From Machinist to Executive: Technician Training, Retention, and Industry Evolution

This is going to be a fun... When did you start in this world, in the world of equipment dealerships?

Okay, so basically just under 50 years.

Okay, say 40. I'm going to be on arithmetic.

And who did you start with and what was your job when you started?

And when did you start FAS? Or when did you get involved with FAS? Let me say it that way.

So of the. 40 years,10 years has been in training, and 30 years was in various functions in different locations as a technician or involved in repair and maintenance of equipment.

Well, let me stop there. So at Hawthorne, before the Grove crane came in was roughly how many years?

Okay, so let me say 10,000 hours just to get a little bit picky.

Did you go to any technical schools during that term?

No, no, that's cool. But how many weeks or how many hours? We got 10,000 hours. We got 250 weeks. How many weeks would you say you had? been trained at Hawthorne in that five years?

Okay, so 500 hours of training in 10,000 hours of time. That's 2,000 hours a year for five years. Excluding overtime, taking out vacations, that kind of stuff. I'm just trying to put into context training. What do you think it is today?

agree. So there's the first perspective that how did we get to the place that we think somehow technicians can walk into a shop and by breathing the air and talking with the other guys, get to the level of skills that you were at with 500 hours of training over five years. I think that's impossible.

So what you're pointing at there, the first thing is the leadership on the floor of shop technicians is critical.

Has that always been the case?

One of the things that's interesting, I knew Tom Hawthorne quite well, and prior to you being in the dealership, Tom was, to me, one of the most farsighted individuals in dealerships in that generation. I'm talking about the 60s and the 70s. And there were very few men like Tom. He was very special. So I'm going to translate that now today. The generation of leaders in the equipment world that we have today. Many cases, they're second generation, and in some cases, they're third generation. In almost all cases, the leadership transition, the transfer of leadership from one generation to another has been delayed. We've got a lot more executives that are in their 70s still running things, some in their 80s, and that used to be very rare in the old days. It's very common today. So what I'm trying to lead up to is if I'm coming out of high school or I'm in high school, first of all, you talked about having shop in your high school.

They don't have shop today in high school.

Oh, it's horrible. They don't have, like I had, we had health and we had home cooking and all kinds of different things. Those are gone.

Yeah, exactly. I wish the hell I'd had typing with the way that the world has turned out. But the young people coming out of high school don't know much about our industry.

And I don't know that there's many dealerships that go into high school career day or work with the human resources people, advisors to students as to what their careers could be. And they've got some very good advisors now. But if they don't know what the job is or they don't know the company, that's nuts. Is that something that we need to do more? I mean, go younger to try and attract people to us?

Yeah, that stuff isn't out there at all anymore.

So just as a ratio, with all of the dealers that you see and all the manufacturers that you're involved in, which is just about every OEM brand, there is of significance today. What percentage would you say are the leading edge, the guys that are out front of everybody? Half, a quarter,10 %?

Okay, so let's go backwards over the last 25 years, because these numbers are relatively fresh in my head. In the year 2000, imagine that there were 200 dealers. In the year 2010, that number of dealers shrank by 50% to 100. To 2020, the consolidation and the bankruptcies and walking away considered again to come down in half. So now we've got 50. We're at 2024 and it's getting closer to 25. It's accelerated because of the amount of money that's necessary. So most dealers look at sales revenue as a measure as to whether we're okay or not. And they say, well, this sales revenue is going up. Everything's fine. At which point I talk about this. Well, it better be going up. You're not competing with 75% of the people you were competing with 20 years ago. If it doesn't go up, you've got a real serious problem. You're next to the door. And they look at me stunned because they had never thought of it that way.

So if you're now saying that 25 that's left from the 200 has five that are prepared for the future, that's pretty damn scary.

Why is that?

Well, you've got two avenues that you can take. One is the inbound and the other is the outbound. Are we seeing more men and women leave as technicians than ever before?

You mentioned Mike, and I agree with you. Any idea how long Mike's been doing this?

Yeah, and how long has he been prominent in society that everybody knows who the heck he is?

And that's maybe three to five years. Go crazy, say it's five. The moral of the story is I'd like to have a whole bunch of advocates like that. I'd like to have 100 of them. But I haven't got 30 years to wait to get them to be prominent in society. Sure. And, you know, this is a nasty problem. And COVID is a good trigger point, Jim. But it's not just our, it's every industry.

