Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
The Profitable Path: Transforming Service From Cost Center to Profit Engine
What if everything you thought about running a service department was backward? That's the provocative question at the heart of this eye-opening conversation with John Dowling, author of "Service by the Boxes" and decorated Marine.
The fundamental misconception crippling most equipment dealerships is seeing service as a cost center rather than a profit engine. "Revenue is vanity," John explains, highlighting how dealerships focus on sales while neglecting the departments that truly drive profitability. The transformative insight? A service job isn't complete when the machine is fixed—it's done when the invoice is paid and the money is collected.
This mindset shift cascades through every aspect of service management. From customer segmentation (80% of revenue comes from 20% of customers) to abandoning the misguided "first-in-first-out" approach, John challenges conventional wisdom at every turn. Perhaps most surprising is his revelation about maintenance services—the highest-margin work that dealerships have mysteriously surrendered, with industry studies showing a staggering 95% market share loss.
The technician shortage plaguing the industry isn't what it seems either. "If we would have been training people and had apprenticeship programs 20 years ago, we wouldn't be here right now," John observes, pointing to decades of mismanagement and underinvestment. The solution involves restructuring shops with team-based approaches that leverage senior technicians as mentors while maximizing efficiency.
For service managers transitioning from technical roles to leadership positions, the challenge is shifting from tactical to strategic thinking. Without proper business and leadership training, even the most skilled technicians struggle when promoted to management. As John puts it, "It's a business unit and some of these business units are 20, 30, 40, 50 million dollar, if not 150 million dollar business units."
Ready to transform your service department from a cost center to a profit powerhouse? Email john@servicebytheboxes.com mentioning this podcast for your complimentary copy of "Service by the Boxes" and start the journey toward strategic service management.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. We're joined today by John Dowling, author of Service by the Boxes, amongst other things, a decorated Marine. He's starting to get to the same color of beard as I've got, so he's not a bad guy anymore. John, good to have you with us.
Speaker 2:Good to be back, ron. John, good to have you with us. Good to be back, ron. So too bad I'm. I'm stuck in in Texas and not not Hawaii, but but I'll come see you one day you've got.
Speaker 1:You got enough years to catch up, man. Yeah, john's put a blog out next week that he calls stop cherry picking work orders, and I'd like to use this podcast to go over what he's trying to get across with the whole idea. John has a very systematic, systemic way of looking at how you run a shop In fact, broader than that that he brings to us from the Marines, also from being a consultant in the industry and also being a recruiter for Jordan Sitter for a while with Jay Lucas. So the background is deep, it's broad, and with that I'd like to just start with the statement that the service department's here to make money. It's not a nonprofit. Yeah, what makes you start with that?
Speaker 2:Um, because majority of dealers that I've worked for that's how, that's how it's seen it's, it's treated like, like a, a cost center. Um, a lot of people would say it's it's, it's a necessary evil. And when I work with dealers, a lot of them will say sometimes they say, man, you know what Running a dealership would be great if I didn't have to deal with the service department. And the reason that is is because they see it as a cost center, they see it as support for the sales department. They believe that the sales department embodies the dealership. If sales does great, the dealership is doing great, but revenue is vanity. You know, revenue doesn't matter. What matters is profitability and cash flow. And what drives bottom line profitability and cash flow is your product support departments, which is your parts and service departments, is your product support departments, which is your parts and service departments. And so what I've learned is that dealerships will sacrifice the profitability in the service department to take care of a customer.
Speaker 2:And so my mindset, to kind of give you a background, you know, like I told you, you know, before I was in the Marine Corps I was a technician. You know, before I was in the Marine Corps I was a technician, got out, went to work for a John Deere dealership and to prove my point, even as a technician, the one thing I did not prioritize in my job and I was a very good technician and so three and a half years in the industry as a technician they put me in a field service truck. So just imagine that how many people would put a technician with three and a half years experience in a truck. And the thing I did not prioritize was writing up my service report, and that was probably the most crucial thing that I could have done. And my thinking was my job as a technician was to repair as many pieces of equipment for the customers as I possibly can, and that was my job. Machine broken, machine fixed that's my mindset, Most technicians, that's their mindset, Most service managers, that's their mindset. And so when I'd go out on go out in a, on a field call, I would fix the machine. I'd look at my schedule and I had two more jobs to hit that day. The one thing that I had to do that would hinder me from completing my task was filling out a service report. I was thinking I could sit here and spend 10, 20 minutes fill out a service report or I could be driving to the next job getting more, more, more, more, more customers, machines up and running, because my mindset was my job is to fix machines. So eventually, what happened after about two weeks? You can imagine the the, the service reports that weren't being filled out. Then the service managers like, hey, it's the end of the month, John, I need to close out all these jobs. You have to come into the shop and I'd have to sit there for a day and just fill out service report after one. Of course, I forgot what I did. I forgot every you know why to have so much time on it, or you know, and but that I say that as an example example.
Speaker 2:My mindset as a technician was my job is to get machines up and running, and if that is the ultimate goal for a dealership or, I'm sorry, for the service department, a dealership is get machines up and running. And if that's the culture and it, it it usually is, because usually when the store manager goes talks to the service manager, it's about what about so-and-so's machine? Did you get up and running? What about this machine? It's very rarely, hey, why do we have an age to work order issue. And so my point is is store managers are usually more concerned about getting customers machines up and running than they are about billing and collecting the money. Until corporate, you know, sends a nasty gram or something about your AR is way out of hand. And so I was taught by the culture that my job is to get machines up and running. Who cares if we make money right, as long as we're getting machines up and running, the customers are happy. The customers aren't complaining. The store manager's not talking to the service manager because nobody is complaining to him about machines not down.
