Trying to hit a KPI without proper education and mentorship can be dangerous to the health of the business.
By David Rogers
The three most misunderstood letters in shop management today are K, P, and I.
(Not the definition, of course.) I’m positive no corner of the industry has escaped hearing about the latest key performance indicators (KPIs) being touted by so-called gurus and experts.
The problem is that in a vacuum, KPIs are just numbers. They don’t inherently mean anything. Measuring that number may tell you the efficiency of this or the profit of that, but it doesn’t answer critical questions. Why is that important? What does it mean for the business? What other numbers are related? Is it bad if you overshoot your target?
Trying to hit a KPI without proper education and mentorship is worse than useless; it can be downright dangerous to the health of the business.
Does that mean shops shouldn’t have benchmarks for critical numbers? Of course not! But there are critical things to consider before you change your systems and processes to try to hit a KPI just because somebody said it’s important.
Chasing one KPI may affect another
One of the first and most critical dangers in following a new KPI is just how interconnected every area of the shop is. In your goal to change systems and processes to hit a new number, you are almost certainly affecting other numbers. If you weren’t given proper training and ongoing guidance, that could have long-lasting consequences.
Take car count as an example. On the surface, there’s nothing wrong with setting a target for how many cars you want to see per day. It may even be a good indication of how you need to adjust your advertising budget to avoid an approaching slowdown.
But car count doesn’t happen in a vacuum; the quality of those customers is even more important. If your car count is increasing, what effect is that increase having on your new customer average repair order? In other words, are you attracting customers whothat are improving your customer base or just making you busier?
The long-term effect is even more critical. As the shop tries to increase car count to hit theirits desired KPI, what is happening to the shop’s attrition rate? Is the marketing driving customers who come in once and then never again? Worse, did you make your shop so busy you can’t take care of long-term customers who are now going to another shop instead of waiting two weeks for an appointment with you?
What if you reach your car count target accidentally? If a shop down the street closes, and you get a big influx of customers without even trying, is it a good thing? In a vacuum, it looks like it. Your KPI says you’re right on target for growing your shop. All the while, your loyal customer base could be rotting away through neglect.
This is why numbers – KPIs, benchmarks, targets, whatever the term – are useless on their own. Whether you’re getting your numbers reporting from a coach’s spreadsheet, a shop management system’s reporting, or the books you’re bringing to your 20-Group, the point isn’t just to measure or hit a target. To create long-term success, KPIs must come with training, education, and mentorship so you understand how to control that number, how it affects other numbers, and critically, how that number can cause problems elsewhere.
For instance, there’s danger in overshooting targets! Blowing past your targets for profit and hours billed can cause significant harm in other areas of the business, yet this danger is rarely discussed!
Does this mean you shouldn’t measure, that KPIs don’t matter, that shops should never seek to improve? Of course not. It does mean operators should be very careful who they take KPI advice from, however.
Expertise is proven through results
One common way operators get recommendations about KPIs, for example, is their 20-Group.
The obvious downside to this is that choosing KPIs on the advice of 19 other shops who may or may not even be sharing their real numbers does not tell you where your unique shop should be focused.
The less obvious downside is that choosing a KPI agreed to with the advice of 19 other shops is that you’re almost certain to set your target at the average of the averages from below-average shops. Nothing comes from this but mediocrity and stagnation.
But even if you escape the trap of letting your 20-Group help set your KPIs, there’s no guarantee trusting somebody claiming to be an expert will give you the real answers, either.
Does that “expert” still own a shop? Or did he or she sell it 20 years ago?
If it feels like I’m being unfair to that coach simply because he or she sold his or her shop, ask yourself these critical questions: how similar are shops now to how they were 20 years ago? How relevant is experience from 20 years ago?
It doesn’t take decades for shop operation knowledge to become obsolete, either. Case in point, how different is operating a shop now compared to two years ago due to inflation?
Ultimately, you should be taking advice on KPIs from a coach or mentor who is currently running a successful shop. If you’re following the advice of somebody not operating in today’s environment, you won’t be able to make decisions that work in today’s world.
Beyond that, you should be listening to mentors who teach the process and system required to hit and maintain KPIs, and the way those KPIs fit into the rest of the shop.
This kind of expertise is proven through results. They should be able to demonstrate, in this economy and in your unique operation and circumstances, how they’ve helped owners create lasting, meaningful, sustainable success in their operation.
If it seems like I’m ruling out the vast majority of coaches, mentors, and groups when it comes to whom to trust, you’re right. The stakes are too high for owners like you who put their family and livelihood on the line every day to run a business.
You don’t have to accept the mediocrity and averages of averages. You don’t have to settle for hitting arbitrary KPIs with strategies that may or may not cause serious harm to your business.
With the right mentor teaching you the correct processes and systems needed to hit and maintain appropriate KPIs, you can create the shop of your dreams, with a fully bought-in team that wants you to succeed. The choice should be clear!
Originally published in Motor Age magazine and online at VehicleServicePros.com