I think a lot of people, and my grandkids are 23 and 19. There's no way in the world they're going to work like I did. My daughter's a bridge. So I'm going to say this is an exponential curve where my daughter's 30 years younger than I am. And her children are almost 30 years younger than, well,25 years younger than she is. So we're spanning a typical. three-generation deal. My parents were war and depression experienced. I'm from the 60s. If it feels good, do it. Whatever piece of grass you want to get interested in, go for it. My daughter's crowd, I don't know how to characterize the quote millennials. I don't even know that that's the generation she's in, but this younger generation is They call it the alpha generation. Do you know what they're calling the next generation?

NEETS, N-E-E-T, not in employment, in education, or in training.

And that percentage is broaching 10% of the workforce. That's a very difficult time. So going to the two ends of the tunnel. Getting people to come into the trade, we can do something about that, but nobody seems to be doing it. Get out with job fairs, career days at high school, get to know every damn human resources counselor at a high school that there is. Hire kids in high school, have them come in one night a week for two hours, Saturday morning for three or four hours, the old-fashioned way. Is anybody out there doing that kind of thing that you can see?

The old thing, the acorn or the apple doesn't fall far from the tree. But, you know, when you and I've talked about her, the store that she was at in Honolulu was the busiest Costco in the state. That's right. Without any comparison. And it was amazing. And they've got a nice structure. They also have an employee development program that's very clean and clear. Similarly, Amazon. Similarly, Walmart. Any idea why that doesn't exist with us in the construction world, in the equipment world?

Yeah, I agree. I agree with you. I've worked with an employee-owned, two employee-owned companies. They were ESOPs type of thing, you know, employee stock ownership programs. And those kind of lost favor because they were good for the owner. It wasn't as good for the employees. You know, the owner has to get looked after before anybody else. Culture is the whole thing. And, you know, Home Depot has been one of my clients over the years. And every morning before they started, they would get together in a circle and talk to each other about anything that was going on in their lives or anything that was going on in the company. And they'd spend 15,30 minutes. And then they do some stretching exercises, the old Japanese approach to life. And, you know, I, being the idiot that I am, I... Asked every single one of them. I said, is that necessary? Without question, yes. You feel embarrassed at times sharing stuff? No, not at all.

This is my family away from my family. And you can't beat that culture.

Most people don't recognize that. It's really, really quite stunning. So the dealership I started with, we had three. apprentice programs going in the course of a year, each one of them between 18 and 24 students. We had, in those days, five stores. When I left, we had 11. We had a 40-foot trailer that we had rigged as a school that we took around and trained customers in their yard, job sites, all kinds of stuff, not to do repairs, but to do things that we didn't want to do. And we had graduation parties and we made a big deal out of this. Everybody knew. The guy that ended up being the president of the company was a bush pilot and a mechanic. He fired me half a dozen times. One time I actually got home. He was so passionate about what he did. He wanted things done properly. So when you talked about going in with students in a shop, our shops were squeegeed every day.

We had the shop floor built that had a central drain and every bay had a drain. You know, the way it was done was proper. Now we're in Canada, we've got winter, we've got snow, we've got all kinds of corruption that can come in. So we had a completely protected area. We had students come in on the weekends and tours, and we had people at stations to tell them what we went and did. I mean, it was a full court press. And then at one of the graduation parties, one of the students got drunk and drove himself into a foam pole and died. That was the last graduation party we ever had. And the apprentice program dissipated because the owners were concerned, rightly so, about the liability. So all of that good stuff went away. I used to teach at technical schools because we wanted to have the cream of the crop. I wanted to see who the best students were. You know, and I would do that as a matter of course, and I wasn't the only one. We were there.

We really, and boy, oh boy, that dealership grew like a maniac when the son of the owner that started it, when he sold it, he sold it to the Caterpillar dealer next door for about a billion four with a B. And that's not bad.

So we got the... You know, we got some suggestions on how we bring people in. If people don't have that culture and if people don't train and develop their employees, what do you think the probability of them being here in 10 years is? Oh,

Yeah, it's kind of all of them. I stayed at home until I got married. Yeah. Everybody said, Ron, what the hell's the matter with you? I said, you got it wrong. They stayed with me. It was my house.

Yeah. You know, but, you know, everything's perspective. And I really agree with having a better balance in life. And, you know, at my age, the community of people that I grew up with, I started with a crowd of about 30 people between the ages of three and four. There's three left. And my circle of friends is shrinking. Sure. And it's just a course, it's a transition in life. It's natural. You know, it's what they call the dash, you know, on your tombstone. You got your birth year, you got your death year. And in the middle, you got this funny little dash that represents 60 years or 80 years or whatever of your life you're supposed to. What am I supposed to do about that? But I think it's, I hope that, number one, that people can do something they're passionate about. If they like what they do, if they love what they do, they're not going to be looking at the clock.

