Growing H&V Collision Centers
Expanding can be a scary proposition—even more so on shaky economic ground. But Vartan Jerian, vice president of H&V Collision in Troy, N.Y., is a dreamer. He expanded his family business to a second location in 2007, and in 2009, he gambled on a third collision center in a building he’d had his eye on. All this smack in the midst of the biggest economic crash in 50 years. “I would drive by this specific building, a repair shop, with my wife and say ‘You know what, that’s going to be H&V [number] three someday.’”
His wife laughed, but Jerian was serious, and he started leasing the building at the end of 2009. “We started when everything was going down the tubes, which was pretty scary,” he says. “Our Troy facility was starting to lose sales.” But things ended up in the black. “We’re predicting this year we’re going to lose 6 percent over last year, which ends up being close to $600,000, which is a considerable sales amount,” he acknowledges. “But with the third location, our company as a whole will be up about 23 percent, even with that loss.”
Jerian has proven that successful expansion is possible no matter what the economic climate looks like. So what’s his secret? He’s been able to stay profitable by using innovative management techniques and keeping operations tightly controlled. By hiring a full-time continuous improvement manager and devising his own hybrid style—a mix of Theory of Constraints (TOC) and lean—he’s drastically reduced cycle and touch time, while improving each shop’s organization and boosting on-time delivery rates. Add in solid insurer relationships and a focus on customer service (they’re closing in on a perfect CSI score) and you have a formula that’s catapulted H&V from a modest one-shop operation to a rapidly growing powerhouse.
More Square Feet
H&V Collision is a family business, started by Jerian’s father, Vartan Jerian Sr., in the 1970s. What began as a wholesale operation focused on dealerships and fleet services morphed into a customer-driven business after Jerian joined his dad in the 1990s.
Jerian’s an expert now, but in 1994, when he returned from the Marine Corps and began working for his father, he “knew nothing about auto body repairs or cars.” (“I’m still not a huge fan of cars,” he admits.) He did like the business, though, and quickly realized that he needed to change his father’s focus on wholesaling. “We had customers walking in the door and my father would turn them away because he was focused on this other work,” he recalls. “I said, ‘Wait a second, these people are here, they want to give us money. Let’s concentrate on that and build our business on taking care of the customers.” Jerian’s new focus raised the shop’s revenue from an average of between $200,000 and $300,000 a year to $1 million by 1996.
As customer traffic grew, Jerian expanded the shop. In 1999, the father-and-son team (Jerian Sr. still serves as the company’s president, but his role is mainly advisory) built a 4,000-square-foot building on their property, creating an entirely new shop. Revenue growth corresponded with the additional space, reaching $1.6 million later that year. They then built yet another addition, this one 7,000 square feet.
None of it was enough to contain their rapid growth. So in March 2008, Jerian made a deal to take over a collision shop in Queensbury, N.Y. It was scary to make the leap, says Jerian. “Expansion to our Queensbury location was already underway when the economy started to go under. But we saw a bright future with [our insurance partners].”
Blended Management Theories
As H&V grew, Jerian needed to keep operations organized and efficient. About seven years ago, he became interested in the Theory of Constraints (TOC) after visiting a shop that used the system. Jerian says, “I thought, ‘Wow, these guys run their shop a lot differently.’ They were getting things done in an organized way, without anyone running around like chickens with their heads cut off.” He called in a consultant to survey his shop, but didn’t love the idea of paying someone to do what he thought he could do himself. So he threw himself into research, scouring books and reading online. (For more on TOC, see “Getting The Kinks Out” in the January 2010 issue.)
His conclusion? For H&V, a hybrid of management philosophies made the most sense. He decided to meld TOC ideas with lean strategies. While TOC provides a systematic approach to identify the most important problems and manage efforts to improve them, the core idea behind lean is to reduce waste in the process. Jerian thinks they’re a natural pairing, since lean theory helps employees accept innovation. “Lean provides a lot of theories and tools, but more importantly, it promotes a change of culture to enhance these efforts,” he says. “To me, this change of culture is the most important part.”
Jerian found his work force was receptive to his new ideas. Because the company’s growth has been so rapid, systems were neglected, and his employees were eager for organization. But staying on top of things became a challenge, and in 2009, he hired Yanzhen Li to serve as the shop’s full-time continuous improvement manager.