Speaker 2:And what I realized, that is the critical shift. If you're going to be successful or have a successful service department, we have to realize that the purpose of the service department is to make as much money as possible for the dealership. Then, because what it does then, Ron, is that service report, the job's not done until the paperwork is done. So it doesn't matter how many machines you get up and running, it counts for not, it counts for zero. You get zero points on the scoreboard until you fill out the service report and the work order is closed.
Speaker 2:And so that shift in mindset says you service report and the work order is closed. And so the shift, that shift in mindset says you have to close the work order. That's when the job's done. The job's not done when the machine leaves the shop or the field mechanic leaves the job site. The job's done when the work order is closed and we've collected money. But when you have that but you have to have the mindset of our job is to make money. The end goal for a service department is to make money. The way that the service department makes money is by repairing customers' equipment.
Speaker 1:I think the foundation is really valid and it's very stark when you compare it to a non-profit. The leadership and dealerships, even today, are primarily out of the equipment side or the finance side, very rarely out of product support. The caterpillar dealer that I started with, the man who ended up being president, who fired me five times, was a Bush mechanic. He was a pilot. Hmm. You dirty fingernails? Yeah, I'm a kind of guy, and the reason he fired me was off.
Speaker 2:You said, he fired you five times.
Speaker 1:Oh yeah, one time I actually got home and the phone was ringing.
Speaker 2:Yeah, he said what are you doing at home? I?
Speaker 1:said you fired me, get your back here. You know what I'm like, and it was an interesting combination. His name was Rod Wallow. If he was still alive and he called, I'd just ask where he was. I'd be on my way. It was wonderful. Yeah, was wonderful. Yeah, and there's very few people like that. But what Rod did? He turned that whole equation on its head. The sales department worked for the service department. In his mind Mm-hmm, you want a machine through my shop? Come talk to me. Yeah, it ain't going to come the other way around. Here's a machine, get it out of here. And when rentals came in, it was even more pointed. But I drive service departments in two things labor, efficiency and quality.
Speaker 1:And the byproduct of those or the consequence of those is profitability, it's market share, it's things of that nature. And I put quality in there. I used to put incentive programs together for every technician, depending on what your labor efficiency was greater than 90, greater than 95%, what your quality was, 99% or whatever I'd give you money and it could equal your monthly pay. And everybody's saying, how the heck do you want to do it that way, or why do you want to do it that way? I said, well, what's the alternative? And he said, well, don't give them that much money. And what I always came back to is, if you look at a technician and just use simple numbers, a technician is going to build somewhere between $200, between two and $300,000 a year of labor and another $200,000. We're looking at a guy who's going to generate $500,000 a year of revenue.
Speaker 1:And revenue means nothing. Let me get to the net income of that. And you're looking at a hundred and a quarter to $200,000 net and you're looking at $100,000 and a quarter to $200,000 net and then flip it back to an equipment salesman. Okay, a guy sells $5 million worth of equipment at 5% gross Congratulations $250,000. The net is close to zero and I think a lot of the problem is, or the dilemma it's not a problem fixed.
Speaker 2:People are afraid of the service department. They don't understand you're spot on. They don't know it and we we naturally fear things we don't know. It's just a black hole for them. They have no idea what it is and they don't want to be found out that they don't know what they're managing that's right, it's, you know, donald runfield and gulf warriors.
Speaker 1:You know, we don't know what we don't know. That's what we worry about, yeah, but but the the, the other side of that, that is kind of weird. Everybody says we can't find technicians. I think that's balderdash yeah they're there, we just don't pay them and we don't coach them and we don't have apprentices.
Speaker 2:And I'll say this every technician that is already hired, they do everything in their power to push out anybody new, or they expect the new technician. This is what I love this. Well. Well, those tech schools, they don't teach those guys anything. They don't know anything. They come and they're not. No, they're, they're, they're, they're not a mechanic. And so I'll ask that guy you know the guy, he's been doing it for 20 years, 30 years, and I ask him what, how much did you know when you first started? Or how many mistakes did you make? Oh man, I made all kind of mistakes, I screwed this up. I was like, okay, I was like even a doctor. Eight years of schooling, eight years in medical school what's the first thing they have? To do?
Speaker 2:right, they have to do. They have to do a residency because they have to everything they learned for eight years. They have to put it in practice. And how many times that that they screw up. And if they have their main doctors, hey, hey, they don't do. That that's not, that's not the right medicine, and so we have to have the same mindset. We run technicians off and I tell people, if you've got a young guy who's willing to spend $10,000 on tools, who's willing to put up with all the crap from your bad culture of all these technicians with bad attitudes and is willing to be hot and sweaty and dirty every day, like, give the guy a chance. Like why are you going to run that guy out of here and say he can't fix anything? Well, of course he can. He's only been doing it for six months, you know. Um, anyway, I digress, I get pretty angry.
Speaker 1:No, that's passion shows, john, and and so let's move to the next one. As a technician, you're operating and thinking tactically and you become one of the best that there is, and the way that things work is you get promoted. Now you're a service manager and 99% of them still think tactically. They're not leaders anymore. Yep, nobody trained them to be a leader. How the hell do we get bridge that?
Speaker 2:yeah well they, they read my book. Service by the boxes is step one are you?
Speaker 1:are you? Are you still giving complimentary for people that respond to the podcast?
Speaker 2:Yes, yes. Anybody who reaches out to me, email me at john at servicebytheboxescom. Let me know you watched or heard this podcast and I'll send you a complimentary book.
