best and strongest advocate of any company is that irate
customer that they were able to turn around into a satisfied one. The ability to
redirect that negative energy into positive energy can turn a potential enemy
into a lifelong friend and a staunch supporter and advocate. That’s just the
type of person that you need to provide you with your best type of advertising—
word-of-mouth advertising. For now, let us discuss how taking the extra step
can help you turn the potentially damaging results of a dissatisfied customer
into a strong positive for you and your organization.
As we’ve discussed, it is very rare that a customer complaint situation ends
up being a clear-cut situation of 100 percent customer responsibility or 100 per-
cent shop responsibility. (Remove the word fault from your vocabulary if you
are trying to take the right approach to satisfying customers.) However, the way
that the opportunity is handled, not the situation itself, will dictate
the ultimate customer satisfaction and long-term net results of the opportu-
nity. Let us explore the results of two very different customer complaint
handling scenarios.
Customer at fault The customer comes into the shop upset that he had a
brake failure as a result of the recent visit to the shop where you did an oil
change. The shop could easily take a hard stand that an oil change didn’t cause
a brake failure and summarily deny any responsibility and have a complete
260
unwillingness to talk further about it. This is very likely within their rights.
But is it the right thing to do?
If the shop takes this hard-line approach, the customer will feel publicly
embarrassed and is likely to go elsewhere for service in the future. The net
result is that the shop wins the battle—and loses the war (lost customer).
However, if the service shop enters the situation with an open mind and,
although they are 99 percent sure that they are not at fault, offers to reach out
and check the vehicle for the customer, they have the opportunity to verify
beyond any shadow of a doubt their innocence, convincingly demonstrate
this to the customer, and then quietly and humbly work to turn this misun-
derstanding into a way to earn more business (a brake job) by handling the
customer in a gentle manner. They might even offer to provide the work at a
discounted rate, thus exceeding the customer’s expectations. Net result—both
the service shop and the customer win.
Shop at fault In a similar scenario where the brake failure is the result of
carelessness on the part of the shop they can either deny responsibility (result
lost customer and probably a lawsuit), assume full responsibility (result fixed
the car, but may not have fixed the customer), or go above and beyond.
In this situation the first choice obviously will have negative results. How-
ever the way the shop steps up to their responsibilities for the repairs will do
far more to create a lasting positive result than what they do in fixing their
error. If they made the error they have an obligation to make it right. How-
ever, they can do this reluctantly, or seize the opportunity to exceed expecta-
tions and try to turn an upset customer into a loyal one. This can be done by a
combination of the shop’s attitude (apologetic/concerned/thoughtful) and a
reasonable effort to go above and beyond, providing more than the required
service (free rental car/additional services at a discount, and so on) to show
that they value the customer and don’t want to lose him.
Both of these scenarios are absolute opposites. Yet, they both present
opportunities to create satisfied customers and lasting relationships or to
result in a lost customer and bad will. The difference is in the attitude in
which the opportunity is approached. That’s right, not the problem the
opportunity. Handling each customer complaint situation presents the oppor-
tunity for positive or negative results. As is demonstrated in these two
examples, the idea of reaching out and going above and beyond what is
required and expected is the key to making the best out of a bad situation.
Remembering that the goal is not merely putting out the fire but creating a
lasting positive result I recommend an additional rule for your consideration
Rule number 12—Try to find a ‘value-added’ solution. Value-added
The result of a transaction
that provides greater
benefit than was originally
Diffusing the Situation expected or required.
If you have ever been in an emotionally charged situation with a customer
you might ask at this point: Yes, sure I need to follow these rules, but how do I
get the customer to stop screaming at me? That is a valid question and the
answer is—you already have the tools that you need. Let’s do a brief refresher
on how you can use some of the communication tools and techniques that
you learned in Chapter 20 along with some additional tips that you have
picked up in this chapter to address this critically important question.
261
When a customer begins an encounter full of hostility, anger, and

negative energy it is important to find a way to diffuse the anger, channel the
energy, and calm the situation down. Failure to allow the customer to vent is
certainly not the best solution because he will be unwilling and/or unable to
listen to reason until he has emptied his bucket (at least to some degree). So,
the first important principle is not only to allow an angry customer to empty
his bucket, to encourage it to happen before you proceed.
However, as soon as the customer has had the opportunity to let off a little
steam and tell his story and you are able to see that you can now start to safely
redirect things in a more positive direction you can use the questioning tech-
niques (open questions/closed questions) to help get the situation under con-
trol and begin to work toward gathering the facts. The use of closed questions,
specifically, can be a powerful tool to permitting the customer to continue to
provide information (so he doesn’t feel ignored or disrespected) while guiding
and directing the conversation so that you can obtain the important facts that
you need. Closed questions, if you recall, are those that can be answered with
a simple, direct, and specific answer (for example, yes/no or left or right) but
do not lend themselves well to a lengthy answer. Now that you can see a rea-
son why you need to know about open and closed questioning techniques
this might be a good time to go back to the previous chapter and review them.
It is important that you realize that allowing customers to empty their
buckets and to vent are, while essential, not an open ticket to allow them to be
loud, abusive, and to go on forever. You need to develop the skills and abilities
to allow for these essential activities while maintaining control of yourself and
of the situation. The ultimate solution is working to attain a balance. This is
an essential skill that requires practice and patience and, once mastered, will
serve you very well in any situation where you work with other people.
The Power of Thinking Win-Win

Often a complaint is not a clear-cut either/or situation. Therefore it requires
that after carefully considering all of the facts involved, consideration is given
to a resolution that allows all parties involved to save face and feel that they
have received reasonable value. This is where real negotiating takes place. This
is where a strong manager thrives because it brings out his or her ability to
Win-Win work to find a win-win solution. Let us discuss the concept of win-win solu-
A problem solving strategy tions a bit further.
that seeks to find a solution A customer complaint situation can be likened to a two-player game. Such
that creates positive results a game always ends with a clear winner and a clear loser. Those are also the
for all involved parties. common rules by which many people and businesses operate. Unfortunately,
with this type of win/lose mentality there will always be some damage to the
relationship that results. The loser may feel embarrassed, cheated, or just sim-
ply incompetent. In any case, after several losses the loser is far less likely to
want to play that game again, at least against the same opponent.
Maybe customer relations does not have to be a game. Maybe it can be
raised to a new level with different outcomes. Does someone really have to
lose each time? Reconsider the examples that we discussed earlier about the
brake failure. In the first scenario the customer was at fault. Did the customer
lose? Why not? The clear answer here is that the business owner saw a far
more important objective at stake than simply winning the game. It was
retaining the valued customer. The same can be said for the second example
262
where the shop was at fault. Again, they tried to negotiate their way to some
sort of a win, no matter how small, out of a situation where they were clearly
the initial loser. Again they did not stop at the win/lose mentality but sought
to find a better solution.
Finding win-win solutions to customer relations problems and to other
business and personal problems is a means of getting the most out of any situ-
ation. It requires more time, more effort, and more thought but consistently
provides new opportunities to make the best out of any situation for all parties
involved.
CASE that it is not your fault. Give the customer an esti-

mate for the full cost of a muffler replacement and
Mrs. Jones comes into your shop absolutely furious
leave it up to her to decide if she wants you to do the
that she brought her car in for a radio repair and just
work or not.
down the street from leaving your shop the muffler
fell off. “I’m sure that you must have done something Option B: Explain that it is not likely that the two
to cause that,” she says. “There’s no way that it is just are related, but, just to remove any doubt, offer to
a coincidence. I’ve heard about how you automotive bring the car in the shop immediately for a physical
service shops prey upon helpless consumers by bug- inspection, at no charge, of course, where you can
ging cars to cause further problems. So, what are you both look over the situation and be sure and then go
going to do about it?” from there.
Option C: Since customers are valuable to you
You decide
and you know that the customer believes that it is
As service director at ACE Auto Service it’s clear to your fault, just go ahead without any further
you that the radio repair and the muffler situation discussion and replace Mrs. Jones’ muffler at no cost
must be a mere coincidence. Which of the following to her.
alternatives do you think is the best option?
Please justify the reasoning behind the choice
Option A: Explain to the customer that you that you’ve made.
weren’t even working under the back of the car and
Complaint Handling Process

We’ve discussed concepts and rules to keep in mind to guide all customer
interactions in dealing with customer complaints. Let us now recap the entire
complaint handling process and break it down into a simple step-by-step
model that you and all of your employees can learn to consistently employ. By
keeping this simple nine-step process in mind you can be sure that you’re not
missing an important step as you work toward customer satisfaction. The
nine-step process for resolving customer complaints is
Prepare for the opportunity to assist—Get yourself in the correct frame

of mind to be of service is essential. You must be ready to be of service
and provide your undivided attention to the situation at hand.
Make a professional first impression—Your initial approach and your
friendly attitude can go far at diffusing a difficult situation and turn-
ing it into one of collaboration.
263
Listen attentively and demonstrate empathy—Ask checking questions

to assure that you clearly understand, and to make sure that the cus-
tomer agrees. Extend yourself by letting the customer know that you
appreciate the difficulty of the situation.
Calm the customer down—Always allow the customer to go first and
share his or her story. This will often help them to release the tension
and anxiety and lead to a calmer dialogue.
Stay focused on the issues—The issues at hand are the circumstances,
failures—not the people. Don’t allow it to get personal. Stick to the
issues to avoid hurt feelings.
Fix the problem—Arrive at a clear and mutually acceptable solution to
resolve the situation and make it a priority to take action immediately.
Explain the solution—Before proceeding, make sure that there is com-
plete agreement between all parties about the proposed solution and
each of their responsibilities and expectations.
Summarize and thank the customer—Once an agreement has been
reached, recap one last time and thank the customer for the opportu-
nity to be of service.
Follow-up to a conclusion—Resolve all outstanding issues as quickly as
possible and follow up after actions have been taken to assure that
they have achieved their intended aim.
SUMMARY
This chapter has been dedicated to providing you with a wide Your ability to resolve customer disputes will have a pro-
range of principles, practices, and techniques to handle cus- found impact with the ultimate success and growth of your
tomer complaints. Customer complaints are an unavoidable organization. Without a solid base of satisfied repeat cus-
part of any customer-based industry and automotive service is tomers, your long-term success is in serious jeopardy. There-
one of the largest customer service industries in existence. We fore, it must be your goal and your responsibility as a
discussed the basic rules of customer handling, some key manager to do more than handle customer complaints and
principles to keep in mind, and closed with a short nine-step make the complaints go away. For the successful manager
process that is easy to remember so that you can consistently this is your best opportunity to turn those negative situations
use it to handle all of your customer service opportunities into positive opportunities that will help you build a base of
with the best results. satisfied customers and assure your future success.

1. In dealing with an irate customer it is essential that you b. let someone else meet with the customer whenever
keep in mind that possible.
a. you are the representative of the company. c. focus 100 percent of your attention on the
b. you should take their attacks personally. situation.
c. you need to block out what they say. d. all of the above.
d. none of the above. 3. The analogy that explains why it is important to allow
2. When asked to meet with an upset customer you should the customer to vent and tell their story before you do
remember that it is important to always anything else is called
a. be sure that your life insurance premiums are a. the plate.
paid up. b. the bucket.
264
c. letting off steam. a. 50/50.

d. letting it all out. b. lose win.
c. win/lose.
4. A good technique to make sure that the customer real-
d. win-win.
izes that you’re listening and understand what they are
saying is 8. In trying to come up with the best solution, and in an
a. asking checking questions. effort to make a logical decision, it is important that you
b. active listening. stick to
c. empathizing with their situation. a. the prearranged timeline.
d. all of the above. b. the facts.
c. your customer’s feelings.
5. So that the customer understands that you can relate to
d. your guns.
their situation it is important that you show
a. empathy. 9. Finding a solution that goes beyond the minimum
b. sympathy. required is called ______________ solution.
c. inconsideration. a. a cost-effective.
d. disdain. b. seeking the best.
c. a value-added.
6. It is important that you are able to ________________
d. a long-term investment.
_______________, rather than quickly jumping to con-
clusions if you want to resolve a customer complaint 10. The step in the nine-step Customer Complaint Handling
a. avoid having a perspective. Process that you do not take before arriving at a possible
b. try to avoid seeing it from any perspective. solution is to
c. see it from the customer’s perspective. a. thank the customer.
d. disregard the company’s perspective. b. begin with a friendly greeting.
c. stick to the facts.
7. Trying to find a solution that provides benefits to both
d. empathize with the customer.
parties involved is called a _________ solution.
265
SECTION
7
EMPLOYEE RELATIONS
T he greatest asset of every successful organization is its people. Success in building and
maintaining an employee team begins with a comprehensive and well-planned recruit-
ing and selection process. Comprehensive strategies to evaluate, motivate, and educate
existing employees play an important role in long-term employee retention. The success of
every business depends on its ability to motivate all employees to work together to attain
organizational goals. Even the unfortunate situation of “the problem employee” can
result in a loyal, productive employee if the company uses a positive approach to employee
problem solving. Finally, in the rare case where chronic employee performance or behavior
problems cannot be resolved it is essential for every manager to know the correct methods
and processes required to properly address these situations.
• CHAPTER 22: Recruiting and Selection • CHAPTER 24: Progressive Discipline

• CHAPTER 23: Motivating Employees
C H A P T E R
22
Recruiting and
Selection
CHAPTER OBJECTIVES
■ To identify the major steps in the recruitment ■ To examine the major methods for finding qual-
and hiring process ified candidates
■ To identify the knowledge, skills, and abilities ■ To define the steps necessary to narrow down
required to perform specific job tasks the candidate pool
■ To develop a task analysis to determine the key ■ To recognize the importance of orientation and
responsibilities of a job integrating a new employee into the company
KEY TERMS
job description discriminatory hiring practices referral
task analysis rich candidate pool screening
KSAs headhunter interview
269
SECTION 7 ■ Employee Relations
Introduction
Managers spend a great deal of time motivating and inspiring those people
under their direction. Much of the frustration that they feel is directly related
to difficulty in getting the performance that they need from all of their
employees. In some cases this lack of performance is due to an employee who
lacks the necessary skills or abilities. Even more frustrating is the situation with
an employee who has the ability but is unwilling to perform up to potential.
Unfortunately, even when in the midst of these management difficulties very
few managers stop to think that they may have been able to minimize or even
completely avoid these situations if they had just been a bit more careful in
the recruiting and selection process. The recruiting and selection process has a
profound impact on the ultimate performance of the organization and is too
often taken lightly.
The potential impact that individual employee performance has on the
organization requires that you take the process of candidate recruitment and
selection very seriously. The process begins long before you run the want ad. It
starts by clearly defining job responsibilities and developing a complete and
accurate job description. Armed with this information you can launch a much
more focused job search to identify qualified candidates.
Once the best candidate has been chosen the process is not over; the real
work is just beginning. You may have identified the candidate with the best
potential to be successful, but it is what you do with that raw talent that will
determine whether or not the candidate reaches full potential. Hiring is a pro-
cess and not an event. The final step in the process is helping to ease the new
employee’s transition into the company, making him feel welcome and appre-
ciated, and helping him to become a productive member of the team.
Defining the Job

If you ask any employee what his job is you should expect that he can easily
give you an accurate description with little effort. If you ask his supervisor
what the job description is for that same job the supervisor can also provide a
description. Hopefully, you will find similarities between their two defi-
nitions. Unfortunately, you are just as likely to notice some significant differ-
ences between the descriptions given by these two people of the very same
job. Do you find this difficult to believe? Try it yourself.
It is commonly assumed that employees and management have a com-
mon understanding and agreement of job responsibilities. They should agree
on what the job responsibilities and priorities are, what the expectations of
management are, and what it takes to be successful. That is true if the job
description has been well thought out, well documented, and clearly agreed
upon between both parties. Unfortunately, that often is not the case.
When a misunderstanding exists between an employee and management
about job requirements and responsibilities this leads to inefficiency. The
employee may be doing things incorrectly or not focusing on the highest pri-
orities. It leads to important tasks being put off or not done at all. It can lead to
poor work performance resulting in disciplinary action or even dismissal. It
will also contribute to substandard department performance, which will
jeopardize the manager’s job security. These performance concerns may not
270
Recruiting and Selection ■ CHAPTER 22
be due to the employee’s inability or unwillingness to do the job right. It may

be solely due to a simple lack of clear and complete communication of
expectations.
Lack of a clear and detailed definition of job responsibilities may result
in a highly qualified candidate underperforming. It is also possible that with-
out a clear job definition on which to base candidate selection the individual
hired may start out lacking some of the skills and abilities that are essential
to be successful. Neither of these problems can be fixed by motivation or
discipline.
The long-term implications of a vague or poorly communicated job
description are that the conditions are likely to continue to repeat. Replacing
the current employee will not improve anything. Similar results will continue
to repeat until the organization recognizes that the solution is to clearly define
the job and the knowledge, skills, and abilities required to perform that job.
CASE 2. Once you have completed the list go through

and prioritize the items with 1 being the most
The purpose of this exercise is to describe one of your
important to 10 being the least important.
current positions. If you are employed you should do
this with your job. If you are not working, you can do 3. Ask your supervisor (or professor) to do the same.
this with this course. 4. Compare the two lists. Place a checkmark in front
of those that are the same or similar. Place a star
You decide
in front of those that are different.
This exercise is meant to capture your first responses.
5. Do you have any items marked with stars? Why
Please do not take time to think deeply. Write down
might the lists be different?
the first things that come to your mind in answer to
the following requests:
1. What are your top ten responsibilities in your

current job (or course)?
Job Descriptions
Job Description
Development of a complete and accurate job description helps the organiza-
A listing of all of the
tion to ensure consistency in hiring. They will also get better and more consis-
important characteristics
tent performance from new employees once they are on board. The first step
and responsibilities of a
in developing a job description is to do a task analysis that defines the impor-
particular position.
tant responsibilities of the job. With that framework in place it is then neces-
sary to identify the knowledge, skills, and abilities that a candidate must
possess to be qualified to perform those critical tasks. Task Analysis
Being armed with an accurate job description and a complete task list is The development of a
not enough. Every supervisor’s dream is to find the perfect candidate who comprehensive listing of
matches the job description, has extensive related experience, possesses all of all of the individual duties
desired knowledge and skills, and is available at an affordable price. This, how- and activities that must be
ever, is not very likely to happen. Therefore, the best method to address this performed in a particular job.
271
common situation is to prioritize the importance of the tasks, the knowledge,

and the skills to develop a shopping list from which you can effectively select
the best match out of the available candidate pool. This prioritized list will
provide you with a clear idea of the investment that you need to make in the
new employee to help him or her strengthen any weak areas so that he or she
can grow into an ideal employee.
Task Analysis
A task analysis is the foundation of every job description. It takes into account
all of the activities that an employee is required and expected to do in a partic-
ular job. By doing a little bit of research you may find that a complete and
accurate task analysis already exists for a particular position. The federal gov-
ernment, the work of research universities, and analyses developed by other
companies can provide you with a good starting point. If time and money per-
mit, you can conduct a formal task analysis process by convening a panel of
experienced individuals and enlist their help to break the job down into its
component parts.
In most cases, however, you are likely to have limited time and limited
funds to perform this important task. When you need to hire a new employee
it is most often because of a vacancy. You cannot close down the shop for six
weeks while you do the background research to develop a job description. But
even though your situation may limit your options, you cannot afford to take
the importance of a task analysis too lightly.
The logical solution in most cases is to do a task analysis using those
resources that you have at your immediate disposal. Here are a few suggested
ways that you can obtain the information that you need to develop a task list
for any job.
Option 1. Based on your experience supervising people in this position, sit

back and, starting from when the employee arrives at work, try to
write a journal that recounts all of the events and activities that would
occur in a typical day for an employee doing this job. This should be
the story that describes the wide variety of tasks, both planned and
unplanned, that an employee in this job is likely to experience in a
complete day.
Option 2. Ask one or more employees who are currently working in this
job title to keep a journal of their activities for several days. This jour-
nal should be a log, a minute-by-minute account, of all of the tasks,
both planned and unplanned, that they perform each day.
Using the information gathered from these processes you can begin to
develop a task list for the job. Out of the outline or journal you can then create
a list of each of the unique tasks that are part of the responsibilities of this job.
Once you have completed a list of tasks you can begin to group them. This
should provide you with a list that indicates all of the major tasks that need to
be performed and, just as important, how often each of them occurs in a typi-
cal day. From this you can develop a final list of all tasks that defines, in rank
order based on the number of times that they occur, the most common tasks
down to the least common ones. This provides you with a basis for developing
a job description that will clearly communicate what you expect and need
from an employee holding this position.
272
CASE school. Write down every single thing that you do

every time that you do it for that one hour. The list
A task analysis is a detailed description of all of the
should include everything from the major activities
activities that you do within a period of time. It is
down to the insignificant ones. All activities, whether
most commonly used to explain job requirements of
planned or unplanned, should be listed. The resulting
a particular job but it can be used in a variety of other
detailed chronicle is an example of a task analysis for
situations.
you for that specific day and time.
You decide
You are going to do a brief task analysis. Pick one
hour of your day. It can be at home, at work, or at
Knowledge, Skills, and Abilities

Your ultimate goal is to find the best person to do the job. In an effort to do that,
you have set out to develop an accurate and complete job description. First you
conducted a task analysis. The information you gathered tells you what an
employee in that position needs to do. However, just knowing what needs to be
done is not quite enough to help you to be sure that you are finding the right
candidates. You need to further analyze the activities of the task analysis.
If you are to identify a candidate who is most likely to succeed at any job
you need to clearly understand the traits that a successful candidate must
possess. That is, you need to have a clear and complete understanding of what
knowledge and skills a person needs to make him or her capable of doing the
required job. Further, you need to know what abilities that person should pos-
sess in order to be able to be successful in this position.
A candidate who is most likely to succeed at a job must possess a blend of
all three of the key characteristics of knowledge, skills, and abilities (KSAs). KSAs
One or two of the three is not enough. It is only through a balance of all three The knowledge, skills, and
of these characteristics that you are likely to identify the right candidate. abilities that an individual
You can develop a list of KSAs by creating a list of what your ideal candi- must possess in order to
date would look like. However, you are most likely to develop a more accurate perform a particular job
and complete list by using a task analysis as your basis. Start with a particular or activity.
activity that is required as a part of the job. With a clear idea of what the task is
(for example, performing an oil change), you can then break the task down
into the component parts of KSAs as follows:
• What knowledge is required for an individual to correctly perform this task?
• What skills does an individual need to have to correctly perform this task?
• What abilities does an individual need to possess to be able to correctly
perform this task?
By answering these three questions for every task listed in the job respon-
sibilities you can develop a comprehensive KSA profile for the job. Some tasks
will require significant knowledge but may not require extensive skills. Others
may require specific abilities as a higher priority. For example, special abilities
may be a low priority in performing a tire rotation. The ability to deal well
with people in stressful situations, however, is an essential requirement to deal
directly with customers.
273
It is most common that the extensive list of KSAs that you derive from ana-
lyzing all of the job tasks will be very long. However, you will find that there
are different tasks that require the same knowledge, skill, or abilities. The num-
ber of times that a specific KSA is repeated generally indicates that the specific
factor is a high priority for an individual capable of doing this job. That knowl-
edge is essential in helping you to decide which factors are most important
and, therefore, which candidates are best qualified to meet your needs.
CASE has been employed. He is A.S.E. certified in Brakes

and Steering & Suspension and has worked at
You are the service manager. You have just inter- these shops doing preventative maintenance. All
viewed the following two applicants for a position as of his employers agree that he is a model
engine performance/diagnostic technician: employee and is very reliable and motivated.
Candidate A: This person is very interested in the job.
She has provided you with proof of her knowl- You decide
edge having recently passed all eight of the Take just a few minutes and list the knowledge, skills,
A.S.E. Light-Duty Automotive Technician certifi- and abilities that you find in the information pro-
cation exams. She has provided you several refer- vided for Technician A and Technician B above. Based
ences from previous employers where she solely on this information would you choose Techni-
worked—a major retailer and at a parts ware- cian A or Technician B for this position? What is the
house that indicate that she is intelligent, reli- basis of your decision?
able, and highly motivated.
Candidate B: This candidate has provided you with
references from the last three shops where he
CASE You decide

You are the service manager. You need to hire a new Please describe the basic knowledge, skills, and abili-
service advisor. Through doing a task analysis you ties that a candidate must have to be able to perform
know that a high priority responsibility of the service this important task.
advisor is scheduling customer appointments when
they call the shop.
Effective Job Descriptions

A complete and accurate job description will be a valuable tool as you attempt
to identify and hire employees to fill vacancies. However, its value does not
end there. An effective job description should be the foundational documen-
tation that is used to make sure that management and the employee have a
common understanding of job requirements, responsibilities, and priorities.
274
A well-developed job description provides an objective basis upon which all

employee performance appraisals should be based. Finally, comparing
employee KSAs and the job description should clearly indicate those areas that
are high priority for employee training and development. By developing and
implementing a plan to remedy acknowledged weak areas the employer is
able to provide the new employee with tools for success. This creates a positive
environment for employee and employer alike to get the job done, grow
within the organization, and succeed.
Objective Criteria
There is one last thing to remember when developing a job description. It is
essential that all of the criteria used to define knowledge, skills, and required
abilities are job-related, essential, and unbiased. You must be careful that the
criteria that you use do not discriminate against any individual or group.
Every criterion must be able to pass the test that it is necessary and reasonable.
Otherwise it is likely to leave you open to criticism and/or even legal action
for discriminatory hiring practices. Here is an example of a criterion that, Discriminatory
although well-intentioned, might cause a problem. Hiring Practices
The service manager of a small tire store is setting up the criteria for a new Those rules or practices that
position of assistant service manager. Every employee is expected to do a wide unfairly exclude groups or
range of tasks in this store. Therefore, this individual will be required to occa- classes of potential
sionally handle and restock tires. In trying to be on the safe side the service employees.
manager writes into the job description the need to lift and handle 75 pounds.
He knows that the only tire/wheel combinations that reach this weight are the
big truck tires. He also knows that they rarely have a need to handle them
because they do not stock or sell many. However, he decides that it is better to
have a high weight limit rather than risking an employee getting hurt in the
process.
After posting the job and hiring an employee, the shop owner is notified
by several candidates that they believe that the company is discriminating
against women in their hiring practices because women are less likely to be
able to meet the criterion for lifting and handling 75 pounds. In this case the
shop is opening itself up to bad publicity and even a discriminatory hiring
practices complaint since it has unintentionally discriminated against a par-
ticular group of potential candidates by setting this requirement higher than
is reasonable.
The best way to ensure that the criteria are complete, accurate, and not
unreasonable is to review each of the job tasks and KSAs with the following
questions in mind:
1. Is this a job requirement?
2. Is the requirement set at an appropriate level?
3. Does this requirement discriminate against any group or class?
Criteria for any job do not have to be reduced to an unreasonably low
level to provide access to all potential candidates. However, they must be
reasonable and based on required tasks. The knowledge, skills, and abilities
required should be based on acceptable performance of the job and normal
circumstances. Although you may have the best intentions in being safe,
you have to balance that desire with the assurance that you are not
discriminating.
275
Finding Candidates
Once you have developed clear criteria so that you know exactly what you are
looking for in a job candidate it is time to find that candidate. If you are to get
the best employee it is important that you use a variety of methods to find the
largest pool of qualified candidates from which to choose your new employee.
If you have followed the direction provided earlier in this chapter you have
done all that you can to clearly define what it takes to do the job. As a result,
you have a solid basis for identifying the right candidate. Now you need to
turn your efforts to the search process.
Rich Candidate Pool

You should use a variety of resources ranging from mass media to personal
referrals to reach and attract the largest and most diverse pool of qualified can-
didates possible. This requires using different types of communication. You
must identify those that are most likely to reach different populations within
the marketplace. Most mass media stations intentionally produce their mate-
rial to reach a specific and narrow target market (youth, 20–35-year-olds, sports
enthusiasts, women). Using a group of TV, radio, and direct mail sources that
appeal to the same audience will get the attention only of that narrow segment
of the population but will do nothing to reach the rest of the community. It is
important to carefully target market when looking for new employees (just as
you would in your sales activities). To do so you must identify a selection of
media that will reach across geographic areas and groups within the commu-
Rich Candidate Pool nity. When you do this, you will have a rich candidate pool to choose from.
A group of applicants that is Your ultimate goal is getting the best candidate to fill your needs. You
sufficiently large and diverse want to be the best. The fastest way to accomplish this is to attract and employ
to be representative of the the best. You can be sure that you are identifying the best candidate when you
qualified talent available in start the process by inviting all qualified candidates to apply. You need to be
the marketplace. aware if you want to be responsive to the public that should have a workforce
that is representative of that population and can, therefore, best address their
unique needs. Having a representative workforce is as important as having
employees with the right knowledge and skills. However, only through an
intentional plan for targeting diverse markets can you be sure that you will
accomplish this goal.
Advertising
The typical marketing budget for employee recruitment is limited. In addi-
tion, in most cases personnel needs require a speedy resolution. Many of the
mass media methods are too expensive or take too much lead time to prepare
to be suitable for these situations. (You may want to refer to the materials pre-
sented in Chapter 25 on the benefits and drawbacks of various advertising media.
This information can help you get the best value for your money when you are run-
ning a help wanted ad just as it can when you are advertising for new service cus-
tomers.) The most common methods for finding job candidates are
newspapers, headhunters, job boards, and referrals. Each of these has unique
benefits.
Newspaper advertising has long been the most common method for run-
ning wanted ads. It enables you to get your message out very quickly, typically
within a matter of two to three days, and ensures that your message reaches a
276
broad audience. In many large communities there are several papers to choose
from. The large metropolitan paper has the widest reach and can blanket the
area. Suburban and special-interest newspapers should also be strongly con-
sidered as a part of your advertising strategy. These newspapers cater to
smaller, more localized audiences. These audiences may be localized to a
specific neighborhood, suburb, or target audience within the larger commu-
nity. These newspapers can target specific populations at a reasonable cost and
help ensure that you are attracting a rich cross-section of the overall
population.
Headhunters have recently become increasingly available in the automo- Headhunter
tive service industry. Whereas previously this method for finding candidates Independent recruiter
was limited only to corporate white-collar positions, the prolonged shortage whose sole job is to actively
of technical workers has resulted in multiple headhunter organizations that seek out qualified
cater to automotive service personnel needs. The explosive growth of the candidates to fill job
Internet as a primary communication source has brought with it the rapid positions for companies.
growth of online job boards and Web-based employment agencies that can be
accessed quickly to help you to expand your employee search.
A final, and very valuable, source for finding new employees is referrals Referral
from your suppliers, your customers, and your current employees. Who Individuals who have been
knows your organization better than those groups? As a result, who would be recommended or directed
best qualified to refer candidates to you that are most likely to meet your to a company as a client or
needs and “fit in” to your organization? In a healthy organization where the potential employee.
employees, customers, and vendors are proud to be associated with your com-
pany, referrals are one of the most reliable sources for new employees.
Even though you may find strong candidates through referrals, this
method has its own potential problems. Most of the referrals that you receive
are likely to be current employees of other suppliers and/or direct competitors.
Nothing can tarnish your reputation in the industry faster than developing a
reputation for stealing employees from your competitors. In most businesses
there is a gentleman’s agreement that companies do not steal employees from
each other. So, what do you do? Here is an example.

