Fixing a Bad Hire
The hardest part of owning a business is hiring the people for the business. Or at least, this is what William Custer, president of Will’s Auto Body Inc. in Concord, Calif., says has been his experience.
He thought he had an ideal situation. A friend recommended someone for an estimator position and Custer thought it would be the perfect fit because the woman had 15 years of experience in the industry. Plus, she was recommended by a friend. It had to be a good recommendation, right?
When that estimator started, Custer realized the learning curve was steep. No problem, he thought; he’d just train her. For the first three to four months, he spent time personally re-training the new hire on how to write an estimate and use the shop’s basic estimating software package from CCC Information Services.
Once she learned the process, the estimates started to get cleaner and the shop was mostly back on track to charging the correct amount for repairs, he says, and he became more lenient of mistakes.
He was fooled.
Custer realized the shop was losing money. Each month when he sat down to work on the numbers, he noticed KPIs, like capture ratio and profit margin on parts, going down. The numbers had decreased from the financial period before the new hire. His capture ratio was resting at 33 percent. Later on, he realized he lost roughly $150,000 in profit margin on parts and was losing vendor discounts due to the estimator’s poor process of sending back the wrong part, ordering the wrong parts and not communicating issues with vendors.
That’s when Custer realized: he had hired the wrong estimator. And it was up to him to fix that critical problem.
Growing up, Custer spent every Sunday watching car shows and soon realized the automotive industry was one in which he wanted to work. After school, he worked for a junk yard while repairing vehicles on the side and then he moved his way to a Chevrolet dealership where he worked as a combo-body technician.
Eventually, Custer opened his own shop in March 2014 and started out in the industry by hiring people who said they knew the job and could properly perform the collision repair work.
“I was able to spot it within two days if something was not being done right by a technician,” he says.
Custer had successfully opened his own collision repair shop, moved from Illinois to California on his own and started a business in a market that was nestled away from the business of major roads.
And, he had the experience he needed to successfully run a body shop since he had years of experience working in the shop floor.
He soon learned that starting a business entails more than good luck.
At the beginning of a hire, Custer says he normally did a background check on the potential hire and did research into his or her prior work experience. In the estimator’s case, however, he decided against it because she was recommended by a prior colleague.
“I wasn’t worried at first because of all the years she had been doing estimating, but when she started, it was a big learning curve,” Custer says.
When Custer noticed a drop in his revenue and KPIs, he decided to start figuring out what exactly was going wrong in the process. He started by upgrading the CCC estimating software.
First, he upgraded to a $400 package, then a $800 package and a $1,200 package. Once he upgraded, he was able to receive reports on his KPIs more often than when he was looking at them monthly.
He realized the new estimator was working hard but didn’t produce the same money the shop was making before she was hired, he says. But, Custer did not want to completely give up on the money he invested to find the problem and the money he invested in the hire.
So, he brought in trainers from CCC to help retrain her, the other office manager and himself on the software program.
But still, the problems persisted. The estimator did not improve. If anything, her attention to detail, willingness to adapt to new processes and overall attitude continued to suffer.
“We should have been producing 50 percent in capture ratio at a minimum,” Custer says. “And that’s if we’re in a high-volume and high-traffic area.”
Since Will’s Auto Body is out of the way of a busy market, the shop needed to produce 80–90 percent in capture ratio or better, he says.
Custer was faced with a hard decision. He had just spent the past several months investing significant time and money into this estimator. Was it worth it to continue the training and hope the situation would turn around?
After more than five months of this training and tracking KPIs, Custer says the only solution was to let the estimator go.
“We already were having a hard time with profit margins and then training was padding that expense and we couldn’t afford it anymore,” he says.
Now, Custer was left down an estimator. And this time, he knew he couldn’t afford to make the same mistakes, so he decided to overhaul his hiring process.
“Since it was a specialized position we decided to put an ad out on Indeed.com this time around,” Custer says.
Custer interviewed over 15 candidates to find the correct person to replace his estimator.
And, Custer realized that he might not like the person he hires for the position personally but he knew exactly the characteristics he needed in a new hire: passionate, hard-working and loyal to the job.
He also started to focus on the results from the “test runs” he did with potential hires. He would enter the interview and walk the hire through a scenario in which he pretended to be the customer and the job candidate had to walk him through an estimate he would receive.
The hire that replaced the previous estimator was put through a couple interviews and test runs before being hired, he says.
Now, with the new hire, the shop is back to producing its average sales of $100,000 per month and has even expanded the square footage of the shop from 4,000 square feet to 8,000 square feet, to double capacity for the influx of work.
Not long after firing the estimator, Custer’s capture ratio went up to 87 percent. Parts discounts from vendors increased from 11 percent to 40 percent.
Now, Custer says he will never make the same mistake of neglecting a background check in his hiring process. He also says he now checks the reports from CCC at least once per week.
“It’s a lot easier to clean up incorrect data from a week’s time than six months worth of incorrect data,” Custer says.
Another important realization came from Custer recognizing he made too many excuses for the old employee’s mistakes.
“I initially made up a bunch of excuses and thought oh well she’s had some kids and that can explain the gap in her work history and why she needs to be retrained,” he says.
SHOP STATS: Will's Auto Body Location: Concord, Calif. Operator: William Cluster Average Monthly Car Count: 30 per month Staff Size: 6 Shop Size: 8,000 square feet; Annual Revenue;$1.2 million