Speaker 1:Okay, so let me go up in the helicopter a little bit. As you know, my approach to things is quite different than most, and the dilemma that I'm looking at these days is it is very hard to find talented people with skills, to hire them, and as time passes, it's going to become more and more and more difficult. Going to become more and more and more difficult. The technical schools are necessary, but that's one brand and that really only works for John Deere, ag and Caterpillar. Everybody else has to have multiple brands in order to make it work.
Speaker 1:And that's what was the genesis of our assessments for technicians and job functions? That, instead of a technician going to technical school for a week, coming back and I asked them when they come back, I said you know what'd you learn? Oh, it was great, fantastic. Did you have a test at the end? No, well, how do you know how you did? Well, I don't. I got a certificate, terrific. And then I wait a month and then I go back to him and said tell me something that you remember from that class.
Speaker 1:And invariably there's nothing there yeah so you got to wonder how that happens. But then move it up to the service manager. You touch a lot of dealers. How many service managers have you been involved with that have had management training?
Speaker 2:no, I'm on. Ironically, you said that I had a dealer reach out to me this. Yes, not yesterday, but tuesday. What is today? I don't know what. Today is, ron, monday. I'm the gray hair. My beard is starting to get to my head, I think, and I can't, I can't remember what.
Speaker 2:Well, welcome to my world it's going to get worse, my friend yeah, but anyways, yeah, so this one service manager, uh, is doing a great job. And, um, the owner of the dealership a fairly large dealership went to like, what are you doing? What are you doing that that you're just out outperforming every other service department that we have? Like, you're doing a great job, customers are happy, you're making money. And you know what? He said Training. He goes at the other dealerships that I've worked for before I come to work for you, they had training, they had leadership training, they had customer service training, they had management training. He goes, these are all things I've learned through training. And so he reached out to me because the the owner was like, hey, we want training. Do you know anybody? And, um, so he reached out to me to see if I, if I'd be willing, and that's of course. I said yes, um, but you're right, most managers don't have training. They, they don't, um, and that they and they just I.
Speaker 2:Let me go back to me. I was a technician. Like you said, best technician gets promoted. I had no idea what I was doing. Now, I, I know how to run a shop.
Speaker 2:You know, in the, in the marine, in the marine corps, I was a, I was a sergeant, so I knew how to get things in and out, like I knew how to get things done. But I had people above me were telling me get this done, get done. Whatever you got to do to get that done, get it out of here. So I knew what to do and I struggled on on like prioritizing, you know. So in the first day I was looking down as I got all these tractors which one do I work on first? You know which one is is the prior, the priority.
Speaker 2:And I'm an honest guy, you know, and I you know, mechanics or mechanic shops we've always get this bad rap of we screw over the customers and we lie to them, we take all their money and we run. And I was like I'm not going to do that, I'm going to be above board, I'm going to go above and beyond and I'm going to be ethical and honest. And and so I came up with this idea that most service managers do of first in, first out, which is not ethical, which is not right, which is not business savvy, which is, you know, it's counterproductive. Because you have a guy, for an example, you're having, say guy brings in his, his, his tractor and all he does is mow his two acre yard and that's it.
Speaker 2:And then you have another guy who has a skid steer down and he has a whole crew of people not working that week. And so there's people, there's husbands, who can't afford to buy groceries for their families because he's not working, because this the skid stairs down and the job shut down. So so how would it be ethical to say, well, this guy's machine came in first. Who doesn't need it? It's just a hobby to work on his machine and prioritize his repair over somebody else who's trying to feed their family. So it really kind of got me going down this thought of like how do we prioritize jobs? And it continues to grow to more, to more strategic level as well from there.
Speaker 1:What? What becomes interesting with that is now, all of a sudden you're into a category called market segmentation and I'm going to base that on the value that that customer brings to me as a dealership the value that customer brings to me in a computational sense as an influencer in the marketplace, and service managers don't have any training on that.
Speaker 2:No, no, I remember years ago I was reading a business book. I can't remember, at some point you read, read so many books you don't even remember what you read, where by who but he talked about the Pareto principle. The italian um, uh, financial guy, whatever in in italy and he realized that 80 percent of the land was owned by by 20 percent of the of the pop the population. Of course, that principle, we know it as the the 80 20 rule, and it has grown and it it still, it still and it's a principle. So it's not 100, 80, 20, but it is amazing, still today, 80 of the wealth is held by by 20, by 20 of the the pop the population.
Speaker 2:But almost every business and I I'm not telling you anything that you don't know but 80% of our revenue from customers only come from 20% of our customers. And so, really, when we've talked about prioritizing our workflow, is that we need to focus on the customers who pay our bills. We need to focus on our customers who are invested in our dealership, in our brand, you know that are partners with us, versus the customers who come by every two or three years and want something done fast but really cheap, you know. And so I think teaching that to service service manager for them just to understand that that not every customer is equal and we need to prioritize our top customers, or or you call them, our key account is is very critical for for us to do that I.
Speaker 1:I take market segmentation and I put it into. I think it's six different categories. It starts with machine population. It goes then to the relationship that you have with your marketplace, with parts, with service, with rentals. Then it goes to the loyalty how long have they been a client of yours? Then it becomes how do they pay their bill? Then it becomes how influential are they in the marketplace? So I got this six-digit code that I want to put on the system so that anytime anybody calls up that customer record, they're going to see that code, yeah, and they're going to be trained on what the heck that code means. And if this code shows, I want you to get the champagne out and treat this guy with he'll make love to him.