As a service director for more than five years in the street. He asked if I had a few moments and advised
same dealership and an active participant in the local me that he was actively looking to make a job change.
service and parts manager’s club I knew my market He said that he definitely intended to leave where he
well and had a good working relationship with my was working as soon as he could find a suitable new
fellow service managers. We worked well together, employer and wanted to know if we would be inter-
sharing ideas and tried to support each other’s ested. I was immediately very excited and very con-
growth even though we were direct competitors. cerned. Here in front of me sat one of the top three
One of the things that had always bothered me was technicians in the city and he was ours if I wanted him.
the habit of a few shops stealing employees from Yet, he was an employee of a competitor and close
their competitors on a regular basis. That seemed collaborator. Was it right? What should I do?
totally wrong to me until one day when I was faced I asked the technician to give me a few days to
with a unique opportunity. get back with him. I considered the possibilities and
Totally out of the blue I was visited by one of the the potential consequences. How could I pass this up?
top technicians from another service shop down the How would it affect our reputation if I did not pass
(Continued )
277
this up? After much thought I called the technician calling out of respect to him and to give him the
and laid out the facts to him. “I am very interested opportunity to meet with his technician to try to iron
in having you come to work for us, and I would love out their difficulties. I told him that if they were
to have you here. However, we have a very good unable to settle their differences that I intended to
and long-standing relationship with your current actively pursue hiring this technician. After some dis-
employer and I do not want to jeopardize that. I cussion he agreed that this was a reasonable
know that this might sound weird but what I would approach.
like to do, with your permission, is to call your manager The final result was that the technician had
and talk to him. I need to try to find a way that both already made up his mind that it was time for a
saves our reputation with him and others in the city change and was set on leaving his current employer
yet does not allow you to end up working for some despite the efforts made by his boss to keep him. He
other manufacturer or independent shop. Is that OK called me back after having a heart-to-heart talk
with you?” He agreed. with his current manager. We were successful in hir-
Later that day I called his service manager. I let ing this talented technician.
him know about the visit. I asked him if he realized After the fact, several of our fellow service man-
that this technician was out shopping around. I reas- agers heard about this encounter and thought that it
sured him that I had not changed my position on was an odd approach. However, by taking this extra
stealing technicians from other service shops. How- care I was able to hire a great employee while main-
ever, if this technician had made up his mind to leave taining our dealership’s reputation and, on the per-
his current job I would like to have the opportunity to sonal side, maintaining a friendship with the service
have him rather than seeing him go to some other manager down the street. It was an investment of
competitor’s shop. I closed by telling him that I was time and effort well spent.
Screening and Selection

The final steps in the process of finding the right job candidate are screening,
interviewing, selecting, and hiring. These are all combined into one group
because they typically fall together in a rapid-fire sequence of events. Deter-
mining what you need is a long and involved process. Finding those candi-
dates who best exemplify the knowledge, skills, and abilities that you need to
fill the position takes some time. However, once you have finally pulled the
candidate list together and are satisfied that you have a large enough, rich
enough pool of candidates you will likely be impatient to hire someone.
Although these final four steps can be accomplished in a relatively short
time do not be impatient. You need to take the time to move through each of
these steps methodically to ensure that you have not wasted all of your previ-
ous efforts.
Screening
Depending on the size of your company or your department the initial
Screening screening may be done by your human resources department or by you. How-
To carefully look at and ever, the purpose of this step is the same whatever the setting, and that is to
separate those qualified or thoroughly review all applications and narrow down the pool of candidates
unqualified based on pre- based on a few very basic decisions. The first of these is: Does the candidate
established objective meet all of the requirements in the job description and job posting?
criteria. Conducting a fair and effective hiring process means it must be an objec-
tive process. Filtering the candidate pool by eliminating all candidates who do
not meet the minimum requirements as stated in the job posting helps to
assure the objectivity of the process.
278
Once you have eliminated candidates that did not meet the minimum
requirements you will find that you have:
1. not enough candidates that are qualified to proceed forward,
2. a pool of candidates that, although qualified is still too large to inter-
view, or
3. a reasonably sized yet rich pool of qualified candidates.
The appropriate action if you have pool that is too small is to re-open the
search process. This may delay the hiring process, but it will improve your satis-
faction in the end. If, in contrast, your remaining pool is too large you need to
take additional steps to narrow it down to a reasonable number for interviews,
typically six to 12 candidates. Have the selection committee evaluate and rank
the candidates based on the information provided in their applications. Once
you have narrowed the pool to a reasonable size it is time to proceed to inter-
views.
Interviewing
In many automotive repair shops the interview process is the sole responsibil- Interview
ity of the direct manager who will supervise the new hire. In some organiza- A formal meeting intended
tions the human resources department or a specially appointed selection to identify and verify
committee conducts the initial interviews. In either case the goal is to conduct qualifications and
an organized process to verify, based on a face-to-face meeting, the degree to characteristics.
which candidates meet your job requirements.
Candidates who make it to this stage of the process have already met the
scrutiny of the screening process, which means that they meet the minimum
requirements. The interview process allows you to verify this information, clar-
ify any areas in question, and gives the candidates the opportunity to make a
personal appeal to convince you why they are the best candidate for the job.
There is a big difference between best qualified and best fit for the organi-
zation, though. Being successful requires a blend of both. Not only is it impor-
tant that you verify that the candidate has the proper qualifications, you also
have to evaluate personality, style, and attitudes to see if he or she is a good fit
for your organization and its unique culture.
The interview process is a combination of objective and subjective evalua-
tions by the interviewer(s). One of the best ways to ensure that the interview-
ers have a sound basis for comparison is the use of a structured interview
process. This will provide you with the best opportunity for evaluating all can-
didates according to the same criteria. A structured interview should have a
common location, time schedule, and a prepared list of questions. With these
tools in place you will have a better basis for comparing all the candidates—
under similar conditions based on identical criteria.
One of the potential problems with interviewing multiple candidates is the
possibility of getting the candidates and/or their responses confused. One way
to address this issue is to use a scoring or ranking system. By assigning a score or
ranking on each of the responses from each candidate you can reduce confusion
as you complete multiple interviews. This will allow you to debrief on and score
each interviewee at the conclusion of the interview. Then, you can proceed to
the next interviewee without needing to remember previous issues or questions.
Occasionally the interviews will result in one candidate that emerges as
the clear favorite and is your first choice to hire. More often, though, the
group of candidates will be closely ranked into several groups. The first group
279
is those candidates that you do not want to consider any further. At the other
end of the continuum are the clear top three or four that are all qualified and
very close when compared. If you have trouble clearly separating the top can-
didates, a second, more in-depth interview with these finalists is highly rec-
ommended. For this second interview you may want to consider involving
individuals who hold similar positions or will be working closely with this
new employee. You may also want to involve your supervisor for an unbiased
second opinion.
Selection
The information provided by the applications and the interviews should pro-
vide you with enough information to make your final selection. It is impor-
tant that you can support your final decision as being a clear, unbiased, and
objective one. In today’s society it is not uncommon for a candidate who is
not chosen to contest your decision. This may range from a complaint to you
or your boss up to a threat to file a discrimination lawsuit. If your process was
built upon a well-defined foundation of clear and complete job requirements,
identified knowledge, skills, and abilities, and a rigorous and objective screen-
ing and interviewing process you will have little to worry about.
There is one last action that is a vital part of this step. It is completing the
background check. You probably stated in your job criteria that all candidates
must have a valid driver’s license, a clear police record, and be drug free. How-
ever, because of privacy issues many states and localities limit your ability to
perform these background checks until you make the job offer. Under these
circumstances when you have made your final choice you offer the candidate
the position contingent upon his or her ability to pass these screens. The
selected candidate needs to be clearly informed that employment cannot
begin until the results have been received and verified. Once this happens you
can finalize the job offer and hire the individual.
Hiring
After having completed the exhaustive process that we have covered in this
chapter you might believe that it is finally over. You have hired your new advi-
sor, technician, porter, or other employee and now you can just put him or
her to work and go back to the millions of other responsibilities that have
stacked up on your desk while you were spending time with this. You could
take that approach, but it is not recommended.
Hiring is not an event, it is a process. When a new employee shows up on
the first day for work the process is not over. It is entering its last important
phase. Having taken the time and effort to identify, select, and then convince
the right candidate to take the job you need to be sure not to drop the ball at
this point. Your new employee is a stranger in your company; he or she may
know a few of your employees but is bound to be somewhat insecure and con-
fused working with new co-workers, in a new place, with new rules and new
expectations. The faster and better that you help that new employee to inte-
grate into your organization the sooner they will feel comfortable and become
a productive member of the team.
A great way to start this process of integrating a new employee into your
organization is to set aside time to put him or her through a new employee
280
orientation. This orientation should include completing all of the new

employee paperwork and explaining it all. More important, however, this ori-
entation should include introductions to co-workers in your department and
to key employees in other departments within the company. Taking the time
to review your company handbook and to discuss company policies and your
specific expectations will further help the new employee to understand his or
her responsibilities.
Taking the time to orient the new employee as the last step in the hiring
process is important. It helps the new employee to feel wanted, to feel
accepted, and to start out with a clearer understanding of what is expected
and required. Finally, by clearly demonstrating how glad you are to have this
new employee on board and how much you value him as an employee can
easily make his first impression a very positive one. You needed someone, you
wanted him, you selected him . . . now start off his employment by making
sure that he knows it.
SUMMARY
In this chapter we discussed the entire process necessary to Armed with this knowledge you can begin the recruit-
identify, select, and hire the best people to fill job positions ment process. This process starts with advertising to attract
within organizations. This process does not begin by advertis- qualified candidates. Once an adequately large and diverse
ing for new employees. Rather, it requires that significant pool of candidates has been collected, it is necessary to screen
background work is done first to clearly identify what is the applicants to eliminate those who do not meet the mini-
needed and what is required to perform the job. mum job requirements. When the candidate pool is narrowed
The background work required begins with a task analy- down to only qualified candidates, the process proceeds
sis. This process breaks down the job into its component activ- through interviews. The interviews verify the knowledge,
ities. This helps to clarify those skill sets that a properly skills, and abilities and assess how well candidates will fit into
qualified candidate must possess. By defining the knowledge, the culture of the organization. The next step in the process is
skills, and abilities (KSAs) a candidate must possess to effec- hiring. However, this is not the last step. The final step is to
tively perform the many and varied job tasks you can build a help to integrate the new employee into the organization
definition of what the job is and what the job requires. You through conducting a new employee orientation.
can then build an accurate job description and will know what
to look for to find the right candidate to fill that position.

1. The last step in the hiring process is 3. If you establish job requirements that are not essential or
a. interviewing. are too difficult to match the actual needs of the position
b. selecting. you might
c. orientation. a. get sued for discrimination.
d. screening. b. get bad publicity.
c. screen out some good candidates.
2. A ___________________________ lists of all of the
important characteristics and responsibilities of a partic-
ular position. 4. The best way to obtain a rich candidate pool for a
a. KSAs. position is to
b. job description. a. only advertise in the high-income suburbs.
c. task analysis. b. use a variety of media and publications.
d. newspaper article. c. target specific audiences to assure diversity.
281
d. a and c. 8. When one of your current customers sends a potential

e. b and c. candidate to you for a job opening this is called a
_________________.
5. KSAs are
a. knowledge, skills, and abilities. 9. To develop a comprehensive listing of all of the individual
b. knowledge, skills and aptitudes. duties and activities that must be performed in a particu-
c. knowing, seeing, alerting. lar job you should conduct a _____________________.
d. three letters. 10. Please mark the proper letter from list A that best
6. A process that can have a profound impact on the ulti- describes each statement in list B.
mate performance of the organization and is too often
List A List B
taken lightly is
A—Knowledge a. outgoing and friendly _______
a. recruiting and selection.
B—Skills b. able to perform complex
b. hiring and orienting.
repairs _______
c. advertising and promotion.
C—Abilities c. able to pass ASE tests _______
d. incentives and promotions.
d. cooperates well with others _______
In Questions 7–9 please fill in the blanks e. types 25 words per minute _______
f. can memorize specifications _______
7. A ___________________ is an independent company
that actively finds candidates to fill jobs for other
companies.
282
C H A P T E R
23
Motivating
Employees
CHAPTER OBJECTIVES
■ To recognize the importance of motivation as a ■ To discuss the importance of regular perfor-

tool for improved employee morale, retention, mance reviews
and productivity ■ To examine the relationship between compen-
■ To develop and communicate clear performance sation plans and the resulting performance
goals to employees
KEY TERMS
expectations metric compensation plan

tracking performance comeback incentives
sub-goals redo
283
Introduction
Keeping employees motivated is a very complex endeavor. One of a manager’s
key responsibilities is to motivate employees, obtain consistent performance,
and then help them and the department to continue to improve. Your ability
to do this is based on clearly defining expectations, consistently tracking per-
formance against those expectations, and maintaining open communication
with employees to regularly advise them of their progress.
Setting Clear Expectations

A common cause of sub-par performance is often not an employee’s unwill-
ingness or inability to perform. The primary cause is lack of a clear under-
Expectations standing of management’s expectations. With a lack of very clear and specific
Clear and well-defined expectations it is quite possible for employees to have a different understand-
statements of respon- ing of the goals, directions, and priorities than what management intends.
sibilities and intended Employees may be working their hardest in the direction that they believe
outcomes. that they are supposed to be headed. Unfortunately, without clear expecta-
tions provided by and consistently reinforced by management they can very
easily be heading in a totally different direction than management intended.
If that is the case they may reach a destination—but it will not be the one that
management had in mind.
In today’s hectic world of work it is difficult enough to finish those things
that are top priority. There certainly is not enough time to be diverting any
energy or resources to activities that are not as important. This loss of produc-
tivity is likely to assure your failure to meet your goals. Therefore, it is essential
that you clearly and consistently define the goals, objectives, and priorities of
each job and of the organization. Only with this clear and consistent commu-
nication can you be sure that everyone is exerting all of the effort that they
have toward accomplishing the right results.
The key test to be sure that the goals and objectives that you set are sound
is that they meet the test of the following four questions:
1. Are the goals clearly defined?
2. Is the level of expected performance reasonable?
3. Within the limits of the time and resources available, is the goal
achievable?
4. Have the goals been clearly communicated to the employee(s)?
Your ability to successfully answer these questions about any goals and objec-
tives you develop will greatly increase your employees’ ability to achieve them
and, thus, markedly increase your chances for ultimate success.
We have already noted the importance of clearly communicating expecta-
tions. However, if your goal is to obtain maximum performance it is not only
necessary to define and communicate the goals, they must be reasonable and
achievable. Why is this true?
Goals and objectives set a clear direction for action and, if properly con-
structed, act as incentives and motivators for performance. Anyone who
enters a race has a clear idea of where the finish line is. In addition, each com-
petitor has his sights clearly set on reaching that finish line. But what would
happen if the finish line was so far in the distance or so poorly explained
that the competitors might very well get lost? They also might lose their
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Motivating Employees ■ CHAPTER 23
enthusiasm and motivation because the goal seems too vague, too distant,
and appears unreachable in spite of their best efforts.
When goals and objectives are not clearly stated or are far too ambitious,
rather than being motivators they become morale-breakers. If goals are not
clearly defined and employees are unsure of exactly where they are headed,
they are unlikely to fully commit their energies and resources to them. When
employees feel that the goal is simply unattainable their response is most
likely to dismiss it. The result is that the goal has a negative effect on produc-
tivity and morale. In order for the goals and objectives that you set to become
motivators for excellent performance you need to be absolutely sure that they
will be viewed by the employees as reasonable and obtainable and, therefore,
goals that they can willingly accept, support, and commit to.
Tracking Performance
Once goals and objectives have been clearly communicated, it is important
that you are tracking performance on an ongoing basis. The combination of Tracking
monitoring performance and keeping employees advised of their status Performance
toward goal achievement is essential to success. It reminds employees what Consistently monitoring
the goals are and that you are keeping them clearly in focus. It provides them actual performance against
with encouragement that you are noticing the fruits of their efforts. Finally, it measurable stated
gives them adequate warning when performance is lagging so that they have objectives.
the opportunity to make the necessary changes to assure ultimate success. All
these factors help to make the long, hard pull up the hill to reach the final
goal a consistent effort. This will help reduce stress, keep employees focused
and engaged, and will let them know that you see and appreciate their
successes.
Many major goals are not accomplished overnight. The longer it takes to
achieve a goal the more essential it is to have methods in place for maintain-
ing focus. Using performance tracking is essential as we work toward achiev-
ing the final goal one step at a time. Major goals are often long-term and
complicated. You will need to be wary of your employees putting off working
on the overwhelming larger goals until it is too late.
Putting these major goals off is easy. It is easy to get distracted or mis-
directed into working on tasks that are simpler, more easily completed, and
that provide rapid rewards. Careful planning, tracking, and status reporting
on progress toward the big goal will help ensure that it stays in the forefront of
your employees’ minds and efforts. An additional technique that you may
find helpful is to break the big goal down into several smaller segments.
Breaking down big goals into sub-goals reduces anxiety and makes the Sub-Goals
task less overwhelming. Carefully planning each of these sub-goals allows you Small, short-term goals that
and your employees to make the journey toward the big goal one step at a are part of a larger, more
time. Then as they accomplish each sub-goal they should be reminded how complex overarching goal.
they have just finished one more step toward the big goal. This will continue
to re-energize their commitment toward the ultimate objective.
Measuring What Is Important

Setting clear goals and expectations makes tracking and motivating employee
performance much easier. Managing with data is essential so that you can be
objective in your employees’ evaluations. The ability to draw a clear connection
285
between stated performance objectives and actual performance makes the

process of employee evaluation more valuable to both you and the employee.
Although it may be difficult for an employee to accept the fact that his perfor-
mance is below par, this difficult conversation is much easier to deliver—and
much easier for the employee to tolerate—when it is based on objective per-
formance data.
Establishing measures, however, is a bit more complicated than just gath-
ering data and running reports. It is important that the data that you report
and measure is closely aligned with the core responsibilities of the job and
organizational priorities. Data is a valuable tool, but you need to remember
that this data reflects only a portion of an employee’s overall performance.
Metric An example of a very measurable performance metric for technicians is
Easily definable measure- productivity (number of flat-rate hours produced). It is a very important factor
ment (usually numbers) in the ultimate success of the department and the organization. This number
used to monitor and track is commonly used to measure performance, to motivate employees, and even
performance. to reprimand employees when productivity is below expectations. The beauty
of such data is that it is a clear, specific, measurable, and definable goal. How-
ever, be careful that this data does not take on more importance and weight
than it deserves. Data cannot measure every important part of the total job
responsibilities. Your performance evaluations must include more than just
easily measurable information, they should answer the question: What are the
overall goals and objectives of this position?
Care needs to be taken to look at the big picture of the total job respon-
sibilities. Taken to an extreme, measuring and managing solely based on easily
measurable data is a huge mistake. How is that possible?
If you measure, reward, and punish based on productivity then the only
thing that your employees will really value and strive to achieve is productiv-
ity. However, productivity is not likely to be your only goal. Customer satisfac-
tion and quality of repairs are also major goals as are several others. The point
is that if you consistently measure and report productivity and stress this mea-
Comeback surement (or any other one) too much, then regardless of what you say to the
A recently repaired vehicle contrary employees will realize that the way to get recognition, the way to get
that returns to the shop on the boss’s good side is to produce more hours (productivity). Nothing
because of customer more, nothing less—despite the other things that you have said about the
dissatisfaction with the importance of reducing errors, comebacks, and complaints. Let us look at a
completeness or accuracy real-world example of how overemphasis of one measurement can lead to
of the repairs. trouble.

When taking on a new position as service manager in I looked around the shop for clues on the root
a large dealership my employer advised me that they cause of the problem and for ideas to turn this situa-
were “looking to make a change. We need someone tion around. I quickly learned that, but for a few minor
who knows and understands how to build satisfied exceptions, the shop was staffed with some very
and loyal customers.” Upon starting the job I found competent and conscientious technicians, was well
out that this was no small problem. The dealership equipped and in a great location. The service advisors
had the lowest customer satisfaction ratings in the were experienced, polite, and responsive to customer
entire region of the country—and one of the lowest needs. They did a very good job addressing customer
in the entire United States. Why was this so? complaints. The telephone operator and cashier were
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both professional and polite. How could a problem of double-check the quality of repairs. Those vehicles
such magnitude exist in a shop that had the potential that were not fixed correctly were returned to the
to be a leader in providing quality service? technician before the customer even picked them up
Although the solution was not accomplished and these incidents were tracked as redo’s. Those
overnight or as the result of one simple action, the few instances where cars were delivered to the cus-
pivotal change that resulted in turning this situation tomers and resulted in customer complaints were
around centered on identifying one very simple fact. tracked as comebac ks and given top priority when
The shop measured, rewarded, and displayed one they came back into the shop.
thing, and one thing only. This was the total number Most important, the board was not used any
of flat-rate hours produced by each team and each longer to track hours produced. Its big numbers,
technician daily. Even though the dealership talked still posted daily, reported the number of redo’s and
the talk that they were interested in quality, previous comebacks that each technician and team tallied.
management had promoted and rewarded only pro- At the end of every month there was a special
ductivity. The greatest testimony to this focus was a ceremony and lunch where the shop celebrated the
large whiteboard hanging on the shop wall where the team with the highest quality ratings. The team
daily productivity of each technician and team was was treated to a free lunch of pizza and soda and
posted for all to see. It was positioned so that all of received acknowledgement for their important
the technicians walked by it every time they headed achievement.
up to the service desk to get an order, get an You might think that this was just a shift from
approval, or ask a question. They prided themselves in overemphasizing one measure for another. However,
“being on top on the board” and competed intensely since all of the technicians were paid based on flat
among themselves to earn and maintain that status. rate it was already clear to me that they had internal
They kidded the lower producing teams and shamed motivation to maintain and continue to grow those
those who produced fewer hours on their own team. numbers. The shift of the board’s focus helped to add
In this situation, what do you suppose would help another important measurement to their thoughts
to change the attitudes and the performance? The and actions.
answer was to change the board. The board was not In less than two years, as a result of these
removed or broken up and burned (although those efforts—and measuring and rewarding what man-
options were considered). The board was used, but agement really valued—the shop went from last
used to report and reinforce what management said place to first place. We were visited by the regional
was their real number-one priority, satisfied customers. manager from the manufacturer and acknowledged
In addition to changing the board, a temporary as having made the single largest improvement in
position, of quality control technician, was created to customer satisfaction ratings in the entire region.
Performance Evaluations
Conducting semi-annual or annual formal evaluations of employee perfor- Redo
mance is important to ensure that all parties know where they stand. This
A repair that does not meet
benefits the supervisor as much as it does the employee. Therefore, this should
quality standards and must
happen regularly and be taken seriously as an important part of doing your
return to the shop for
job as a supervisor.
additional repairs before
Taking the time to sit down and prepare an annual evaluation requires
delivery to the customer.
that you take time to reflect on the past year. It provides for a formal mecha-
nism to debrief on all of the events and actions, no matter how large or small,
that have contributed to the year. Successes and failures both need be
addressed. The overall evaluation should be balanced. It should cite positive
behaviors that you want to reinforce and see occur regularly. Likewise, it needs
to clearly address those unfavorable incidents or instances where performance
fell short of expectations so that focus can be placed on them in the coming
year to resolve and avoid them.
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We have been called a critical society. As a culture we commonly fail to

provide adequate reinforcement and praise for the good things that happen.
Whether as children or as employees it is common to hear the question, “Why
do you only say something when I mess up? What about the good things that
I do?” If we are to help build the skills and morale of our employees it is essen-
tial that we acknowledge their best performances, the bright spots in their
year. In fact, the best way to start off any counseling session and, especially, an
annual evaluation, is to list the strong points and highlights of the year first. It
gives the employee reinforcement to expand those positive areas. It makes the
rest, even if it is very critical, more palatable.
Beginning with praise for the best efforts of the past year is especially
important when evaluating someone who is experiencing serious performance
problems. The intent here is not to sugar coat the problems. It is not to divert
attention from the concerns. However, it is important to make it clear that the
concerns that you are about to review do not mean that he or she is a bad per-
son. Conversely, he or she has shown some positive traits and performance.
However, there are some serious issues that need to be resolved. By approaching
it in this manner the goal is to separate the behavior (lack of performance) from
the person. It is much easier to change behaviors than it is to change people.
Because of the importance of handling some of the more difficult employee
performance situations we will dedicate significant time to covering a formal
process to work with those situations in Chapter 24—Progressive Discipline.
The Evaluation Process

Evaluations should provide a review of the time period (year/six months/quar-
ter) for each of the important performance criteria for the employee. This time
period should be determined in advance, clearly stated at the time of hire, and
consistently followed. Using a standard format for evaluating all employees
ensures consistency. It also ensures that no important issues are unintention-
ally omitted.
The list of items that should be discussed at a periodic evaluation should
include the job responsibilities of the employee’s position and observed behav-
ior and performance related to those responsibilities. This clear and constant
alignment of responsibilities and evaluation reinforces to the employee that
their stated job responsibilities and the periodic direction and guidance that
you have provided are, in fact, the exact basis for evaluating their performance.
Although the annual evaluation meeting should be a comfortable situa-
tion, be certain to provide enough structure so that it does not become a con-
versation with no specific point or outcome. In many situations this may be
the only instance where an appointed time has been set aside to discuss
past performance and future expectations. Communicating this information is
essential to assuring that the employee and the employer both clearly under-
stand each other and what is expected. This is also one of the best times for pro-
viding the employee the opportunity to air any questions or ongoing concerns.
Many larger companies use a prewritten evaluation instrument that covers a
broad range of general criteria to ensure that all evaluations are consistent and
cover the full scope of job knowledge, skills, and abilities. Some examples of
these criteria are: ability to work well with others, takes initiative with minimal
supervision, and is rarely late or absent. These performance criteria help assure
that the evaluation interview is a broad-based recap of performance. They help
make it easier to start some of the difficult conversations about performance
288
issues with everyone from the poor performers to the exemplary ones who,
although above average in some areas, may have some issues to address.
Many companies, especially smaller ones, do not rely on a formal evalua-
tion instrument to conduct evaluations. However, thoroughness and consis-
tency are essential characteristics of an effective evaluation no matter what
form it takes. Therefore, even in the case of locally developed criteria it is
strongly recommended that the supervisor prepare a list of performance stan-
dards, expectations, and other important performance criteria against which
all employees to be evaluated will be measured. By measuring all employees
against the same standards of performance the supervisor is then assured of
being able to conduct a thorough, meaningful, and unbiased evaluation.
Regardless of whether they are conducted in a mega-corporation or a small
two-person shop, regular evaluations are essential tools for employee develop-
ment. The annual evaluation is one of the most effective means to ensure that
all, employees and management, are in agreement about what is expected and
what has occurred during the past twelve months. More important, they leave
the evaluation with clear expectations for the coming year and a better under-
standing of how they are going to work together to achieve them.
Employee Compensation
There is no more serious issue in dealing with any employee than their com-
pensation plan. Any change in pay is likely to have significant impact on their
performance, overall satisfaction, and willingness to stay with your company.
Therefore, one of the first rules of management is Do not mess with your
employee’s money! This is more than a matter of economics. It is often a matter
of great pride and is closely tied to their self-worth. Their status among fellow
employees and where they see themselves being ranked as a part of that group
is at stake in the minds of most employees.

As service director in a large metropolitan dealership work area was at the other end of the shop. Nothing
I was fortunate to have a very talented and stable had been said, nothing had occurred. He was always
group of technicians. Turnover was uncharacteristi- one who was willing to help anyone at any time. He
cally low because of a strong commitment from the was as loyal as the day was long. He was the last tech-
entire management group to provide a comfortable nician who I would have expected this behavior from.
and stable work environment. I thought that I really I approached him and cautiously asked, “What is
valued my employees and demonstrated that in the the problem?” His reply, without hesitation, was that
way that I worked with them and treated them on a he did not want to work any longer at a shop where
daily basis. I thought that I knew how important an the employees were not respected. “Not respected?”
employee’s pay was. That was not true until I learned I replied. “Yes,” he replied. “This is the second time in
the following lesson the hard way. a row that you have been late getting our paychecks
At our dealership all of the technicians got paid to us. We’re supposed to be paid at 5 P.M. on Fridays
weekly, at the end of their normal work day every Fri- and it is already 5:10 and—no paycheck. I can toler-
day at 5 P.M. One very typical Friday I very unexpect- ate a lot but I just cannot work for anyone who
edly caught a glimpse of one of my most loyal and messes with my money. I am here on time every day.
long-term technicians loading up his toolbox. His I am rarely late or absent.”
(Continued )
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I stopped him at that point, explaining that I was As I went home that evening and over the course
sorry and that I had gotten involved with a customer of the weekend I thought over and over about my
question and did not realize that it was so late. Besides, unintentional blunder. I made several attempts to call
I thought to myself, it was only 10 minutes. It was not a him at home to talk further about it but was not able
matter of us not having the money to make payroll—it to reach him. Finally, on Sunday evening I was able to
was not that the checks were not ready. It was simply talk to him and, based on the otherwise solid rela-
that I had been distracted and lost sight of the time. tionship that we had along with his long-standing
He had already loaded his toolbox in the back of respect of top management and his co-workers he
his car. He did not appear to be mad at this point. reluctantly agreed to give me/us one more chance.
However, he was not ready to commit to changing his This near catastrophe left an indelible mark in
mind about quitting, either. He quietly drove off. my memory about the relationship between an
There I stood surprised, frustrated, and afraid that employee’s pay and your relationship with them. To
I had, through my ignorance and insensitivity, lost many employees their paycheck is the clearest mea-
one of our best technicians! sure of how much you value and respect them.
It is important to realize that your employees’ compensation plan is more

Compensation Plan than simply his or her hourly rate. The total compensation plan is a combi-
nation of all of the pay and benefits that are received. In addition to direct
All of the pay and benefits
monetary items such as hourly rate and performance bonuses other valuable
that are received by an
benefits provided may include paid vacation and sick time, health and life
employee including regular
insurance, and disability and retirement benefits.
pay, incentives, paid time
It is important that you are aware of the full range of compensation bene-
off, insurance, and
fits and that you offer and maintain a direct link between performance and
retirement contributions.
compensation. Since changes in pay rates or performance bonuses are the
most likely compensation items to be individually changeable, they are com-
monly the ones that can be closely tied to the employee evaluation process.
The annual evaluation is the ideal time to sit down and reward your employee
by giving him a pay increase that is directly tied to a glowing annual evalua-
tion. To the same extent, a pay increase that is less than expected can and
should be tied to a substandard evaluation. By doing this, the employees can
all see a clear relationship between performance and rewards. Based on this
logic, care should be taken to avoid two very common errors—positive evalua-
tions with no reward and pay raises across the board that are unrelated to per-
formance. Although some work environments may make these situations
unavoidable, such as under a union contract, it is strongly suggested that you
be vigilant and try to avoid these situations when possible. Failure to tie
performance to rewards sends a dangerous mixed message to employees that
can confuse them and significantly harm their morale.
Let us consider the possible implications of such situations. It is very diffi-
cult to conduct an evaluation with an employee in which you give him a
glowing review filled with praises of his exemplary performance and then
announce that there will be no raises this year. What message does that send
to the employee? How would you feel? Even during tight financial times it is
important to avoid this situation. If it is at all possible you need to work to
provide some type of reward, no matter how small, that you can tie to exem-
plary performance and an exemplary evaluation.
If an unavoidable situation exists where you find yourself in circum-
stances where you have no ability to give any raises for the year, it is strongly
suggested that this be announced well in advance of evaluation time. This will
290
help to separate the individual and their performance from the compensation
issue. It will help temper employee expectations.
The second pitfall of passing on raises is the across-the-board raise. This
method of giving raises equally rewards all employees—and that is often cited
as its benefit. However, not all employees have worked equally, performed
equally, and been dedicated to the company and its success equally—so why
would you reward them equally? The across-the-board raise sends a mixed
message to your employees. You say that you want performance, commit-
ment, and dedication and yet you pay for showing up. It is easy to see how
employees would be confused about the message you are sending.
Even though it is clear that there are significant pitfalls to giving raises in
this way there are situations where this type of pay raise strategy is mandated.
What do you do then? You should do as you have with any situation that is
beyond your control. You acknowledge it, understand the possible implica-
tions on morale and motivation, and move forward better armed to deal with
it since you realize the potential problems that it may present in the future.
Incentives
Incentives are short-term benefits or bonuses that are tied to specific perfor- Incentives
mance within a limited time period. An example of an incentive is a $5 bonus Short-term benefits or
for every set of four new tires that a technician recommends and sells. bonuses that are tied to
Another incentive might be a month-long competition for two tickets to a specific performance within
local race event for the technician who sells the most additional labor and a limited time period.
parts. Incentives are intended to provide very specific and immediate rewards
for increased performance over the short term.
Incentives can be very beneficial. It should always be your goal that they
will result in a short-term increase in performance and, more important, that
they will have a lasting effect. Through encouraging employees to go ‘above
and beyond’ what they have previously done it is hoped that they develop the
self-confidence that they can and will perform at this higher level after the
incentive is over. With this in mind, incentives can be an effective part of a
long-term improvement strategy to stimulate and increase performance levels.
Even though incentives are short-term, it is important to remember that
just like all changes to overall compensation they follow the rule stated
above—Do not mess with your employee’s money! As such, it is essential that
incentives be structured so that all employees are confident that the incentives
are fair and equitable. Failure to do this results in complaints of favoritism and
cheating and can reduce employee morale rather than improve it.
Tying Performance to Compensation

