Summary of Sharpe’s BMW
Tom Dunn worked as a service manager at a BMW dealership in Michigan known as Sharpe’s BMW. He had been recently appointed after the resignation of the former service manager. He noted that the revenues and customer service index (CSI) ratings of the service department had decreased over time.
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Bob Deshane who was the acting service director of the dealership proposed a new bonus plan to George Sharpe. He believed that the new bonus plan would correct the department’s problems. He proposed that the service technicians should be compensated differently. Sharpe approved the plan and Deshane handed it to Dunn for implementation.
The service departments are essential to the revenue flow in all auto dealerships. The service department in Sharpe’s BMW had grown amply in a span of three years. The growth was brought about mainly by the higher sales of vehicles to the locals. The company had also been competing aggressively with other suppliers.
There were two kinds of jobs offered in the service department in Sharpe’s BMW. These were the customer pay and warranty pay. The customer pay service took place when a customer paid for car repairs after the warranty period had expired. The warranty pay service on the other hand took place when BMW paid for repairs of cars still covered by the warranty.
The payments given to the service technicians depended on which pay they were working on at a particular time. After the CSI score and revenue had dropped Deshane carried out an investigation and found out that the problem lay in the service department. He realized that there was a difference in the payments given to the service technicians. The customer pay job paid the service technicians more than the warranty job. However the CSI score for the dealership was based on the value of the warranty job.
The gap between the warranty pay and customer pay made the technicians prefer the aftermarket repair stores. Technicians were being paid hourly wage fees at the aftermarket repair stores. NADA and individual dealerships have failed to offer a solution to this crisis.
Deshane’s new plan proposed a monthly bonus to the technicians who would score a CSI rating of 91% and above. This plan enabled the technician’s efficiency to be assessed regularly. By implementing the plan the dealership would also communicate to its staff that it was commitment to the improvement of the CSI ratings.
Dunn personally felt that the bonus would have insignificant economic value to the technicians. He wondered how the bonus plan would be implemented. He also felt that the technicians at Sharpe’s BMW received extensive training which was very expensive. Dunn knew that a successful implementation of the bonus plan would make a difference in his career and the automobile industry.
Analysis of Sharpe’s BMW
Sharpe’s BMW had amply increased in size over three years due to their dedication to customers. They provided pick-up and drop-off services to the people who purchased vehicles from them. They also extended these services to customers who lived far away. Sharpe’s BMW offered the virtual service section experience to several of its customers. This service enabled several customers to transact without going inside the service department. This feature acted as an important device in luring in customers from competitors.
On average the service department returns covered 82% of the dealership’s operating costs. The service technicians played a vital role in the dealerships. I agree that the difference between the customer pay and warranty pay should be addressed by NADA and the separate dealerships.
Dealerships can gain 100% return from the service department. If the questions on the CSI survey were revised to focus more on the performance of service technicians the CSI ratings would rise. The BMW’s customers would be able to rate the service technicians they meet at the dealership. BMW will be able to monitor the performance of the technicians which this will automatically increase the CSI score.
BMW can introduce a system that will make the service technicians more committed to the dealership. It is important to do so since the firm invest heavily in their training. The system should also maximize on the technician’s productivity. Deshane’s new plan should be reviewed so that the monthly bonus amount can be raised. Higher monthly bonuses will definitely motivate the service technicians to produce quality work. This will guarantee an increase in the CSI scores and a decrease in the operational costs at the dealership.
Dunn should advocate for the monthly bonuses to be increased for the successful implementation of the new plan. Higher monthly bonuses will also make it easier for Dunn to introduce changes to the dealership. He should come up with an effective program to implement the proposed plan. Dunn will leave an impact in both the dealership and automobile industry if the new plan is successful.
Case study questions
Pros and cons of the suggested monthly bonus plan
The proposed monthly bonus plan is good for both the service technicians and dealership. The bonus plan is an indication that the dealership recognizes the efforts of the technicians. The company should compensate the technicians by offering them the monthly bonus in addition to appreciating them verbally.
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This bonus will motivate the technicians to produce quality work. This will guarantee an increase in the CSI scores. Higher CSI scores will lift the rank of the dealership. A dealership is recognized for quality work and exceptional service. The operational costs at the dealership will then be fully covered by the higher CSI scores.
There are several disadvantages of the proposed monthly bonus. It is of insignificant economic value to the service technicians. A technician can earn an equal amount by working quickly in the warranty pay job. It will therefore be deemed as non-beneficial by some of them. It could lead to a decrease in their productivity.
The monthly bonus plan is new in Sharpe’s BMW and foreign in the automobile industry. Dunn will face a big challenge when he introduces the proposed monthly bonus. Some of the service technicians may have a hard time adjusting to the new plan. Others may feel that their efforts are not being compensated fairly.
It is likely that there may be service technicians who will resent the plan and even engage in a strike. The productivity of the staff may decrease leading to a drop in the CSI score. This will reflect negatively on Dunn as the service manager.
Dunn realized that good service technicians were hard to recruit and even retain. Good service technicians can quit today and get another good job the same day. Technicians lack discipline and have no loyalty to their employers. Dunn therefore needs an effective implementation plan of the monthly bonus. He should communicate the implementation of his bonus plan to his service technicians.
He should introduce the proposed bonus plan after having a clear measurement system of what success means to the dealership. The measurements should be posted on a notice board for all to see. There must be transparency in rating the technicians. Dunn should have a program allowing employees to suggest and implement changes. He should be flexible in changing the bonus plan according to the needs and targets of the company as time goes by.