The Power of Failure
Last month I discussed how the book Moneyball inspired me to take a different look at our KPIs—first, total labor hours per repair order, and, now, the percentage of vehicles delivered that didn’t require additional parts after the vehicle was put into production. The greatest impact of tracking that second KPI was financial, but the one the meant the most to me, as a leader, was lowering stress. I don’t have an exact measurement for stress, yet it can be felt by everyone in our building. It is something that almost always gets mentioned when people come visit our shop. They always make a comment about how calm things seem.
Since our management system doesn’t technically track this for us, we had no historical data to see what our percentage was before we made changes to our processes. I know a consultant who has dedicated a good chunk of the last six years to figuring out an industry average and he strongly believes it is below 20 percent. That means more than four out of every five vehicles delivered will need additional parts once in production. Before we get too far into it, let me define “into production” as the stage after a vehicle has been fully disassembled and a final repair plan (estimate) has been written and all those parts identified have been ordered and received.
Now, let’s think about some of those instances that count as a failure: If a technician needs to go grab a clip from a hardware cabinet or a technician is building a vehicle and realizes the bumper cover retainer that came in is for the wrong side, those are failures. In the scenario where a part gets broken as we put a vehicle together, that would not be considered a failure. The point of the KPI is to measure if we ordered and received all the correct parts for a vehicle one time. If a vendor sends the wrong part and we catch it before it goes into production, then that vehicle is still considered passing.
One of our biggest struggles in starting to keep score was discussing failures. It’s no surprise that most people don’t like to admit they made a mistake. It took a while, and a lot of tough conversations, before everyone realized it was beneficial (and safe) to discuss where our process broke down. Nick Foles, the reigning Super Bowl MVP, happened to recently give a great speech on how failure is the best teacher. In that speech, he said, "Failure is a part of life. That's a part of building character and growing. Without failure, who would you be? I wouldn't be up here if I hadn't fallen thousands of times, made mistakes. We all are human. We all have weaknesses."
Those conversations––along with manual tracking that KPI for years––got us to a point where 90 percent of our vehicles went through production without ordering another part. The first time we started averaging 90 percent, the vehicles were flying out the door and we starting calling customers with scheduled appointments to bring their vehicles in sooner. We couldn’t fill the shop up with enough vehicles. Inevitably, we started to break all the rules we put in place to be successful, just so we could keep everyone busy. Once we broke the rules, we ended up back where we started with having to order parts for vehicles multiple times. This was a great learning lesson that, admittedly, we have had to learn several times.
To be honest, it took until 2012 for the shop to realize that tracking this KPI was something we needed to stick with for the long term. That year, we finally broke a company annual sales record that was set in 2008. When I compared the data from 2008 to 2012, we have 9.5 people total on our team, down from 14 people in 2008. When I let the team know that the payroll in 2008 matched the payroll in 2012 (meaning nine people were getting paid the same as 14), that’s when they realized how much the processes we implemented benefited them.
Today, I realize how lucky I am to have read the book Moneyball. Whether you read that book or not, I encourage you to take a good look at the KPIs you track and see if you can find one or two that impact your business the most. Once you find them, narrow your focus and track the progress and see how it impacts the overall financial and mental health of the company.