The last, and most important, rule about the value of compensation as a moti-
vator is that it is essential that you reward what you value. What does this
mean? If you refer back to the story earlier in this chapter about turning around
customer satisfaction in a dealership you can see how changing the focus and
goals of a shop can change performance. By simply refocusing the employees’
attention on quality rather than simply on production it was possible to make
a dramatic improvement to the shop’s customer satisfaction rating.
On a day-in day-out basis the best way to keep each individual employee
focused on the right mixture of objectives and priorities is to pay careful
291
attention to how employees are paid. Therefore, the rule of thumb in design-
ing and maintaining a compensation plan for an employee is that it should be
clearly aligned with the goals and objectives of that job. This way you will be
rewarding the exact performance that you believe is the most important.
Do you value production? If so, then the compensation should be tied to
producing labor hours. Do you value quality? If you do, you should make sure
that you have built in some reward to the employee for customer satisfaction.
Your employee compensation plan serves as a constant reminder of your goals
and objectives. There is nothing that can communicate them to your employ-
ees more clearly, directly, and constantly. Since their compensation is closely
tied to their self-worth and feeling of being valued, the best way to assure their
success and yours is to tie their compensation plan to achievement of organi-
zational goals and priorities.
SUMMARY
Motivating employees is one of the most basic responsibilities individual attention if you hope to get the best performance.
of a supervisor. Without proper direction and motivation, the The regular one-on-one performance review process and
performance levels from each employee that you expect in establishment of personal goals helps bring your guidance
order to succeed will never be reached. Setting clear and direction down to a very personal level. This allows you to
performance expectations that are measurable and achiev- praise their successes, provide guidance on areas in need of
able and clearly and regularly communicating them to your improvement, and encourage their growth during the coming
employees are essential steps in motivating employees. You year.
should develop a set of metrics that can be tracked and com- One of the best reinforcement mechanisms to support
municated on a regular basis to provide reinforcement to individual evaluations is for employees to see a direct link
every employee about progress that is being made. In addi- between company goals and the performance expectations
tion this provides an early warning when performance is lag- that you have set for them. Further, there should be a clear
ging and changes are needed. relationship between your performance expectations and
Establishing and communicating clear expectations on specific goals for employees and their individual compensa-
the department or organizational level will aid all employees tion plans. By developing a clear link between goals, expecta-
in directing their efforts toward company goals. However, you tions, and rewards you send a clear and unwavering message
must remember that each employee is unique and requires of what is important.
1. It is important that expectations be ______________. c. never give performance evaluations.

a. definable. d. reward performance and ignore lack of performance.
b. reasonable.
4. __________ are short-term benefits to help motivate
c. achievable.
specific performance.
e. all of the above. a. Bribes.
b. Incentives.
2. In terms of performance measurement, metrics are c. Penalties.
a. based on the scale of 10. d. Compensation plans.
b. a measurement to track results.
5. Employees often do not do what their management
c. a different system than SAE.
wants them to do because
a. the goals have been clearly defined.
3. Whenever possible you should attempt to b. they are not getting paid enough.
a. separate compensation from performance. c. goals have not been clearly communicated.
b. tie performance to compensation. d. they just are not motivated.
292
6. Which method is least likely to help your department c. personal details about everyone.
achieve major, very complex goals? d. poor performance.
a. Get all of the little goals out of the way first. 9. One of the pitfalls of tying an employee’s pay to one fac-
b. Break the big goal down into sub-goals. tor such as flat-rate pay is
c. Tie pay incentives to completion of the goal.
d. Make sure everyone knows what the goal is.
7. A well-designed and prepared performance evaluation
will not
a. discuss both employee strengths and weaknesses. 10. List four items that are part of a comprehensive compen-
b. be conducted on a regular basis. sation plan
c. be posted on the company bulletin board.
d. cover a variety of skills and abilities related to the job.
8. It is important that you track and reward _______________.
a. what is important.
b. everything that you can.
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C H A P T E R
24
Progressive Discipline
CHAPTER OBJECTIVES
■ To recognize the application of discipline as a ■ To examine the use of counseling and advising
positive tool for employee development in attempting to correct poor behavior or work
■ To describe the necessary steps of the progres- performance
sive discipline process
KEY TERMS
progressive discipline punishment

advising reprimand
counseling separation
warning
294 294
Progressive Discipline ■ CHAPTER 24
Introduction
Motivating employees is very tricky and complex. Even more difficult is
addressing those personnel performance problems that are not and cannot be
addressed and resolved through positive motivation. What do you do about
the employee who insists that she will not pick up the pace? The one who has
a chronic tardiness problem? The one who always bends, spindles, and muti-
lates the company rules? Progressive discipline is the toolset that you need to
get out and utilize to deal most effectively with all of these issues.
Progressive Discipline Process

Progressive discipline is a tool, actually a set of tools, that can help you to Progressive
maintain a positive and constructive environment while doing the really Discipline
tough work required to try to resolve the most difficult personnel problems. A structured and consistent
This process ensures that you have in place a systematic method for trying to human resource
resolve personnel problems for all of your employees in a positive and con- development process that
structive manner and even address termination of employment when that is works to gain the best
the last resort available. results out of difficult
It is unfair to allow someone to continue to fail and bring down the orga- employee performance
nization. It does nothing for their morale or their future to allow them to wal- situations.
low in failure. It is unfair to sentence the rest of the crew to having to
overwork and overproduce just to compensate for the shortcomings of one
employee. It is certainly unfair to the owners and investors in the company to
let one person’s unwillingness to contribute their fair share undo what it has
taken a lifetime to build.
Performance issues are often not a matter of blame or fault. Rarely is the
employee’s behavior malicious or intentional. It is not that he is a bad person
who is trying to ruin things for everyone else. In the vast majority of cases
performance problems fall into one of two categories: (1) the employee does
not realize what he is doing wrong or doesn’t know how to change things, or
(2) he is in the wrong job and you owe it to him and the organization to do
what you can to get him out of that bad situation.
I Did Not Realize It

Have you ever been in a situation where someone taps you on the shoulder and
very politely says, “Pardon me, but you are standing in my way?” Chances are
that you did not realize that you were blocking the person. It is likely that your
response goes something like “Oh, excuse me. I did not realize that I was in
your way.” This simple, common scenario is very similar to many of the perfor-
mance problems that occur in the workplace.
In this scenario, all that it took to resolve the problem was to make the
offending party aware of what she was doing that was creating the situation.
Once advised, she gladly and apologetically moved and, in so doing, resolved
the problem. In this case merely taking the time and mustering up the courage
to say something led to a speedy and complete resolution to the problem.
However, some situations are a bit more complicated than that one. If you
pulled up to an intersection in your car and were blocked by the car in front of
you, you might use the same technique to get the person to move. However,
295
what would you do if you asked her to move and she said, “I would be glad to,
but the car has a flat tire and I have never fixed one before.”
Once notified that she is causing a problem she is, like in the first situa-
tion, very willing to move. Unfortunately, she has a problem that she cannot
or at least does not know how to quickly resolve. At this point you have sev-
eral options. You can: (a) change the tire for her, (b) show her how to change
the tire and help her to do it, (c) wait for someone else to help her, or (d)
decide that you are more willing to continue waiting than you are to get
involved.
Both of the scenarios presented are very simple. However, they are simple
examples that closely parallel common performance problems that we encounter
at work on a regular basis. Fortunately for us, the majority of personnel prob-
lems fall into these two categories: ones that require notification and ones
that require notification and temporary assistance and training.
In both of these groups of issues the first and most important ingredient to
success is communication. Most often the one at the center of the problem is
either not aware of the problem or is aware but unable to resolve it alone. Not
until you identify the issue at hand and take the time to open a dialogue with
the party involved so that she is aware of the problem and offer assistance or
guidance will the problem move toward being resolved.
The progressive discipline process can be universally applied to deal con-
sistently and effectively with these situations. It provides a consistent method
for addressing issues ranging from the most simple (our first scenario) to ones
that are far more complicated and intense.
In the Wrong Place

This second group of performance problems are more complicated and, there-
fore, difficult to resolve. Jim Collins, in his book Good to Great uses a powerful
analogy of “getting the right people on the bus” (Collins, 2001) to provide us
some direction on how to deal with these types of personnel issues. As a man-
ager and leader it is your responsibility to the organization and to all of your
co-workers to “get the right people on the bus.” That is, hire and retain the
people with the right knowledge, skills, abilities, and attitudes to help maxi-
mize the productivity, profitability, and overall success of the organization.
Beyond getting the right people on board, it is critical that you work to get
the right people in the right seats. That is, that you know your people and the
needs of your operations well enough to consistently match up the right
people with the right jobs and responsibilities.
However, occasionally situations arise where you find that you have the
wrong person in place. Then what? Is it that you misjudged him in the first
place? Did you hire the wrong person? Did you put him in the wrong posi-
tion? Or . . . did he change? In the final analysis it is not nearly as important
what the cause is. What is most important is that you recognize that a prob-
lem exists, and do something about it.
Clearly, the hardest part is acknowledging the problem and taking action.
However, once you have overcome this hurdle the problem then becomes one
of determining the proper course of action. The best course of action in all
personnel problem situations is to proceed through a consistent and steady
process of progressive discipline to make every effort to resolve the perfor-
mance issues at hand.
296
Discipline or Punishment?
Progressive discipline is not a pathway to punishment. It is a system that
provides for and assures that a consistent and fair approach is taken to
communicate with employees, identifying performance problems, and pro-
viding counseling and guidance to resolve performance problems. Finally, and
only when all else fails, it provides for disciplinary action up to and including
dismissal.
The goal of progressive discipline is to resolve the performance issue and
save the employee. That is, by separating the performance issue from the per-
sonality, the goal of this process is to work with the employee to resolve the
performance problem. As a result, the ideal ending is to reinstate the employee
as a happy and productive member of the team and to eliminate only the sub-
standard behavior or performance.
Steps in the Process

The main steps in the progressive discipline process are
• Advising
• Counseling
• Verbal warning
• Written warning
• Written reprimand
• Written reprimand with penalty
• Separation from employment
As the title indicates, the intent is to have a consistent and logical pathway
that you can follow in resolving personnel issues. The tools and steps in the
process can be used informally in the case of minor or incidental issues. How-
ever, it is important to carefully and methodically follow the procedure to deal
with all important or persistent performance issues.
Just as it is essential that the process is followed every time, it is critical
that it be followed as its name implies, progressively. That is, by following step
by step and not by bypassing steps in any but the most extreme cases. It is
important to note that there are a few severe incidents that may merit acceler-
ating the process, but every attempt should be made to follow the process step
by step as often as possible.
Finally, just as it is important that you understand the steps and the intent
of the process, the same is equally true for all your employees. For the process
to be most effective it is essential that all of your employees are aware of the
steps and the intent of the process so that they understand what you are doing
and why you are doing it when you formally enter this process. The employee
must have a clear understanding of the positive and corrective intent in which
you use this process. Now, let us take a little time to discuss each of the steps of
the process in more detail.
Advising
Advising Providing formal feedback
Advising is often considered as a pre-disciplinary step. Regular advising and or notice to an individual
providing consistent and positive feedback should be ongoing in your depart- of their performance or
ment. Your employees cannot be assured that they are doing the right things behavior.
297
unless you provide them with regular feedback to guide them and reinforce
their positive actions.
Advising is necessary to make sure that employees know when what they
are doing is straying from the intended goals and directions of the company.
Regular communication and advising is an important foundation to assure
positive and properly directed efforts and is essential to minimize the need to
move into more formal processes like the remaining steps of progressive
discipline.
It is important to note that advising is actually the first step in discipline.
It is your most common and low-key method for answering the all-important
question that you as a supervisor must be able to answer: “How can I be sure
that my employees know what is expected?” It is only fair to be sure that they
clearly and consistently know the rules before criticizing or penalizing them
for not following them. You must have clear evidence that you have exercised
this step early and often before you consider moving to the next more formal
step, counseling.
Counseling
As you move through the steps of progressive discipline each step builds upon
the previous one and becomes a bit more formal. Counseling is very similar to
advising because the message and the intent are to communicate what the
required performance is and what the issues and concerns are that you have
with their substandard performance.
Counseling In counseling, the supervisor moves from informal conversation to a
A formal conversation more formal and structured one. At this point we have tried to make the
and discussion with the employee aware of the concerns but the performance has not changed, or has
specific intent of making not changed enough. Now we need to take the time to make it explicitly clear
an employee aware to the employee that a performance problem exists, that it is a concern, and
of concerns about what the expectations are to address and resolve this issue.
performance or behavior. Although counseling does not need to be conducted in an intimidating
manner, it does require that the supervisor find an appropriate method to be
certain that the employee clearly understands the importance of the discus-
sion. This is often done by holding a special meeting or discussion with the
sole purpose of covering this issue. In that way, it reduces the chances that the
employee will take it lightly or dismiss the concerns that are expressed as a
suggestion only. Finally, it is highly recommended that the supervisor docu-
ment and retain in writing a brief accounting of the meeting as supporting
documentation in the event of the need for further discipline.
It is important to point out that this process is not a one-way street. At any
time where significant progress is made toward resolving the performance
issue at hand the supervisor can move back up the ladder to a more informal
Warning step to ensure that the gains are maintained. After results from a counseling
A formal notification either session prove successful the supervisor can revert to ongoing advising. How-
verbally or in writing to ever, if counseling does not yield marked improvement and additional action
inform an employee of is required, the process then moves on to a formal verbal warning.
unacceptable performance
or behavior accompanied by
Verbal Warning
a clear statement of future
penalties and consequences Unfortunately, attempts to advise and counsel do not always produce suffi-
if a substantial improve- cient results. In these cases it is important to continue to move forward in the
ment does not occur. disciplinary process. It is important to remember that the intent of the process
298
is not discipline but rather resolving performance problems. However, when

sufficient progress has not occurred or there is a relapse after a brief improve-
ment, a verbal warning is in order.
The verbal warning closely resembles the counseling session. It is an event
that is intentionally arranged to focus on current specific performance issues.
It is intended that the sole focus of this meeting is making the employee aware
of the concerns and also of their gravity.
The difference between the counseling session and the verbal warning is
the addition of two key ingredients, direct notification that this is a warning
and a clear statement that continued concerns may lead to further discipli-
nary action. In an ideal sense you hope that the employee understands the
gravity of the situation and the need for immediate action. Unfortunately,
although this is most often true, there are cases where the employee is either
unwilling or unable to make sufficient progress. In these cases, formalizing the
disciplinary process really begins to take shape with the verbal warning.
Keeping in mind that the ultimate goal is a resolution of the issue at hand,
the threat of direct consequences for continuing with the current behavior
and/or lack of performance is brought clearly into the picture. It is essential
that the supervisor takes the time to reassure the employee of the ultimate
hope for a positive outcome so that this is not seen merely as a punishment. Punishment
At the same time, the supervisor must be very direct in spelling out in detail A penalty that is assessed in
the issues in question, what is expected to resolve them, and the consequences response to unacceptable
for failure to resolve them. In the event that noticeable improvement does not performance or behavior.
result it is necessary to move to the next step, a written warning.
Written Warning
The final step in the progressive discipline process before implementing penal-
ties is the written warning. It is not dramatically different from the verbal
warning. It is a progressive (step-by-step or gradual) increase upward from the
previous step.
When a written warning is given, the employee again has a formal meeting
with the supervisor with the sole intent of discussing performance issues. The
past history of advising, counseling, and verbal warnings should be recounted
to make it clear to the employee that this is not a new issue. The positive intent
of the progressive discipline process must also be reviewed and discussed. At
this point, however, the employee needs to be clearly advised that the prob-
lems, and the resulting lack of progress, have brought the situation to the point
where it is now necessary to commit this to writing to be put into their person-
nel file. Finally, as a part of this written warning, the employee is reminded that
to this point there have been no direct consequences or punishments but that
if clear and substantial progress is not immediately evident that the next steps
will include penalties ranging from time off up to and including dismissal. Reprimand
Just as in all of the previous steps, the intention is to resolve the defi- A formal and typically
ciency. Also, as in the past, the intention is to turn up the heat to, hopefully, stern warning based on
get the employee’s undivided attention to the problem and to resolving it. If unacceptable performance
this goal is not achieved, the process then proceeds on to a written reprimand. or behavior that includes
an immediate penalty
combined with a clear
Written Reprimand
statement of future
The written reprimand step in the process, although very similar to the writ- penalties if the situation
ten warning in content, generally will add two additional and very important is not resolved.
299
characteristics. Typically the written reprimand is conducted by the direct

supervisor along with his/her supervisor or a representative from the company’s
business office or human resources department. The inclusion of the next level
supervisor demonstrates solidarity and commitment of the entire organization
to this course of action and the importance of resolving it immediately.
The second additional characteristic is the inclusion of an immediate
penalty. Depending on the severity of the infraction this penalty may be a fine,
elimination or delay of an expected pay raise, or a suspension from work with
or without pay. The clear intention of the penalty phase is to stress the impor-
tance and urgency in resolving the performance problem and the commitment
of the organization to taking whatever steps are necessary to resolve it.
As with the other steps in this formal process, the written reprimand also
includes a clear statement of a plan for corrective action. This plan for correc-
tive action will provide guidance and may include some very specific and
intentional assignments that are hoped will help in leading to a change in per-
formance. The document will also very clearly state the additional steps and
penalties in the process if the change does not occur.
Depending on the severity of the problem and the policies and procedures
of the organization this step may be repeated several times with increasing
penalties before moving forward. There is a very delicate balance that must be
maintained when a problem has escalated to this high level. It is important to
be consistent and persistent in continuing to move forward in the process if
significant progress is not evident. At the same time, it is even more important
than before to continue to reassure the employee that although the situation
is serious, the ultimate hope of the supervisor and the company is that this
can finally be resolved, put behind them, and that life can return to normal
for all involved. For this reason, the supervisor needs to be patient and allow
time between steps so that the employee that is trying hard to change has the
opportunity to show progress.
Unfortunately, in a handful of cases, in spite of your best efforts to try to
guide, direct, and motivate an employee and provide every resource to help
them to succeed it just does not happen. This results in the progressive disci-
pline process playing out to its final step, and certainly the last resort in any
personnel issue, separation from employment.
Separation from Employment

Separation The final step in the process is separation from employment. Termination of
Termination of employment employment is rarely the wish of any employer or employee. After all, you
as a result of severe or hired this employee because you needed to get a job done. You thought right
chronic unresolved from the start that he was the best qualified for the job. You have tried to work
performance or behavioral with him, motivate him, guide him, train him. You have invested a great deal
concerns of an employee. of money and time toward assuring his success and, yet, somehow you have
failed.
The separation meeting is conducted just as the previous step of written
reprimand. A formal meeting is arranged with the direct supervisor and other
company official along with the employee. The focus of the meeting is to
recount the ongoing performance problems, the repeated attempts to resolve
them, and their continuation. Each of the steps moving through the progres-
sive discipline process should be reviewed. Finally, the ultimate decision to
terminate employment should be stated along with any plans and scheduling
for exit activities, if needed.
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It is common for a supervisor to feel a great deal of sadness and loss

when faced with the unenviable task of calling in an employee to dismiss him.
It is truly a lose-lose situation. The company and the department lose all of
the time and energy that they have invested in trying to develop a good
employee and have to start over at square one, running ads in the paper in the
hope of finding someone as skilled and capable as the person they must now
dismiss.
Certainly for the employee the sadness and loss is very direct and per-
sonal. He may feel that he is a failure, he may feel a loss, he may feel angry. It
is hoped, however, that through the use of progressive discipline that in most
cases the employee is able to see that the intention of the supervisor and the
company has been a positive one and that they have tried their best to help.
Dealing with Separation

Knowing how difficult separation from employment is to any supervisor and
to any employee, I would like to take just a few minutes to reflect back to our
earlier discussions about “having the right people on the bus” (Collins, 2001).
It is unfortunate that in spite of our best efforts that occasionally we choose
the wrong employee. This is also true when some major change in the com-
pany or the individual occurs that makes a previously good match turn into a
chronic problem situation—but it does happen.
Progressive discipline and separation from employment is a very intense,
emotional, and time-consuming process that none of us, employers or employ-
ees, chooses to face. However, in being accountable to our organization and,
ultimately, to each other, we must. It is not fair to allow an employee to drag
down the ship and for everyone else to have to pay the penalty whether that is
in doing extra work or in accepting lower pay because of diminished overall
performance. When a situation arises that in spite of our best efforts we cannot
resolve, it may seem unfair to the employee to terminate employment. But, it is
even more unfair to everyone else who is doing their job to penalize them by
allowing the employee to stay.
Finally, although it may not seem so in the short term, it is unfair to allow
an employee to stay in a situation where he or she continues to fail. What
motivation, what satisfaction, what feeling of self-worth can be gained by wal-
lowing in a situation where one continues to underachieve? It is not personal.
It is not that he or she is a bad person. It is that the employee is in the wrong
seat and, quite possibly, even on the wrong bus. After all (and to take the anal-
ogy a step further), if their intended destination is Denver and you are headed
to Miami, it really is better for all concerned to let them know as soon as pos-
sible so that they can get on the right bus and that you can fill that vacant seat
with someone who will benefit from going where you both want to go,
together.
Skipping Steps
In the intense environment that caused you to utilize progressive discipline it
is common that once you have made the determination that there is no other
alternative and that you need to move forward that you must strike swiftly and
effectively. There is a natural tendency to postpone and avoid entering into a
disciplinary situation with an employee. After all, it is an acknowledgement
301
that all is not well and is the beginning of what may become a long, difficult,
and time-consuming process. Unfortunately, most personnel problems do not
go away on their own. Therefore, since it is not going to heal on its own, the
longer you wait the worse it gets and the harder it will become to achieve a
positive outcome.
Many managers, because of the stress and time commitment may try to
delay moving into progressive discipline and then want to skip steps and get
right to the penalty and/or separation steps. After all, they’ve already been too
patient and now they have made up their mind.
Actually, when a supervisor wants to move to the end of the process what
he or she has most likely done is fail to take the time and make the commit-
ment when the problem was first identified, and now is trying to make up for
lost time. The supervisor waited too long to make the difficult decision to start
the process.
In all but a few cases it is the best for the supervisor, the company, and the
employee to begin the process and follow the process, step by step, and allow
reasonable time between steps no matter how late the process has been started.
As in most processes there are exceptions to this rule based on the chronic
nature of a problem or its severity. This may warrant in certain conditions to
move quickly from step to step or even to skip a step. However, to provide the
employee with the best opportunity to correct the problem performance or
behavior (which is really the ultimate goal, right?), the thoughtful and method-
ical process that is progressive discipline is generally the best solution.
The Need for Consistency

Progressive discipline is a system and is more than merely a group of tools. It
really is part of an organizational philosophy that supports a positive, pre-
scriptive approach to addressing personnel problems. It is founded on the
concept that the majority of these problems can be resolved amicably and to
the best benefit of both the employee and the employer.
Following this procedure for all employees is a must if your organization is
truly to benefit from all that it can offer. No, of course that does not mean that
you are disciplining everyone. It means that you are communicating regularly
with everyone. It means that you are advising and guiding everyone on a reg-
ular basis so that they know where they stand, what they are doing well, and
what they need to improve—remember the first step? That is right, it was
advising.
An advisory and counseling relationship should permeate your entire
organization. This is the best preventative medicine to avoid personnel issues
and performance problems. Only through this communication channel can
the employee and the employer be confident that they know where they
stand and where they are headed. Fortunately, this lends itself very well to
moving into formal discipline much more easily and comfortably in the rare
occurrence that a problem develops that needs a higher level of attention.
Outside Resources
Although it is suggested that all supervisors consider this system when work-
ing with all personnel issues and concerns it does not mean that you are
expected to do it alone. In fact, there are cases where it is highly recom-
mended that you involve external assistance.
302
Just as in the case with anything that you do, you need to recognize your
strengths and your abilities as well as your weaknesses. Your desire to resolve
employee problems and your commitment to progressive discipline does not
make you a psychologist, a doctor, or a lawyer. Therefore, it is important that
when you become involved in a situation that goes beyond your expertise you
draw upon expertise that will help you in these sensitive areas.
Situations arise that are the result of causes that require skills and knowl-
edge that you simply do not possess. Family, legal, and psychological issues
are just a few general areas where your ability to fully understand and know
the proper course of action may be limited by your experience and knowledge.
In these cases, involving appropriate external resources must happen at the
earliest stages. No matter how good your intentions, without the right skills
and expert guidance in these situations you may unwittingly make the situa-
tion worse, thus reducing the likelihood of you reaching your original goal, a
happy and productive employee.
Timeliness Is Essential
There is one last and very important principle that you need to follow. That is
being timely with both praise and criticism. This principle can be applied to
all of the relationships that you have with your employees. However, just as it
is important to recognize and reward exceptional performance or exemplary
behavior when you see it so that you reinforce it, it is also true that you must
address negative situations in a timely manner.
If your true goal is to identify, acknowledge, and correct the behaviors or
other problems you must not hesitate to take action. The closer that the cor-
rective action follows the offense, the more likely that positive results will
occur. This timeliness allows for you to discuss the issues while they are still
fresh in everyone’s minds. If it has risen to the level where some penalty is jus-
tified, it helps to make a clear connection between action and consequence.
Failure to act quickly confuses the situation. This delay can have a strong
demoralizing effect on the employee. The employee may feel that you are
opening up old wounds weeks or months after the incident. Rapid response
simplifies the situation. It helps to keep the employee from feeling like he or
she is a failure and limits it to “I made one mistake.” Seeing a direct link
between error and consequence makes taking corrective action easier for both
employer and employee.
SUMMARY
One of the most misunderstood principles in personnel devel- primary intent is that through advanced warning, appropriate
opment is the use of progressive discipline as an approach to guidance and counseling, and consistent follow up that
improve employee performance. Discipline is too often seen as many difficult situations can be resolved. Therefore, valuable
a last resort method of dealing with and dismissing the employees can be retained. Punishment and separation from
employee who has gone off track and for whom there is no employment are treated as last-resort options within this
other reasonable alternative other than termination of employ- process. Although it is hoped that in the vast majority of
ment. For this reason the process of discipline is too often cases taking proper preemptive action will correct perfor-
delayed well beyond when it should have been initiated. mance, the progressive discipline process also provides a
Progressive discipline is a development-oriented process methodical and well-documented audit trail in the unfortu-
of identifying and methodically defining, following up with, nate circumstances that the final inevitable result is termina-
and addressing performance issues in the workplace. Its tion of employment.
303

1. The practice in progressive discipline that is considered a verbal warning if the performance does not improve, the
pre-disciplinary step is next step in progressive discipline is
a. termination. a. a written warning.
b. counseling. b. immediate termination.
c. written reprimand. c. notice of termination if not resolved.
d. advising. d. a second verbal warning.
2. When going through the disciplinary process it is impor- 7. The difference between a _________________________
tant that the manager is careful not to is that one simply makes the employee aware that a
a. let them see you sweat. problem exists while the other provides immediate nega-
b. start the disciplinary process too soon. tive consequences.
c. skip any steps in the disciplinary process. a. reward and punishment.
d. all of the above. b. termination and a separation.
c. day off without pay and separation.
3. As a manager you may find it very appropriate to
d. warning and a reprimand.
___________________ as a part an effective disciplinary
process. 8. Too often managers see discipline only as a means of
a. skip right to termination. _____________.
b. go it alone. a. counseling employees.
c. seek outside assistance. b. punishing employees.
d. skip as many steps as necessary. c. getting employees to quit.
d. two or more answers are correct.
4. Started early and followed step by step, _____________
______________ can be an effective tool in employee 9. Effective methods used to get the employee to improve
development. their performance are
a. progressive discipline. a. counseling and advising.
b. harsh punishment. b. threatening and docking their pay.
c. providing unannounced bonuses. c. advising and threatening termination.
d. none of the above. d. warning and punishing.
5. ___________ is essential in helping the employee be able 10. The primary goal of the Progressive Discipline Process
to see the direct relationship between their performance is to
problems and the consequences of their actions. a. fire ungrateful and unproductive employees.
a. Empathy. b. be a tool to help improve employee performance.
b. Sympathy. c. protect the company from lawsuits.
c. Inconsideration. d. punish poor performance and reward good
d. Timeliness. performance.
6. Once an employee has been advised and counseled
about an ongoing performance problem and has had a
REFERENCE
Collins, J., Good to Great: Why Some Companies Make

the Leap and Others Don’t (New York: Harper
Business, 2001).
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SECTION
8
MARKETING, MERCHANDISING,
AND SELLING SERVICE
A utomotive service is a very competitive business. For this reason it is essential the
manager is able to clearly communicate the reasons why the public should choose
their shop from the crowd. Effective marketing is essential to help them build customer
awareness and a solid client base. However, the financial resources of any organization are
finite. Better understanding of the benefits of each of the mass marketing mediums is impor-
tant to help business to use their resources most effectively. As with any other industry, there
are specific types of marketing that are most effective in reaching the target audience for
automotive service. The understanding of mass marketing and point-of-purchase merchan-
dising methods and techniques are essential in developing a successful marketing strategy.
Once marketing efforts have attracted customers the automotive service employees need to
be prepared to gain the maximum return on this investment by recommending and selling
needed maintenance and repair services to all of their customers.
• CHAPTER 25: Marketing and Mass Media • CHAPTER 27: Point of Purchase
• CHAPTER 26: Target Marketing and Merchandising
Building an Identity • CHAPTER 28: Selling Service
C H A P T E R
25
Marketing
and Mass Media
CHAPTER OBJECTIVES
■ To recognize what marketing is and its impor- ■ To develop proper pricing to be profitable and
tance in the success in a competitive market- competitive in the marketplace
place
■ To identify the basic qualities that establish
value to a product or service
KEY TERMS
marketing performance quality

value convenience advertising
price availability mass media
307
SECTION 8 ■ Marketing, Merchandising, and Selling Service
Introduction
In business you may have the brightest idea and the best invention yet fail.
The cause is that not enough people know about you, your business, and what
Marketing it can do for them. Without this awareness you are bound to fail. Marketing is
A complex process that lets the complex process that lets the world know what you have to offer and what
customers know what you value it brings to them so that they will enthusiastically “beat a path to your
have to offer and what door” to become your customer. Having a great product or service is an impor-
value it brings to them. tant factor in being successful in business, but if people do not know about it
you will surely fail.
Marketing is not making a product or providing a service. It is not manu-
facturing or sales. Marketing is a process. In its most complete and thorough
sense, this process should begin early in the product development process.
The process of gathering information to help guide the development of a
product and the initial strategy to get it to the public is market research. This
research helps to assure that the product or service is targeted to meet the
needs of a specific group of potential customers.
In automotive service your involvement with marketing as a manager will
rarely begin until the product is developed and ready to go on sale. This more
common aspect of marketing refers to the development and implementation
of an intentional campaign to promote a product or service to the public. This
is typical of the marketing efforts that you will be involved in planning and
implementing to ensure the success of your service operations.
Marketing helps you to clearly direct your efforts by helping you answer
these simple yet critical questions:
• WHO—Who has an interest in my product or service?

• WHAT—What is their specific want or need?
• WHERE—Where can I find them?
• HOW—How can I best reach them?
The answers to these four questions provide you with a solid foundation upon
which you can build a plan to bring attention to and develop interest in what
you have to sell. Armed with this background information, your ultimate goal
is to move a group of people who do not even know that your product or
service exists to becoming loyal customers and vocal advocates.
The Five Basic Goals of Marketing

One of the overarching goals of any marketing initiative is to intentionally
move your target audience through the five basic goals of marketing (Figure 25-1).
Advocacy
Loyalty
Acceptance
Interest
Awareness
Figure 25-1 Five basic goals of marketing
308
Marketing and Mass Media ■ CHAPTER 25
The ultimate goal is to influence and move as many potential customers as far
possible up those steps.
Here is how the five-step process works. If, for example, you have a new
company or a new product you begin at ground zero. People do not even know
that your product exists. The first step, then, is to reach out and build
awareness. Once potential customers are aware that your product exists you
need to create interest that will entice them to investigate your product. Once
they have learned more about your product your goal is that they reach the
level of acceptance and try it. You are now halfway up the steps and have moved
these potential customers to become consumers of your product or service.
Once customers have tried your product, you need to meet or exceed their
expectations so that they will be willing to come back and purchase again.
Now you are moving toward the next goal of becoming their preferred vendor
for this product, loyalty. The last, and final, step is by far the hardest to reach.
It should be your ultimate goal that through your efforts and the excellence of
your products and services that your customers not only become loyal and
return as regulars, they are so pleased that they openly recommend you as the
best source for this product. When you have reached this plateau you have
achieved the ultimate goal of advocacy.
It is important to note that although these five goals appear simple, they
are a simple roadmap to a long and difficult journey. There is intense competi-
tion in the marketplace and while you are striving to build a base of loyal cus-
tomers your competitors are trying equally as hard to take them away. It is for
that reason that your plans to develop and market your products must be
based on sound principles that guide customer buying decisions. Most cus-
tomer buying decisions are based on logic and that logic is one of making a
purchase that provides them with the greatest value. Let us discuss the factors
that make up value in the mind of the typical customer.
Establishing Value
Potential customers are not likely to do business with you unless you are able
to clearly communicate what sets your product or service apart from the com-
petition. You must demonstrate the unique value of your product. With that Value
in mind let us take a few minutes to talk about some universal characteristics The relative worth and
that customers value. usefulness of a product or
service.
Characteristics of Value
There are five common characteristics that potential customers consistently
use to guide their purchase decisions in the very confusing, crowded, and
highly competitive marketplace of today. These major characteristics are
1. Price
2. Performance
3. Convenience
4. Availability
5. Quality
Whether someone is looking to purchase an exotic sports car or a 10-year-old

pickup truck, a home in the city or a room to rent for the night, they are likely
309
to find that they have several choices. The decision process used to make that
choice takes into account the five major factors. Together they are the major
part of the value of that product or service to the potential customer.
Different people may value some characteristics more than others. Their
immediate priorities may even cause them to shift their opinion of what is of
the greatest value to them at any one time. However, no matter how much
this may differ from person to person and from time to time people will con-
tinue to make their purchase decisions based on value. Therefore, you need to
clearly understand these factors and the impact that they have on the final
buying decisions if you hope to succeed in business.

