If you’re making decisions out of fear, you’re making bad decisions.
Although this shop owner was referring to how repairers are agreeing to just about anything because they’re afraid afraid of angering an insurer, afraid of losing work, afraid of going out of business his comment, taken in the larger context, epitomizes a serious and growing problem.
Fear permeates this industry in large part, because customer expectations are changing. Such shifts in the market happen to all industries, and what all industries have to do when put in this position is adapt. Change.
But change can be scary. Ergo … the fear.
Trouble is, fear doesn’t make a good CEO.
Rather than letting your emotions run your business, you need to face your fears and the facts. Fact: Change is going to happen, with or without you. Fact: There’s an overcapacity of collision repair shops in the U.S. market, and this excess supply will sooner or later result in decreasing numbers of shops. Fact: Until those numbers shrink bringing demand more in line with supply things are going to get worse before they get better. (At NACE, an insurance rep mentioned that due to this overcapacity, shop labor rates are poised to decrease over the next four years. Yes, decrease.)
Fearful or not, shop owners need to find smarter ways of doing business. But to do this, they’re also going to have to let go of their preconceived notions. For example, a Colorado shop manager attended a NACE seminar on direct-repair programs and, after listening to some larger shop operators discuss their DRPs, he came away with the impression that there’s a disparity in how insurers treat the Mom & Pops and the Big Boys that insurers don’t “pressure” the Big Boys as much. He said he also learned that if you can deliver repairs cheaply, quickly and correctly, insurers will stay out of your hair.
“I find this both intriguing and terrifying,” he says. “… It could give quality shops the opportunity to distinguish themselves from hack shops, but yet, quality repairs cost money.”
Or do they?
Or is this one of those preconceived notions the industry clings to out of fear? Says John Sweigart, principal of The Body Shop @ and BSB’s 2005 Executive of the Year: “Saying quality costs money simply isn’t true. Quality isn’t the final product. Rather, it’s the process you use to get the end product. If quality is defined as, ‘Doing the job exactly right, the first time,’ then it has to be both cheaper and faster. The real problem is that most shops don’t have a business model that can make money any other way than by running up the price.” As for the perceived disparity, he says: “The only disparity between the Mom & Pops and the Big Boys is the way their owners think.”
All shops are being pressured to lower costs. But instead of addressing these challenges, too many shop owners are letting fear cloud their judgment. They’re either fighting the changes or making decisions that, short term, bring in volume but, long term, can’t sustain them.
In the minority, however, are those who are actually delivering those who are keeping costs down and increasing profits. And the fact that they’re able to do this means those of you who fear change are living on borrowed time.
“Insurers understand shop utilization or, better yet, the lack thereof,” says Michael Giarrizzo, owner of DCR Systems in Ohio. (Giarrizzo and Sweigart worked together at Sterling until they both moved on to start their own businesses, based on the principles of “lean” manufacturing.) “Insurers also understand that although some shops are better than others, the traditional repair model can only deliver a certain level of consistency. My point being that insurers aren’t afraid to go elsewhere if a shop doesn’t want to play.”
“I don’t for a second believe that what we do is the cause of insurers and consumers demanding lower pricing, faster cycle time and higher quality,” says Sweigart about shops like his and Giarrizzo’s. “We’re not offering a lower price to drive the competition out we’re simply responding to what the market is asking for.”
Regardless, many of you will continue to blame insurers and shops like Sweigart’s and Giarrizzo’s for the direction the industry is headed, and many of you will continue to make bad, emotionally charged decisions out of fear.
And that’s your choice.
Just remember, you do have one.
Georgina K. Carson, editor