Speaker 1:If this guy comes, help him as much as you can. But he's down the pile a bit. Yeah, and that's alien. It's strange for a service manager, because here comes a mission I'm going to fix it. Yeah, yeah, and that's alien. It's strange for a service manager because here comes the mission to fix it. Yeah, the only thing that they're concerned about. As soon as the machine is repaired and it's out of there, their job's done. Yeah, it's not done until the money's received. Yeah, he pointed out, but that's also a concept that's alien to them. Here comes an interruption I've got 20 guys in the shop. Let's just stay in the shop. They're all busy and they've all got jobs. It's going to take them all day. And here comes a salesman and he wants his machine in here right now, because that guy's going to buy this machine this afternoon. And I'm going to tell them sorry, I'm full, I'm the service manager. How?
Speaker 2:long do you think I'll have?
Speaker 1:a job.
Speaker 2:Not very long.
Speaker 1:Not very long. Somebody's going to come down with a thunder or a thorn and say get out of here. Okay, so I'm going to come back. The other side. I said okay, I'm going to put you in here, I'm going to disrupt my schedule, but you're going to pay overtime rates. Well, that's not fair. It's during the day. I said yeah, but the guy that I promised the machine to, that's in here that I'm going to displace. I'm going to have to work on him tonight and I can't charge him overtime because you got bumped in.
Speaker 1:So you're going to pay for it. Oh, it's like I took their oldest child. It's a business man it's not playtime.
Speaker 1:So it becomes really interesting and technology can help us dramatically. So I segment my customers. I also segment my technicians on skill levels and I do it the traditional way with engine, powertrain, hydraulic, electrical categories and a general yeah. So I know who my best guy is and I schedule my best guys to my higher segmentation priority customers. And I have a schedule. So now I get into a box that what's an acceptable backlog? Customer calls up, he's got a machine down, I'm sorry, it's a two-week wait. And you go to the large Komatsu Caterpillar those Typically a one to two week in the shop is pretty common.
Speaker 1:Three to five days in the shop is pretty common. Yeah, five days in the field is pretty common. If somebody calls and it's in the field, I want to be there in 24 hours. Boom. That opens me up to another opportunity. Mr customer, would you like to get a priority rating? Here comes amazon. Amazon primes 139 a year and it's free, and they start tracking what you buy, what you don't buy, and they start interfering with how you work. Why don't we do that?
Speaker 1:yeah we're going to give you a priority. I'll give guarantee a 24-hour response in the field. Yeah, guarantee a 12-month warranty on on repairs. Yeah, on and on and on. And I'm going to charge you $149 a year, or whatever the number is, it doesn't matter. Again, getting the service manager to think from a leadership perspective instead of tactically as a manager of people, meaning that you are only as good as the people that you're leading, and that's alien. You're the conductor of the orchestra. Your back is to the customer, but the other real deal is having every customer that you have this year be a customer for life. The japanese taught us that in the 80s.
Speaker 1:We lose customers every damn month yep, yeah, I like.
Speaker 2:I like the mark, the mark, the marketing term, lifetime value, and I think, if so, let me say this so one issue that we're having is we're promoting or hiring the wrong candidate to be a service manager. We need a business minded person who understands what we're discussing, not saying that a technician can't grow into that, because I did right. I was a technician and I tell people I did everything. I was a service manager for seven years. The first three and a half years I did everything wrong and I was like I'm tired of losing, I'm tired of getting my butt whooped, I'm tired of losing money, tired of everybody mad at me. And I started to look at everything I did and I, when I'd get into bad situation, I like how did I get here? And I would backtrack until I realized this is what I did wrong. I shouldn't have done that. But I mean that's a lot of hard work and so we need to get.
Speaker 2:They need training. You know, if you have a technician who you promoted into service management, they need training. Take, take, take your assessment. You know understanding what they need, what they need help on. Take your assessment. You know understanding what they need, what they need help on but we really moving forward. We need to realize we need a business minded managers to manage. It's a business unit and I think that's one thing kind of our opening conversation I try to drive to dealership owners. It's a business unit and some of these business units are 20, 30, 40, 50 million dollar, if not 150 million dollar business units and you're going to put a guy in there who doesn't understand a P&L, who doesn't understand marketing, who doesn't understand lifetime value of a customer, you know, who doesn't understand the reasoning behind you know to set the segment, your customer base, and then they're wondering why is this not working? Why am I not making money at my dealership? So anyway, it went on a range.
Speaker 1:I kind of no, no, you're good. That crazy service manager, the president of the company, rod firing me. We hired MBAs or engineers as assistant service managers. They were the administrators, they were the business people, so that we can have a combination of good technical skills and good business skills.
Speaker 1:And if you think about sports, just to use a simple analogy, and you think about superstars, the Michael Jordans, that crowd, how many of them turn out to be good coaches? Not many. One in my mind, and it was Bill Russell, and he won the NCAA championship at San Francisco. The last two years he was at university. He was NBA champion with the Celtics. Every year he was a player. When he became pair coach was the only time he didn't succeed and win the championship, but the next two years where his player coach he'd figured it out, then he did so only once, like you experienced, yeah, like he didn't know. There Nobody gave him a manual, but I can't think of anybody else that's like that. And why is it? They have such discipline, they have such desire that can't be given to other people.
Speaker 3:You either have it or you don't. Motivation is something I use to tease people. I can't motivate anybody, but I Motivation is something I use to tease people.
Speaker 1:I can't motivate anybody, but I can de-motivate every single one of you. It's easy. So here comes the technician Every morning. They have eight hours of labor if they're in my shop.
