The Training Never Stops: Evaluations
Wait a minute! It can’t be December already. I should have been better prepared. After all, I was in my local hardware store the week before Halloween, and the store staff was getting out their holiday decorations then. Anyway, the holidays are upon us, and with that comes a busy time in the shop. Many shops are reporting a banner season, and this is following a good summer. All indicators are pointing toward a healthy economy in the automotive maintenance industry. As a country, we made it through a rocky election season, and hopefully we can come together and truly be “one nation, under God, indivisible” once again. Although I enjoy the holidays as much as the next person, I also suffer from anxiety during this time. The holidays and the end of the year also mean it is time for evaluations.
Fortunately, most of us have collected good data during the year, and our software systems have provided good analytics for us. But, the issue comes up of how do we analyze the data correctly? Back in the day when I would analyze a shop’s performance, I might see that the car count average per day was up by 7 percent. I would smile until I saw that the ticket average had dropped by 9 percent. Then, my stomach would start turning over. Higher car counts are great. Who wouldn’t want that? However, increasing car count at the sacrifice of ticket average made me fear that we were not offering the quality of service we built our business on.
End-of-year evaluation is a critical function of the shop, and if we are to have an idea of what our goals are for the next year, we must start by analyzing where we are now. Let’s look at the evaluation process, starting with the shop’s evaluation and then proceeding to inventory and, of course, personnel evaluation. Hopefully after studying the evaluations, it will give us a clear vision of what we can anticipate for next year.
Typically, the evaluation process will start with the shop itself. Most of us have access to quality data via our point-of-sale (POS) systems. As a side note, if you do not have a quality POS system and a mandatory requirement for your staff to utilize it, then I would suggest that your first goal for the new year is to purchase a system and get the necessary training to use it correctly.
In today’s business environment, the POS can be the biggest moneymaker you have. However, if you have chosen to stay with the handwritten accounting forms and have kept good records, you also know the value of the information. Knowing what to do with the information is the difference between success and failure. As I have learned from the the good folks at National Oil and Lube News, information is valuable. In my role as an industry consultant, I have seen several times where the owner or manager would have made different decisions if they had had the correct information.
Shop evaluation starts with the various reports found on our POS systems. Start with a statistics report for the year. I also had a template made where I would compare what my expectations were to what we actually did. I made my template in the same order as the statistics report, so the comparison was easy. Total full services or car counts were my biggest concern, so I would start with that, and then proceed through what I called the service items — air filters, light bulbs and wiper blades. Then I reviewed the data on the number of recommendations the techs suggested, and last of all, the different services we offered, starting with transmission services and ending with safety inspections. For my preferred method of operations, this followed our company philosophy of service before sales.
Our staff will normally do whatever is important to us as owners and managers. To achieve your expectations, it often means you have to change the way you measure your success. Comparing expectations to the actual statistics report highlighted what the goal was to the staff. After the data from the statistics report was analyzed, I would look at the lubrication, transaction and financial reports, and then finish the shop evaluation with the data from the productivity reports.
As we all know in this business, controlling inventory is an absolute requirement. After finishing the various lubrication reports, it is time to delve into the inventory reports. Most industry experts agree the most important indicator of the health of a business is the inventory level. How many times during the year did each item “turn” during the year? Everyone knows that in an industry that prides itself on speed of service, having inventory on hand is important. Knowing the cost of goods is as important to the bottom line as the income. The bean counters in the front office tell us 25 percent is an acceptable cost of goods. There is some argument as to what is an efficient turn in the inventory, but generally, the higher the turns, the better for the bottom line. My personal favorite expert on a number of auto maintenance topics was the late Howie Loewen, former senior consultant at Integrated Services Inc. I went back to the National Oil and Lube News archives and pulled an article Loewen had done in March of 2013 relating to inventory control.
“The most significant measurement in inventory management is inventory turnover,” Loewen wrote. “Inventory turns are measured by the number of times your average inventory investment turns over on an annual basis. Inventory turnover is calculated by dividing cost of goods by your average inventory. (Average inventory can be based on monthly, quarterly or annual inventory levels.)
“To calculate average inventory using beginning and ending annual inventory, add the beginning and ending inventory and divide by two. Using quarterly inventory levels, add each quarter-ending inventory, and divide by the number of quarters used to measure the turnover. To calculate cost of goods sold, add your beginning inventory and purchases, and then subtract the ending inventory.
“An evaluation must be done on a monthly basis to review the inventory turnover against the inventory investment. This can be accomplished by dividing the monthly cost of goods (from the store’s profit and loss) by the month-end inventory.
“Monthly inventory turns should range in the 0.75-one turn per month. An evaluation must be done on a monthly basis to review the inventory turnover against the inventory investment. This can be accomplished by dividing the monthly cost of goods by the month-end inventory. Inventory turnover goals should be a minimum eight to 12 times per year based on the store volume. Lower-volume stores should be in the lower range, and higher volume stores in the upper range.
“By increasing our inventory turn ratio, we can significantly improve our cash flow. Maintaining a lower average inventory can increase your inventory turn rate.”
Before you can calculate your inventory turnover, like Loewen explained, you must have an accurate inventory evaluation and good numbers to look at. A hand count and adjusting the inventory to correct the on-hand inventory number is the first step. Many inventory control specialists suggest breaking up the inventory into categories to help ensure the most accurate inventory counts. The advantage of breaking up the inventory is that several people can help with the hand counts. One person can count air filters, while another counts oil filters and yet another counts oil bottles. Once the adjustments are made, the same point-of-sale system that aided in the shop evaluations can do the breakdowns on the inventory. It is interesting that when the data begins to flow, it is normally different from what most operators think it is. Regardless of the method of operation, controlling the inventory is normally the difference in making a profit or not.
When it comes to evaluations, the shop and inventory evaluations are easily compared to employee evaluations. When evaluating the shop and inventory, there are no gray areas — it is all black and white. However, evaluating employees is mostly a gray area. These are people, and there are as many different ways to evaluate people as there are people. If you have six employees, then you will have six different evaluations. Each person brings different skills to the shop and to your customers, and all of these skills are important. Thankfully, the POS systems can once again give us some hard data to work with, but please keep in mind that these are people, and people are prone to interpret expectations in different ways.
The preferred POS report is the employee productivity report. This report will break down the various metrics you can use for measuring the productivity of each employee. It goes without saying that a complete employee handbook that includes company policies and your expected procedures when a customer comes into the shop is extremely important. Hopefully, armed with a company policy, the procedure manual and the employee productivity report generated by the POS, you will have good data to perform a helpful evaluation for the staff.
The goal of the employee evaluation is to highlight areas of strength so the employee can continue to build on those strengths. A good evaluation will also point out areas where improvement is needed. Preprinted forms can be bought at office supply stores, or thanks to the grand ol’ www, you can also download good employee evaluation forms from the Internet. However, the way you decide to evaluate is up to you.
A top-to-bottom evaluation is a necessary chore if you want to continue to improve, and as with any journey, if you want to get where you want to go, you have to first start with where you are. An in-depth evaluation of the shop will serve as a good map of how to get there.
December is a great time of year, and we should celebrate and spend as much time as possible with friends and family, being thankful for the past year and hopeful for the year to come.
RAGAN HOLT is the quick lube advisor for National Oil & Lube News. He is available for consulting and training in the quick oil and lube industry. He can be contacted at: firstname.lastname@example.org