Having delayed the start of a 700 mile drive home hotels were available. I needed to find a room fast.
after a week of vacation and knowing full well that I I did not really need a place with a pool and a restau-
needed to be home the next day I set out for the trip. rant, just a place that was clean with a good bed. My
In addition to the late start, construction on the free- priorities at that point were availability number 1,
way further delayed my progress in getting home at performance number 2, and price number 3. I simply
a reasonable hour. At 2 A.M., still several hundred wanted somewhere I could find right away that was
miles from my ultimate destination, I felt myself get- reasonably clean and comfortable and would not
ting so tired that I simply could not go on. I had cost me a small fortune.
reached the point where I was not only falling asleep In normal circumstances, given the time to shop
at the wheel; I was starting to see things. around and without the urgency of being exhausted
The only two reasonable and safe choices were and in danger of falling asleep at the wheel and
to sleep in the car or to get a hotel room to get a few crashing, my priorities and decision process would be
hours’ sleep before I headed on the last leg of my very different. However, under these particular cir-
journey. I quickly decided against sleeping in the car. I cumstances that is what mattered most to me, and
needed to get a few hours of good rest. I decided those are the priorities that guided my purchase
that a hotel was the only solution. decision.
I began looking for road signs along the side of
the freeway and at the exits that indicated what
Perceived value is a combination of all benefits received (such as quality,

convenience, features, reliability, and so on). It is a complex and sometimes
unpredictable calculation that customers make in factoring in what is impor-
tant to them at that time and then making the decision that best meets those
immediate criteria for perceived value. As in the example of getting the hotel
room, the perceived value for a customer can and will change based on the
particular circumstances when they determine that it is time to buy.
Even after considering the purchase of a big-ticket item (new car) for
months and doing all of the research a customer’s priorities may change. The
importance that the buyer places on vehicle reliability, resale value, price and
quality may change as the buyer’s priorities change and affect the resulting
final purchase decision.
Price
Price
The amount of goods or
money exchanged to The importance of price is often overstated. Price is an important factor in
receive a product or service purchase decisions. Yes, you can price yourself out of the market. However,
in return. market research consistently demonstrates that price is not the number 1
310
factor in establishing value. More often it is rated number 3 or number 4 in

customer surveys. Price alone is not the answer to marketing success. Cus-
tomers make their final purchase decision based on the total perceived value
of the product or service, not solely on price. However, price cannot be
ignored, it must be seriously considered along with all of the other factors.
If you fail to pay adequate attention to pricing you may price yourself
right out of the market. This is a warning that we have all heard from time to
time. An important characteristic of pricing is that it is very likely to be the
easiest and most common factor for making side-by-side comparisons. With
many choices savvy consumers will use price as one of the first criteria to
narrow their search. They can do this from the comfort of their home whether
in the newspaper, on the phone, or over the Internet.
There are two major groups of factors to consider in establishing your
price: internal factors and market factors. The internal factors are those that
determine what price must be charged in order to make a reasonable profit
and, therefore, make providing the product or service a good business deci-
sion. The external factors are those that dictate the current rate in the market-
place. That “going rate” is the range of prices that the competition is currently
charging for comparable goods or services.
Internal Factors It is essential to clearly define the physical costs of bringing

a product to market. The direct costs are the cost of materials and the cost of
labor. In addition to these raw materials it is important that you also include a
third, and more often neglected cost, the cost of support services. Without fac-
toring in these costs in you are likely to receive a far lower net profit than you
originally expected.
Support services takes into consideration all of those other expenses
that, although they are not directly related to this specific product, are
required in order for the product to be produced. These include the facilities,
equipment, utilities, and other staff (accounting/sales/etc.) that are not a part
of the product. However, without them the product would never have been
made. These support services are generally referred to as overhead or indirect
expenses.
The last internal factor is profit margin. Even having accurately and thor-
oughly accounted for all direct and indirect expenses that are part of the prod-
uct, unless the activity can provide a reasonable return on investment it is not
a good business decision. It is essential that you are able to include within the
final retail price a return on your investment that justifies your commitment
of time, energy, and capital. Armed with a thorough knowledge of what it
costs to make the product and what pricing levels you must achieve to make
this a good business decision you can then look at the marketplace to deter-
mine what price the market will bear.
External Factors The common phrase “what the market will bear” describes
what the perceived value is to your target audience. It is the worth of a product
to potential customers taking into consideration your product and all others
out there that can meet their needs. After all, it is not reasonable to expect that
customers will pay more than they have to for any goods or services. The
information obtained by doing a price survey of the competition should give
you a range of prices that can guide you in establishing your price. Remember
that you do not have to be the cheapest—just the best value—to be the most
successful.
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We have spent quite a bit of time talking about pricing because it is impor-
tant. Remember that it is not the only factor nor is it the most important fac-
tor. It is, however, a factor that must not be ignored since it is one of the
easiest factors for customers to use to rule you out as a potential vendor.
Performance
A very important factor in establishing the overall value of your product or
Performance service is the performance of that product. Clearly identifying the perfor-
The ability to meet or mance characteristics of your product is essential in differentiating your prod-
exceed expectations to carry uct from the competition in the marketplace. A key question in defining your
out an expected function. performance is: What makes my product unique? That is, what does my prod-
uct do or do significantly better than the rest of the products available to
consumers?
In order to compete effectively and market the performance of your product
it is also essential to clearly understand the features and benefits that your com-
petition has to offer. What are the features and benefits that your competition
heavily promotes to distinguish them from the rest of the competition? Once
you know what the competition’s direction is in establishing their competitive
advantage based on performance you will be able to counter that strategy with
one of your own. You can determine that their key characteristic is not impor-
tant, you can choose to compete head-to-head, or you can differentiate yourself
as having greater value based on your unique solution to the customer’s needs.
In the final analysis, you must remember that unless you are willing to bet
your future at being chosen at random among your competitors, you must
clearly differentiate yourself from them in the marketplace. You must give the
customers a reason to choose your solution because it has a higher perceived
value in their minds.
Convenience
Unless you have a product or service that is so unique or such a great deal that
customers will drive past hundreds of competitors just to get to your door and
do business with you, you will have to consider the benefit of being conve-
nient as part of your marketing strategy. The local exotic sports car dealer is
probably a good example of someone who does not have to worry too much
about convenience. They are the only game in town and people will travel
great distances to get to their site. That is not likely to be so, however, if you
are selling or servicing mainstream vehicles. You are faced with hundreds of
competitors in your marketplace, many of whom are located closer to parts of
Convenience your target market. So you need to factor convenience into your marketing
Providing a solution that is plan if you want to succeed.
comfortable or easy. Convenience is a highly variable factor. Although customers would like to
be able to get service done right here, right now, 24/7/365, they are not very
likely to value that convenience so much that they would pay a very high pre-
mium in price to get it. The amount of convenience that you can and should
look to provide is based on a combination, just like price, of how much it costs
you to provide it and its added value to customers.
The most common convenience factors are location, hours of operation, and
payment methods. The relevance and importance of these factors varies from
industry to industry and from market to market. Although service facilities do
not necessarily need to be located on prime real estate they generally need to be
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conveniently located to provide service to their target audience. Unfortunately,

no matter where you locate your business you will always find a competitor who
is closer to some of your market and every bit of inconvenience that you cause is
just one more opportunity for the competition. It creates one more reason for
some of your clients to choose to conduct their business elsewhere. However, if
the perceived value that you provide is greater than that of your competitors,
your clientele is likely to go ‘a little bit out of their way’ to seek you out.
Hours of operation is one of the most often-cited convenience factors in
the minds of service customers. However, the value of evening and weekend
service hours may vary greatly in different markets. For example, in an area
populated by young working couples the value of evening or weekend service
hours is very high. The ability to get maintenance or service performed with-
out having to take a day off from work may be a significant factor in the cus-
tomer choosing a repair shop. In contrast, in a South Florida suburb that is
heavily populated by retirees the importance of evening and weekend service
hours is significantly less. The perceived value definitely changes based on the
specific target audience.
The importance of convenience is also measured in comparison to the com-
petition in the marketplace. If several of your major competitors offer this bene-
fit then it is worth considering just to prevent them from using this against you.
On the other hand, if none or few of the competitors offer this service it might
be a benefit to explore to provide your shop with a unique feature that will set
you apart from the competition.
Willingness to accept a variety of payment methods is a convenience ben-
efit that is expected by many consumers in today’s marketplace. Customers
expect every business to accept a wide variety of debit and credit cards along
with cash and possibly personal checks. Even though providing access to
these payment methods adds to the cost of doing business this flexibility is an
expectation. Failure to meet this expectation may be the deciding factor that
sends customers to your competition who provide this basic service.
CASE requesting that you stay open until 10 P.M. during the
week.
You are the owner of a local three-bay quick oil
change location. Your normal hours of operation are You decide
10 A.M.–6 P.M. Monday to Friday and 8 A.M.–4 P.M. Do you extend your hours? What information would
Saturdays. In your most recent batch of customer sat- you need to consider to help you to decide if it is a
isfaction surveys you have seen several comments good business decision?
Availability
Availability is the capacity to deliver your product and/or service in a timely Availability
manner. Common examples of this characteristic in the automotive service busi- The capacity to deliver a
ness would be how far in advance it is necessary to schedule an appointment to product and/or service in a
get service work done or how likely it is for your shop to have the needed parts in timely manner.
stock or locally available so that work can be completed the same day.
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Lack of capacity to meet customer demands in a timely manner can create a

problem for the shop with the best reputation and most affordable service in
town. After all, customers also expect convenience. Significant industry research
has examined the negative impact of having to schedule service too far in
advance. Results indicate that once the wait time exceeds three to four days
even the best shops begin to lose repeat business because of inconvenience.
This is an important issue that requires serious thought and careful plan-
ning. All of the efforts that you make to provide quality service, maintain a
competitive price, and offer competitive service hours can go for naught if you
are so successful that you become backlogged with appointments 10 days in
advance. Unfortunately, this type of backlog not only costs you immediate
business; it can also turn the word-of-mouth testimonials of your most loyal
customers against you, thus hampering future business.
When capacity is overwhelmed by demand it is time for the company to
make some difficult decisions. As we just discussed, allowing the situation to
remain that way will undo the goodwill and good reputation that you have in
the community. Something has to be done, whether that is increasing
staffing, adding on to your facility, or extending service hours. If nothing is
done the negative consequences are inevitable.
CASE You Decide

You are the service manager at a very popular yet What would you do? Which of the following options
small fast-service shop in town that is located on a would you consider to improve the convenience of
crowded corner in an old two-bay service station. You your shop?
have developed such a good reputation for providing a. Go to a complete second shift to double shop
high value with a competitive price, convenient capacity?
hours, and friendly and professional personnel that
b. Add on two more stalls in the parking area and
you are swamped with work. You have so much work
purchase nearby land to park the cars?
that you’ve had to go to an appointment system and
are currently booking appointments for oil changes c. Raise prices to slightly slow down runaway
and tire rotations two weeks in advance. As a result demand?
of this you have had several customers confront you d. Consider all of the above suggestions after care-
and threaten to change shops even though they love fully reviewing them?
the quality of your work.
The example provided above is intended to bring to bear several principles

that we have talked about in this chapter as well as in ones presented earlier in
this text. When demand exceeds supply you need to make some important busi-
ness decisions. As noted in the first option you can expand service hours and
thus increase capacity without enlarging the building or noticeably increasing
overhead. The second option offers a plan to expand physical capacity. The third
option deals with something that we have discussed briefly in this chapter, pric-
ing. In the final analysis you can address problems of this type by using any one
of these strategies or more likely by employing a combination of several of them.
Before we leave this topic, there is one more situation to consider. What
do you do if you have excess availability? That is, you have significant unused
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capacity or supply? The same principles that we have already talked about
apply. In this situation, however, you would consider reducing the workforce,
reducing the facility space (sell it/sublet it/use it for a different purpose), and
consider lowering price to get demand and supply more closely aligned.
Quality
Quality is an attribute of any product or service that is a powerful combina- Quality
tion of perception and reality. People perceive quality when what they receive Excellence or superiority as
performs meets or exceeds their expectations. This can be absolute or relative. a result of continuous
The ability to meet the intended use would be a minimum expectation and, improvement of process
therefore, an absolute criterion. In comparison, the ability to do a better job and product.
than the competition would be a relative criterion for evaluating a product or
service as being high quality.
Quality should always be measurable and definable. However, quality in
the mind of the consumer is not a static objective. It varies based on the cus-
tomer’s expectations and needs. In many cases it is part of an evaluation based
on multiple measurements (such as the highest quality for the price). For
more in-depth background on quality please refer to Chapter 12 where we
address the underlying philosophies of quality and continuous improvement
in greater depth.
The quality of your product is one of the attributes that will set you apart
from the competition and give you a competitive advantage. However, it is
important that you do not go overboard. You need to meet or exceed cus-
tomer expectations while not overbuilding your product. That is, you need to
be good enough but know when additional improvements are not noticeable
or have little increased value to the customer. Failure to realize this important
distinction can lead you to providing something that goes far beyond cus-
tomer expectations and, in the process, has become so expensive that you
have priced yourself right out of the market!
How Much Is Too Much?

When considering and addressing any of the five major characteristics it is
important that you keep moderation and balance in mind. That is, you need
to clearly understand how important each issue is to your target market. You
need to appropriately respond to their needs. Not overreact or underreact. You
may need to extend your service hours but the cost of 24/7 service may be too
high. A compromise of service until midnight may be the best solution in this
situation. Going to an extreme will cause you to make an investment beyond
what is needed, and you will be wasting your money. Another example would
be an obsession with quality. When your focus on making the best product
goes beyond what the customer needs or is willing to pay the benefit will
become a deterrent that will chase customers away.
What is needed is an appropriate and balanced response to addressing all
five characteristics in the combination that best suits the wants and needs of
your target market. This requires that you have clearly defined and intimately
know the wants and needs of this target audience. If you do not do your
homework in defining and understanding your potential customers you are
likely to make careless investments of your time and resources where they will
not have maximum impact. If, however, you keenly understand the needs and
315
motivations of your market you will be able to get the maximum benefit in
improving your perceived value in their minds with the minimum amount of
time, effort, and cost.
Advertising
The communication of a
marketing message to gain
Advertising
attention and encourage At the start of this chapter we defined marketing as the complex process that is
the purchase of a product involved in letting the world know what you have to offer. Advertising is a
or service that you have to major component of any marketing plan. It is one of the biggest action steps
offer. in the process. After you have identified what you have to sell, its features and
benefits, and how you want to promote it to the public the next step is to
Mass Media advertise it. Mass media is the most common method of advertising your
Mediums of communication message to the public. The most commonly used mass media vehicles are
(TV, newspapers, Internet, Internet, e-mail, television, newspapers, magazines, direct mailing, radio, and
and so on) that are billboards and signage. Each of these media has unique strengths and weak-
designed to reach large nesses. A brief overview of some of the strengths and weaknesses of each of
audiences of people. the mass mediums is provided in Figure 25-2.
Benefits of mass media types
Mass Total Cost Ability to Access to Ability to Target Ability to

Medium of Usage Reach Audience Target Market Specific Audience Personalize
Internet Low High Mid Low Low
E-mail Low High Mid High High
Television High High High Mid Low
Radio Mid High High Mid Low
Magazines High Mid Mid Mid Mid
Newspapers Mid Mid Mid Low Low
Direct Mail High High Mid High High
Signage Mid Mid Low Low Low
Figure 25-2 Benefits of mass media types
Web-Based Media
The Internet has grown to be the most widely used medium for sharing infor-
mation worldwide. It has the potential to reach the entire world in a matter of
milliseconds after you post the information on the Web. The cost to post a
message on the Web is the cost of having a Web portal and is the least expen-
sive of any mass communication medium. The primary methods of using the
Web for advertising are through Internet postings, Web ads, and through the
use of e-mail. With this great power for instantaneous and low cost communi-
cation via the Web why is it not the best and only method to spread your
message?
The strength of the Web is that it reaches a large market quickly. However,
what it possesses in wide reach and low cost it lacks in discrimination. That is,
developing a company Web site and posting announcements and advertise-
ments on it does little to target the message so that it reaches the specific audi-
ence that we want it to reach. Therefore, it reaches most people but may not
316
get the message to those that you want it to reach in a manner that will assure
that they will see it, read it, understand it, and be likely to respond to it.
Those of us who regularly surf the Web fail to realize that even with the
explosive growth of the Web that there still remains a significant portion of
the public who may not have convenient access to the Internet or may not
access it on a regular basis. Therefore, although it has the potential to reach
everyone in the world it may not be effective in reaching people right in our
neighborhood and, most important, in our target market.
Web-based advertising is a much more costly alternative than general
Internet postings but is much more likely to be found by potential customers.
Web advertising requires that you link to a Web service (search engine or a
buying service site) that will post your ads as pop-ups or inserts on their pages
as people use these commonly used sites. Both of these methods are very poor
for providing the information to your specific, local target market. Another
alternative, however, is the use of Web directories. These directories provide
information about businesses, similar to a phone book, which may be worth-
while in helping potential customers to find you in time of need.
The last Web-based advertising medium, e-mail, is a direct targeted
person-to-person communication on the Internet. It is an electronic version
of direct mail marketing. Since it is addressed to specific individuals it can
overcome the ambiguity of Internet postings. It makes sure that it reaches spe-
cific individuals. It also has the benefit of speed since it travels in milliseconds
from the sender to the receiver.
The strengths of e-mail are low cost and high speed. The drawbacks are
limitations of the receiving audience. This first limitation is that you can only
send a direct e-mail to those individuals who have provided you with their
e-mail addresses. Those communications are limited to those of your current
customers or customer contacts who are willing to provide you with this pri-
vate information. This means that those who you can reach are a subset of
those that you already know. This makes this approach suitable for customer
retention activities but of minimal value for attracting new customers.
Unfortunately, the convenience of being able to reach everyone via e-mail
so quickly and affordably has created its own set of problems. We as consumers
have been so inundated with volumes of unwanted e-mails that we have
created a whole new category of communication to describe them—spam.
The rapid expansion of the amount of unwanted e-mails has resulted in most
individuals having to use spam-blocking software to manage the great vol-
umes of unwanted and unsolicited e-mails they receive daily so that they can
keep their important e-mail traffic down to a manageable level. As a result,
most of the e-mails that you send out with the intent of reaching a potential
market will never be seen or read by their intended receiver. They will be
caught, quarantined, and deleted electronically by spam-blocker software
and, therefore, never reach your target audience.
Broadcast Media
Prior to the explosive growth of the Internet, television was the medium of
choice to reach the largest audience in the least amount of time. Like the
Internet, television and radio have the ability to reach a wide audience. How-
ever, the need to develop and produce a commercial is expensive and requires
lead-time before it can be aired. In spite of these high costs to produce and air
a commercial it remains one of the best ways to reach an entire market
317
because more people have access to TV and radio broadcasts than they do to
the Internet.
Automotive service is generally a localized activity. That is, the target mar-
ket lives within a small geographic area that is close to your shop. Definite
drawbacks of TV advertising are high cost and its minimal ability to reach a
narrow market. As an advertiser you want to reach your target audience but do
not want to waste your time or money reaching those who have no interest in
your product or service. TV advertising can be targeted choosing the place-
ment of the ad in relationship to programs that the target audience is most
likely to watch. This does not, however, assure that any one ad placement will
be viewed by the target audience. Further, within the broad group who watch
a particular show you are likely to be paying to advertise to a much larger
group who are not part of your target market.
Radio provides a lower cost broadcast alternative to television. Radio has
much in common with TV advertising. It, too, reaches a broad geographic
area and reaches many people that are not your target market. It does not
have the staying power of a print medium where it can easily be saved. How-
ever, its ability to reach a wide audience quickly makes it worthy of considera-
tion to help to build awareness of a new company, a major change, or a major
marketing push.
Print Media
One benefit of newspapers and any other print medium is staying power. With
live mediums like TV you have 15, 30, or 60 seconds to get your message
across and then it is gone. With print mediums like newspapers, magazines,
and direct mail the customer has the ability to take his time reading your
message and to keep it for future use if it appeals to him. This staying power is
a substantial benefit to print media. This means that the number of possible
exposures that you get out of one ad is much more than just the initial
posting.
Newspaper advertising is one of the largest and most common forms of
print media used in automotive service advertising. Automotive service adver-
tising can be found every day of the week in large metropolitan daily papers
and in local neighborhood weekly papers. Advertising in the metropolitan
paper is a much higher-priced option than the local papers. It provides broad
reach to an entire metropolitan area. However, with this wide coverage come
increased cost and the likelihood that much of the exposure is going to be
wasted on people who are not your primary target market. Local community
newspapers are a much lower-cost alternative. They allow you to reach a
much more narrow geographic territory.
Magazines have a longer shelf life than newspapers and the average reader
will see your ad several times. However, much like TV advertising, they reach a
very broad market. Although automobile manufacturers may advertise in
magazines to build public awareness this medium is cost prohibitive for
service advertising. There is, however, one exception. It is the local shopper
magazines that are delivered in the mail or inserted into newspapers. These
publications are a hybrid of a mailer and magazine. Although they are printed
in a booklet form, they have no articles and are simply a compilation of adver-
tisements from a variety of local businesses. They provide a mid-priced option
to reach your target market with print advertising.
318
The most common form of print advertising used to promote automotive

service is direct mail. By designing a very specific advertisement and then
mailing it only to those who are in your target audience this medium can be
highly efficient. The cost for production and mailing per piece is much higher
than for newspaper ads but the amount of waste (those ads that are going
to people who are not your potential customers) is much lower. Two major
types of direct mail are commonly used to promote automotive service. They
are those that are sent to a predetermined customer base or those that are
sent to a specific geographic area. The predetermined customer base mailing
addresses can be targeted to an audience that meets specific criteria such as
location, household income, type of car owned, or other characteristics. There
are market research companies that specialize in developing and selling tar-
geted database mailing lists in most major markets.
Billboards and Signage

Billboards and signage are a unique part of mass media. They do not have the
benefits of speech and motion, they cannot be saved for the future, and in
most cases they cannot be changed rapidly to address an immediate need.
However, they are a constant silent salesman to keep reminding customers
that you are there and that you are interested in their business. They keep you
in potential customer’s minds as someone to consider when the need arises.
People commonly think of billboard media as the gigantic fixed signs along
the freeway or above the roadways at major intersections. However, this same
medium can also be found at bus stops, on park benches, and even on a movie
screen as you walk in prior to the start of the movie previews.
Onsite exterior advertising signage is an effective use of this medium on
your property. In addition to the signage telling customers that this is your
location, advertising billboards onsite can be a silent salesman that will
remind people that you are right here, right now and are ready and willing to
serve their needs. The recent expansion of electronic billboards has resulted in
shops being able to present colorful, attention-grabbing messages to attract
business much like a TV ad but targeted to the local audience.
CASE You Decide

Your assignment is to find an automotive service ad in Review the ad and circle and mark those items in the
some form of local print media (newspaper/flyer/ ad in which the company has used any and/or all of
magazine). The purpose of this exercise is to see how the following marketing principles:
many of the different marketing principles you can —Price
see applied in the ad.
—Performance
—Convenience
—Availability
—Quality
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SUMMARY
In the world of business it is not enough to have the best potential consumers. The five major factors that determine
product in the world if no one knows about it and therefore that value in the mind of a customer are: price, performance,
does not buy it. Identifying a target market or audience for convenience, availability, and quality. Although price is an impor-
your product or service is the first essential step in developing tant factor and is often used to narrow down a customer’s
a marketing strategy. To do this you must answer four simple choices it is rarely the most important factor in a customer’s ulti-
questions: Who has an interest in my product or service? mate buying decision. The importance of these five factors on
What is their specific want or need? Where can I find them? any specific purchase decision can vary from customer to cus-
and, How can I best reach them? tomer and situation to situation. Therefore, the importance of
Marketing is the process of letting potential customers all five factors should be seriously considered.
know what you have to offer and its importance to them. The Effectively advertising and promoting your product or
goals of marketing are to influence customer behavior so that service is critical to your success. There are several mass-
they become aware of your product, develop an interest in it, communication mediums that can be used to get the word out
purchase it, become regular customers, and become vocal about you and what you provide. Primarily due to their high
advocates of its benefits. cost TV, radio, and magazines are rarely a good choice for pro-
Effective marketing of any product or service is based on moting automotive service. The most common advertising in
understanding and communicating the important attributes the automotive service industry is direct mail and newspaper
that build the value of your product or service in the mind of advertising.
1. ________________ is communicating of a message to c. Value.

gain attention of a product or service. d. Gold plating.
a. Mass media. In Questions 4–7 please match the terms with the best definition.
b. Advertising. _____ 4. Quality a. meets or exceeds expectations.
c. Television. _____ 5. Availability b. excellence or superiority.
d. Politicking. _____ 6. Convenience c. delivered in a timely manner.
2. The most important factor upon which customers decide _____ 7. Performance d. comfortable or easy.
which one to purchase is _________________________. In Questions 8–10 please fill in the blanks to complete the
a. Lowest price. following statements.
b. Perceived value.
Television, radio, the Internet, and newspapers are all
c. Lack of availability.
examples of (8) ______________.
d. Random choice.
The most commonly used methods for advertising auto-
3. ____________, although not the top factor in determin-
motive service are (9)____________________________
ing the customer’s final choice to purchase is often used
and (10)______________________________.
to help them narrow down their choices.
a. A dartboard.
b. Price.
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C H A P T E R
26
Target Marketing
and Building
an Identity
CHAPTER OBJECTIVES
■ To examine who your market is, along with their ■ To demonstrate how to formulate a unique
unique needs and wants market identity
■ To identify the features that differentiate you ■ To apply general marketing principles to your
from the competition product or service
KEY TERMS
target market awareness image

market research identity personal media
wants logo
needs tag line
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Introduction
Target marketing is the application of marketing principles to efficiently and
effectively direct your message to your potential customers. To do this it is first
Target Market important to clearly define your potential target market. Once you have done
The group of people who this you can determine the most efficient means to communicate with those
have a want or need that individuals so that they know that you exist (awareness), know who you
may be satisfied by a are (identity), and know what sets you apart from the competition (image).
specific product or service. These factors will enable you to establish your competitive edge in the market-
place that will attract customers and help them to become loyal customers
and advocates of your company.
Whether you are starting with just an idea or have an existing product or
service, if you are planning to effectively market it you must begin by defining
your target market. There are few products that have universal appeal and are
needed by everyone. Further, advertising and promotion are very expensive.
To maximize the results you need to take steps to clearly define who your
potential customers are and how you can best communicate with them. Your
target market is the “who” that you are looking for.
If you have done a thorough job of defining your market you should be
well on your way toward reaching your target audience to let them know that
you have a product or service that will meet their needs. The important ques-
tion then becomes “What do I tell them?” Reaching them is important. More
important, however, is to know what to say. Your goal is to get their attention
and convince them to buy from you. To do this you need to know what your
target market values and what motivates them to make a purchase decision.
Armed with this information you can focus your message to make it clear to
them that you have what they need.
Defining Your Market

Before you can effectively market your product or service to the right audience
it is essential that you sit back and reflect on your goals. If you do not know
who you are and where you are going it is going to be impossible to effectively
communicate to the public. So you must first define your vision, mission, and
goals. We spoke about this at an organizational level back in Chapter 9. These
principles and techniques can be universally applied and should be used not
only in organizational planning but also in activity planning.
In general, to effectively reach your target market you need to identify the
who, where, how, and what of your potential buyers. The following questions
will help to break this thought process down in more detail. When you can
clearly and definitively answer all of these questions you can be assured that
you know your target market and are ready to begin your marketing initiative,
assured that your investment is well directed toward reaching your ultimate
goal. The questions are
• What is the specific customer want or need that this product or service
will address?
• How large is the market for this product or service?
• Is there a sufficient demand to make this effort worthwhile?
• Who is my competition and what do they have to offer?
• What is unique about the way that I am addressing the need?
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Target Marketing and Building an Identity ■ CHAPTER 26
• Who are the potential customers that will value this most?
• Where are they?
• How do I reach them?
Every manager should be able to sit down and answer all of the questions
listed above before making the investment of time and energy to set out in a
new direction or begin a new initiative. If you do not know the answers to all
of these questions it is probably time for you to do some research before you
proceed.
Market Research
Doing market research before you act will help you to define the demand Market Research
that you are looking to satisfy. A clear example of this is the need to define The study of the
how big the potential market really is and if there is sufficient demand to sup- marketplace that helps
port your efforts. These are questions that are too often ignored. In their to determine the exact size
enthusiasm to launch a new product or service many companies have failed and nature of the market.
because they did not do the research to verify that the market was able to sup-
port their plans. Their initiatives were doomed from the outset.
Because of the constraints within your small business it will rarely be pos-
sible to hire an outside marketing consultant every time you have a new idea
or consider a new product. Fortunately, a great deal of market research data
already exists in the city or county where you do business. Good sources of
this data are the local chamber of commerce or small business administration
in your area. In most cases is not necessary that you do a high-level (and high-
priced) study to answer the questions about the size and nature of your target
audience. What is necessary, however, is that you take a step back and ask the
people that you currently serve and those that you hope to serve: Am I on the
right track? Do you want or need this?
Beyond defining who you will be soliciting as customers you must also have
a clear picture of your competition. You need to identify the current pricing and
value of products provided by them. This is essential to make sure that there is
enough demand in the marketplace so that you can stake out enough territory
to make it worthwhile for you to expend the effort and investment. Effective
methods to quickly identify target audience and competitor information are
through the use of surveys, media audits, and shopping the competition.
Surveying the marketplace can take many forms. However, the simplest
and quickest is done by telephone or via the Web. If you know your market
you should know your competition. If you know your competition then you
should easily be able to survey your most direct competitors to obtain this
information. For example, if you were interested in finding out what price
your competition is charging for an oil change this week how would you find
out? The easiest way is to ask them! Pick up the phone and call them posing as
a potential customer. This is a low-cost, quick, and effective method of obtain-
ing this essential information.
A second method for doing market research is through checking the
media. In the automotive repair industry the most common methods of
media used are newspapers, flyers, and direct mail. Careful review of all of the
publications in your market can provide you with a rich resource for identify-
ing what value the competition offers and what features and benefits they are
promoting as the reason to buy from them. Careful review of their ads should
323
help you determine what value they are providing. (Remember the five key
characteristics of price, performance, convenience, availability, and quality?)
Print advertising will be valuable in identifying the features and benefits that
they are promoting and the overall public image that they are trying to build.
Checking your competition’s advertisements is something that you should
use to your advantage to help you to identify and stake out your unique mar-
ket niche in the marketplace.
A final method that is more involved and time consuming than the survey
or media research is “shopping your competition.” Shopping the competition
requires that you, or someone on your behalf, visits the competition posing as
a potential customer. By doing this you will obtain firsthand detailed informa-
tion about the entire experience of dealing with this competitor. Telephone
surveys will provide you with a brief overview, media research will provide
you with information about how the company wants you to perceive them;
however, shopping the competition provides you with the richest input about
the competition based on firsthand experience.
Shopping the competition can provide the added input of what the physi-
cal environment of the competition is really like. Here are some of the impor-
tant market research questions that you will be able to answer as a result of
shopping the competition that you would not be able to answer by using the
other methods
• Was the shop clean and professional?
• Were the people friendly?
• Did they seem like they cared, or did they just ignore me?
• Did they try to high pressure me to buy or were they more interested in
finding out my needs and addressing them?
• Was the business the same as what I had expected based on what I have
learned about them in their advertising?
• Is there something that they are doing that I should consider?
• What shortcomings do they have that I can capitalize on in trying to
attract their customers?
The best way for you to differentiate and distinguish yourself from the compe-
tition is by knowing the competition’s capabilities and the needs of your tar-
get market. Market research is an essential tool that must be used to properly
position yourself in your market.
Wants versus Needs

Wants What is the difference between wants and needs? And why should you care?
Things of interest; desires. There is a significant difference between what people want and what they
need. It is important to understand the difference if you want to effectively
Needs market any product or service and make a profit.
Needs are very specific items or issues that must be addressed with some
Specific items or issues that
degree of urgency or you run the risk of negative consequences. Wants, on the
must be addressed with
other hand, go beyond needs and although they seem important, do not carry
some degree of urgency or
the same risk. They are often more accurately described as desires. Here is an
risk negative consequences.
example. I am going to go out to buy a brand new sports car because I need
reliable transportation to commute to and from work daily. Out of that past
phrase we can separate the needs and wants. I need reliable transportation to
get to and from work. However, I want a new sports car. A reliable vehicle
324
and/or a bus pass or carpool would probably be adequate solutions to meet

the needs; the sports car, on the other hand, is a bit beyond the minimum
requirements.
If you ask a customer what he needs, what do you expect to hear him say?
Will he really clearly define what he needs? What he wants? Or a combination
of both? To be most effective you need to understand the difference.
CASE a. Find a way to cut your price (and your profit) to

meet her needs by selling her four top-of-the-line
You are the service advisor at Sunshine Tire & Wheel.
tires, mounting and balancing and a 4-wheel
A customer arrives on the back of a tow truck with a
alignment in order to keep her business and her
flat left front tire. She is very concerned because she
goodwill.
only has $300 available to spend and she needs a
complete new set of four top-of-the-line tires. You b. Tell her that you can meet her needs but that the
know that the top-of-the-line tires retail for $100 lowest you can go for the 4 tires and labor is $500
each and mounting, balancing, and alignment is an tax and she will have to take it or leave it.
additional $100. You want to keep a satisfied cus- c. Offer to sell two top-of-the-line tires, mounting,
tomer but if you meet the stated needs you will have balancing, and aligning the car all at $300 tax
to cut your prices dramatically or risk losing this order (your normal retail price) along with explaining
and all of her future business. that you can match these new tires with the same
brand and tread pattern as is currently on the car.
You decide
Please choose the best option from the list below
that meets the customer’s needs and explain your
reason.
Awareness
This is a concept that was briefly introduced in Chapter 25. However, building
awareness holds a greater level of importance in service industries than it Awareness
does in many other businesses. As a result it is important that we take more Getting the word out that
time now to explore it in greater depth. something exists.
You probably would not be in the business you are in or working for the
company that you work for if you did not believe that the company provides
goods or services that have value. You know that there is a need (market) for
them and the ones that you represent have unique features (value). You know
that the market should be beating a path to your doorstep to buy from you.
The real question, however, is: do they know that? The first goal of marketing
is building awareness. You may have the best product at the best price in the
most convenient location, but if the market does not know it your business
will fail.
Building awareness is getting the word out to the public, and more specifi-
cally to your target market, that you exist. Building awareness is letting people
know the name of your company and some general idea of what you do. In
our case it is announcing to the world that you are out there and are ready and
willing to serve the needs of the automotive service market.
325
You might ask, “Why should I put my efforts into such a general effort?
We want business now. They cannot buy our name; we need them to buy our
products.” Although that is a good point and aims toward your ultimate goal,
automotive service customers normally do not jump in their cars and run to a
repair shop just because they saw an ad or heard about it on the radio. Their
most common motivation is that they have an immediate need—whether
that is squeaky brakes or a radio that cuts in and out. Until they have a need
your calls for them to become your customer will go unanswered. However,
when they finally have a need and have to decide where to go for service you
need them to know that you exist and, should therefore be considered as a
possible location to take their car for service.
Building awareness is planting the seeds in the minds of the market that
you are there. This is essential for every service business because until you are
firmly entrenched in their minds you will be overlooked when a need for
automotive service arises.
How does a shop build awareness? By obtaining a high degree of general
exposure to the potential market. This exposure does not have to be specific but
it needs to be consistent. Potential customers need to see you or see something
about you often enough for the message that you exist to stick in their mind.
CASE automotive repair shops that you drive past.