Speaker 1:And they can go home when they finish that eight hours of labor. If they finish in five hours, congratulations, you can go home. Yeah, another three hours, I'll give you three more hours, I'll pay you for 11, but you're only going to work eight. Holy, and the young guys on Thursday afternoon or, you know, friday for the weekend. They see all these experienced technicians leaving at noon and intrinsically they think to themselves geez, I'd like to be like that when I grow up. So they're motivated to get better at what they're doing and they start asking questions. They go to these guys how do you do this, why do you do that? Which is part of the coaching culture, and we've lost that.
Speaker 1:We don't have apprentices anymore.
Speaker 2:No.
Speaker 1:We hire you out of a technical school. What the hell do they know? We don't know anything. I mean it's a helper. I used to have one helper for every two technicians. They brand for the parts. They clean. The parts they clean, yeah, clean the bay.
Speaker 2:You know, leverage the skills of people yeah, yeah, we had a conversation a couple years ago, ron, I don't remember. We're talking about the military, so so in the Marine Corps we have a fire team, so every squad is made up of like three to four fire teams, which means you have three people, then you have a fire team leader, so you have a team of four. You know, and really that's how I think it should work in the shop I think you and I are on the same page of this is you probably need one senior tech and three younger techs that can do majority of the diagnosis. The younger techs do majority of the heavy lifting, um on the machines, but as they're working on those machines together, they're being taught how to diagnose the equipment, how to use the electronic manual or, if they still have a paper, a paper manual, um. And then you probably need a shop foreman over like four, like a squad leader over four or five fire teams. You have another manager who who manage that.
Speaker 2:But my, I think what happened? What went wrong is you have a lot of smaller dealerships, um, let's just say non-cat, non-deer, you know, the ones that have to have multiple lines and stuff is they make a lot of their money on on the sales side of the business. They see service as a cost center and so what they've done they're like we don't need multiple layers of support because that's just added cost. Every technician needs to be billing out X number of hours and they see it as a purely way of cutting costs, like cutting payroll. They don't see the long-term issue and so they most of these dealerships and a lot of them I have worked for do not see the long-term benefit in investing in that technician role. Now, where we are at today, in a technician quote-unquote shortage, we didn't get here overnight. If we would have been training people and had apprenticeship programs 20 years ago, we wouldn't be here right now. We're here because mismanagement, bad leadership from the executive level of our industry who has devalued the technician and says you know what? They don't need a service writer. They're just grease, grease monkeys. If they can't fix it, fire them, we'll find somebody else who can.
Speaker 2:First is saying hey, let's bring in these young people, let's have a senior tech, you know, mentor them, let's do an apprentice program, let's reach out to a tech school, a tech college, let's do interns with them and let's really invest in our parts and service. But they didn't really see it as a long-term, you know way, to long-term to drive their business. They're saying, oh, we got to have it, we need to hire some people who can fix equipment. They're saying, oh, we got to have it, we need to hire some people who can fix equipment. But the equipment got more and more complex and you're just not going to learn this stuff overnight.
Speaker 2:And another thing is manufacturers the fastest way to sell a new model, so a manufacturer, if they want to gain market share, they come out with a new model. That's the easiest way to sell it. So now we're coming out. We used to have the same model for like 10 years easiest way to sell it. So now we're coming out. We used to have the same model for like 10 years, you know. So technicians would know everything about that, that, that backhoe or that or that bulldozer because they worked on it for 10 years. Now they're coming out with a new model, a new series, every two or three years and it's it's not technology being overwhelmed with new systems and they need a support staff. Like they can't do it by themselves, they need that fire team to support them.
Speaker 1:And we've got God. We can do this critique or evaluation on every department in every capital goods industry Washing machines, lawnmowers, whatever, it doesn't matter, they're all the same Yep and leaders in the manufacturing side. Example washers and dryers in your home, mm-hmm, I don't remember what brand it was, but let's say LG, just to pick one. I could go to the front of the dryer and I could talk to the machine and the machine would reply to me. It said how's your filter? You got a lot of lint in the filter. Do I need to clean the filter? And it would come back and tell me Things aren't as clean as they should be. Is there something wrong with the washing cycle? Yeah, back with an answer. If there was something wrong, I said give me, give me the instructions and they walk me through the repair.
Speaker 1:Now, if you look at the equipment that we're dealing with, I started in 69 with a caterpillar. You know at At the time I think there were 286,000 part numbers. Today the Caterpillar dealer is dealing with over 800,000 part numbers. Yeah, how the heck do you do this?
Speaker 2:How the heck do you manage that? When I talk to service managers total side note here and they bitch and moan excuse my French about why can't we stock this parts, about why can't we stock this parts, why can't we stock that parts I tell them there's hundreds of thousands of part numbers. Like do you expect him to type in each number? And so I like to bring them in. Like sit down, mr service manager, tell me what part number you want us to stock. Well, I don't have a part number. Okay, we can't start unless we have a part number. And let's, let's go through the sales history on every single part number. Well then, you multiply that time a million or 800, whatever the number is. Like you can't do it, it's, it's impossible. And we expect these parts guys to have every part in stock for every unit anyways.
Speaker 1:I totally no, but again, again, take that same stance. Let's go to get in a plane and we'll run around to 100 different dealerships and we'll find at least 90 of them where the technician leaves their bay, walks to the parts department to place an order for parts yep yep, why the heck don't they stay in the bay? I had people with headsets in the parts department in 1970.
