At body shops across the country, often the same types of frustrations and problems can arise. A common challenge for many shop owners is finding effective ways to improve their paint and material (P&M) margins. So are there truly quick fixes that will help to boost P&M margins?
There are several steps that collision shop owners and their paint departments can utilize that are almost guaranteed to quickly improve profits.
Measure
Shops must have a strong measuring method in place so that accurate comparisons can be made. You can’t manage what you don’t measure. The first step to see an improvement in your margins is to measure everything the exact same way — consistently — each month. Be sure to exclude items that are not part of P&M — this can have a huge impact. Items that are billed as separate items or are the cost of goods sold in another department such as clips, cavity wax or seam sealers, should not be considered P&M costs.
Reports with a local or regional comparison can offer great insight. Paint jobbers and third-party companies can provide reports of and comparisons to local, regional and national key performance indicators (KPIs) to help you see where your shop stands.
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Being able to evaluate how your shop compares to similar shops in the same area — on paper — can spur effective action. If the shop across town can do this, why can’t you?
Share
Having good reports is necessary and important to tracking performance and change. But these reports can only bring about positive action if their data becomes information that is shared across the shop. It can then become a tool for savings. A great report that sits on the manager’s desk unread, unanalyzed and overlooked doesn’t have much of an impact on the technicians working in the shop.
Get faster improvement in the paint department by simply sharing the information you do have. Let your staff know they are being monitored or measured, and how. Then be open with them about the results. This is cited as the Observer or Hawthorne Effect, where people tend to improve their performance if they know they are being measured.
Once you begin to see improvement, it must be maintained. Continuing on a forward trajectory means keeping all staff in the information loop. Get those reports off your desk and in the hands of staff. Everyone wants to know the score, and once they do, they will be more invested in working to change it.
Expect the best
Another slightly more obscure psychological tool is the Pygmalion Effect, also known as the Rosenthal Effect. This is the belief that the greater the expectation of performance that is placed upon a person, the better they actually perform. The effect is named after the Greek myth of Pygmalionm, a sculptor who fell in love with an ivory statue he had carved. So be sure to tell your staff that you expect great things! Be the cheerleader in your shop, and you may be rewarded with a winning team.
But let me also pass on a warning — there is also counterproductive theory called the Golem Effect. This is when low expectations can lead to a decrease in performance. Don’t bring a negative attitude into your shop and display it in front of staff and expect them to not notice. Even if things are a bit tough, you don’t want to let them see you cry.
Include everyone
The steps thusfar may seem obvious at first glance, but even with the best intentions, we can exclude people and cause feelings of resentment. For example, everyone knows that the bulk of shop spending on P&M is in the paint shop. With paint and other liquids accounting for often 70 percent of all material costs, it seems logical to look to the paint department first to do measuring and then look for the improvements. But to be truly effective, you need to include everyone.
Who else in the shop has an effect on P&M margins? Including everyone in this initiative not only makes good sense, but often it will return good dollars as well. For example, establishing a method for the body technicians to track flagged hours versus material used is a great way to keep them invested and in the game. Taking this approach over several months will smooth out most of the blips that can appear because of normal spikes in hours or purchasing.
A little more challenging is getting everyone else involved. Let the employees vote on the best implementation for improving P&M margins each month. At a recent lunch and learn at my shop, it was pointed out that the cost of using shop towels as pizza napkins was considerably more expensive than keeping paper napkins on hand. A new employee processing invoices had noticed and pointed out the cost after she keyed in some invoices. Another example is using two-inch-wide masking tape to reseal parts boxes. Box sealing tape, which is much cheaper, will do the job just as well without unnecessarily adding to your P&M expenses. Small suggestions can add up to big changes.
Parts managers or other people involved in the ordering of materials can surely have an impact. They should pay special attention to inventory. Make sure excess stock is either returned for credit or stored safely, if needed in the short term.
A porter in a local shop noticed what looked like still-good sandpaper sheets as he was sweeping and placed the scraps in a box for miscellaneous use or reuse. Encouraging your staff to pay attention to these types of misplaced items can help save money.
So who else can you enlist to be on your team? Consider the vendor or insurance claims representative who walks through your shop and sees your operation on a regular basis, in addition to those of many others. I’m not talking about enlisting these people to act as your spies, but rather as an outside observer. If they see other effective business practices that you do not employ, they can share some suggestions. Sometimes that third set of eyes doesn’t need to be a paid coach or advisor. Sometimes good ideas or questions can come from people who see your operation with a more objective view.
Once you have everyone aware and everyone involved, you have a team. A team is always more effective than a bunch of individual players. There are big things that can be changed that improve P&M margins. There are also a lot of little things that can add up quickly.
Keep score
Score keeping is a great way to let the natural competitive spirits of your team members drive profit boosts. Post the results or reports for everyone to see. This alone can and often does lead to improvements without any further action needed. Push for better performance in the shop, but with attainable goals for improvement. And give credit where it is due to foster a continued cycle of improvement — stand up and cheer those who meet those goals.
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