(Please pay particular attention to look for all of
Unlike most of the exercises we have done in the
the shops so that you list the first five and do not
past, this one is going to be very personal. Every day
miss any regardless of how large or small.)
you pass automotive service shops on your way to
school or work. a. Are the five that you see the same as the five
that you remembered in the first question?
You decide
b. Which ones did you fail to list in the first
Right now take a few minutes to answer the follow-
question?
ing questions:
c. Why do you think you may have forgotten
1. Please write down the names of the first five about the shops that you did not originally
auto repair shops that you pass regularly on your list?
way to work or school.
d. If you owned one of those shops that you
2. What unique things can you remember about passed but did not list in the first question,
each of them? what would you do to increase customer
3. Now, the hard part: Tomorrow as you head awareness?
out for work or school write down the first five
Building Identity
Once people are aware that you exist you need them to be able to pick you out
of the crowd. The concept behind this is very simple. Those who know you well
as a person can easily do this when they see you across the way at the mall or at
work. As a competitor in the busy and crowded automotive service market you
need to be able to expect your customers to pick your business out of the crowd.
326
Building identity is most commonly done through developing a unique

and easily recognizable public appearance that customers can quickly and eas- Identity
ily identify that this is you. One of the most common ways to do this is to Developing a unique and
develop a corporate logo. A logo is a specific way of presenting your corporate easily recognizable public
name consistently so that customers can recognize it at first glance. Just about appearance.
every large company has invested substantial time and money in developing a
logo. These logos present the name of the company in one unique yet consis- Logo
tent design, colors, fonts, and graphics. What does the logo of your bank look The name of the company
like? What colors are in the logo at the grocery store where you shop weekly? presented in a consistent
What about at the clothing store where you buy most of your clothes? Now, format—colors, fonts, and
what about at the place where you work? graphics.
Using a logo to establish a clear, definable, and consistent identity to the
public is very important. Instead of asking people to carefully read the words
in an ad, on a billboard, or on your exterior signs they begin to recognize a
picture. That picture (your logo) is distinct enough that they can rapidly and
at a single glance clearly tell that it is you. This is much akin to recognizing
your face in a crowd.
Many companies go beyond just a logo and create an entire corporate
visual identity. The logo is the centerpiece of this identity but it may include
the color schemes used on their buildings, their advertisements, and even their
company stationery. This theme is likely to be carried over into the colors and
designs on company vehicles and onto employee uniforms. All of this is an
expanded use of the efforts to build a unique and quickly recognizable identity.
A logo is great for visual effect, but how do you carry this concept forward
when people cannot see you? What do you do on the radio to maintain this
same consistency? The answer is simple. The audio version of a logo is a tag line. Tag Line
This is a simple phrase that is consistently used in both print and media advertis- Consistent phrase used in
ing and promotion. This phrase is intended to convey some unique features or both print and media
benefits of your organization that helps you to stand out from the competition. advertising to promote a
An example might be something like the following: “MicroMax Motors . . . we product or service.
may be small but we give you maximum value.” Can you think of a tag line that
CASE Bank: ___________________________________________
An effective tagline helps to put the name of a com- Beverage: _______________________________________

pany in the back of our minds so that when we have a Breakfast cereal: _________________________________
need for that type of product or service we consider Clothing: ________________________________________
them to meet our needs.
Electronics: ______________________________________
You decide Insurance company: ______________________________
Below is a list of 10 very different products. Take a Radio station: ____________________________________
few minutes and write down the first tag line and
Snack food: ______________________________________
company that you can remember for at least five of
these categories:
Automobile company:____________________________
Auto parts: ______________________________________
327
you have heard on the radio or on TV that has become so common that if you
only catch part of the message you know exactly what company the ad is from?
Those companies are making effective use of tag lines to build their identity.
Establishing an Image
Tag lines have a great value in helping to build identity. However, they go fur-
ther than just providing an easy means to identify your company. In addition
Image to establishing identity they also help to establish an image. Image is a set
Clear, consistent, and of clear, consistent, and specific attributes or characteristics that define your
specific attributes or company in the consumer’s mind. Ask anyone what the first things are that
characteristics that define come to mind when you give them the name of a company or a product.
a product or company. Hopefully, if you ask 10 people the responses will be similar. If the responses
are similar and they all convey the intended goals and direction of that com-
pany then the company is doing a great job of developing, communicating,
and living up to their image. If not, they have some serious work to do!
Building an image is clearly not a desire to portray the company or prod-
uct as something that it is not. The basis for building a clear and consistent
public image is to make the public very aware of who you are, what you do,
and what sets you apart from the competition in the marketplace. In short,
what you do better than everyone else. When people see this demonstrated
repeatedly over time it develops into a consistent image of who you are in
their minds.
Different companies will actively work to stake out their niche in the mar-
ket by developing a consistent image through everything that they do. A com-
pany that has a simple and plain-looking facility, does not provide the fancier
services, and guarantees to meet or beat the lowest price of any competitor in
the market is working to build an image of a no frills, low-cost provider.
Some examples of how an automotive repair facility might reinforce its
image in promotional materials are listed below.
Price: Best value for your money/Low price guarantee

Convenience: Open late to serve you/extended service hours/we are just
around the corner
Quality: Consumer choice award winner/Money back guarantee/10-time
award winner
CASE a. Engineering: _________________________________
Each company stakes its identity, its image, and its b. High performance: ____________________________
future on what makes it different. c. Reliability: ____________________________________
You decide d. Fuel economy: ________________________________
Take a minute to write down the name of the auto- e. Style: _________________________________________
motive company that comes to your mind first when f. Luxury: _______________________________________
you hear the identifying attribute. g. Value: ________________________________________
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CASE company is trying to communicate to you please

answer the following:
Your assignment is to find an automotive service ad
in some form of local print media (newspaper/ a. What techniques and methods did the company
flyer/magazine). This exercise is very similar to the use in the ad to promote a unique identity?
one we did in the last chapter, but with a slightly b. What words, phrases, or other methods did they
more focused approach to target marketing. use to project a unique image?
You decide
Please read and look carefully at the ad in front of
you. Once you feel that you see what messages the
Communicating Your Message

Once you know what you want to say, who you want to say it to, and how you
want to say it you need to choose the most efficient communication methods
to get the word out. These methods are called media. They fall into two main
groups: mass media and personal media. The most commonly used mass
media are television, the Internet, newspapers, magazines, direct mailing,
radio, and billboards and signage. We discussed the general benefits and limi-
tations of these individual advertising mediums in Chapter 25. You may want
to review this information.
Mass media is an effective way to keep your name in front of your current
customers and to attract the attention of potential customers in your target
market. By effectively choosing the medium to get the message out to all of
those who have a need and desire to do business with you it is possible to let
people know that you are there in the market (awareness), let them know
what is unique about your shop (identity), and why they may want to con-
sider doing business with you rather than with others when they have a need
(image).
Another medium for reaching your target market is word of mouth. In
Chapter 19 we spoke at great length about the value of satisfied customers and
the resulting benefit of having customers who become your vocal advocates. It
is important to realize that word of mouth is the most effective, valuable, and
lowest cost method of getting your message out. Nothing surpasses the
credibility that goes with your current customers telling others about the
wonderful experience that they have had doing business with you.
Personal media is the word-of-mouth unsolicited recommendations Personal Media
and customer referrals open given by your loyal and satisfied customers Unsolicited recommenda-
that you simply cannot buy. However, that does not mean that you are tions and referrals from
helpless to do anything about it. Although you cannot buy it you can your existing customers.
encourage it. Savvy shops encourage their customers to share the good news
with their friends and acquaintances. This can be done with a simple sug-
gestion, or even by offering them a special promotion for passing on the
good news.
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SUMMARY
Being effective in business is not that different from being Customers must know that you exist so that they will be able
successful as an individual in life. In both cases it is essential to to consider you when they have a need (awareness). They
know who you are, what your strengths are, and how to use must recognize you (identity) when you try to communicate
them to your best advantage. In the business sense, this is with them through media or signage so that they know that
exactly what you must strive to do to define your goals and you are trying to attract their business (identity). They must
directions, your audience, and your competition as you move know what sets you apart from all of the others (image) so
forward to consider and implement any initiative. Once you that they see a reason why they should choose you.
have built a solid argument to move forward it is then impor- In the final analysis, your goal should be for customers to
tant that you let the world know. instantly recognize your company, know who you are and
Target marketing is identifying the audience for your what you do, and have you at the top of their list as the com-
product or service and focusing your efforts on reaching that pany with whom they prefer to do business. Your job in build-
specific group. The goal in building awareness, identity, and ing your identity and effectively targeting your marketing is to
image is to differentiate you in the mind of the consumer. create the environment that makes this possible.

1. To be successful in business you need to focus your a. locus.
efforts on meeting the customer’s b. picture.
a. price. c. tagline.
b. son-in-law. d. logo.
c. needs. 6. ____________ is a set of clear, consistent, and specific
d. demand. attributes or characteristics that define your company in
2. Looking for information that will help you identify your the mind of the consumer.
audience, where they are, and how to best reach them is a. Awareness.
a. personal media. b. Your logo.
b. market research. c. Image.
c. mass media. d. Your needs.
d. building awareness. 7. In a service industry customers do not normally seek you
3. The primary audience that has an interest in and ability out unless they have an immediate need. It is for that
to purchase your product or service is your primary reason that you need to build ______________________
so that they will consider you when that need arises.
a. target market.
b. audience. a. customer wants and needs.
c. marketing source. b. your market share.
d. cause of frustration. c. customer awareness.
d. your skills and abilities.
4. If you ask a customer what their requirements are for a
product or service they are most likely to tell you their 8. What is the automotive manufacturer that comes to
__________, not their __________. mind when you think about exotic sports cars? What
colors are in their logo?
a. shoe size/sock size.
b. needs/wants. 9. What automotive company comes to mind when you
c. height/weight. think of tires? What colors are in their logo?
d. wants/needs.
10. List the tagline of any automotive-related manufacturing
5. A __________ is the name of the company presented in or service company that you have heard. What company
a consistent design, colors, fonts, and graphics. uses this tagline in its advertising?
330
C H A P T E R
27
Point-of-Purchase
Merchandising
CHAPTER OBJECTIVES
■ To examine the concept of point-of-purchase ■ To distinguish those types of merchandising that

merchandising are commonly used in automotive service
■ To identify the various methods of merchandis- ■ To identify the unique features and benefits of
ing used in retail businesses different merchandising techniques
KEY TERMS
merchandising package pricing impulse items

point-of-purchase up-sell captive repair items
merchandising competitive pricing board
signage product display
331
Introduction
This chapter focuses on a commonly used means of increasing sales within
the automotive service shop, merchandising. If you remember, in Chapter 25
we began our discussion by introducing the broad concept of marketing.
Marketing was defined as “the complex process that is involved in letting the
world know what you have to offer and what value it brings to them so that
they will enthusiastically beat a path to your door to become your customer.”
Point-of-purchase merchandising is a small, yet very important, part of an
effective marketing effort.
Merchandising Merchandising is, simply put, promoting an item for sale. That definition
Displaying and promoting might initially sound like marketing. You need to remember that it is not differ-
an item for sale. ent than marketing; it is a part of marketing. For our purposes in this discussion
of automotive service applications the area of merchandising that we will be dis-
cussing is limited to the most common merchandising efforts, those that are
Point-of-Purchase done at the business location. Those marketing efforts are point-of-purchase
Merchandising merchandising.
Efforts to display, promote, Point-of-purchase merchandising is an intentional effort to remind cus-
and demonstrate the tomers what we have to offer while they are already at our place of business.
capabilities of a product To be successful in any retail business we need to be sure that our customers
or service through know that we are in the marketplace as a possible supplier, what we have to
placement of onsite offer, and why they should consider making the purchase from us. Have you
reminders in a place of ever seen effective point-of-purchase merchandising? What was it? Where?
business. Some of the most effective point-of-purchase merchandising is so low key
yet effective that you are very likely to have become accustomed to it and do
not consciously know that it is there. Yet, somehow it keeps on quietly sug-
gesting to you “What about this?” This is an effective use of this medium as a
silent salesman that constantly, yet quietly, asks you “By the way, while you
are here, do you need one of these?” When is the last time that this question
has come to your mind while you were out shopping?
A great deal of the most expert, well-researched, and consistent point-of-
purchase merchandising can be found in the big box retail stores. Signs, dis-
plays, flashing lights to alert you to specials, and coupons on display as you
enter the store are all methods of point-of-purchase merchandising.
The Goal
The vast majority of the customers who enter your service shop have inten-
tionally visited you. Unlike strolling through the mall where they might just
be looking around it is highly likely that when they arrive at your shop they
have a very specific goal and need in mind. The purpose in using point-of-
purchase merchandising is quietly yet effectively raising the customer’s aware-
ness of the vast array of other services and products that you have available.
You quietly suggest to customers ways that they can do additional business
with you while they are already there. This makes it more convenient for
them, and it significantly adds to your bottom line.
Merchandising Locations
There are seven areas that are common to most automotive repair shops
where effective use of merchandising can help to stimulate customer interest
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Point-of-Purchase Merchandising ■ CHAPTER 27
and thus produce increased sales. Good merchandising locations exist both
outside and inside of your main shop area.
Some of the exterior locations that can be very effective include the front
of your lot along the public road, the exterior of the building area, and at the
customer entrance. If your department is a part of a larger company location,
as is the case with a dealership or retail store, signage in the other departments
can be an effective reminder that will build awareness of the services that you
offer.
Once you enter your service area there are abundant opportunities to
merchandise and promote your services. Point-of-purchase merchandising
can be effectively employed in the service drive area, at the service write-up
desk, in the customer waiting area, in the workshop area, and at the cashier’s
window.
Hopefully, after looking at these lists you are thinking “But that is just
about everywhere in the entire place.” If you thought that you would be right.
Any place that a customer can see, touch, or feel something that may stimu-
late their interest in considering additional purchases is a point-of-purchase
merchandising opportunity.
Signage
Permanent or semipermanent signs at your site serve as reminders to customers
of what you have to offer. That ranges from announcing the variety of manufac-
turers whose products you sell to very specific announcements about current
specials and new additions to your product line.
Signs can be used for indirect or direct promotion of your products, services,
or even of your reputation. Signage encompasses a variety of written communi- Signage
cations ranging from directional signs to warnings to reminders. For the pur- A variety of written
poses of point-of-purchase merchandising your goal is to use this medium as communications displayed
reminders to help promote sales. They can be something as general as a public publicly in a permanent
display of your corporate vision, mission, and goals or as specific as a sign giving or semipermanent manner.
notice of a $19.95 Oil Change Special good only today.
Signs that identify the use of well-known and respected products and
companies that you work with do not directly promote or sell a specific
item effectively. Yet, they can be effective by selling your credibility and repu-
tation. They act as silent salesmen that remind customers that you deal with
reputable vendors and provide them only with quality parts. It helps to
remind them that the service and parts that you provide can be trusted.
Through reinforcing the customer’s confidence it allows them to become
more comfortable in dealing with you, and this results in increased sales
opportunities.
This type of signage can often be found in the most public areas of the
building: in the service drive, on the building exterior, and throughout the
workshop. They may be a permanent illuminated signs from your best known
parts providers that are affixed to the outside of your building. The intent is to
remind people that they can purchase those products at your store. They can
be banners affixed to the walls in the service drive that display the name and
logo of a prominent supplier. This signage tells that you deal with good com-
panies. They can be prominently displayed logos or signs located near a
prominent piece of shop equipment that helps remind the customer that you
use only the best to work on their car.
333
Menu Boards
A very common use of signage in the service shop is the menu board. It is called
a menu board because it is much like what you’ll find in a fast-food restaurant.
It is a highly visible listing of your most common products or services with
their prices prominently displayed. Why post them? The customer already
knows what he wants, doesn’t he?
The menu board serves a dual purpose. First it clearly states your prices
right out in the open. This communicates your willingness to be open and
honest about your services and your prices. It also provides a visible reminder
of other products and services that customers might want to consider while
they are in your shop.
Service menu boards may be used in an automotive repair shop in the same
manner that they are used in fast-food restaurants, to prominently display
Package Pricing package pricing specials. A package price offers a special discount if the cus-
A special price offered for tomer purchases several common services at the same time. This can be an effec-
the purchase of a specified tive tool to up-sell from the customer’s initial service request. This will result in
combination of products the customer purchasing additional work. While the customer is rewarded with
or services. a better price and increased convenience the shop is rewarded by increased effi-
ciency, revenue, and profits. We’ll address the concept of up-selling in the
Up-Sell Chapter 28.
A variation of the service menu board that has become common in more
To sell a customer more
aggressive retail establishments is the competitive pricing board. This sign
products or higher priced
clearly shows a comparison of the availability and pricing of common services
products than initially
and repairs at your shop and at those of your primary competitors. The pur-
requested.
pose of this board is not simply to suggest service; it is to sell your credibility.
Competitive Pricing By openly displaying your pricing right alongside that of your competitors it
Board helps to dispel customer misconceptions or insecurities about your prices
A sign displaying a being competitive in the marketplace. This helps to allay customer fears.
comparison of current Finally, it plays a very important role in helping you to effectively sell addi-
prices for common products tional service. Why, you might ask?
or services offered by your Today’s price-conscious consumers will typically do some comparison
shop and your major shopping before they decide to make a purchase. As a result of this common
competitors. habit, customers may be reluctant to make a purchase decision on any item
that they were not planning to purchase today. This is due to their uncertainty
of the current market price of that item. Without this information they are
not sure whether or not they are getting a good deal. However, you can help
them to overcome that fear. You can do that ‘homework’ for them by display-
ing a competitive pricing menu board . . . thus opening the door to additional
sales and increased customer confidence.
More direct sales signage can effectively promote current service specials
as a means of stimulating additional sales. Small billboards along the street,
below your outdoor company sign, next to the service drive-in door, or along-
side the service write-up desk can be used effectively to let the customers know
about limited-time offers. They remind your customers that they can get a
needed service done at a lower price if they act now.
Product Displays
Signs can effectively remind customers what companies you deal with, what
you sell, and your pricing, but nothing gets people’s attention better than real
examples. No matter how professionally done, a sign that says we sell tires is
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not as likely to attract serious interest and attention as a product display with Product Display
a real tire. The displayed item generates much greater sensory appeal. You can An exhibit of a product that
see it, touch it, feel it, and, in some cases, even smell it. For those who are is available for sale.
technically aware, a display can peak their interest as they are able to take a
closer look at the real thing. For those who are not so technically inclined, it
provides a reminder of what the product is actually like and gives them the
opportunity to be able to better understand what you are selling.
In all cases, an effective product display gives you and the product manu-
facturer the opportunity to present the features and benefits of that product to
the customer. It is these features and benefits that build value in the customer’s
mind and make the purchase a worthwhile investment. Some of the more
effective product displays may be combined with free brochures to provide
customers with more in-depth information. They can also include cutaway
displays of a part of the product that focuses on the unique qualities of that
product and sells its value.
In contrast to the glitz and glamour of the display of new equipment and
technology, another very useful product display is the failed part display.
Some may prefer to steer clear of this type of negative merchandising as being
a scare tactic. They can, however, be very effective in explaining to your cus-
tomers, and especially to your non-technical customers, the importance of
taking service and maintenance seriously. Such a display may include photo-
graphs of the results of a failure because of a lack of preventative maintenance,
such as the inside of an engine that has failed. They may be a comparison of
good parts next to failed parts to show real examples of the type of damage
and cost that can be incurred by not taking care of your car. Finally, they
might be as simple as some examples of failed parts from your shop that are
strategically placed in a showcase or on the service desk as a silent reminder of
the need for service.
Displays are powerful tools in helping to get your customers thinking
about what they need and they help to motivate them to act now. They can
provide a gentle and courteous reminder of the service that the customer
knows is overdue, they can encourage the customer to approve the service
that will soon be due because you are running a special and it is more conve-
nient to do it all in one stop. They can cause the customer to reconsider the
potential consequences of putting off a repair that he knows could have expen-
sive consequences if neglected any longer. In all of these examples the intent in
effectively merchandising is not to generate unneeded service sales but rather
to heighten awareness.
Product displays can be effective in promoting sales of a variety of addi-
tional items. A stack of oil filters on the service counter can serve as a reminder
to your customer to consider getting an oil change while she is in for this repair
visit. Something as simple as a single spark plug can remind a customer of an
overdue engine tune-up. Wouldn’t a car battery sitting on the service desk pro-
vide a good reminder that a long, cold winter is just around the corner?
In addition to reminding customers of products and services that they
know you have, product displays also help you to promote other items that
customers might never have considered that they could buy from you. Some
service shops have expanded into apparel and sports-related merchandising.
Racing jackets, shirts, and car models of vehicles that are sponsored by their
company or by a major industry partner are common examples. A tastefully
done showcase in the customer waiting lounge can effectively make the point
that your company offers these items for sale. Another example of this is
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a display of over-the-counter performance parts. This will let customers know

that along with providing service for their car you can also be the supplier to
meet their do-it-yourself accessories and parts needs.
Impulse Items
One of the simplest and most effective point-of-purchase merchandising
efforts is the one that you’ve experienced as a child, a teenager, and as an adult
every time that you’ve gone through the checkout lane at your local grocery
store. What can you always find lining both sides of the checkout lane as
you’re waiting impatiently to be checked out and pay your bill? Although you
might have correctly answered tabloids, nail clippers, or batteries the most
common item is candy.
Do you seriously believe that putting an entire display of individual candy
bars, gum, and other sugar-filled treats within the reach of a small child who is
being held hostage in the seat of a grocery cart for the past hour is by chance?
No, it is very intentional. The items that line both sides of the checkout lane
Impulse Items are what are called impulse items. These are items that are commonly used
Commonly used items that and wanted by most customers. They are also commonly lower priced items
are prominently displayed that would not have been the primary reason for a trip to the store.
to promote additional The intention of impulse purchase merchandising is to quietly say to the
immediate sales that were customer “Don’t forget that you need this too.” Getting to the too part can’t be
not the original purpose overstated. The intent is getting the customer to purchase a little bit more
of the customer’s shopping while they are in your store. It is not to get them to buy something that they
trip. really don’t want or need, but something that they might not have thought
about or remembered unless something or someone had reminded them.
The idea of the candy-lined checkout lane works well in grocery stores but
how does that apply in an automotive service shop? There are few types of
businesses in which impulse item marketing cannot be effectively used. In an
automotive service shop there are three very common areas that can be effec-
tively used for impulse purchase merchandising. They are the service write-up
desk/drive area, the cashier’s area and the customer waiting area. The use of
small displays or signage in each of these areas can effectively remind cus-
tomers of common additional items that they might want or need that were
CASE a. windshield wiper inserts.
As the new service manager at a brand new shop you b. car battery.
want to help spice up the service desk area with some c. crankshaft.
impulse items to help bolster sales. You’ve met with d. spark plugs and air filter.
your service advisors and they’ve provided you a list
e. crank position sensor.
of possible items.
f. fuel sending unit.
You decide
Which of the following items would you choose to
display at the service desk to help promote impulse
sales? (Hint: you can choose more than 1)
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not a part of their original plan that brought them to your store. Examples of
these types of items might be windshield washer fluid, snow brushes, or special
key chains with your logo on them.
What Should I Merchandise?

You can merchandise any item. However, the most effective focus for mer-
chandising is those items that are commonly known and highly competitive.
There is sound reasoning why those items are the most effective targets for
merchandising. Let’s explore that in more depth.
The idea of merchandising is to get customers thinking about their needs
and wants so that they are able to sell themselves on additional services and
repairs. This is done in contrast to you taking the time to go through a lengthy
presentation to customers to bring up every possible item that they might
want or need. Besides, since you’re probably not a mind-reader, how could
you possibly know about those needs and wants that the customer hasn’t
shared with you?
Displaying a computer module, although interesting to some, is not likely
to be appreciated by the majority of your customers or is it likely to inspire
them to buy one. In contrast, most of your customers know what a battery
looks like and most of them have heard enough tales about people getting
stranded in the winter with a dead battery. Therefore, they know what the
item is and can relate to its importance. Thus, this would make a good point-
of-purchase item to display as a reminder.
The second important focus for merchandising is focusing on highly com-
petitive items. These are those services and repairs that even the most techni-
cally challenged customer regularly reads about in flyers and newspapers. If
they are at all sensitive to their need to maintain their car they have some
sense of what the price is on the street for these types of parts and services.
Therefore, using these items as an intentional subject for your merchandising
helps to show that you provide these common services and that they can buy
from you, now, here and at a competitive price. We previously spoke about the
competitive pricing menu board that can effectively make this point. A simple
maintenance menu sign displaying your prices for the most competitive items
(oil change/tune up/wheel alignment/tire rotation) can effectively convey
this message.
Going back to the impulse items example provided earlier, your local gro-
cer could put fresh artichokes at the checkout line but he doesn’t. Why? The
most likely reason is that they are not an impulse purchase. That is, they are
not an item that most people will commonly want and need and get to the
checkout line having forgotten to purchase. Artichokes are more likely a need
than a want. They are either needed for a recipe or not. You can’t normally say
that about a candy bar or two AA batteries. You should focus your efforts on
common and competitive items, not on captive repair items. What are captive
repair items? Let’s discuss that further.
Captive repair items are those items are available only through a very Captive Repair Items
limited number of sources. They are those that cannot normally be provided Items are available only
by a great number of your competitors. Examples might be repair of some through a very limited
computer-related systems on a late model car that requires special tools or number of sources.
equipment. If you are a dealership selling and servicing that make of vehicle,
you have a captive market. Similarly, more complex and highly technical
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repairs are not likely to be provided by many of your competitors. Although

not totally captive they are semi-captive or low competition repair items.
Customers are unlikely to consider going to the local muffler shop or quick
service plaza to have their automatic transmission overhauled or to replace the
inner door panel on their new car. These are good examples of captive repair
items. Even though there are some other shops that might be capable of doing
this repair customers generally won’t consider shopping around for these
repairs. Further, due to the complexity and broad range of possible repairs and
costs it is much more difficult for customers to comparison shop on such an
item. Therefore, these are not items that you would want to merchandise.
In effective marketing, the major focus should always be on giving the
customer as many reasons as possible why they should choose to do business
with you. You do this by promoting features and benefits of the products and
services of your organization. The combination of these benefits makes up the
total value in the customer’s mind. Only when they can consistently feel com-
fortable that they are getting a better overall value from you than they are from
your competitors will you have a loyal, repeat customer. Point-of-purchase
merchandising can be a powerful and cost-effective tool in your efforts to con-
tinue to reinforce this message to your current customers every time that they
pay you a visit.
SUMMARY
In this chapter we have discussed an area of the marketing of salesman to remind customers of items that they want or
your service operations that is critical to your success, point- need and those that they might have forgotten. In addition, it
of-purchase merchandising. Point-of-purchase merchandising helps to raise their consciousness of items that they might not
includes all efforts that you make to display, promote, and have even realized that you were ready and willing to provide
demonstrate your capabilities to your customer through for them.
placement of reminders at your facilities. The end goal of point-of-purchase merchandising is to
The three major types of merchandising efforts are promote additional per-customer sales. By doing this through
through the use of signage, product displays, and impulse the use of these methods it is possible to suggest additional
item merchandising. These merchandising efforts may be tar- sales in a low-key, low-pressure way that will not make the
geted in a general effort to reinforce the attributes and values customer feel pressured or uncomfortable. After all, it is far
of your organization or to help directly promote the sale of a better for your long-term relationship when the additional
specific item. These communication tools serve as a silent purchase is their idea, not yours—and that is the point.
1. Promoting an item for sale is called c. impulse item merchandising.

a. promoting. d. all of the above.
b. merchandising.
3. _________________ is the ability to sell a customer more
c. marketing.
d. displaying. products or higher priced products than they had initially
requested.
2. Effective methods of suggesting the purchase of addi-
tional items to customers who are in your shop can be a. Add-ons.
done through b. Trickery.
a. signage. c. Up-selling.
b. product displays. d. Being a salesperson.
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4. _____________________ is a conscious effort to display, c. interior trim panel.

promote, and demonstrate the capabilities of a company d. battery.
to customers through placement of onsite reminders.
7. A special price offered for the purchase of a spec-
a. Point-of-purchase merchandising. ified combination of products or services is called
b. Shameless promotion. _________________________.
c. Marketing.
a. package pricing.
d. Bragging.
b. discount pricing.
5. A visible display comparing your prices to those of your c. being competitive.
competition on a variety of common repairs and services d. service merchandising.
is a ________________________.
Signage can be an affective tool for merchandising. Please list
a. service menu board. examples of two different types of signs that can be used in
b. package pricing guide. an automotive service shop.
c. competitive advantage listing.
d. competitive pricing board. 8. __________________________________________.
6. The repair item that would most likely not be a part of 9. __________________________________________.
a point-of-purchase display is a(n)
a. oil filter. 10. List three impulse items that you might find on display in
b. windshield wiper blade. an automotive service shop.
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C H A P T E R
28
Selling Service
CHAPTER OBJECTIVES
■ To analyze the relationship of sales per vehicle ■ To identify additional sales opportunities in the
to profitability repair shop
■ To examine tools that will help improve sales ■ To demonstrate the importance of focusing on
opportunities in the service drive customer repair priorities
KEY TERMS
billable hours walkaround safety inspection

service estimate soft-sell price leader
checkout time service pricing menu
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Selling Service ■ CHAPTER 28
Introduction
The survival of an automotive service shop depends upon providing service at
an affordable price. It also depends upon the shop’s ability to consistently
generate a profit. This depends upon more than just generating sales. It is also
dependent on how efficient your shop is. The ability of the shop to consis-
tently sell additional needed services to increase overall sales per transaction is
a major factor in achieving and maintaining shop efficiency and profitability.
Support Services
There is a major difference in the overall results to the company between sell-
ing $1,000 in labor by servicing 20 cars at $50 per transaction and one who
generates the same sales by servicing five cars at $200 per transaction. The
sales are the same but the net effect on profitability is very different. The rea-
son that they differ is the cost for support services that go into every customer
transaction. For every customer that comes into the shop the typical shop pro-
vides the following nine support services. These are all necessary activities for
which the customer is not charged. The nine support activities are as follows:
1. Greet customer and get their service information.
2. Prepare preliminary estimate.
3. Road test car to verify customer concerns.
4. After diagnosis, prepare detailed estimate.
5. Contact customer and obtain repair approval.
6. Road test car after repairs to verify problem is resolved.
7. Contact customer to notify that car is ready for pickup.
8. Prepare the service bill.
9. Take payment and release vehicle.
The difference in profitability between servicing 20 cars to generate $1,000
and servicing five cars to sell the same amount of service is in the number of
times that you need to provide the nine support services and the resulting cost
to pay personnel to provide these services. You can dramatically reduce the
amount of these indirect expenses and significantly increase the profit earned
for the same amount of total sales if you can improve your average sales per
vehicle serviced. Once you see the difference between these two examples the
answer is obvious, selling additional service per customer and increasing
billable hours per vehicle is an essential skill that your shop must develop Billable Hours
and consistently practice. The amount of time directly
It is important to understand before we proceed with discussing this topic related to the performance
that the shop’s focus needs to be more than just selling more service. It needs of repairs for which you can
to be selling more needed service. What is the big difference? The difference is charge the customer.
in being honest and ethical and in providing true customer service, not just
increased customer sales at all costs. A good customer service representative
must strive to be careful to maintain a careful balance where the driving force
is to be thorough, yet not oversell. That is, to always base the additional
service recommendations on those services that the customer needs and
wants. Only in that way is it possible to generate the ultimate goal: additional
profit and a satisfied customer.
In the last several chapters we discussed marketing, merchandising, and
the importance of promoting service to customers. Now that the customers
341
are in our shop and we have their attention, the way that we handle the sales
transaction during their visit will make the difference between success and
failure. A major deciding factor is our ability to identify and sell additional
needed service and repairs at every opportunity.