Li, a former Chinese national with extensive education in the field of continuous improvement and experience using a number of management philosophies, works closely with Jerian to keep the shop running smoothly, in big ways and small. “For example, if we see that one store is outperforming another store in a department, we want to see what they’ve changed or what they’re doing that’s a little bit different. Is it the people or is it the process? We analyze that and bring it back to our other shops. Change is an everyday event around here,” says Jerian.
The results speak for themselves. Though the industry touch-time average is 1.8 days, H&V averages between 3.8 and four hours. “We have an assembly line process for all our vehicles,” he says. “They’re taken apart by one team, repaired by another team, painted by another and reassembled by a different team. And then they’re cleaned and detailed. We move people, rather than vehicles, from location to location.”
By streamlining their repair planning process and reducing supplement rates (from 75 percent to approximately 18 percent), they’ve slashed the company’s overall cycle time from 12 days to 4.5 days. The techniques bleed into the front office, too. “Our old system was a pile of papers in a binder. Everyone had to waste time sifting through [it],” he says. He cut the front office staff at the Troy location from four people to two, sending the extra personnel to new locations.
Scheduling got an overhaul, too. H&V now schedules vehicles more evenly throughout the week to help balance the flow through the shop so “we don’t have the ‘in on Monday, out on Friday’ syndrome,” says Jerian. “Our new methods lower everyone’s stress level and have allowed us to improve our on-time delivery from 75 to 95 percent.”
Li is in charge of overseeing new systems and goal-achievement, but says he relies on Jerian to make things happen. “I need the support from the top management,” he says. “That’s the most important step for any kind of continuous improvement. [Jerian] has the overall vision, so my job is how to translate his vision into procedures that everyone can easily use.” He strives to make his changes simple and transparent: “A number goal is best whenever possible,” Li says.
Close Ties With Insurers
Strong insurer relationships have been a key factor in H&V’s phenomenal growth. In the mid-1990s, when the business was moving away from its wholesale roots, Jerian says H&V didn’t have DRP relationships. “No insurance companies really needed us in that market, “ he says, “but we ended up securing a lot of direct repair agreements because of our performance and our facilities—the layout and the cleanliness of it. It shows [how well] we’re going to take care of our customers.” And when the time came to grow beyond the Troy location, knowing those foundations were solid gave them a boost with insurers.
“Of course we talked to our insurance partners before we moved, but none of them can promise they’re going to be able to do anything for you. No one’s going to give you a contract and say, ‘Open up here and I’ll guarantee you $5 million in business,’” Jerian says. “You have to make an educated guess on the risk that’s involved and put your heart and soul into it.”
The new location started paying off immediately: “There was a need in the marketplace for a collision repair shop of our caliber,” Jerian says. “There were a lot of shops that weren’t that friendly to the insurance companies. We saw it as an opportunity to expand our footprint in a growing area.” Revenue speaks louder than words: At the new Queensbury location, the previous owners’ best year sales were $850,000. In the first nine months, H&V raked in $1 million.
Integrity With Customers
Jerian credits his commitment to customers as another key to H&V success. “Our goal for every store is to have a consumer satisfaction index (CSI) score of no less than 98 percent,” he says. He’s currently sitting above that number at 98.7 percent, a fact he’s not shy about mentioning. “We’re not perfect,” he admits. “Do we make mistakes? Absolutely. But if we do have a customer who’s having a bad experience, we take care of that right up front.” He gets the whole staff involved in this philosophy, from customer service reps to repair managers to production management.
“We promise to give customers their vehicles back on a certain date, and that, to me, is an integrity issue,” he says. “If something is going to change, maybe a part goes on back order, well, that’s going to happen. But we should know in advance, be able to call that customer and be proactive rather than reactive,” he says.
The company also strives to be a part of the community, throwing splashy opening celebrations, hiring locally and reaching out to local politicians. “It has truly been a pleasure to watch H&V grow from a two-man shop in Troy to what they are today,” says Rensselaer County Executive Kathleen Jimino. “They continue to create jobs, expand and invest in the communities they serve, even in these trying economic times.”