Speaker 2:You know the mechanic never left his bay because the management says, well, I'm not going to pay for that new computer, he doesn't need a laptop, he can just wait. He can just walk his lazy butt up there and order his parts. Okay, the most valuable, high, highest margin product a dealership sells is in technician hour. Yep, and why the heck are you going to pay 165 an hour, 200 an hour for a technician to walk to go get a part, when you could pay somebody 14 an hour to bring him the part and buy him a 500 a thousand dollar computer like your instant? Are you get that investment back in a month or two and but that's. They don't see that. They're saying well, why am I going to buy him a thousand dollar computer? Well, why are you going to spend ten thousand dollars a year to pay him to walk back and forth and not get reimbursed for it?
Speaker 1:yeah, we have, you're one of them, but we have a bunch of contributors that write blogs and get involved with podcasts with us, et cetera, and I call them thought leaders, experienced executives and revolutionary reformers. Yeah, and, thought leaders are very rare. They typically get shunned, like you said. Somebody's coming in from the outside and the group bands together and say, well, we don't want you around here. The revolutionary reformers are really rare and, with the delay of transition of leadership by a full generation that's been going on, a lot of the men and women that were 50 to 60, that would have been the leaders today they gave up. They got impatient. I'm not going to hang around, so I'm leaving this, and we can't afford to lose that talent.
Speaker 2:Yeah.
Speaker 1:Walked right out the door. It's, you know, there's almost computers. When they started it's a switch, it's a zero one. And now I had a chat this morning. We're talking about artificial intelligence and the guy said well, it's not artificial intelligence, it's just we're having the computer think for us. That's why it's called artificial. But that data is there for us to do. We just never had the time to look at it all. And if you, if you look at the repair of a machine, we have basically rebuilds, repairs and maintenance. Which of those three is the most important?
Speaker 2:What would you say as in creating profitability and value, or uptime for profitability for everything maintenance absolutely in the maintenance.
Speaker 1:So why is our market share on maintenance only five percent?
Speaker 2:because we're, we're thinking like a technician, or we got this false sense of pride of saying, well, I'm not going to change oil, that's a, that's a, that's a. Whatever job, that's not a, I'm gonna manage. I'm gonna rebuild an engine. Um, I guess. And to your point, um, uh, revenue is vanity.
Speaker 2:And so I remember I was a service manager. I got like the sixty thousand dollar engine job and I was so excited I called it. I called the director of product support man. I just closed the sixty thousand dollar engine job and you know what? I lost my butt on that job. I don't think he even made money. I called the director of product support man. I just closed a $60,000 engine job and you know what? I lost my butt on that job. I don't think I even made money. I had this big revenue number right, but I didn't make anything. I make more money in changing oil and I tell that to dealers over and over again. Hire a young guy, teach him how to change oil. That's your highest profit margin. Product in the service department is changing oil and everybody does it. Everybody understands they need to change the oil, but service managers don't care about focusing on that business. They're concerned about the engine job that you don't make any money on, but you get this big vanity number though.
Speaker 1:I was in the industry when that became an issue In the 60s. Almost every manufacturer actually post-World War II, going into World War II, basically there were seven major companies making equipment and it was all tractors, bulldozers. Okay, coming out of World War II, people started broadening the base. They were rubber-tired loaders, excavators, back of blah, blah, blah. But as a result of that we had to have more skills and something had to give. And the first thing they gave was maintenance. Don't have time for maintenance. I got to get after this repair. Don't get better.
Speaker 1:The customers that were smart and there's many of them decided well, I still need maintenance because it saves me money, it keeps owning and operating costs down and I'm going to hire somebody to do that for me. And where do they go? They come to the dealer and they take somebody from the dealership and they hire them. And all of a sudden we don't only lose the maintenance work, we lose the low technical skill required work. And that cycle has been going on forever and I'm not joking.
Speaker 1:Aed used to do surveys I think it was every five years, and it was invariably 94%, 95%, 96% market share loss for maintenance. And there was a follow-up question If the dealer charged you the same amount as you would pay would you have them do the maintenance? And the answer was invariably yes. So that brings us back to the other side. Instead of having a maintenance rate, we charge for the dropping fluids and changing filters the same price as we'd repair a hydraulic boat, and it's nuts and yeah, because the the dealership's saying well, why on earth am I going to lose money?
Speaker 2:well, you're not going to lose money because you're going to charge for five hours. If your technician is good, he's going to do it in like two and a half hours or three hours and you're paying them twenty dollars versus forty dollars an hour. So you're you're not, you're still making. That goes back to that business understanding and I hate to say you got to have somebody with an MBA to be able to explain this. But it's profit. It's profit that that counts, it's not revenue, and people are just hung up on revenue and that's why they go out of business or get bought or close the doors but let's go.
Speaker 1:Let's go in a different direction. The service manager is in the office. He goes there all day and he stays there. He very rarely goes out to the field. Parts manager is the same thing. I used to require the service manager and the parts manager to spend one half a day a week in the marketplace with the customers. Yeah, it was like pulling chicken's teeth to get them to do it. Yeah, that's where the fun is, john, but you better know what you're doing. If you're in front of the customer and they start talking with you, they find out really quickly whether you've got value for them or not. It's a real test. And again, it goes back to leadership at the dealership. Yeah, a customer focus, a customer retention focus, customer service focus, not a profit focus. Yeah.