While working as service director in big-city shop we in the future. Yet, we could not afford to lose money
were commonly assaulted by competitors who tried on every transaction. The solution was that we all
to woo our customers away from us by waging price gave a little to make it work. The technicians agreed
wars for highly competitive repairs. The most com- to take a slight cut in time paid per oil change. The
mon of these was the ever-present cheap oil change parts department agreed to cut their profit margin
ad. The competition was eating into our market on the parts. The service advisors and technicians
share. The big question was “How do we compete agreed to make a serious effort to both do a walk-
and still make money?” around inspection and a review of the service histo-
We needed to be price competitive on the oil ries on each vehicle to be sure that they looked for
changes if we did not want to lose those customers. additional needed services on each vehicle. The
After all, if they went there for an oil change they service department agreed to run an ad in the local
might decide to stay there for their next alignment, newspaper advertising our new competitive oil
tire rotation, tune up, and so on. However, providing change pricing and to provide a special bonus to our
an oil change at a competitive price would result in us service advisors and technicians for all additional bill-
losing money unless we figured out some other way able hours sold on any vehicle initially scheduled in
to generate a profit. We had tried this before and did for just an oil change.
many oil changes, all at a loss, and really did not want The result of this collaborative effort was to
to be busy and lose money. That simply did not make retain our customers, sell more service per customer
any sense. So, what was the answer? The answer was transaction, and generate a profit for those vehicles
selling additional service. that came in for oil changes that were priced at a loss.
I met with the technicians, service advisors, and A greater long-term benefit was that our technicians
our parts department and we brainstormed. The one and advisors learned how much needed additional
thing that we all agreed on was that we could not service sales they could generate with just a few min-
afford the risk of losing these long-term customers utes of checking and our long-term average sales per
and the other business that we might lose from them repair order significantly increased.
Selling in the Service Drive

Selling service begins on the service drive as the service advisor greets the cus-
tomer when they first arrive. At this point, the customer has made a commit-
ment. He or she has chosen to do some amount of business with your company
and demonstrated this by taking the time to make an appointment or even just
to drive in unannounced with a service question or need. What you do with this
opportunity will make all of the difference as to whether or not you are success-
ful. A part of your success is based on your professional attitude and customer
relations skills but just as important is your ability to maximize the financial
return on the opportunity that the customer has provided you.
342
In the following sections we will discuss several of the most common tech-
niques that have been proven to help increase service sales per visit. These
techniques are the effective use of the service estimate, the walkaround, main-
tenance history review, and the use of a service pricing menu.
The Service Estimate

A service estimate is a preliminary idea of what the expected service costs will Service Estimate
be prior to beginning repairs. However, in most cases vehicles arrive without The preliminary appraisal
the customer or the service department having a clear idea of the exact repairs of the costs to perform
needed. How, then, is it possible to give an accurate and complete estimate? maintenance, repairs, and
Simply, it is not. Let us talk further about how to effectively prepare estimates. diagnosis given to the
An accurate estimate can be the key to obtaining or losing customer approvals customer prior to the
to perform service work. start of repair work.
The first step in estimating the cost of repairs is to determine whether the
needed repairs are clearly defined or are uncertain. If, for example, the vehicle
is coming in for an oil change it is possible to give a detailed and exact esti-
mate up front. If it is coming in for an oil leak it is most likely that the actual
repairs necessary to correct the problem are unknown until further inspection
and diagnosis is performed. In cases such as this, the best initial estimate will
be to project the time and materials needed to evaluate the situation and to
gather a detailed repair estimate. This is commonly called checkout time. Checkout Time
In a situation where the cause of the problem and needed repairs are to be Time and resulting charges
determined, it is important for the advisor to provide the customer with a real- related to inspecting and
istic estimate of the cost to evaluate the situation and make a complete and testing to determine the
accurate diagnosis. It is vitally important that the service personnel make it actual cause and actual
clear to the customer that this is a charge for diagnosis and that should they costs to perform needed
choose not to have the repairs done that they will be responsible for these repairs.
charges. In addition, the customer should be advised that these charges are in
addition to those that will be incurred for the actual repairs.
Failure to take the time to obtain approval for a reasonable preliminary
estimate for checkout time along with a careful explanation of how that pro-
cess works is likely to cause difficulties. Without being properly advised that
these preliminary charges apply whether or not there is an approval for repairs
leaves the shop open to the customer arguing that they did not know that
there would be a charge if they declined the repairs. Further, failure to differen-
tiate the checkout charges as costs in addition to the repair costs may leave cus-
tomers believing that if they approve the repairs the diagnosis will be included
in the final repair costs. Misunderstandings about these issues can be finan-
cially damaging as well as having a negative affect on customer satisfaction.
Just as it is important to recommend preventative maintenance to every
customer, it is important to provide a thorough preliminary estimate. Failure
to take the time to provide an estimate that relates to the difficulty of the task
at hand is likely to cause problems. If the initial estimate is too low it will
require a follow-up call to get additional approval for more money. This may
make the customers feel that you are trying to “nickel and dime” them and
they may lose confidence in you. On the other hand, overestimating the
needed time to arrive at a firm estimate may result in customers feeling that
they are being overcharged, which may result in the loss of the sale or, more
important, the permanent loss of a customer.
343

As service director, I found that I started receiving com- moving and was able to write up more customers by
plaints from a group of our senior technicians. They giving them a quick estimate and then calling them
consistently complained that it seemed like they spent back when he knew more.
more time waiting for approvals for diagnosis and I explained to him that it was creating a bottle-
repairs than they did fixing cars. After investigating, it neck in the shop and dissatisfaction among the tech-
became evident that the vast majority of these com- nicians. Further, I was concerned that it might cause
plaints trailed back to one service advisor. I asked some customer problems when they had to be contacted
questions and looked at some repair orders and I two and three times asking for more and more
noticed that the initial estimate on almost every one of money just to finish diagnosing their cars. I directed
the repair orders that he wrote up was the same—$25. him to take more time preparing more thorough esti-
The estimates were always small—and always the mates in relationship to the complexity of the prob-
same! How could it be that they all needed the same lems that the customers had indicated.
amount of time? How did he arrive at that figure? The result was that he wrote up a few less orders
I met with the service advisor in question and each day, but improved his sales and the productivity
expressed my concerns and showed him a variety of of the technicians. The percentage of estimates that
examples of the estimates and asked him to explain. turned into approved repairs increased. It ended as a
He said that he did a better job keeping the customers win-win situation for all involved.
The Walkaround
Upon greeting the customer in the service drive the advisor can simply be an
order-taker or can be a service salesperson. As an order-taker the advisor is in a
reactive mode where he simply listens to what the customers says that he
wants or needs and provides those services. This type of approach sounds
more like a fast-food restaurant than an automotive service shop. However,
even the better fast-food restaurants do more than this. They ask the customer
if he would like a combination meal, dessert, or to try their new menu item.
Why? Because they (or their supervisors, at least) know the value of generat-
ing additional sales per customer. A professional automotive service advisor
should be expected to do at least that much!
One of the most effective methods for moving from the position of order-
taker to that of service consultant and salesperson is the effective use of the
Walkaround walkaround. When the customer arrives, the advisor should make every
A physical inspection of a attempt to move with the customer to their vehicle. Then the process
vehicle by walking around becomes very simple. Let him point out to you exactly what it is that he wants
the entire vehicle looking to have done. By doing so, you are able to demonstrate your genuine interest
for indications of additional and empathy in the customer’s vehicle, his concerns, and his needs. Then,
needed service or repairs. while you are at the car you can do a very simple walkaround.
After the customer has completed his explanation of what is wrong and
what he wants you to fix you can then take the lead as you slowly walk com-
pletely around the car looking for any telltale signs of other repairs or services
that are needed. As you spot these signs you can very easily point them out to
the customer. It might seem high-pressure sales to recommend services or
repairs from a distance. However, it is much easier to suggest a sale when you
are standing next to the broken mirror or worn-out tire, looking at it and put-
ting your hand on it as you inspect it more closely and ask “Would you like
me to address this issue too while you are already here?” This technique can
help you open the door for adding additional service items to most vehicles
that enter your shop and, thus, increase your per-vehicle sales and net profits.
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Maintenance History Review

One of the simplest opportunities to up-sell needed service to every customer
is the reminder of pending or overdue scheduled maintenance. The manufac-
turer of every vehicle on the road strongly recommends the value of preventa-
tive maintenance. They all spell out a regular schedule for performing that
maintenance throughout the life of the vehicle. They even warn owners that
failure to do so may reduce the useful life of the vehicle and/or void the war-
ranty. However, it is widely accepted that the vast majority of vehicle owners
are not attuned to that information and either are not aware or choose to
ignore the warnings. Therefore, the majority of vehicles that come into your
shop are likely to be overdue for these simple, affordable, and highly profitable
services.
When a customer arrives for service the job responsibility of the service
employee to be more than an order-taker, he or she must truly be a service
advisor. It is the customer’s expectation that the service advisor is their techni-
cal service expert. Advising customers of upcoming and overdue vehicle main-
tenance is a primary part of being this expert who is counseling the customer
and informing him what he needs to have done and should have done.
Recommending preventative maintenance is one of the easiest items to
soft-sell to every customer. Even though customers neglect maintenance most Soft-Sell
of them are aware that there is some care and upkeep that they are expected to A pressure-free approach
do. All that the service advisor needs to do is to be the one to remind them. to selling based on
Many customers intend to have maintenance done but simply forget. Others gentle reminders and
may be putting it off but realize that they are taking the risk of having a pre- recommendations.
mature failure. That makes these types of sales easy, yet the opportunity is too
often missed.
Service personnel live in a very hectic, fast-paced environment. As such, it
is easy for them to forget to do the little things because they are in a hurry to
get this customer’s vehicle done and get a short break before the next one
arrives. Another cause for failure to recommend the full package of mainte-
nance services is due to the advisor’s lack of personal belief. That is, the advisor
may think that the 30,000-mile service is expensive and, as a result, be hesitant
to recommend it to the customer.
Whatever the reason for failing to recommend the preventative mainte-
nance is, there are two compelling reasons why all service personnel need to
make these recommendations to all customers every time that they enter the
service area. First, as the service experts the customers expect the company
personnel to accurately and completely advise them of needed services and
repairs. If a premature failure occurs, especially shortly following a trip to your
shop, the customer is likely to want to throw some of the blame on the shop.
After all, you are the experts. The conversation with the service manager fol-
lowing a failure is likely to sound something like this: “Why didn’t you tell
me? How was I supposed to know? That is why I spend the money to bring my
car to you rather than doing it myself! Can’t I depend on you to give me cor-
rect advice?”
The second reason for consistently recommending preventative mainte-
nance is job security. That is, we already know that up-selling additional serv-
ices and repairs increases the shop’s productivity and profitability. We also
know that preventative maintenance is one of the most often neglected areas
in the automotive service industry. Therefore, it is one of the primary means
by which a service advisor can significantly contribute to the bottom line
through his or her efforts in working with every service customer.
345

Over the years, there are very few service managers customer was called and advised of what we had
or advisors who have not encountered a story from a found and I explained further that the manufacturer
customer where a premature major failure has had been consulted. The customer was advised that
occurred due to lack of preventative maintenance. there was clear and undisputable evidence of lack
The following is one of many that I experienced. of maintenance that voided any warranty coverage
A late-model vehicle is towed in with the com- for this failure. The customer’s immediate response
plaint “engine quit, will not turn over or restart.” This (before “I am going to have to call my lawyer”) was
vehicle was about 18 months old and had 17,000 miles “But nobody ever told me that I had to change my oil
on it and was still within the manufacturer’s basic war- when I bought this car!”
ranty. Upon inspection it was evident that the engine Fortunately, we conducted regular service
was seized up due to overheating. The engine would advisor training in our shop and had a clear and
not turn over at all, even with the use of a breaker bar, consistent focus on reviewing customer service files
and looking into the valve cover it was easy to see the and recommending preventative maintenance. As a
discoloration due to severe overheating. result, when the customer called me and, in a very ani-
I asked the technician to pull the car into the shop mated conversation, accused the company of never
to put it on a lift for a more thorough inspection. I was having told him about the need to change the oil it
concerned that this looked like it might be a case of was easy to calmly respond that this could not
neglect rather than a warranty failure. As soon as the have been the case. I recounted to the customer our
car was up in the air the technician called me to his stall. service reminders that we regularly sent him, the
“Look at this” he said as he pointed to the oil filter. The service history that we printed on every one of his
vehicle still had the original factory-installed oil filter. repair orders, and the regular review of maintenance
The filters that come on new engines from the factory that the advisors conducted at every visit.
are typically distinctively different from those that you Because of our consistent pattern of reminding
can purchase from any store (even from dealerships) customers of needed maintenance in our shop we were
and this one had obviously never been changed. I did not only able to generate a significant amount of
not want to risk a denied warranty claim. increased sales per vehicle, we were even able to dodge
I called our factory rep and explained what we a bullet that might have resulted in a legal battle. This
had found. He declined any warranty assistance. The is just another way that doing the right thing pays off.
Service Pricing Menu

Service Pricing A valuable tool to help service personnel to accurately and completely provide
Menu estimates quickly is a comprehensive service pricing menu. This may be in a
A comprehensive quick notebook or be PC-based. In either format, the purpose is to provide a quick
reference listing common reference for the service salesman to be able to identify and accurately quote
service repairs and pricing. the cost for the majority of common repairs that the shop performs.
A comprehensive pricing menu is far more than a listing of preventative
maintenance items and maintenance packages that you might see on a flyer
or on a menu board in the service drive. It lists common light, medium, and
even heavy repairs. The menu is commonly organized by vehicle systems (for
example engine repair, brakes, electrical, and so on). The purpose of the menu
is to give the service salesman a fingertip reference source to save time and
improve accuracy. Rather than developing a completely new estimate each
and every time a repair is needed, the most common repairs are already
recorded. The only additional work that it requires is periodic updating as
labor or parts prices change. This provides a tremendous time savings and
greatly reduces the chance of errors in pricing estimates.
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The comprehensive menu provides two additional benefits. It assures that

pricing is consistent for all customers. This helps to assure the credibility of
the shop. It provides the service salesman the opportunity to provide useful
and accurate information to customers. Rather than simply giving an estimate
for checkout time they can also prepare the customer with a range of possible
final costs depending on what is found. They are now in the position to give
an accurate estimation of the most likely repair based on the symptoms and
can get approval to spend up to that limit during the preliminary estimate.
This reduces wasted shop time. In addition, the menu information provides
the service advisors with information on parts and labor costs that will help
them to address customer price inquiries.
Selling in the Shop

So far we have covered most of the opportunities that the shop has to sell
service out at the service write-up area. However, the face-to-face interaction
between the customer and the service advisor is not the only potential place to
sell service nor is the advisor the only one who should be involved in looking
for opportunities to sell it. In this section we will focus on the most often neg-
lected area to identify, recommend, and sell service: the opportunities that the
technician has in the repair shop. The service technician should always be
looking for opportunities to identify additional needed maintenance or repairs.
Two methods that can help are the consistent use of a safety inspection along
with a general physical inspection to look for telltale signs of problem areas.
Safety Inspection
Having every technician perform a safety inspection on every vehicle that Safety Inspection
comes into the shop can be the most valuable tool for increasing per-vehicle A visual check of a wide
labor and parts sales in any shop. There are four major reasons why an inspec- range of systems on
tion should be mandatory for every vehicle. the vehicle that could
affect vehicle safety or
1. As the service experts, the customer expects that when their vehicle
reliability.
leaves your care that it is fixed . . . and that includes having informed
them of any and all other services or repairs that they need.
2. A failure, even if completely unrelated to those services that had been
requested, that occurs shortly after a visit to your shop will almost
always be accompanied by the question from the customer “What did
you do to my car?”
3. No one has the technical ability or better access to quickly and easily
identify additional needs more than the technician who, while
driving the car, pulling it into the shop, and working in and under it
has the perfect vantage points to find other needed work simply by
looking around.
4. Last, and certainly not least important of all, it is the best means to
up-sell legitimately needed repairs per vehicle, thus enhancing tech-
nician productivity and shop profitability.
Although some shops charge a nominal price for the service inspection,
only a percentage of customers are willing to bring their cars in to pay specifi-
cally for this service. The potential benefits of this inspection are far greater to
the shop if it is carried out on all vehicles by all technicians. In order to do this
347
it is much more marketable as a free customer service that you can promote to
all of your customers as “just our little way of showing that we care” to provide
them additional peace of mind. Meanwhile it rewards you with additional sales
and profits. An example of a free 10-point service inspection worksheet is pro-
vided in Figure 28-1.
10 point service inspection

During your visit to your shop we were glad to inspect the following systems for you at no charge.
Please let us know if you have any questions regarding this free service.––The Service Department
CONDITION
Systems Inspected OK Needs Attention Comments
Fluid levels
Belts & hoses
Horn
Tire condition and inflation pressures
Front lights (headlamps, front turn signals)
Rear lights
Figure 28-1(taillamps, brakeservice
Free 10 point lights, turn signals)
inspection worksheet
Seat belts
Hazard flashers
Exhause system
Suspension system
Figure 28-1 Free 10 point service inspection worksheet
Selling for the Entire Shop

Along with all of the technical training and experience that your technicians
have they have also worked to develop their ability to spot a problem quickly
and accurately. Your job in getting them more involved in selling service is to
get them motivated to use those skills on every vehicle that they see. It is not
hard to convince a technician who specializes in brakes and suspension work
to notice a loose ball joint while the car is up on the lift for a brake job. The
technician will get a direct benefit from spotting and doing this extra work.
What about the noisy muffler that she notices as she pulls the car into her
stall? She does not do exhaust work—and does not want to, either.
Becoming more aware of those things that are not directly related to the
work that they have been assigned requires a shift in mindset for most techni-
cians. They need to see themselves as more than individuals; they need to
become a part of the departmental service sales team too. This is a value that
you should try to instill in all of your employees. After all, if every one of them
is looking out for the best interests of the entire team they will all get addi-
tional work, earn additional pay, and you will earn additional profits. But
what do you do when that type of team spirit is not quite there yet?
In some cases, when trying to instill new habits and values into your
workforce, it is necessary to provide a short-term incentive just to prove your
point. An example of such an incentive would be to provide a small bonus to
each technician for additional work that they identify that is then sold to the
customer and performed by others in the shop. This demonstrates the point of
the ultimate benefit of everyone doing this for the common good.
348
CASE decision if you can consistently generate enough

additional sales as a result of this promotion.
As the service manager you need to continue to find
ways to attract more customers or to create a reason You decide
for your current customers to stop in a little bit more You have just finished running a $49.95 alignment
often. You realize that the most common way to do special. A review of repair records indicates that the
this is to promote common services as price leaders. shop has done 40 alignments during this two-week
A price leader is the practice of significantly lowering special. They normally sell this service for $69.95
the price of a commonly used product or service to and pay the technician $50 for labor, a net profit of
attract attention and additional business. It is typical $19.95 per alignment. A careful review of the repair
that price leaders are priced at very low profit margins orders shows that 40 cars came in for alignment but
and, in some cases, can even be priced at or below 20 of them were regular customers and 20 were new
actual cost. With low profit margins or no profit customers. How do you think the company fared as a
margins how can this be a good business decision? result of this promotion?
The answer is simply that it is only a good business
CASE walkaround to identify additional needed services.

As a result they averaged $50 in additional preventa-
You are the service manager. Based on your past expe-
tive maintenance sales per vehicle. In addition, all of
riences you decide to try a $49.95 alignment special
the technicians did their best to carefully inspect the
again this year but with a different twist.
vehicles for additional needed services and repairs to
You decide these 40 additional cars. They identified and were
In this case, you priced the repairs the same and able to sell five complete sets of four tires, along with
used this opportunity for your service advisors to rec- more than $4,000 in needed suspension and other
ommend preventative maintenance and a vehicle vehicle repairs. Was the promotion successful?
The Value of Increased Sales per Vehicle

With the example of the alignment special still fresh in your mind, think for a
minute about the effect of the two ways of handling the promotion on the
technicians, the advisors, and the company. In both exercises the company
priced the price leader the same. In both scenarios the service advisor took Price Leader
the time to make the appointment, to meet and greet the customer, to write A product or service offered
him up for service, to notify him when the car was done. In both scenarios the at an unusually low price or
technician did identical alignments. profit margin to attract
It is obvious that the company generated significant additional sales in customer traffic.
the second scenario as a result of up-selling. However, the profits were much
greater than just that. Significant additional profits were earned because of the
increased efficiencies of simply increasing the sales per vehicle. That is, the
advisor spent a similar amount of time with the customers in the first scenario
and the second scenario, yet generated substantially more sales and profits
349
with the same efforts in the second scenario. Likewise, the technician took the
same amount of time road testing the vehicle and pulling it into the shop in
both scenarios but was able to do more productive (and profit-producing)
work in the second scenario. Without the additional sales generated from the
price leader in the second scenario he would have had to work on one or more
additional cars to generate the same amount of labor and parts sales (thus hav-
ing to spend lost time road testing and pulling those cars in and out). As a
result of up-selling he was able to become much more efficient in the use of
his time—and generated additional profits for the company.
Some Words of Warning

If you have carefully read the advice that I have been providing in this chapter
you know that we have been talking about selling needed services. The idea of
up-selling and generating additional sales per repair order can often be so
tempting that shops go overboard. That is, they work so hard to push the idea
of additional sales per repair order that employees feel compelled to start sell-
ing additional services whether or not they are really needed. Let us close this
chapter with two important warnings about up-selling service: sell only
needed service and focus first on the customer’s main concern.
Sell Only Needed Service

It probably is not necessary to remind anyone that customers are skeptics
when it comes to automotive service. That is, they are wary that they are
going to be sold things that they do not want or that they do not need.
Unfortunately, the automotive service industry attracts local and national
attention every time someone is caught red-handed overpricing service, sell-
ing unwanted or unneeded service, or in any way taking advantage of a cus-
tomer. You can check the newspapers or the video archives of local exposés or
national stories on network television to find incidents like these. They are,
without question, ones that you do not want to be involved in.
The best protection from accusations of unethical practices is to be sure that
the repairs and services that you recommend are based on sound service prac-
tices. That is, recommended maintenance can and should be based on published
manufacturer recommendations. Service recommendations should be based on a
complete diagnosis performed by a qualified technician. It is my strong advice
that any time that you have doubts about your ability to back up your recom-
mendations with these credible resources—simply do not go there! It is not
worth jeopardizing your reputation and that of your company over a few dollars.
Focus on the Customer’s Main Concern

This may sound like another simple suggestion, but it is extremely critical to
customer satisfaction. In the flurry of activity to recommend additional sales
at the service desk and then again in the shop it is critically important to keep
clearly in mind what the customer’s primary concern is. That is, it is essential
that you clearly document the customer’s primary reason for coming in for
service. This item must be resolved before addressing any additional mainte-
nance or service items.
The reason why you must take a hard-line approach on this is very simple.
The customer has come to you with a problem. Whether it is a seized engine
350
or erratic radio reception, it is something that is of great enough concern to

justify them making an appointment and taking the time out of their busy
day to get it resolved. Failure to address this issue is, to the customer, a total
failure on your part to provide service. Regardless of all that you have done
right, if you fail to fix this one item you have failed completely.
If you take the time to look for, sell, and perform other services while the
car is in the shop yet ignore the customer’s primary concern it will often be
taken as an insult by the customer. It may seem petty, but experience has
proven time and time again that you must keep your priorities in line with the
customer’s needs—and if the customer needs you to fix his radio static then
you need to be sure that you do that—even if you notice a much more serious
and potentially hazardous problem!
SUMMARY
In this chapter we have discussed the importance of selling through a concerted team effort on the part of the service sales-
service. Customers depend upon their service advisors and person (advisor or manager) and the technicians that you can
technicians to be their expert consultants who will provide maximize the service opportunity presented every time a cus-
them with sound advice, guidance, and fair pricing for repairs. tomer drives through your doorway to add to your bottom line.
It is important that you thoroughly and conscientiously evalu- It is imperative that the focus on increasing sales does
ate their vehicle, recommend needed maintenance and serv- not compromise your credibility or that of the shop. You can-
ices, price service and repairs competitively and complete them not afford to let your drive to sell more compromise your val-
on a timely basis to maintain satisfied customers. ues. You must remember to always and only sell needed
While contributing to customer satisfaction, maximizing service and maintenance. Finally, no matter what the situa-
sales per service transaction has a marked effect on the prof- tion, if you are truly focused on providing the best service for
itability of any service operation. There are multiple opportuni- your customer you must always be sure to clearly identify
ties to sell service in the service drive and in the shop. It is their primary concern and make a point to fix that first.

1. A free service provided to customers that can be an d. a and c.
effective tool in finding addition needed repairs is the e. b and c.
a. service estimate. 4. A service advisor has to carefully explain to the customer
b. price leader. that the charges for _______________ are for doing the
c. safety inspection. diagnosis and that the customer will be billed for these
d. all of the above. charges if they do not approve the repairs.
2. A ___________________ is a product or service that is a. price leaders.
specially priced at a lower profit or at a loss with the b. safety inspections.
intention of attracting business. c. checkout time.
a. loser. d. service estimate.
b. price leader. 5. A ____________________________ provides the service
c. super special. advisor with a quick-reference source of information
d. total loss. listing the current price for parts and labor for common
3. The service advisor can identify additional needed repairs repairs.
or services easily through the use of _________________. a. service pricing menu.
a. a walkaround inspection. b. comprehensive repair estimate.
b. a walkabout inspection. c. fast-food menu.
c. checking the maintenance history. d. price leader.
351
6. A service department can dramatically improve its effi- List three of the nine support services that a shop generally
ciency and profitability by increasing the number of provides as a part of every service transaction at no charge.
________________ that it sells per service transaction.
8. _____________________________.
List one of the four reasons why a safety inspection should be
9. _____________________________.
done on every vehicle that comes into the shop for service.
10. _____________________________.
7. _____________________________.
352
SECTION
9
THE LEGAL ISSUES
AND RESPONSIBILITIES
A utomotive repair continues to be at or near the top in total number of consumer

complaints every year. The importance of automobiles in people’s lives is likely to con-
tinue, thus making automotive repair one of the most important business transactions that
people make in their lifetime. Awareness of and compliance with state and federal regula-
tions is essential to ensure that the manager and the organization are operating within the
boundaries of the law. Further, in order to protect employees and the public the manager
is required to direct and control compliance to safety regulations. In this section will discuss
these two important topics and conclude with a discussion of the how advanced planning
can ensure a safe workplace.
• CHAPTER 29: Legal Guidelines for Service • CHAPTER 30: Workplace Safety
Operations
C H A P T E R
29
Legal Guidelines for
Service Operations
CHAPTER OBJECTIVES
■ To examine the implications of the repair order ■ To examine the requirements and respon-
as a legal contract sibilities for repair and vehicle warranties
■ To identify the major areas of legal respon- ■ To examine the special laws and systems devel-
sibilities in customer transactions oped to resolve customer disputes with vehicle
■ To distinguish the major types of legal actions repair issues
related to automotive repair
KEY TERMS
litigious small claims court lemon law

civil warranty binding arbitration
criminal subject matter expert
contract compensatory damages
355
SECTION 9 ■ The Legal Issues and Responsibilities
Introduction
Litigious We live in a litigious society. That is, everything is influenced, affected, and,
Likely to resolve disagree- in some instances, run by the ability of anyone to sue anyone over anything.
ments or disputes by This is particularly true when dealing in business and, especially in the retail
engaging in lawsuits. trades. The automobile is typically the second largest purchase that any indi-
vidual makes during his or her lifetime. That is one of the reasons why it is
one of the prime targets for many of these legal actions.
Our society is very independent. People rely upon their ability to move
about freely. The automobile is the primary product that provides them this
flexibility. People rely upon their cars to get them to work, to an appointment,
to the store, to a date, to the doctor, and back home again. No other single
product contributes so much to our daily freedom and, thus, is a greater source
of frustration and anger when it does not consistently perform its function.
When frustrations arise it also becomes a cause for legal action to seek remedy
for these situations.
In this chapter we will discuss the legal responsibilities and potential con-
sequences related to our dealings with customers. Consumers are protected
from unfair treatment by a variety of state and local laws. Although these laws
vary slightly in their standards and legal remedies, they are common in
concept across the states and territories of North America, and beyond. We
will also explore more adversarial legal encounters addressing repair liability
and product liability and the potential avenues of legal recourse open to
customers.
Customer Issues
Consumer rights cover a broad range of expectations that consumers have
when they consult an expert and hire that expert to do something on their
behalf. As an automotive service shop you are that expert. By taking on that
role, there is a broad range of legal responsibilities and related liabilities
that assume with each service transaction. Your responsibilities begin with
Civil performing workmanlike and quality repair up to responsibility that the
Related to the code of laws vehicle is safe and able to perform its expected function. The legal liability
and resulting legal actions that you assume for your actions ranges from a small claims court fine up to
developed to protect the and including civil and criminal charges and penalties. You are account-
rights of the individual able both civilly and criminally for what you promise, what you perform, and
and general public. all events resulting directly or indirectly from your actions. That is a very
large and serious group of responsibilities and, therefore, you must under-
Criminal stand them.
The code of laws developed
to punish serious and/or
intentional violations of
The Repair Order
the law. The most simple, direct, and common involvement that every service person
has with the law is in the preparation of a repair order. It is too commonly
Contract overlooked that the repair order is a legal contract. It is a two-party agreement
A binding legal agreement that states what both parties agree to. It states what the customer’s concerns
between two or more are. It states what items you are expected to address and resolve. It states what
parties. your company’s expectations are in return—the price to be paid. It also indi-
356
Legal Guidelines for Service Operations ■ CHAPTER 29
cates a timeline for all those events to be completed. Finally, it is on your sta-
tionery and is signed and dated by the customer, who acknowledges his
acceptance of the terms.
The repair order form, format, and wording are standard for a very important
reason; it must comply with state and local codes and laws regulating service
transactions. Although these laws vary to some degree from region to region
the general information included, as noted earlier, is universal. Taking the
time to accurately, completely, and legibly fill out a repair order is an essential
and very serious responsibility of every service employee who deals with
customers. As with a contract to purchase a house, a car, or any other item, if
any disagreement arises about the transaction the foundation for any legal
arguments will go back to what is stated in writing in the contract, the repair
order.
The typical repair order includes statements of the terms and policies of
the company. These are there to ensure that the customer has been duly noti-
fied of the conditions of this contract on behalf of the company. Most impor-
tant for the service employee, there are four areas of important information
that must be accurately and completely completed. The first of these areas is
customer information. This information will include the name, address, and
phone number of the customer. It will also indicate specific contact informa-
tion for how best to reach the customer during the time that the vehicle is in
the shop.
Vehicle information is also an important data source for this contract. The
vehicle information includes make, model, color, license plate number, VIN
number, and current mileage of the vehicle. The accurate recording of the VIN
number, which is unique to every vehicle, and the current mileage can be
essential in the event of legal action.
Repair requests are the primary reason for the customer’s visit to the shop.
Completely and accurately recording the customer’s concerns and their
requests for service is essential. This information provides your technicians
with guidelines for action. Incomplete or inaccurate documentation of the
customer’s wishes is likely to result in customer complaints. It is for this rea-
son that you should always ask the customer to review what you have written
down and verify that this is an accurate and complete explanation of what
they want before they leave.
The fourth and final area is the section on the repair order to record cus-
tomer approvals. This data generally documents three specific and important
pieces of data. The customer signature is provided as an overall agreement to
the terms of the contract. That is, that he acknowledges that he has read,
understood, and accepted the general terms of the contract and that he agrees
that the explanation of his concerns and repair requests is thorough and
accurate. The second approval, usually initialed by the customer, indicates
approval of the initial or preliminary repair estimate. The final approval is the
customer’s agreement of how he wants to be notified to obtain additional
approvals once he has dropped the vehicle off and left the premises. All of
these three areas are important and binding legal agreements between the
company and the customer. All three are required to comply with most repair
order laws. As a result, failure to accurately and completely comply with all of
them all of the time can lead to significant disagreements with your customers
and, unfortunately, can result in legal action.
357

