People Powered

In an industry that’s often marked by tough insurance negotiations and tense customers, keeping people happy can be a challenge. Gunn Collision Centers, a three-shop chain based in San Antonio, Texas, is building its business by rising to that challenge.

The collision centers got their start as part of the Gunn Automotive Group, a six-franchise dealership that’s been family-owned and operated since 1955. But by becoming a subsidiary of the dealership, taking advantage of a company-wide Employee Stock Ownership Plan (ESOP), and focusing on customer service, the three shops—Gunn Collision North Central, Gunn Collision Northwest and Gunn Collision Northeast—have quadrupled their sales and kept employees and customers happily in place.

Breaking Away

For years, the Gunn Collision shops operated as just another department in the Gunn dealership. But 10 years ago, under the leadership of director Wes Burke and general manager Gary Powell, the shops split off and reincorporated as a subsidiary of Gunn Automotive Group in order to focus attention and resources exclusively on the collision repair business.

Burke admits that in the mid-1990s, the collision repair department was one of the worst performing departments of the dealership. Burke and Powell analyzed the market situation and the changes going on in the collision repair business, identified opportunities for growth, and presented them in a business plan to Gunn’s board of directors. The plan was to separate the collision repair business and aggressively court customers.

“When you decide you want to become aggressive in any market, you have to concentrate your efforts on gaining market share, whether you’re selling peanuts or collision repair,” Burke says. The only way for us to do that effectively was to separate our assets and concentrate on doing that one type of business—collision repair. Otherwise, we were just a sub-department of a new-car dealership.”

That plan required a shift in philosophy as well as action, Burke says. “A lot of it is a mental state of mind.” The Centers also focused on becoming more efficient.

The plan worked: Since becoming a subsidiary, the three Gunn Collision Centers, which total 88,836 square feet, have more than quadrupled their combined sales, going from roughly $400,000 a month to about $1.3 million today. Together, the shops repair more than 800 vehicles a month.

In Powell’s opinion, Gunn has the best of both worlds: It has the advantage of having ties to a dealership group, but isn’t under dealership control. “In tracking sales, we have determined that being part of a dealership group gives us brand recognition, which increases our collision repair sales for makes our dealerships sell,” he says. Yet Gunn Collision isn’t limited to repairing only what the dealership sells or limited by the dealership’s branding in the community, and isn’t subject to the dealership’s additional layers of management or expenses.

“We control our destiny,” Powell says.

Giving Employees an Ownership Stake

While Gunn is a family-owned business, its employees have an ownership stake in the company as well. In fact, they own 13.3 percent of the total company, thanks to the ESOP that Curtis C. Gunn Jr. put in place four years ago as both a financial instrument for the company and as a way to reward employees.

According to The National Center for Employee Ownership, an ESOP is “a type of defined contribution benefit plan in the U.S. that buys and holds company stock.”

Like many plans, Gunn’s ESOP is set up as a trust, and the company contributes a portion of its net profits to that trust each year. (The annual amount varies, but Gunn has contributed about $4 million to its ESOP to date.) Employees become fully vested, meaning they are eligible to receive 100 percent of the value of their stocks, once they have worked at Gunn for more than six years, and they receive the value of their stock when they leave the company.

While roughly 11,000 companies in the U.S. have ESOPs, general manager Gary Powell believes that Gunn is the only dealership in Texas that offers one.

Not surprisingly, the plan was well-received by employees. Mike Irle, a frame technician at Gunn Collision Northeast and a 27-year Gunn employee, says he was shocked—and thrilled—when the ESOP was announced.

“Some big corporations think of you as a number,” he says. “I think Mr. Gunn thinks of us as family, sharing his profits with all of us.” Irle’s participation in the ESOP has netted him about $13,000, and he’s in good company: More than 50 percent of the collision centers’ 86 employees are fully vested.

But the plan has benefited the company, as well. Powell says it’s had a positive effect on everything from employee recruitment and loyalty to efficiency and attitude.

“I’ve seen an improvement in employee morale,” he says. “A lot of people now are looking at expenses and asking questions about doing things differently, wanting to increase the profitability of the company. They feel like this is their money that they’re spending. There’s pride of ownership.”

“The fact that the company cares enough to give back really keeps our employees here, because there’s a financial stake in longevity, but also a financial stake in trying to do better work,” adds Martin Hoffman, body shop manager of Gunn Collision Northwest. “The more successful the corporation is, the more their stocks are worth. That money is going toward their retirement, it affects their pocketbooks, and that makes them care a little more.”

The ESOP is just one way that Gunn Collision Centers fosters an environment of longevity. Managers are encouraged to have “open door” policies and provide employee feedback at monthly meetings; the shops arrange employee outings like deep-sea fishing excursions on an annual basis; and employees receive loyalty bonuses for every five years of employment.

“We try to foster a positive work environment,” Hoffman says.

Focusing on Customer Service

That positive environment applies to Gunn’s customers, as well. In 2003 the collision centers, which were always physically separated from the dealerships, began a renovation process that was just completed last year.

First, production space was increased. In the Northwest location, an additional 6,000 square feet was added; the North Central location went from 16,000 square feet to 39,999 square feet. Equipment was updated at the same time. “We believe in having the latest and best equipment,” Powell says. That includes three downdraft spray booths in each of two locales, along with prep stations, and a tunnel booth and prep stations in the third. Each location has Car-O-liner frame machines with electronic measuring, along with a secondary frame machine. The shops also have tire machines as well as tire balancers and each has a Hunter alignment machine, which allows them to do 98 percent of their mechanical in-house. They also purchased scanners for diagnostics on the vehicles they repair.

Second, the waiting area of the Northeast location was rebuilt with customers in mind: The design is open and airy, with a television on the wall, a business center with Internet access, and comfortable seating throughout.

According to Powell, one unexpected benefit of the renovation has been the reaction from the shops’ female customers, who have responded positively to the design. “The female customers that we have like coming there because it’s not intimidating,” he says.

But Gunn aspires to understand and cater to the needs of all its customers, not just women. “We try to assess the information needs of every customer, and we try to get enough information to them to [make sure they] understand the repair process. Most of our customers are accustomed to taking a vehicle into a mechanical shop and either waiting on it for an oil change or picking it up later that day. They don’t understand that collision repair takes longer.”

In addition to keeping customers informed throughout the repair process, Gunn asks them to fill out a survey when they pick their car up; then a call center contacts them for further feedback, asking such questions as, “Would you refer Gunn Collision to your family and friends?” and “Were you kept informed?” Last month, for example, 93 percent of customers said they were kept informed and 95.9 percent said they’d recommend Gunn Collision Centers.

Maintaining that level of customer satisfaction is crucial to the future of the company, in Powell’s opinion.

“Collision repair is a referral business,” he says. “If you’re not on top of your game and into customer service, you’re going to be left behind.” To that end, three months ago Gunn introduced mandatory weekly, in-house customer service training meetings for its 12 estimators, where customer feedback is reviewed and specific scenarios discussed. “When [a survey response] is negative, 95 percent of the time it comes down to communication,” Powell says. “We have to do a better job of keeping people trained in customer service… because there are a lot of other shops that are available [to customers] out there.”

Burke agrees. “In today’s business, if you’re not retaining your clientele, you won’t be in business,” he says. “It boils down to your employees and how motivated they are to satisfy customer needs and have empathy.” Customers have a lot of choice. Ultimately, their decisions come down to personal relationships, Burke says. “People buy from people.”