Eric McKenzie’s One-Year Rebound

March 1, 2012
The shop director honed in on seven key areas to turn an unprofitable collision center with a 60-day cycle time into a valuable dealership asset.

When Eric McKenzie arrived at Park Place Bodywerks in Dallas, Texas, to be the body shop director, cycle time at the luxury-brand dealership shop was an astounding 60 days and the collision center was not profitable.

“I was blown away, I couldn’t believe it,” McKenzie says of the shape the shop was in when he started five years ago.

But within one year, using his industry knowledge, financial acumen and management skills, McKenzie helped drop cycle time to 20 days and profits soared to nearly $2.2 million, with annual revenues of about $18 million. Customer service index (CSI) scores increased from around 80 percent to 97 percent. Revenue has grown steadily since, and the dealership recently opened a second shop in Grapevine, Texas.

McKenzie took over a shop that the dealer considered a necessary evil, and turned it into a valuable, growing operation. Dealership General Manager Robert Morris says that McKenzie’s transformational prowess completely changed how the dealership thinks of the collision repair side of the company. “Now it’s a vital part of our store,” he says. “We definitely see the potential in it.”

McKenzie shared his story with FenderBender, explaining how he identified waste, maximized existing resources, stuck to a budget, and used better processes to increase efficiency, profit and morale.

Turning around business

McKenzie took the job as body shop director as an opportunity to advance his career. He previously worked as an assistant manager at another family-owned luxury vehicle shop in the area.

When he got to Park Place, things were a mess. The shop had a reputation for cars coming into the shop and never leaving. Vendors saw they could take advantage of lax accounting oversight, so the shop was charged for products and services it never received. Relationships with insurance companies were hostile.

The dealership itself was successful; it had grown from one location in 1987 to nearly 20 locations and more than 1,200 employees. But the collision center was simply considered a necessary evil. The owner didn’t have expertise in collision repair, so the shop was subject to poor management practices.

McKenzie has a business management degree and a collision repair background, and coming from another luxury-brand shop, he knew how the business was supposed to run. So he got to work.

Techniques for change

Among McKenzie’s first orders of business were tightening up areas that were bleeding. “No one was managing the numbers,” he says.

Here are seven key areas in which he made sweeping changes:

1. Vendor relationships. McKenzie began holding vendors accountable, asking them about services they were charging for, but never providing. In some cases, he dropped vendors that did not cooperate.

2. Incentivized paint usage. He challenged his painters to waste less paint. He gave them a share of the profits if they used less paint and materials. For example, they used to use inch-and-a-half-sized tape. Now they use smaller tape, and use sandpaper until it cannot be used anymore.

The shop was at 28 percent gross profit on paint, and now they’re at about 70 percent. Painters had “no skin in the game,” and now they do, McKenzie says. “If they have a reason to excel, why wouldn’t they?” he says. “Offer them a little bit of a piece of the pie.”

3. Staff culture change.  Most of the staff had been waiting for a good manager to come in and help them do the right thing, he says. When he got there, he let them know that the business would run top-down, and that managers were there to help them and to make money.
About 25 percent of the staff didn’t like what they heard and left. Some were fired. The rest stayed on. “I would say most of them weren’t really happy with the way things were going,” McKenzie says. “They were more than willing to listen and follow and change directions. They did. And it’s worked out really well.”

4. Mental habits. The culture change included a shift in thinking.  Park Place’s extremely high cycle time was due to poor processes, lax oversight and other issues, he says. But employees just started thinking that everything took a long time. McKenzie began to change that by changing processes and showing employees that they could do their work more quickly.

5. Paint department efficiency. The paint department had been running double shifts, with painters coming in at 5 a.m. and working until about 2 p.m. Then the next crew came in at noon, with paint booths sometimes running as late as 9 p.m. or 10 p.m. Paint booths are the most expensive piece of equipment in the shop because they require a lot of energy, McKenzie says. So they switched to 8 a.m. to 5 p.m. operations. He also took a staff of 10 painters and created five painters and five preppers.  Rather than each painter applying primer, sanding, taping and painting, the painters simply painted, and the preppers did the rest. This maximized staff time, and within the first week of these changes, they decreased a one-month backlog of work to two days.

6. Mechanical hires. The mechanical staff was in high demand because estimators went to them for help constantly. With eight estimators, they were constantly competing for the attention of one mechanic and a helper. So McKenzie promoted the helper to a mechanic and hired a third mechanic, which helped the shop catch up on a backlog in that department as well.

7. New equipment. McKenzie knew from working at his previous job that an inverter spot welder helps reduce labor time for body techs, and even produces better-quality work. They were working on some of the most expensive cars on the road, but they didn’t have this important equipment. It turns out, someone once told them it would cost $100,000 in wiring upgrades to handle the welders, but that wasn’t true. McKenzie got a quote and it cost $12,000. The shop bought a spot welder that was so efficient that the company now has three at the main facility in Dallas, and one at its new location in Grapevine.

Relationship changes

McKenzie’s efforts began to instill pride in his employees, who saw the improvements—staff members such as Paul Chadwick, body shop manager of the Dallas location. Chadwick has been with the company 18 years. He remembers that executives from the dealership often came to the shop because of some problem going on; now they only come to praise the staff, he says. “It’s brought morale way up,” he says.

McKenzie says the routine of processes helps people feel like they know what they need to do to be successful. That makes their jobs much easier, he says.

He says he manages by walking around and talking to people. They used to have a lot of staff meetings, but now they happen about once per quarter. Front office meetings take place once per week. Chadwick says the shop now has a team atmosphere, where everyone helps, teaches and learns.

Relationships with insurers changed, as well. “There was no sense of negotiating,” McKenzie says. He still doesn’t do DRP relationships, but when they do need to work with insurers, the interactions are much less contentious.

“You just kept looking around, what can we do next?” he says. “It’s just constantly, what can we do next to be the best at what we do?”

He says he has had a couple sleepless nights, and had several pages-long lists of things he wanted to do when he first came on. He began with the large-impact items and moved on from there. They’re still working to improve where they can.

“I like being successful,” he said. “It’s been fun.”

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