While working as a service director I had become very He said that it was his home number and went on to
aware of the legal implications and risks of our repair say that he was not at home that day; he was on the
laws based on the horror stories that I had heard road with his work. I asked, “Would your wife have
from some of our competitors as they returned from been home during that time?” He said, somewhat
court. I met with my technicians and service advisors sheepishly, “I guess so.” I pointed out to both the cus-
several times and tried my utmost to spot-check tomer and the magistrate that there was a clearly
repair orders and procedures to assure that we were written note on the hard copy of the repair order
following the law both in spirit and to the letter. where the service advisor had noted “approval given
I believed that we were doing fine until one day. . . . by phone—$385” that also documented the exact
The dealership received a summons in the mail. date and time that the approval was obtained.
I was called to the general manager’s office because The judge turned to the customer and asked,
this complaint was related to a service problem. “Did you check with your wife to see if she may have
When the general manager brought up the cus- given the approval?” The customer said nothing and
tomer’s name I had no recollection of any problems simply shook his head NO. He then tried to argue that
with the customer or the vehicle. The documentation it was his car and that he never told them to call his
summoned us to appear in small claims court to wife. This last-ditch effort to make his point fell short
defend ourselves in the case of this customer who of the mark.
said that we had not obtained proper approvals for Based on the evidence presented the magistrate
the $385 repairs done on his engine. I checked the dismissed the customer’s complaint for the $385. I left
records and the repair order documented the date the courthouse with a smile on my face. Feeling
and time when the customer had approved this somewhat shaken by having to go to court at all I felt
amount for the repairs via the telephone. I was like the vindicated victor proud of how, unlike some
incensed. The customer was trying to take advantage of our competitors, we were doing it all right.
of us. We had done the job right, we had gotten the About ten days after the hearing we received the
proper approvals and my response was, “We are final judgment of the court. In it was a big surprise. It
right, let’s fight!” documented the finding in our favor on the customer
I arrived at court on the appointed date and time complaint. In addition, however, it was a letter stat-
armed with the customer’s file and all of the supporting that we were being fined $500 by the state. It
ing documentation. The customer went first and went on to explain that after review of the document
pleaded his case. His main point was that he insisted it was found that the dealership had not complied
that we never spoke to him to get the approval for with all of the laws and regulations of the repair code
the $385. The magistrate then asked me to explain in that we did not have the customer sign and initial
our position. I responded by citing the date and time all of the proper boxes on the repair order.
noted on the repair order at which the service advisor Did we lose? Yes. Did we learn? Yes. In the long
had documented that approval was given. The cus- run, was it worth it? Yes. As a result of this small
tomer shouted out that he was not available at encounter all of the people that I have worked with
that time and was on the road and, thus, could not since that date have heard “that little story about
have given the approval. Somewhat puzzled, I asked, small claims court” and, as a result, we all are a lot
“What phone number did you leave the service advisor more careful about how we handle every customer
as the number to call if an approval was required?” transaction.
Quality of Repairs
The most general responsibility of any repair shop is to consistently perform
repairs that meet or exceed customer expectations—quality repairs. As a busi-
ness operating in the automotive service industry it is a reasonable expecta-
tion of every customer that you are an expert in your field and, as such,
358
regularly perform work to this standard. This includes not only fixing the cus-
tomer’s concern but doing so in a manner that is consistent with accepted
industry principles and practices. This means providing a safe and lasting
repair at a fair and reasonable price. Any consumer can, and will, question you
and your shop if they have concerns that all of these criteria have not been
met. It is not uncommon for those who do not feel that they have received
what they bargained for to take legal action.
The most common method for customers to take legal action for minor
complaints is small claims court. Most areas provide an easy, low-cost means Small Claims Court
for individuals to request a legal hearing before a referee or judge to resolve A local court that deals with
minor disputes involving items of low monetary value. These courts do not minor civil actions. Common
deal in large-ticket civil issues or criminal concerns but are provided strictly to features of these courts are
address small misunderstandings. Since most of these courts allow the cus- that the actions are typically
tomer to represent themselves the cost to file and proceed is very low. heard by a magistrate or
As a service manager the small claims court is likely to be your most com- other court-appointed
mon direct encounter with the legal system. Examples of complaints that are referee, the value of the
heard in these courts include being overcharged, not having the work done by claim or damages is limited
the agreed-upon time, poor workmanship, and not following specific repair to $1,000 or less, and self-
order laws. representation is allowed.
Small claims court, however, is not the customer’s only legal recourse. If
their dissatisfaction and perception of their loss, damage, or injury exceeds
the limitations of a small claims action they have the ability to pursue action
for greater penalties and restitution through civil and criminal court actions.
Although these actions are more lengthy and expensive in both time and legal
fees for both parties the potential findings and penalties are much higher.
Repair Warranty
Consumer protection laws vary from state to state. One commonality, how-
ever, is that they all have laws that protect consumers against unfair sales prac-
tices. If you are not familiar with the laws in your state and locality you should
be. I strongly urge you to get a copy of the federal, state, and local regulations
relating to automotive repairs and repair liability, study them, and keep them
as a handy reference just in case.
The most commonly cited unfair practice is failure to reasonably
warranty and correct a premature failure of a repair. The specific minimum Warranty
guarantee is based on state or local repair warranty codes. In the automotive A guarantee of the integrity
industry a 90-day/3,000-mile repair warranty has been the national industry of a product or service
standard for the past 20-plus years. Any reputable repair shop or parts supplier including a commitment
expects to provide a money-back guarantee for a failure within this time. The to correct problems related
only caveat is for failures due to abuse or negligence. to that product or service
There is no question that you must offer a warranty and know what your within a specified time or
legal responsibilities are in your locality. Failure to comply with these legal usage limit.
requirements will result in expensive legal proceedings. They are difficult to
defend except in a clear-cut case of abuse and can garner your shop some very
unwanted negative publicity.
Some shops have made a point of turning the requirements for providing
a repair guarantee into a marketing benefit. By heavily promoting and honor-
ing a warranty that exceeds the legal minimum standard, even to the point of
providing a limited lifetime warranty, they use this to demonstrate their supe-
riority over the competition.
359
Safety and Reliability

Concerns about the general quality of repairs and compliance with warranty
regulations are the most minor legal encounters that you will experience.
Questions of the safety and reliability of repairs pose much more serious and
potentially damaging legal questions.
There are two areas of concern regarding safety and reliability. They are
those related directly to the repairs performed and those related to the overall
safety of the vehicle. From the position as the expert in automotive repair
your shop takes on the burden of advising the customer from that perspective.
As such, there is a responsibility to tell them what the correct repair is and to
follow that path. Taking shortcuts resulting in unsafe repairs are a clear viola-
tion of the customer’s trust in you as the expert. At times this may occur at the
specific request of the customer. This, however, does not absolve you of
responsibility.
It is not uncommon for a customer to ask if you can do something cheaper.
This may be accompanied by requests to bring in their own parts or for you
to use rebuilt or junkyard parts. You need to be aware that although these
shortcuts may be at the customer’s requests, the customer is not the repair
expert. You continue to be liable for the quality of the repairs that you do regard-
less of the circumstances. If you knowingly make repairs that you do not believe
are thorough, complete, and up to industry standards you are responsible. You
may even encounter liability if you refuse to do a repair.
As the expert in automotive repairs you also have a professional respon-
sibility to advise customers of an unsafe and potentially dangerous condition.
Many shops operate under the misconception that if they refuse to work on a
vehicle that they have no liability. What if a car comes into your shop and you
discover a very unsafe condition, even one that is totally unrelated to the cus-
tomer’s initial service request? What should you do? What are your respon-
sibilities and potential legal liabilities?
Subject Matter Because you are the subject matter expert you can be held accountable if
Expert you allow the customer to take the car back out on the road without clearly
Someone who is generally advising them that the vehicle is unsafe. The clearest protection that you can,
accepted as having special and should, employ if the customer insists on driving his car out after your
knowledge or skills in stern warnings is to put a clear statement on the repair order indicating that
a particular topic area the vehicle is unsafe to drive and that the customer has acknowledged accept-
because of training ance of this warning. To be sure that the customer really understands the risk
and education. involved, and to protect yourself, you need to be sure the customer signs this
before leaving.

As a service manager I have seen cars come and go cant amount of off-roading. Because of all of the
that are rusty, neglected, and, in general, a risk to worn and loose bushings he really believed that the
drive. None, however, were quite as clear and obvi- front end needed extensive and expensive work to
ous as the SUV that came into the shop because it be safe to take back out on the road. He suggested
“steered kind of funny.” Once the technician had that we do it all or tell to the customer that we
inspected the car he called me over to his stall. He decline the opportunity to do the work at all. I was all
pointed out that the vehicle had obviously been prepared to give the customer a big estimate and the
driven hard and that there was evidence of a signifi- all-or-nothing ultimatum and then he pointed out to
360
me his last and final piece of evidence. The lower con- him not to drive the car and that he should have it
trol arm on the right side of the front suspension had towed out of our shop. He said, “It is my car and I will
a large crack in it. It showed evidence of being hit drive it out of there if I want to!” At that point I
and, frankly, I had never seen one with that much informed him that we were putting a statement on
physical damage. It made me think not only about the repair order that clearly indicated that the
the need for extensive repairs but it also made me vehicle was unsafe to drive and that we recom-
think “What if the customer declines? This vehicle is a mended that he not operate it until repairs were
hazard on the road and at any moment he could lose completed. Further, he was told that we would not
complete control of steering and get killed and/or kill release his keys to him until he had signed the state-
someone else!” ment acknowledging that warning.
Following normal procedures the technician gave When the customer arrived I received a call from
the estimate to the service advisor so that he could the cashier. He wanted his keys and did not want
speak to the customer to get approval for the repairs. to sign the warning. I met with the customer and
In addition, however, I made sure that the technician explained that we had a legal responsibility and that
told the advisor that if the customer declined the he needed to understand the potential consequences
repairs that I wanted to be notified immediately. As I of driving the vehicle in that condition. He finally
had feared, the customer declined the repairs. The agreed to sign the release statement with the prom-
service advisor came to my office to notify me. The ise that he would only drive it slowly and only directly
advisor indicated that the customer planned to pick back to his house. I do not know for sure if he did as
the vehicle up at about 5:30. I immediately called the he promised but I felt a lot better that I had done
customer and advised him of the severe damage on what I could to protect the customer, other drivers,
the control arm and that the vehicle was unsafe to and the company by catching and directly dealing
drive. I further advised him that we strongly advised with this potentially lethal situation.
Civil and Criminal Liability

Almost all legal encounters that you experience in automotive service man-
agement will be civil complaints and civil suits. These legal actions will most
commonly be for small amounts such as the small claims court examples pro-
vided earlier. Some may be for larger amounts. The largest of these will be
those asking for replacement of the vehicle and for payment of damages for
the loss of time and use of the vehicle.
In the unfortunate case that injuries occur as a result of a failure you may
encounter civil actions that are seeking compensatory damages for medical Compensatory
expenses and loss of compensation due to injuries. In the most extreme cases Damages
this can even include damages for wrongful death. One thing that these civil A payment or settlement,
suits have in common, regardless of their severity and size of settlement, are usually as a result of a legal
that they are limited to monetary compensation. Civil responsibility, how- action, intended to make
ever, is not the limit of your accountability as a service expert. up for a loss suffered.
As service experts, the liability and responsibilities that technicians and
repair shops carry can go beyond that of financial responsibility. The potential
exists for criminal liability. Yes, read it again—criminal liability. As the one who
has been entrusted with the responsibility to perform repairs that meet or
exceed industry standards, any instance where a failure occurs could leave
you, your employees, and your organization open to criminal charges. A car
can become a weapon. It can inflict serious injury up to and including death
to its occupants and others around it. Even when this is the case, if you have
performed quality repairs the resulting liability will likely only be civil. How-
ever, if you knowingly perform (or condone) substandard work or take short-
cuts that you know are below standard you are exposing yourself and your
361
company to possible charges of criminal negligence. Just in case you did not
realize it, a charge of criminal negligence can result in jail time.
New Vehicle Issues

If you are working in a new car or truck dealership service department there are
several unique and important legal situations that you must be aware of and be
prepared to address. These are issues related to the manufacturer’s warranty
and to customer complaints that the car is not meeting its intended purpose.
When the frustration with unresolved complaints is very high customers are
likely to threaten proceeding with a lemon law lawsuit. However, more common
in these situations will be your involvement with binding third-party arbitration.
We will now briefly discuss these three areas of legal responsibility.
Manufacturer Warranty
We have discussed the general repair warranty that most localities require that
all automotive repair shops offer and honor. If you are working in a dealership
there is another type of warranty that you deal with on a daily basis. It is the
new vehicle warranty offered by every car manufacturer. As the local manufac-
turers authorized repair center your shop is responsible (based on the dealer-
ship franchise agreement with the manufacturer) to provide service. You are
accountable for resolving all customer complaints within the limits of the
stated manufacturer warranty.
As a dealership you can make a claim for reasonable reimbursement to the
manufacturer for all warranty repairs that you perform. The manufacturer is
ultimately responsible that the warranty is upheld. However, you are the local
agent that must meet with the customer, evaluate the situation, and take the
appropriate action to resolve the customer’s complaint if it falls within the
warranty. It is important that you fully understand that this is not an option,
it is a legal requirement.
Unlike an independent shop, you do not have the choice to decline taking
in this type of work. The customer, through their warranty, is guaranteed a reso-
lution to vehicle problems within a stated time and mileage range and you are
the local agent responsible to make sure that resolution occurs on a timely basis.
You have to act. You have to make the repair. You have to shoulder the respon-
sibility and legal liability that the repairs are done professionally and completely.
Lemon Law
Although they are state statutes, I am not aware of any state in the United
Lemon Law States that does not currently have an active lemon law statute. In general,
A law that mandates specific the concept of all of these statutes is that a customer has a reasonable right for
guidelines and requirements the vehicle that they purchase to be able to meet its intended use. That is, a
for providing vehicle new vehicle should be able to reliably and consistently transport the customer
purchasers a settlement and be reasonably available to do so on a regular basis. One quick source that
(repair, vehicle replacement, can provide you access to the specific Lemon Law statute in your state is
or a refund) when they have through the Web site Lemon Law America (http://www.lemonlawamerica.com/)
encountered ongoing and which has a search feature on its homepage that will direct you there.
unresolved defects with their Although the responsibility for making a vehicle that meets the intended
vehicle. use requirement falls squarely on the shoulders of the new vehicle manufacturer,
362
as a local service provider you are likely to have customers bringing in vehicles
to you that they say are lemons. Further, if you represent a new vehicle manu-
facturer as a dealership service facility you need to be aware when you hear
those two words that you need to be wary, alert, and take appropriate action.
Most lemon laws do not apply until the vehicle meets one of two important
criteria: (1) the vehicle has been in for the same problem 3 times and it is still
unresolved or (2) the vehicle has been out of service for more than
30 days due to a problem. Both of these are bases for claiming that the vehicle
does not meet the minimum accepted standards for intended use.
When a customer determines that they want to pursue a lemon law action
you are likely to be named in the suit. Your ability and willingness to provide
service and the competency of your personnel will be questioned as contribut-
ing factors to reaching the lemon law qualifying status. This can, unfortu-
nately, put you in the middle between your customer and your manufacturer.
Therefore, customer threats of this nature should never be taken lightly. You
should make every attempt to accommodate their needs, resolve their prob-
lems, and make sure that you have notified the manufacturer so that they
understand the need for their involvement to resolve this situation before it
escalates to legal action.
Binding Arbitration
In an effort to work together to reduce the number of legal issues that escalate
to formal legal actions, thus clogging up the legal system, consumer protec-
tion agencies and the automobile manufacturers have worked together to
set up arbitration boards in most states to address these issues in a more infor-
mal manner. This method provides the benefits of a speedier resolution and
lower costs to proceed. As a result, if you look in the owner’s packet of just
about any new vehicle sold you will find a brochure providing information
about and a way to contact the arbitration board serving in your area of the
country.
Binding arbitration is an informal legal process under which the manu- Binding Arbitration
facturer agrees to adhere to the decision of an unbiased panel. This panel typi- An informal legal process
cally consists of a consumer advocate, a manufacturer’s representative, and a under which the
neutral technical expert. Although the manufacturer agrees in advance to manufacturer agrees
adhere to the findings of the board, the consumer is not similarly bound. to adhere to the decision
Throughout the process the customer retains the right to proceed with formal of an unbiased panel.
legal action if he or she is dissatisfied with the panel’s findings.
The arbitration board provides an important pre-litigation step in the pro-
cess of resolving customer complaints. By providing this step that is just short
of going to court it saves the manufacturers and you, as their representative,
money for legal representation. Due to their fast response time arbitration
hearings provide the consumer with a reasonable alternative to lemon law
proceedings. Because they provide the customer with a faster and less formal
resolution process an important side benefit is that the customer’s loyalty to
you and the manufacturer will not be as severely damaged.
Whenever a customer complaint reaches the level that the words legal
action or lawsuit are raised it is important that you take these threats seriously.
The degree to which you are able to respond swiftly to resolve the complaint
will have an impact on your long-term ability to save that customer as yours.
You must work to avoid the customer feeling the need for a third party to get
involved, whether that is an arbitrator or a judge.
363
SUMMARY
In this chapter we discussed the most common areas where through small claims court. Although this is the most com-
you, as an automotive service employee, are likely to have mon legal proceeding in repair disputes the process is limited
direct encounters with the legal system. Every service shop in the dollar value of the issue in question. When the potential
enters into a variety of legal contracts every day of operation loss or damage is great the customer may escalate their legal
as they write up repair orders for their incoming service cus- pleadings to a civil court action. In extreme cases where there
tomers. Every one of these repair orders is a legal and binding is significant bodily or monetary injury or a question of inten-
contract between your company and your customers. tional negligence a criminal action can be taken against the
In bringing their vehicle to you for service the customer shop and involved employees.
has expectations about your abilities and your practices. They There are specific laws and legal procedures that have
come to you because they need a subject matter expert who been developed to protect the rights of automobile pur-
has the knowledge and skills to fix their automotive problem. chasers. Lemon laws are state statutes that protect consumers
As the expert, they expect that you will return the vehicle to against prolonged and unresolved product problems. They
them with: (1) a quality repair, (2) at an affordable price, (3) in prescribe rules, procedures, and remedies up to and including
a timely manner, and (4) with a guarantee that the repair will replacement of the vehicle and full refunds. In an effort to
correct their problem for a reasonable period. provide customers with an alternative and faster method of
When a customer is dissatisfied with their repair experi- dispute resolution, most automotive manufacturers voluntar-
ence and they are unable or unwilling to reach a resolution ily offer their customers the opportunity to take their con-
with the repair shop there are several levels of legal remedies cerns through binding arbitration to quickly resolve all but the
that they may seek. The most common legal recourse is most severe product-related disagreements.
In Questions 1–5 please match the term in the left column with c. employee of the company.
the best definition provided in the right column. Indicate the let- d. magician with a magic wand.
ter of the definition on the blank provided to the left of the term. 8. As a certified technician who conscientiously works on
1. ______ civil a. an informal legal process vehicles and does his best to “fix them right the first
involving a panel of experts. time” you could still be taken to ____________ if a cus-
2. ______ arbitration b. a law that can require. tomer is dissatisfied with the repairs that you performed.
buying back a new vehicle. a. criminal court, small claims court, or civil court.
3. ______ criminal c. an informal legal procedure b. small claims court or civil court.
heard by a magistrate or c. small claims court only.
referee. d. no court because I tried my best.
4. ______ small claims d. a law designed to punish 9. The “universally accepted” minimum warranty for auto-
intentional or severe motive repair and parts is
violations.
5. ______ lemon law e. a law designed to protect a. lifetime warranty.
the rights and property of b. 3 years/ 36,000 miles.
individuals. c. 5 years/ 50,000 miles.
d. 90 days / 4,000 miles.
6. There are four major areas of information that must be e. 12 months /12,000 miles.
completed on a repair order. Which of the following is
not one of those four areas? 10. If a customer brings a car into your shop and declines the
repairs that you recommend you are _________________.
a. customer approvals.
b. current service specials. a. fully responsible for the safety of that vehicle.
c. vehicle information. b. still responsible if the vehicle is unsafe and causes harm.
d. customer information. c. not responsible for future injury or damages since
e. repair requests. they refused the work.
d. responsible to make sure the customer knows if the
7. As a(n) ____________________ the customers expect us vehicle is unsafe.
to have the knowledge and skills to accurately and com-
pletely resolve their vehicle problems at a reasonable price.
a. charitable organization.
b. subject matter expert.
364
C H A P T E R
30
Workplace Safety
CHAPTER OBJECTIVES
■ To examine the underlying basis of federal ■ To recognize the general responsibilities of the
workplace safety laws employer in providing a safe workplace
■ To discuss the three major agencies responsible ■ To define the major requirements of the OSHA reg-
for workplace safety administration ulations as they apply to automotive repair shops
KEY TERMS
OSH act of 1970 emergency action plan personal protective equipment

CCOHS carcinogens lockout/tagout
EASHW HAZMAT MSD
OSHA MSDS
general duty clause right to know
365
Introduction
As an employer or a supervisor you have a moral, ethical, and legal responsibility
to provide a safe workplace for your employees, customers, and neighbors. In
an ideal world, business owners would take it upon themselves to assure that
these conditions were met without the need for external regulation or threats
of penalties. Unfortunately, the rapid economic growth in the 1950s and 1960s
resulted in the entry of many entrepreneurs to the market place and rapid
expansion of mega-corporations. Fallout of that rapid growth was a lack of
understanding and concern for the potential impact that these new enterprises
were having on employees, customers, neighbors, and the society in general.
A call from the public gained momentum in the late 1960s for the govern-
ment to provide protections to every individual and society in general. One of
the most far-reaching results of those calls for public protection came in the
form of workplace safety legislation. The result of this landmark legislation is
still with us today and guides and directs the actions and accountability of
business owners and supervisors in the workplace.
Workplace Safety Legislation

Occupational In an effort to provide a safe workplace for all workers the Occupational
Safety and Health Safety and Health Act of 1970 (OSH) was signed into law by President
Act of 1970 Richard Nixon. This bill, nicknamed the “Safety Bill of Rights,” was the result
The landmark federal of widespread public complaints about the rising injury and death rates on the
workplace safety legislation job. The OSH Act established three new federal agencies
that created OSHA, NIOSH, • OSHA, the Occupational Safety and Health Administration, a new
and OSHRC to protect agency within the U.S. Department of Labor
workers in the workplace. • NIOSH, The National Institute for Occupational Safety and Health, to
conduct research on occupational safety and health, and
• OSHRC, The Occupational Safety and Health Review Commission, an
independent agency to address enforcement actions that are challenged
by employers
You may read about and hear about NIOSH and OSHRC on rare occasions in
your business dealings. The agency that you will need to be aware of and work
with throughout your career on a regular basis in the automotive service
industry is OSHA.
The movement toward federally mandated and regulated workplace safety
is not unique to the United States. In Canada the Canadian Centre for Occu-
CCOHS pational Health and Safety (CCOHS) serves a similar function. In Europe, even
The Canadian federal
though many nations had created their own independent safety agencies they
agency responsible
found that they could do more together than they could do alone to resolve
for workplace health
the ongoing problems of workplace safety. As a result, in 1996 all of the European
and safety.
nations banded together to form one “super agency” for the same purpose—The
European Agency for Safety and Health at Work (EASHW). Detailed informa-
EASHW tion is readily available on the Internet for all of these three organizations by
going to the following Web sites:
The European agency
responsible for workplace • United States—http://www.osha.gov
health and safety. • Canada—http://www.ccohs.ca
• Europe—http://osha.europa.eu/OSHA
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Workplace Safety ■ CHAPTER 30
The purpose and evolution of workplace safety agencies have evolved in the
United States, Canada, and Europe over the past 30 years. As a result, the
agencies of today function quite differently than they did at their outset.
However, even though their methods have evolved they are just as important
for you to understand today in your efforts to manage a successful repair shop.
The models and implementation of the workplace safety rules in all three
cases are very similar. Let us look at OSHA as an example of the evolution of
these agencies and the main features of their regulations and how they affect
your work and operation of your shop.
OSHA
When it was initially created, OSHA began primarily as an enforcement OSHA
agency. The relationship between OSHA and workplaces was legendary as an The bureau of the U.S.
adversarial relationship between business and government. In their effort to Department of Labor that is
“clean up” the unsafe workplaces across the nation the agents of OSHA visited primarily responsible for
as many worksites as possible. In their wake they left citations, levied heavy assuring workplace safety
fines, and even closed down companies for unsafe practices. and monitoring compliance
The publicity created by the unannounced safety audits by OSHA agents with federal workplace
helped to raise awareness in the business community. However, instead of safety regulations.
encouraging employers to understand why they should want to improve their
workplace so that they would voluntarily comply, it led to one where little
change was voluntary. Employers simply tried to hide the truth and lived in
constant fear of getting caught. The ability of OSHA to improve the safety of
the workplace was limited to the number of agents, the number of visits, and
the number of fines that they could levy. OSHA was having minimal impact
on improving voluntary compliance from companies.
During the last ten years OSHA has made a dramatic shift in their approach
to workplace safety. They have shifted their focus from being an agency of
enforcement to one of education, advising, and enforcement. Although enforce-
ment remains a requirement in situations of serious violations and unsafe work
conditions, they have shifted their efforts to prevention.
OSHA has found that they can have a greater impact on overall workplace
safety if they work with employers rather than against them. With this in
mind, they are currently engaged in providing training and consulting serv-
ices to interested businesses that will help businesses to understand the federal
workplace safety regulations and how they can get their company in compli-
ance to those laws. Further, they conduct voluntary non-punitive site inspec-
tions to help employers identify areas that may be violations so that they can
be remedied before an accident occurs.
This background information should provide you with a general under-
standing of these safety watchdog agencies, their origins, and their basic rela-
tionship with your business. Now, let’s take a little bit more time to explore
some of the major areas of workplace safety that you must be aware of and
involved in to assure that you are providing a safe workplace for your employ-
ees. These are the major responsibilities that you have as a supervisor or
employer in assuring that your shop complies with these important regula-
tions. These are the standards that you can and will be held legally accountable
for. This accountability can be rapid and severe especially in the unfortunate
occurrence of a major injury or death in the workplace as the result of a safety
violation.
367
General Duty Clause (GDC)

Before we look at the various areas of responsibility it is important that you
have an appreciation of your overarching responsibilities for providing a safe
workplace. The best way to clarify your responsibilities is to read and under-
stand this direct excerpt from the Occupational Safety and Health Act. This
General Duty section is referred to as the General Duty Clause. In this section it simply and
Clause directly specifies the responsibilities of the employer for providing a safe work-
The section in the OSHA place for employees.
regulations that specifies
the general responsibility of
owners and supervisors to SEC. 5. Duties
provide a safe work
a. Each employer—
environment.
1. shall furnish to each of his employees employment and a place of employment
which are free from recognized hazards that are causing or are likely to cause
death or serious physical harm to his employees;
2. shall comply with occupational safety and health standards promulgated under
this Act. 29 USC 654
b. Each employee shall comply with occupational safety and health standards and all
rules, regulations, and orders issued pursuant to this Act which are applicable to
his own actions and conduct.
—Section 5, Occupational Safety and Health Act of 1970, U.S. Congress, 1970.
Emergency Action Plan (EAP)

As an employer you are required to develop and maintain a formal plan to
deal with workplace emergencies and then to clearly communicate that plan
to all employees. The intention of this pre-determined plan is to organize the
actions of all employees so that they know what their individual roles and
Emergency Action responsibilities are in the event of an emergency. An Emergency Action Plan
Plan (EAP) includes six major elements. These elements are
The section in the OSHA
• An evacuation procedure, including predetermined escape routes.
regulations that specifies
• Procedures for employees who are required to stay behind to operate
that employers develop
and/or shut down critical equipment before they evacuate.
and maintain a formal plan
• A procedure to account for all employees after the evacuation has been
to deal with workplace
completed.
emergencies and clearly
• Assignment of medical and rescue responsibilities to those who are to
communicate that plan to
perform them.
all employees.
• The means for reporting emergencies.
• A listing of individuals and their job titles who can be contacted to pro-
vide additional information and clarification on the EAP.
These steps all seem like common sense, but they are too often neglected until
a real emergency occurs. During a real emergency the failure to have a clearly
marked emergency exit or method for assuring that all employees have escaped
the building could result in serious injury or even death. It is exactly for these
reasons that the regulations have been developed. You must take very seriously
your responsibility to take preventative action to make sure that an accurate
and complete EAP exists for your workplace and that every employee knows
and understands that plan and their personal responsibilities within it.
368
Hazardous Material Communication Standard (HAZMAT)

Automotive technicians and body repair personnel use a wide range of chemi-
cals in their work. Chemicals can expose employees and customers to a wide
range of hazards. These hazards fall into two major categories: health hazards
and physical hazards. Potential health hazards range from minor ones (irrita-
tion and sensitization) to severe ones (poisons and carcinogens). The physical Carcinogens
hazards of chemicals range from their flammability to their corrosiveness and Cancer causing agents.
ability to chemically react with other chemicals or compounds. These physi-
cal characteristics can create an unsafe work environment. If you have ever
worked in or been in an automotive shop it is plain to see that these potential
hazards are all around you. These risks exist for those directly using the chem-
icals (the service technicians), those who are in close proximity to their use
(other shop employees) and those who are affected by the work (the service
customers). For this reason, the HAZMAT standard is one of the most impor- HAZMAT
tant regulations to help direct your daily operations in an automotive shop. The Hazardous Material
There are three major subtopics within the hazardous materials standards Communication standards
that deserve more detailed explanation. These are the Material Safety Data of OSHA that require
reporting requirements, Right-to-Know, and Cradle-to-Grave responsibility stringent documentation
for chemical generators. Because they are all topics that you will regularly and record-keeping of all
encounter in the automotive repair business we need to take the time to dis- dangerous or hazardous
cuss them in more detail. materials in the workplace.
MSDS The Material Safety Data Sheet (MSDS) requirement is one of the MSDS
most fundamental communication tools of the OSHA regulations. Chemical The OSHA requirement for
producers, vendors, and users share responsibility under this provision of the all producers and vendors to
law. Producers and vendors are required to provide an MSDS to the purchaser provide Material Safety
for every product that they sell that contains hazardous chemicals. The user Data Sheets for all
shop is required to have a written hazardous communication program so that hazardous materials in the
all employees are familiar with those chemicals in use and how to obtain that workplace and for all end-
information in an emergency situation. users to have the material
The foundation of this system is building and maintaining an organized available in case of
system of MSDS sheets for every product that contains hazardous chemicals in emergency.
the shop. Most shops will maintain two complete sets, or books, of MSDS
sheets. One must be accessible and clearly marked in the shop area. The sec-
ond, or backup copy, is usually maintained in a secured office. In the event of
an emergency the completeness and accuracy of these records can resolve or
even prevent a life-threatening situation.
Right-to-Know Whereas the MSDS requirement deals with the need for all
involved parties (chemical manufacturers, distributors, and users) to maintain
records of all products sold and in use that contain hazardous chemicals, this
regulation addresses the affect of those chemicals on those who are regularly
exposed to them, your employees. The Right-to-Know regulations require Right-to-Know
that every individual that is exposed to a chemical in the workplace must be The provision of the OSHA
made aware of the existence of that chemical and its potential hazards. regulations that requires
Fortunately, the regulation and OSHA’s involvement goes beyond simply that companies inform all
informing the employee that he or she is being exposed to a dangerous sub- employees who are exposed
stance. It requires that information be provided to the end users so that they to hazardous chemicals in
can design and provide protection for employees from unnecessary or unsafe the workplace.
levels of exposure.
369
Some common examples of consistent exposure concerns in the automo-

tive shop would be exposure to asbestos in clutch and brake materials, expo-
sure to body filler dust, or to solvent fumes from paint or cleaners. In all of
these cases safety equipment has been developed and is readily available
through a variety of sources that will limit employee exposure to these haz-
ardous materials. As a result of the increased awareness of the risks involved
with the use of these types of products manufacturers continue to replace
many of them with newly developed products that are less toxic.