Speaker 1:And you know people. I started in consulting in 1980 and everybody said, well, you went into business to make money. I said no, you don't go into business to make money. Making money is a byproduct of being in business. People don't understand that. It's a very weird world and it's getting more and more complicated as time passes. Yeah, the blog is interesting. The tactical thinking from the technician and strategic thinking for leaders I think is one of the most powerful statements in that blog. Identifying the different markets that you're serving used equipment, rental equipment, new equipment, down machines, field shop etc. Is powerful. The message is clear and the dilemma that we have is a lot of people read nod their heads sagely. That's a really good idea.
Speaker 2:yeah, then then tomorrow comes and nothing changes if you can figure out how to make that happen, man, you'd make a fortune yeah, I'm trying to figure it out, but it's, it's you're, you're right, you can tell them when you tell them, when you tell them. And, um, I was talking to Sarah, my wife. We celebrated 21 years this last month.
Speaker 1:Congratulations Way to go.
Speaker 2:Yeah, yeah, we high school sweethearts she was my best friend and who still is my best friend, little sister in high school, and it's funny, I used to. I used to call when Larry's my best friend's name, so I knew Larry wasn't, wasn't home, and so I would call his house and ask for Larry and Sarah would answer, said no, larry's not here, and we would just start talking. And it wasn't until like like two, two, two years ago that Sarah realized that I knew that Larry wasn't there and I was just calling to talk to her. But I didn't have enough guts so I was like, oh, is Larry there? And um, so anyways, yeah, we dated for 12 years before we got married. So, yeah, the 12 and the 21, we've been together for a long, long time, um, but anyways, that's what I told her, like the.
Speaker 2:So I, I love consulting, I love helping people. Um, I've had great mentors in my, in my, my, my career and I really appreciate the relationship I have with you, ron. It's it's been very, very you've been very helpful to me. I don't know if you know that or not, so I really appreciate that and so I really like to give back that and I think that's really what's like life giving. You know, like you're saying, did you go in it to make money? No, I could probably go make a lot more money running a dealership somewhere. But what's life giving? I want to help, I want to give back, and it's it's. There's so many things that they just don't see that they or they weren't trained on.
Speaker 2:And you know, I was working with the dealer here here recently and they're like man, we do a really good job at service. We just can't make money at it. And and it's like, okay, let's, let's, you're, you're in the right spot, you're in the right mindset. Like we're we, we take care of our customers. We just can't figure out how to make money.
Speaker 2:And uh, and he realizes that's how, like he's tired. He's tired of making enough money to make it to, to keep the doors open for one more year, to work another 12 months to make enough money to keep the doors open. He's like this isn't worth it. Like what am I doing? But I will tell you this the my biggest frustration and I could probably get some wise counsel from you is is you can tell them to do it Like like you can lead a horse to water, but you can't make them drink and like like that's the hardest part of and I a nice guy, and so you know everything you read like you got to push, push on their pain points and really make them feel it. And I'm a nice guy and I was like I don't want them to hurt anymore because they're already hurting. And it's really like, hey, there's we.
Speaker 2:They work so hard to lose so much money and you're like you don't have to do it, you're, you're working too hard. You know, delegate, since it's centralized. Your, your command and control. Empower your, your department heads, to make decisions. But once again, you've got to have a service manager and a parts managers that's business-minded, that understands it. Just, you know, I tell you this is simply saying create a budget and tell your managers this is your budget, you stay within these guidelines and just do what you got to do to take care of the customer. Most dealerships don't even do that. It's the service manager doesn't even know if they're doing making a good decision or not. They and so they make bad decisions financially because they spend a lot, a lot of money to get a very little return, but they already know what is their range of money to spend.
Speaker 1:At the risk of this becoming political because of the expression I'm going to use. It's common sense. Yeah, and common sense is not particularly common.
Speaker 2:No, and the part I started consulting in 1980 and I was five years old at the time. Thanks a lot.
Speaker 1:I started teaching in 1967. Um, that makes it even worse. Yes, that makes it even worse. Yes, what would happen? You know, I had a grandfather contract because I was a chicken and wanted to make sure I had enough money to put food on the table etc. So I I started it up in canada for a guy who was the largest broker of caterpillar equipment in the world and he wanted to compete with the caterpillarpillar dealer in parts and service. So he hired me to put together a parts and service business for him, which we did. And two or three years later I was taken into the States to run EBS, which was a by-product, caterpillar's dealer data processing, and they had 450 dealers on their business system and it was failing and they wanted me to come in and put it back together so that the owner of the business could sell it. Yeah, which we did. And all of a sudden I didn't have a grandfather anymore. So it's january 2000, 1984, and I have no guaranteed income.
Speaker 1:I started developing products to sell to dealers. I used the phone because I couldn't afford to travel everywhere and say you know, I'm going to come in and look at your parts department, I'm going to look at your inventory department. I'm going to look at your service department. I'm going to look at your inventory department. I'm going to look at your service department. I'm going to look at how you sell product support and I know how to do that a hell of a lot better than you do, and you're going to pay me to prove that that's true.
Speaker 1:Well, after a while I got to doing operational reviews and I'd come up it'd be a month time span on a calendar. I'd be present maybe two weeks, maybe eight days, and they'd get a report at the end. And here's what I found. Here's the financial, here's the benefits, here's what you need to do. And I'd say, have you got anybody that can implement this for you? And they'd all say, oh yeah, we've got that.
Speaker 1:And I'd follow up a month later and three months later and nothing's happening and being a little slow coming to the. You know you can take a horse to water, you can't force him to drink. I started saying have you got somebody to implement this? And they would say, oh yeah, we've got people like that, or, if you want, I could do it for you. And all of a sudden I had a five-year backlog and at university there's a thing called executive function, which is mostly used at postgraduate students. It's an evaluation of how successful they're going to be and what kind of an impact they're going to have 10 years after school, and there's three categories in global terms there's people that are good at strategy, there's people that are good at implementing and there's people that are doers.
