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Blinded Me with Science! Management Methodology
Keith ElyManaging Partner
Lawrence, KS(785) [email protected]
@KEA_Advisors
#ATD2017
Your photo here
The views and opinions presented in this educational program and any accompanying handout material are those of the speakers, and do not necessarily represent the views or opinions of NADA. The speakers are not NADA representatives, and their presence on the program is not a NADA endorsement or sponsorship of the speaker or the speaker’s company, product, or services.
Nothing that is presented during this educational program is intended as legal advice, and this program may not address all federal, state, or local regulatory or other legal issues raised by the subject matter it addresses. The purpose of the program is to help dealers improve the effectiveness of their business practices. The information presented is also not intended to urge or suggest that dealers adopt any specific practices or policies for their dealerships, nor is it intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service.
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Learning Objectives
• Build the key steps of continuous improvement culture in the dealership.
• Implement the scientific method into the dealership.
• Measure the impact on dealership performance that the scientific method can have.
Why use the Scientific Method
Why should you use the Scientific Method
• Drive continuous improvement
• Isolate “noise”
• Improve performance
The Basis for Continuous Improvement
• Continuous improvement builds a stronger business
• It is a culture choice
• It is a management style and methodology
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What is Continuous Improvement
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PlanDo
CheckAct
Who has used the Scientific Method in business?
• W. Edwards Deming
• Peter Drucker
What is the Scientific Method?
What are the objectives?
• Measure variables that impact performance
• Isolate variables that impact performance
• Manage variables that impact performance
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Ask a question
• Why does something happen?
• E.g. Why is my parts department off the shelf fill rate so low?
Do background research
• What are possibilities that are causing my question?
• E.g. What are the characteristics of parts that are not sold from my shelf?
Develop a hypothesis
• What you believe will occur if you change something – it is a prediction
• E.g. Track and research lost sales, off the shelf fill rate will increase.
Test your hypothesis
• Do the activity you believe will influence the question.
• E.g. Track and research lost sales.
Analyze your data and draw a conclusion
• Did my hypothesis hold true?
• E.g. Did improving the management of my lost sales increase my off the shelf fill rate?
Do it again!
• Is it repeatable?Then
What does this look like in practice?
• Question
• Why is my used truck department performance so poor?
Background Research• Inventory management• Reconditioning• Determination of where to sell the used truck• Market days supply• Price to market• Cost to market• Meaningful margin contribution
Hypothesis
• If we measure market days and use the data to support stocking, pricing and other used truck decision, used truck performance will improve.
Test the hypothesis
• Measure market days supply
Conclusion
Test the question again!
How has the use of the scientific method impacted dealership results?• Off the shelf fill rate
• True turns
• Used truck inventory performance
• Monthly accounting close
• Service department profitability
Question
• What can be done to increase service department profitability?
Background research
• Technician performance– Productivity– Efficiency
• Effective labor rate
• Expense structure
Background research
• Technician performance– Proficiency
Background research
• Proficiency– Communication– Parts availability and staging/delivery– Dispatch– Triage– Operation codes– Tools– Parking lot
Background research
• Triage and its impact on proficiency
Proficiency – current status
• 75% hours billed vs. hours available
• 25% of trucks triaged
• Average wait time to get into a bay 3 days
• Average cycle time (first punch to last punch of an RO) – 5 days
• Average hours billed on RO – 6 hours
• Average gross profit 67%
Hypothesis
• If all trucks (other than those trucks in for maintenance or where repair is easily identified) are triaged, proficiency will increase
Test the hypothesis
• Redesign RO process and develop triage rules (2 and 4 hour rules)
• Train advisors and foreman on triage process
• Train technician to perform triage
• Develop tools to measure triage
• Implement the triage system
Analyze the data and conclusion• What were the results of the tests?• 83% of trucks triaged• Average wait time to get into a bay - .5 days• Average cycle time (first punch to last punch of an
RO) – 2 days• Average hours billed on RO – 7 hours• Average gross profit 76%• 110% hours billed vs. hours available
Do it again!
• Test other questions that will impact proficiency
• Test other questions that will impact profitability– Market based pricing– Headcount analysis– Expense structure
Implementation
– Culture– Measuring performance – not just the financial
statement– Keep the score – Drive accountability– Identify variances– Continuous improvement
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Culture
• Acceptance of change
• Experimentation
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What Are the Performance Measures?
• Measured in small steps
• Behavior (activity) measures
Adopted from: The 4 Disciplines of ExecutionMcChesney, Covey, Huling
2012, Free Press
Keep the Score• Simple
• Update it– Frequency– Visibility
Adopted from: The 4 Disciplines of ExecutionMcChesney, Covey, Huling2012, Free Press
Keep Accountability in Place• Timing
• Commitment– What worked?– What didn’t?– What are the road blocks?
• Commitment for the coming week?– What will have the biggest impact?– It’s all about me– This week, not next
• Keep the scoreAdopted from: The 4 Disciplines of Execution
McChesney, Covey, Huling2012, Free Press
Keep Accountability in Place• Regular and scheduled
• Brief
• Review updated scoreboard
• Know why you are winning or losing
• Take corrective action
• Hold the team members accountable – no excuses
• Make specific commitments for the coming time period
• Knock down obstacles for the team
• Keep your day job out of your meeting Adopted from: The 4 Disciplines of ExecutionMcChesney, Covey, Huling
2012, Free Press
Identify Variances
• What causes processes to not be predictable?
• What causes poor outcomes?
• What causes outcomes better than expected?
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Continuous Improvement
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Closing
• What is the scientific method
• How can the scientific method be utilized in a dealership
• Implementing the scientific method to change dealership culture
Questions
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Blinded Me with Science! Management Methodology
Keith ElyManaging Partner
Lawrence, KS(785) [email protected]#ATD2017
Your photo here