As a Service Director I always took pride in having a After I got over the initial shock and panic of
very clean, well-organized shop. We maintained very being called out of the blue to respond to a life-and-
high standards for our employees and prided our- death emergency I swung into action. I paged the
selves on being good employers. As a result of this we shop foreman and the technician who had worked
tried to go above and beyond in making sure that we on the car. I told them that I needed to know exactly
provided a safe workplace. We regularly provided every item that they had used on that car that day.
HAZMAT training and all of our OSHA-mandated I told them that the list had to be immediate, accu-
paperwork was in order. We thought we understood rate, and complete. While they were looking over the
the true importance of these regulations or at least repair order and searching their memories to be sure
I thought we did until . . . they hadn’t left anything out I ran to grab the dealer-
Our shop had been working on a vehicle that had ship’s MSDS binder.
returned several times for a water leak from the top of Together we listed all of the chemicals used.
the windshield area. We had involved several techni- With that information in hand I pulled copies of
cians, the manufacturer, and the local glass company MSDS sheets for every one of the chemicals that we
that had removed and reinstalled the windshield so had used. I quickly faxed the copies of all of the MSDS
that we could be sure we found any hidden pinholes sheets to the number provided by the emergency
where water could seep in. We had used every method room doctor. About a half-hour later I received a
and product that we could think of to try to stop the return call that the young girl was going to be all
leak. Then, all of a sudden, the leak became secondary. right.
About an hour after the car had left the shop We all breathed a sigh of relief . . . but what if
from its most recent multi-day visit to fix the leak we hadn’t had the MSDS? What if our records had
I was paged to the phone. I was told that this was an been incomplete or just one of our vendors had
urgent call. When I answered it the man on the other failed to provide us with the complete and accurate
end identified himself as Dr. ________ (I don’t remem- information? What if the young girl had been seri-
ber his name). He informed me that he was an emer- ously injured as a result of our failure to respond
gency room doctor and that they had a patient (the completely and in time to help her? Although I never
daughter of the owner of the water leaking car) in thought I would experience anything like this first-
the emergency room there. He said that she was hav- hand it certainly made OSHA and the MSDS require-
ing difficulty breathing. He said “I need to know ments real to me and to our shop. Even though
right away exactly what the chemicals are that are in I haven’t worked there for quite a while now I’d bet
all of the products that you just used on her mother’s that if there are any employees remaining that were
car. This could be a matter of life or death. I need an there that day that they still make sure that their
answer within the next five to ten minutes.” MSDS binder is accurate, complete, and available!
Cradle-to-Grave Responsibility A part of the responsibility of the end-user of

hazardous materials and chemicals is to make sure that they properly dispose
of the byproducts and left over materials. Laws clearly define the proper
methods of disposal. Because of the risks of exposure to these items they must
370
be clearly labeled and be removed from your place of business in approved

containers. This is most commonly done by a vendor that specializes in the
handling and storage of these special materials.
One last, yet extremely important, point needs to be made on the topic of
your responsibility for these materials. The federal laws clearly state that the
generator of this waste (you) are responsible for it and the damage that it may
cause from cradle to grave. That is, you are responsible for it until it is no
longer hazardous. This clearly does not mean your responsibility ends when
you pay a reputable hauler to take it away—as many shops mistakenly believe.
You continue to be responsible for it as long as it exists. You can be held respon-
sible for damage resulting from this material many years down the road. This is
a responsibility that you cannot sell off to your waste hauler or that they can
agree to be assigned as a part of their agreement with you. For this reason you
need to pay particular care to work only with vendors that you can trust will do
all that they can to assure that future liability issues will never arise.
Personal Protective Equipment (PPE)

Safety and health regulations require that employers provide protection for
employees from hazards. Often situations arise in the workplace where a rea-
sonable method does not exist to make changes to the work environment to
protect individuals. In these cases, the employer is required to provide
personal protective equipment that will address concerns of exposure for Personal Protective
these individuals. Equipment
Protective equipment provides a reduction in exposure to individuals from OSHA requirement that
exposure to both health hazards (such as chemicals, radioactivity, etc.) and employers provide
physical hazards (for example, flying objects, excessive heat, etc.). The major equipment to protect
areas of personal protective equipment provided for in the regulations are employees from health
• eye and face protection and physical hazards in the
• head protection workplace.
• foot and leg protection
• hand and arm protection
• body protection
• hearing protection

The old adage that familiarity breeds contempt is It started out as a normal day in the shop. One of
practiced just about every day in many auto repair my top technicians was working just down the line
shops. Because they deal with dangerous chemicals, from my office on a car that had been brought in
moving parts, and other hazards forty hours per with a charging system problem. Initial tests indi-
week every week for years technicians tend to cated that the system was overcharging. That should
become oblivious to the risk. Although I have always have been nothing but a simple replacement of the
been considered a stickler for detail, over time I must voltage regulator . . . until . . . something went terri-
confess that as a service director I started becoming bly wrong.
somewhat numb to these regulations and did not pay All of a sudden there was a scurry in the shop and
nearly enough attention until the following incident one of the technicians came running into my office.
woke me up: “A battery just blew up in his face,” he announced.
(Continued )
371
I ran from the office and double-checked to make the shop and OSHA rules seriously and he had worn
sure that he was OK. By the time I reached his work the OSHA-mandated safety glasses. There was no
stall he had already doused himself with tons of doubt in anyone’s mind that his decision to follow
water to wash the acid off of his face and his cloth- those rules and wear the glasses had saved his sight.
ing. The focus of the blast of battery acid had hit him We were all fortunate. Certainly he was most for-
directly in his face and eyes. tunate because he was most at-risk. However, all of
Quick action by him and fellow employees and the rest of us in the shop were reminded by this close
the ready access to a wash station had helped him to call of the importance of shop safety and compliance
dilute the acid before it could burn him more than with safety regulations. It proved to us once and for
just superficially. But what about his eyes? Fortu- all that these rules are not just there to make life dif-
nately he was one of the few in the shop that took ficult; they really are there to protect us all.
Lockout/Tagout
Lockout/Tagout Lockout/Tagout provides a requirement to take preventive measures to assure
OSHA requirement that that equipment or machinery will not unexpectedly start up or operate while it is
equipment must be under repair or otherwise unsafe to operate. This provision is most commonly
disabled and clearly labeled related to the electrical industry where they are required to disable an electrical cir-
so that it will not cuit from being energized while repairs are being made within that circuit. How-
unexpectedly start up or ever, this same regulation has several applications within the automotive shop.
operate if it is unsafe to Shop operations often require the use of equipment that could cause harm if
operate or under repair. not in proper operating condition. Some examples range from the small bench-
mounted grinder to vehicle lifts. Any time one of these pieces of equipment is
malfunctioning there is a responsibility in providing a reasonably safe work
environment to disable the equipment and clearly mark it as unsafe to operate.
Still another common example in the automotive repair shop is the need
to disable and clearly mark a vehicle that is partially disassembled. Many situ-
ations arise where a repair has been halted while waiting on parts or due to a
variety of other delays. Wiring may be left loose, fuel lines may be discon-
nected, suspension parts may be unbolted, or other systems may be left in a
state where any attempt to start or operate the vehicle could be hazardous. For
these reasons vehicles left in a partial state of repair should be clearly marked
to warn everyone of the potential danger.
This simple provision of the law provides for two separate, yet important,
elements. First, you are required to lockout the equipment. That is, you are to
disable it so that it does not operate. Second, you are required to tagout the
equipment. This is the requirement to place a warning on the equipment that it
is not to be used. An injury caused by failure to comply with these requirements
could be found to be negligence of safety regulations on the part of the shop.
Musculoskeletal Disorders (MSD)

One of the more recent additions to OSHA’s broad-reaching involvement with
MSD workplace safety issues is the introduction of guidelines to prevent muscu-
Chronic physical conditions loskeletal disorders (MSDs). Two of the most common MSDs that you have
or injuries that are brought probably heard of are carpal tunnel syndrome and trigger finger. Carpal tun-
on through specific nel is often associated with office personnel and has been linked to prolonged
repetitive activities that are periods of keyboarding without adequate arm support or regular work breaks.
a part of the person’s job Trigger finger, as the name implies, was first identified in policemen and
duties. resulted in reduced function of that finger.
372
In summary, MSD injuries are chronic physical conditions or injuries that are
brought on through specific activities that are a part of the person’s job duties. As
a result, when injury and/or disability results the worker can take action against
the employer for damages suffered on the job. Although many of these types of
injuries are not immediate or severe in their onset they often become long-term
conditions requiring surgical repair or cause permanent disability.
In recent years you have seen more and more about ergonomically designed
or ergonomically correct chairs, keyboards, tools, etc. These products are pro-
moting the superiority of their design in helping to prevent or at least reduce
the chance of MSDs in the workplace. How does it affect you and what should
you do? You need to include this factor in your decisions that you make in
purchasing equipment, setting up work stations, and assigning job tasks. The
cost to the organization in personal injuries, loss of time, and disability pay-
ments make this an important issue that you must be aware of and address.
Part of your job as a supervisor is taking reasonable care to minimize risks to
your employees and to your company.
Mandatory Safety Training

The OSHA standards indicate that you must comply with the safety regula-
tions and guidelines that govern the workplace. Ignorance is no defense.
You and your company are liable for safety issues covered in these codes.
However, your responsibility goes beyond you having personal knowledge of
the codes and working within them. You are also responsible for having a regu-
lar communication program that assures that all of your employees are informed.
The mandatory safety training regulations in the OSHA standards require
that all employers provide training to all of their employees. This training is
intended to inform employees about the known hazards in their workplace and
what they can do to control them. This includes work processes, equipment,
and all of the materials used in the workplace. These training and information-
sharing requirements have far-reaching implications to you in your role as
supervisor. Some of the major responsibilities that you have are to assure that
• No employee undertakes a job until he or she has been trained on how
to do it properly and is authorized to perform that job.
• All employees know about all of the equipment and materials that they
work with and will come in contact with in the workplace.
• All employees must know what they can do to control hazards and how
they should respond when an unsafe or dangerous situation arises.
• No employee performs any job or task that appears unsafe.
From just this short list of responsibilities you can see that your respon-
sibilities, and potential liabilities, under these safety regulations is broad.
These training activities are not optional. They are federally mandated and the
potential consequences for failure to comply can be swift and severe. It would
be a good investment of your time to browse through the OSHA Web page
(http://www.osha.gov) and then bookmark it and refer to it regularly as a
quick reference to guide your actions.
Mandatory Record Keeping

The final step in complying with OSHA requirements is the need for you to set up
and maintain safety and health records of your operations. These include records
373
of all accidents, related injuries, illnesses, and resulting damage or loss of assets.
OSHA’s stated purpose in requiring these records is to help the business owner or
manager have documentation on hand that will help determine causes of injury
or damage so that corrective measures can be taken to prevent recurrences.
OSHA spells out a five-step mandatory record-keeping system complete
with OSHA-developed forms. The five step system is:
1. Obtain reports on every injury or job-related illness requiring medical
treatment beyond basic first aid.
2. Maintain a record of every job-related illness or injury.
3. Maintain a record of all occupational injuries or illnesses.
4. Prepare an annual OSHA summary of illnesses and injuries and post it
in the workplace.
5. Maintain these records for at least 5 years.
In the unfortunate event that a major incident occurs in the workplace, fed-
eral law requires that it must be reported to OSHA within eight (8) hours of
the occurrence. Major incidents are defined as those that result in the hospi-
talization of three or more employees or any incident resulting in a fatality.
If you are working in an environment where anyone may be exposed to
toxic substances or hazardous materials OSHA mandates supplementary report-
ing of incidents of exposure. The automotive service shop qualifies as such an
environment. You work with volatile and potentially dangerous chemicals rang-
ing from gasoline and oil to a variety of solvents and other chemical compounds
used in the repair of vehicles on a daily basis. Reporting and record-keeping of
exposures and any resulting physical examinations and medical treatments
must be maintained in compliance with the five-step system noted above.
SUMMARY
In this chapter we have discussed the major federal health workers. In addition, OSHA regulations spell out a compre-
and safety legislation that impacts the operation of all auto- hensive system of identification, labeling, handling, and dis-
motive service facilities. The Occupational Safety and Health posal responsibilities for hazardous wastes. They also cover a
Act (OSHA) of 1970 is the backbone of this legislation. It wide range of requirements of facilities and equipment neces-
addresses safety and health issues both in broad, far-reaching sary to reduce the chances of injury. The regulations also
terms as well as in specifics related to common hazards. The require that employers must train employees in safety proce-
legislation charges all employers with the responsibility to dures and educate them about existing dangers that exist, by
provide a safe workplace. However, it goes into much more nature, in the workplace. Finally, OSHA gives the Federal Gov-
detail to specify areas of particular concern and spells out ernment the power to set up an organization to monitor,
actions required by employers in each of these areas. inspect, and levy penalties on organizations that are found in
The first of these areas is the need for all employers to non-compliance of these regulations.
provide an emergency action plan for the workplace and all

1. Occupational health and safety laws 2. The federally required document that provides detailed
a. are very similar in the U.S. and Canada. information on-site explaining the chemical composition
b. have been enacted across all of Europe. of every hazardous material is
c. are intended to protect employees. a. MSDS.
d. all of the above. b. CCOHS.
c. EASHW.
d. HAZMAT.
374
3. Which of the following statements is not a requirement 5. Based on OSHA regulations, _________________ must
of OSHA? know what they can do to control hazards and how they
a. No employee undertakes a job until he or she has should respond when an unsafe or dangerous situation
been trained how to do it properly. arises.
b. No employee undertakes a job until he or she is a. the owner of the company.
authorized to perform that job. b. the direct supervisor.
c. All employees are solely responsible if they perform c. all employees.
any task that appears unsafe. d. properly trained employees.
d. All employees know the materials they will come in
Please match the term from the column on the left with the
contact with in the workplace.
best definition provided in the list to the right.
4. An Emergency Action Plan (EAP) includes all of the fol- ___ 6. personal protective a. disabling unsafe
lowing procedures except equipment equipment
a. assigning employees that are required to ”stay ___ 7. lockout/tagout b. safety responsibility
behind.” of business owner
b. accounting for all employees after the evacuation has ___ 8. general duty clause c. special clothing that is
been completed. provided
c. assigning of medical and rescue responsibilities. ___ 9. right to know d. notify employees of
d. none of the above. hazardous materials
___ 10. emergency action e. posted map of
plan nearest exits
375
INDEX
A management by objective, 59 Customer disputes

scientific management, 57–58 complaint handling, 255–261,
Accountability, 84 traditional management, 54–57 263–264
Administrative area, 14 Closed questions, 250–251 diffusing the situation, 261–262
Advanced systems model, 39–40 Collins, Jim, 70 win-win solution, 262–263
Advertising Comeback, 286, 287 Customer issues, 356
billboards and signage, 319 Commitment, 68 Customer loyalty, 237–238
broadcast media, 317–318 Communication Customer orientation, 230–233
print media, 318–319 basics of, 243–244 Customer relations specialist, 30
in recruitment process, 276–277 nonverbal communication, Customer satisfaction, 30, 140, 230
web-based media, 316–317 245–248 11/4 Rule, 231
Advising, 297–298 questioning techniques, 249–252 ladder of, 237–238
Applied ethics, 88 Communications equipment, 18 measurement of, 233–234
Appointment, 41 Compensation plans, 289–291 silent majority, 231
Archiving e-mail, 223 flat-rate pricing, 165–167 Customer Satisfaction Index
Authenticity, 66 hourly rate pricing, 167 (C.S.I.), 233
Automotive service industry for service advisors, 175 Customer space, 15–16
current status, 4–5 for service managers, 175 Customer’s perspective, 259
market segments, 5–8 technician pay plans, 170–174 Customer waiting area, 16
Awareness building, 325–326 variable rate pricing, 168–169
Compensatory damages, 361
B D
Competitive pricing board, 334
Billable hours, 341 Complaint handling Dealership service departments, 5–6
Billboards, 319 process, 263–264 Decision making, 56, 79, 121
Binding arbitration, 363 rules of, 255–261 Franklin decision model, 124–125
Body language, 245, 247–248 Compliance, 61 performance levels, 129–132
Booker, 24 Computing system, 18 practical principles, 132–133
Bottom line, 193 Conduit, 80–81 return on investment, 122–123
Break even point, 194 Conformance to requirements, 142 risk versus reward, 125
Broadcast media, 317–318 Consistency, 57 three realms, 127–128
The Bucket, 256–257 Constancy, 75 Delegation, 56, 83–84
Continuous improvement, 137 Delivery, 43
Contract, 356 Deming, W. Edwards, 137–138, 139
C Detailing/wash rack, 14
Convenience and purchase
Canadian Centre for Occupational decisions, 312–313 Direct expenses, 155
Health and Safety (CCOHS), 366 Core competencies, 115 Discriminatory hiring practices, 275
Captive repair items, 337–338 Cost center approach, 162 Dispatcher, 23–24
Carcinogens, 369 Cost of quality, 144–145 Dissatisfied customers, 231, 232
Cashiering, 43 Counseling, 298 Drainage, 13
Checkout time, 343 Cradle-to-Grave responsibility,
Chilton Labor Guide Manual, 166 370–371
E
Civil charges, 356 Credibility, 68
Civil liability, 361–362 Criminal charges, 356 Effective rate, 171
Claims administrator, 24–25 Criminal liability, 361 80/20 principle, 141
Classic management Crosby, Philip B., 142–144 Elementary Principles of the Statistical
comparing approaches, 59–61 Customers, cost of retaining, Control of Quality (Deming), 137
leadership, 61 235–236 11/4 Rule, 231
377
■ Index
Emergency Action Plan (EAP), 368 How to Get Control of Your Time Long-range planning
Empathy, 257 and Your Life (Lakein), 219 goals, 106–108
Employee facilities, in service Human behavior, fundamentals mission, 102–104
shop, 13–14 of, 238–239 progress tracking, 108
Employee stewardship, 94 values, 105–106
Environmental scan, 113–114 I vision, 100–102
Ethics, 87–88 Loyal customers, 238
applied, 88 Identity building, 326–328
and leadership, 89–92 Image, 328 M
European Agency for Safety and Impulse items, 336–337
Health at Work (EASHW), 366 Incentives, 291–292 Maintenance history review,
Expanding facilities, 186 Income, 154, 193–197 345–346
Expectations, 284–285 Indirect expenses, 156 Management, 75
Expenses, 155 Individual motivation, 59 leadership versus, 64–71
controlling, 197–201 Individual plan, 180–181 roles, 76–81
direct, 155 Influence, sphere of, 127 Management by Objective
fixed, 157 Inspiration, 70 (MBO), 59, 60
indirect, 156 Integrity, 92 Manager, 64, 65
Expression of the Emotions in Man and Interview, 279–280 as conduit, 80–81
Animals, The (Darwin), 245 Investment planning, 19 delegating powers of, 83–84
Extended hours, 187 Invoicing, 42–43 as judge, 78–80
as position holder, 76–78
qualities of, 81–83
F J Managerial Breakthrough (Juran), 141
Financial stewardship, 93 Job descriptions Mandatory record keeping, 373–374
Fixed expenses, 157 knowledge, skills and abilities, Mandatory safety training, 373
Flat-rate manuals, 24 273–274 Manpower resources
Flat-rate pricing, 165–167 objective criteria, 275 claims administrator, 24–25
for technicians, 171–172 task analysis, 271, 272–273 customer relations specialist, 30
Fleets, 7–8 Judge, 78–80 dispatcher, 23–24
Flowcharting, 44–48 Juran, J.M., 138–142 lead technician, 27
Focus group, 114 Juran’s Trilogy, 141–142 parts specialist, 28–29
Follow-up, 43 porter, 28
Ford, Henry, 55 service advisor, 26–27
K service cashier, 22–23
Franklin, Benjamin, 124
Franklin decision model, 124–125 Knowledge, skills and abilities service director, 31–32
Fringe benefits, 176–177 (KSAs), 273–274 service manager, 30–31
shop foreman, 25–26
technicians, 29–30
G L
Manufacturer warranty, 362
Gas stations, 7 Lead by example, 66 Marketing, 308–309
General Duty Clause (GDC), 368 Leadership, 61, 64, 65 Market research, 323–324
Goal orientation, 61 effective leadership, 71 Market segments
Goals, 106–108, 209, 210 and ethics, 89–92 dealership service
Good to Great (Collins), 70, 296 inspiration, 70 departments, 5–6
Gross profit, 160–161 management versus, 64–71 fleets, 7–8
motivation and, 71 gas stations, 7
relationships building, 67–68 independent repair shops, 6
H
strengths, building on, 65–66 service chain stores, 7
Hazardous Communication traits, 65 Mass media, 316, 329
Standard (HAZMAT), 369–371 Lead technician, 27 Material Safety Data Sheet (MSDS),
Headhunters, 277 Lemon law, 362–363 369
Higher ground leadership, 69 Litigious society, 356 Mehrabian, Albert, 245
Hiring, 280–281 Lockout/Tagout, 372 Menu boards, 334
Honesty, 90 Locus of control, 127 Merchandising, 332–333
Hourly rate pricing, 167–168 Logo, 327 Metrics, 286
for technicians, 173 Long-range goals, 106–108 Mission, 102–104, 209, 210
378
Index ■
Mitchell Mechanical Labor Estimating lockout/tagout, 372 Print media, 318–319

Guide, 166 mandatory record keeping, Prioritizing, 209–210
Motivation, of employees. See also 373–374 Procrastination, 215
Individual motivation; mandatory safety training, 373 Product availability and purchase
Leadership musculoskeletal disorders decisions, 313–315
compensation plan, 289–291 (MSDs), 372–373 Product displays, 334–336
expectations, setting, 284–285 personal protective equipment Production plans
incentives, 291–292 (PPE), 371–372 to increase capacity, 185–190
performance evaluations, 287–289 OSH Act of 1970, 366 individual plan, 180–181
performance measurement, Overhead, 157 support group system, 183–185
285–287 Ownership, 81 team system, 181–183
tracking performance, 285 Profit, 159–162
Motor Labor Guide Manual, 166 P Profit center, 162
Multitasking, 214–215 Profit margin, 159
Musculoskeletal disorders Package pricing, 334 Progressive discipline, 70, 295
(MSDs), 372–373 Parking lots, 14 advising, 297–298
Parts inventory, 15 counseling, 298
Parts specialist, 28–29 dealing with separation, 301
N Performance, 129 need for consistency, 302
National Institute for Occupational and compensation, 289–291 outside resources, 302–303
Safety and Health (NIOSH), 366 evaluations, 287–289 performance problems,
Needs, 324–325 job/performer level of, 131 295–297
Negotiation, 79, 260 organization level of, 130 separation from employment,
Net loss, 194 process level of, 130–131 300–301
Net profit, 162–163, 193 and purchase decisions, 312 skipping steps, 301–302
Nonverbal communication, Personal media, 329 timeliness, 303
245–248 Personal protective equipment verbal warning, 298–299
(PPE), 371–372 written reprimand, 299–300
Phone Log, 224
O Physical resources
written warning, 299
Progress tracking, 108, 116
Objective-oriented strategy, 60, 61 customer space, 15–16 Punishment, 299
Objectives, definition, 59 facilities, 11 Purchase decisions
Occupational Safety and Health Act facility needs, 11–13 convenience and, 312–313
of 1970. See OSH Act of 1970 support space, 13–15 performance, 312
Occupational Safety and Health tools and equipments, 16–19 price, 310–312
Administration. See OSHA Planning levels, 111 product availability, 313–315
Occupational Safety and Health operational planning, 116–117 quality, 315
Review Commission strategic planning, 112–113
(OSHRC), 366 tactical planning, 117–118 Q
Odiorne, George, 59 Point-of-purchase merchandising,
One-time customers, 237–238 332 Quality, 136–137, 143, 144,
Open questions, 249–250 goal of, 332 145–148
Operational planning, 116–117 impulse items, 336–337 achievable, 146
Opportunist, 230 locations, 332–333 affordable, 146–147
Organization product displays, 334–336 definable, 146
systems view, 37–39 signage, 333–334 gurus of, 137–143
traditional view, 35–37 Porter, 28 measurable, 146
Organizational concept, 58 Position holder, 76–78 and purchase decisions, 315
Organizational techniques Prevention, 143 Quality assurance, 42, 136
tracking tools, 220–224 Price and purchase decisions, Quality Control Handbook, The
workload sorting, 218–220 310–312 ( Juran), 141
OSHA, 366 Price leader, 349 Quality customer service, 239–240
Emergency Action Plan (EAP), 368 Price of Conformance (POC), 144 Quality of repairs, 358–359
General Duty Clause (GDC), 368 Price of Nonconformance Questioning techniques, 249–252
Hazardous Material (PONC), 144 closed questions, 250–251
Communication Standard Principles of Scientific Management, combined use, 251–252
(HAZMAT), 369–371 The (Taylor), 58 open questions, 249–250
379
■ Index
R Selling service detailing/wash rack, 14

in service drive, 342–347 employee facilities, 13–14
Reception, 41 in shop, 347–348 parking lots, 14
Recruitment process warnings, 350–351 parts inventory, 15
defining job responsibilities, Separation parts sales and storage area, 14–15
270–271 dealing with, 301 SWOT analysis
finding candidates, 276–278 from employment, 300–301 strengths, 114
hiring, 280–281 Service advisor, 26–27, 345 weaknesses, 114–115
interviewing, 279–280 pay plans for, 175 opportunities, 115
job descriptions, 271–275 Service cashier, 22–23 threats, 115
screening, 278–279 Service chain stores, 7 Systems thinking, 40
selection, 280 Service departments, 5 Systems view, of organization, 37–39
Redo, 287 Service director, 31–32 inputs, 38
Referral, 277 Service estimate, 343–344 outputs, 39
Relationships building, 67–68 Service managers, 30–31 processes, 38–39
Repair order, 356–358 pay plans for, 175
Repair process Service pricing menu, 346–347
appointment, 41 Service stations, 7
T
cashiering, 43 Service workflow Tactical planning, 117–118
delivery, 43 advanced systems model, 39–40 Tag line, 327
follow-up, 43 flowcharting, 44–48 Talent identification, 206–207
invoicing, 42–43 repair process, 41–43 Target market, 322
quality assurance, 42 systems thinking, 40 Task analysis, 271, 272–273
reception, 41 systems view, 37–39 Task-oriented responsibility, 60
work distribution, 42 traditional management Taylor, Frederick, 57–58
workflow chart, 44–46 view, 35–37 Team system, 181–183
work performance, 42 7%-38%-55% rule of Technician organizational plans
Repairs communication, 245–246 individual plan, 180–181
quality of, 358–359 Shop foreman, 25–26 support group system, 183–185
safety and reliability of, Short-range plan, 116–117 team system, 181–183
360–361 Signage, 317, 333–334 Technician pay plans, 170
warranty, 359 Silent majority, 231 flat-rate pay, 171–172
Repair stalls, 12–13 Six-day rotation, 188–190 flat rate with guarantee, 172–173
Reprimand, 299–300 Small claims court, 359 and gross profit, 198
Reputation, 94 Smith, Adam, 54 hourly rate, 173
Respect, 68, 81 Soft-sell, 345 hourly rate with bonus, 174
Responsibility, 84, 90 Soldiering, 57 Technicians, 29–30, 121
Return on investment (ROI), Span of control, 127 flat-rate pricing, 171–173
122–123 Special tools, 16 hourly rate pricing, 173–174
Reward, 125–126 Stakeholders, 113 skill levels, 169–170
Rich candidate pool, 276 Statistical Process Control Termination of employment,
Right to Know, 369–370 (SPC), 139 300–301
Risk, 125–126 Stewardship, 92–93 Timeline, 220
employee, 94 Time management, 211
financial, 93 identifying responsibilities,
S
reputation, 94 212–213
Safety inspection, 347–348 Storage space, 13 multitasking, 214–215
Sales Strategic planning, 112–113 organizing, 214
average cost of, 198–199 Strengths, 114, 207 prioritizing, 213–214
increase in, 193–196 building on, 65–66 procrastination, 215
Sales per vehicle, value of, 349–350 Sub-goals, 285 Time strategy, 59
Satisfied customers, 231, 234 Subject matter expert, 360 Time study, 167
Scientific management, 57–58, 60 Support group, 183–185 To-do list, 221–223
Screening, 278–279 Support services, 341–342 Tone of voice, 245, 246
Second shift, 188 Support space Total management, 59
Selection, 280 administrative area, 14 Tracking performance, 285
380
Index ■
Tracking tools, 220–224 V Weaknesses, 114–115, 207

archiving e-mail, 223 Web-based media, 316–317
phone log, 224 Value-added solution, 261 Win-win solution, 262–263
to-do list, 221–223 Values, 105–106 Word-of-mouth advertising,
Traditional management, 35–37, characteristics of, 309–315 237
54–57 Variable expenses, 158 Work distribution, 42
in automotive industry, 56–57 Variable rate pricing, 168–169 Workflow chart, 46–48
fears of manager, 55–56 Vision, 100–102, 209, 210 Workload sorting, 218–220
in scientific management Vocal advocates, 238 Work performance, 42
system, 60 Workplace safety legislation,
Truthfulness, 90 W 366–367
Write-up area, 15–16
Walkaround, 344
Wants, 324–325
U
Warning, 298–299
Z
Up-sell, 334 Warranty, 359
U.S. Department of Labor (USDOL), 4 Warranty administrator, 43 Zero defects concept, 142
381

Automotive Service Management Principles Into Practice

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Automotive Service

Upper Saddle River, New Jersey

Editor-in-Chief: Vernon Anthony

Pearson Prentice Hall™ is a trademark of Pearson Education, Inc.

Pearson Education Ltd. Pearson Education Australia Pty. Limited

SECTION 2 MANAGEMENT STYLES

SECTION 4 FINANCIAL MEASUREMENT

SECTION 5 ORGANIZING AND MANAGING

SECTION 8 MARKETING, MERCHANDISING, AND

SECTION 9 THE LEGAL ISSUES AND

Preface xi Key Terms 21

Strategic Planning 112

CHAPTER 16 ANALYSIS AND ACTION 192 Organizing Your Surroundings 224

Achieving a Net Proﬁt 193

CHAPTER 21 RESOLVING CUSTOMER CHAPTER 24 PROGRESSIVE DISCIPLINE 294

SECTION 7 EMPLOYEE RELATIONS

Automotive service is a very complex business. It is rare that a service manage-

Andrew A. Rezin, Ph.D., brings a unique perspective to the subject of service

• CHAPTER 1: The Automotive Service • CHAPTER 3: Manpower Resources

service departments service chain stores ﬂeet

The State of the Industry

Twenty-seven percent of employers have at least one unﬁlled position for a

A similar chronic shortage continues to be the cause of alarm in Europe

These technician shortages are a clear example of the global issue of

Service Market Segments

New Car and Truck Dealerships

Whereas two decades ago many dealerships generated 60 percent or more of

Automotive Repair and Maintenance Shops

in access to technical information, primarily through the Web, has been of

Automotive Parts, Accessories, and Tire Stores

PRACTICING THE PRINCIPLES

1. Which of the following service operations may be author- c. poor quality.

4. Which type of service shop is least likely to provide c. 48.

physical facilities support space communications equipment

General Facility Guidelines

Straight Drive-Thru Layout Drive-In Bay Layout L-Shaped Layout

Type of Lift Min Space Ideal Space

Surface-Mounted 12 ft. × 25 ft. 13 ft. × 25 ft.

In-Ground 11 ft. × 25 ft. 12 ft. × 25 ft.

Figure 2-1 Basic repair area layouts

in mid- to large-sized shops therefore include employee restroom and shower

Customer Entrances and Write-Up Area

Customer Waiting Area

Tools and Equipment

R EAL W ORLD A PPLICATION

A shop also typically provides additional specialty tools, or shop tools,

• Automatic transmission (A/T): A/T ﬂuid exchanger, precision measuring

• Management reporting (manager)

Planning Your Investment

R EAL W ORLD A PPLICATION

PRACTICING THE PRINCIPLES

1. A typically sized shop repair stall is c. a good shop drainage system.

service cashier service advisor customer relations specialist

Skills and Abilities Required

Skills and Abilities Required

Claims Administrator (Booker)

in his research and in proper assignment of labor operation codes (especially in

Skills and Abilities Required

Skills and Abilities Required

but also to have an in-depth understanding of the why of repairs, an under-