Speaker 1:And it's important that you know where you fit and don't try and do something you're not up to. But what really is missing is implementers. And then the other side of the table and evaluation of personalities. Are you open? Evaluation of personalities are you open-minded or are you closed-minded? In other words, how adaptable are you to change?
Speaker 1:yeah and you put the open closed with those three categories. Now I got a little grid of six and I can take and look at performance levels of a dealership, sales revenues, customer retention, market share, all that stuff based on those six boxes with a correlation of higher than 90%. So if I've got a good strategist and a good implementer, I can buy doers. If I don't have a good implementer and I got a great strategist I will fail. If I've got a terrible strategist but I've really got a good implementer, I will succeed. So you, you can put all of that stuff together. So now we go back to service departments. I got a service manager who's a great tactician. I'm not going to grow Mm-mm. I got a service manager who thinks strategically. He's a good leader. I will grow.
Speaker 1:My problem with I will grow is we have shops. It's a fixed cost infrastructure. I don't want fixed costs. I want tents and I'm going to have a life cycle on that tent of maybe 10 years. So I'm going to put a pad down somewhere. I'm going to have a like Denver airport tent. I'll do all my repairs in there and after 10 years, as the work moves out, as you look at the expansion of cities and communities. You don't have machines in the inner city anymore. Oh wait a second. Yes, we do, but we've now got rubber-tired excavators because they've got to go in on top of streets. Oh my.
Speaker 2:God yeah, vacuum trucks and pump trucks.
Speaker 1:Yeah, it's a very interesting thing and you know you asked me for something relative to absorption and I mentioned Bill Blackie, the chairman of Caterpillar, and he created manuals. He was an accountant by trade. He created a book that was parts grants, every procedure, service grants, every procedure, every document, every process known to man for those departments. It was defined by Caterpillar and every dealer in the world did things pretty much the same way, with very little variation on the thing. Are those still available? Can you get those? Yeah, but you're going to have to look. It'd almost be an antique. Yeah, there's a book out there. I think you can still get called Earthworm Tractor. Okay, a book out there. I think you can still get called Earthworm Tractor. Okay, I think you can get it in paperback. It was published in the 60s, but you know, it's a guy who's a salesman for Earthworm Tractor. It's a makeup of Caterpillar, yeah, and the salesman's going out to make a sale and all of the things he goes through the demonstration and all the rest of it, and it still applies today.
Speaker 1:John, it's really weird. And if you just get people to read, like, one of the things I'm throwing around in my head is I want to start a book club, yeah, and get a group of people six, eight, 10 guys, gals, whoever and we're going to read a book once a month. We're going to spend four hours on a Zoom call. We're just going to talk about it and start growing knowledge and wisdom and open progression change. Sarah Hanks, who does continuous improvement, got her background. She's an engineer, mechanical engineer. She worked for General Electric with Jack Wills directly. There's a lot of talent out there. We just got to focus it and that's why your book is so important to the audience. If they don't have it, he's offering to give it to you for free. Send them an email, get the book, read the book, follow the book and if you have questions, call him. He'll gladly help you. Now, that might cost. That's good.
Speaker 2:He's got to make some money somewhere, yeah I've got a beautiful wife who likes beautiful things and I got two beautiful daughters.
Speaker 2:So my son, I tell him to go to work. He knows everybody in our neighborhood. We live in a rural neighborhood so everybody's got a little bit of land and he goes to everybody and he mows their lawns, he trims their trees and so I tell him just go, you go make some money. You know you're a man, go make some money and I might get in trouble. I may seem a little sexist or old-fashioned or something, but I like to take care of my daughters.
Speaker 1:But the boys can go work I'm the other way around. I've been around powerful women my whole life. My grandmother had a master's in 1950. Nice, and you know. So. My mother was a graduate. My daughter's got a master's. My granddaughter's got a master's. My grandson, who's 20, just at the end of this month he'll have a nuclear engineering and astrophysics degree. I mean, I bet you he's pretty smart, yeah he's.
Speaker 1:It seems like everybody's really smart in your family. Oh no, I just carry the luggage. Man, yeah, but it's you, you gotta find what you like, if you're lucky enough to find your passion. Everything's good. If you find your passion, you got to recognize it's not static. Yeah, it constantly needs to be refreshed, and so all of our internet-based training five, six hour classes 70, 79 dollars and 50 cents for a five-hour class that's a good value 79 dollars, 79 hours and 50 cents.
Speaker 2:Man don't 50 cents. 50 cents, yeah, plus tax, or that includes tax.
Speaker 1:Well, it's, it's learning, it's not, it's it's. There you go, you don't have to worry about tax that's right that's a great value there you got it.
Speaker 1:So everybody who's listening, I hope you enjoyed this. We rambled around a lot, but I think you get the message. The service department is one of the most critical pieces of an equipment dealership, of any dealership in the capital goods industry. It has the highest gross margin, it has the most influence on customer satisfaction and yet it's treated as a stepchild. Training is not a discretionary event. People are not tools in a toolbox that they get obsolete. You replace them. You can't replace them, and there's guys like John who are young and energetic and in the marketplace, that are out there helping, trying to make a difference, and there are not a lot of them because it's hard to get the skill set that's out there. So for everybody listening and John, thank you very much. I think this is beneficial. I look forward to having another one with you in the near future and to everybody out there, thank you for listening, mahalo.