But that gives them a choice of whether they want to do the 70 hours or they want to do 40 and have another piece of their life that has balance. And I don't think that my generation, which is slightly older than your generation, we didn't really think about it that way. You finish school, whatever age it was, you got a job that was the beginning and that was the end. And if you wanted to make money, you've worked harder. You worked longer. You've had two jobs. In Hawaii, hell, most of the people here in this tourist is you've got to have two jobs to live in this damn place.

So that whole thing comes. But I see the dealership in the supply chain going away. I think that partly what we're seeing with the... numbers of people in a dealership. I think there's too many dealers that are putting profit ahead of customers, of people. And we have too few people doing too much work anymore. It's at every level of job, Costco, your daughter. So if you're prepared to step to the line and put the hours in, you will be recognized if you've got talent. And that's exactly what's happening. But it's self-correcting. So let me give you the statistics that I see from an education point of view. 10% of that book, the student that we were talking about before by the president of West London University,10% of the students and people in America are fine. We don't need to worry about them. They think, they work hard, they're disciplined, they got brains. Here we go.

The statistic I last saw was that 72% of the American population, call it 70, is going from paycheck to paycheck. If anything out of line happens, they're dead meat. Those folks, they have, I call their work a four-letter word. They don't have any choice. They're doing something because they got to do it to live. Then we got 20% in the middle, and they don't know what to do. They can drop into the 70% or they can get up to the 10%. It's not in the 100% of the cases. It's not a question of talent. Everybody's born with capacity. Everybody's born with potential. It's what you do with it. You know, you've heard me say this. My purpose is to help people identify their potential and then give them tools to help them achieve it. That's not an easy job. That's not an easy pursuit. You know, I tease my granddaughter who lives in Hawaii and goes to school here. I tease her. I said, I'm trying to figure out what I want to do when I grow up.

And I'm nearly 80. And she looks at me and she says, don't you know yet? I said, of course not.

And the younger people today have so many choices, Jim. If we don't present an accurate, worthwhile, self-worth type of task, we're dead meat. And I don't think that's going to happen. So I see the dealer going away. And then in the world of technicians, you know the market share. Dealers get less than 95% of the, they get less than 5% of the market on maintenance. Sure. 95% of the maintenance is done by somebody other than the dealer. Well, that's a heck of a lot of technical hours in a year. And then if you look at surveys on market share for repair, best in class is 30. So 70% of the repairs are done by somebody else. You know, in our dealership world, we're losing them, but who are we losing them to? People that are doing the same job, but for themselves. People that are doing the same job or like where you started with a contractor. And in that

So go even further. We say we got a shortage of technicians. So I deal with a lot of dealer principals, a lot of different dealers, and say, who's your most profitable employee? And everybody invariably says, the equipment salesman.

He sells $5 million a year, and he gives me. parts and service business, and all the rest of this stuff. And those territories now are getting closer to $8 and $10 and $12 million. Because the gross margin has gone down, the commission payments goes down, and the salesmen need to have a bigger number of customers, it's hard to hold on to market share. So if we look at market share and equipment, there's two major brands that get between 60% and 70% of the market. The second two get between 10% and 20% of the market. So you put that all together, there's 15% left that about 10 people are fighting for. So I got to play with four. And if I look at those four, best in class of that four is Caterpillar and John Deere. Best next in class is Komatsu and Polvo. You look at their service departments. If you look at labor, now we start looking at the kind of machine and what generates the labor. But typically, and let me be really easy for math.

Say I charge $100 an hour for a technician. I don't have any overtime. And he works 2,000 hours a year, so I'm going to take $200,000 worth of labor. And let's say I'm going to generate a gross profit of 50%, very low. So it's $100,000 worth of gross profit. Well, depending on the brand, I'm going to sell between $1 and $5 of parts for every dollar of labor. So my parts that are generated by that one technician are going to be $200,000. to $500,000. So that technician, you put it all together, is going to generate between $300,000 and $700,000 a year of revenue. This is really good. And I say, well, you know, I'll give you more technicians, but tell me where they're going to work because the bays are all full today. Oh, no, they can work outside. Your comment, I've heard you have no idea how many guys tell me this. They said, you know, and these guys are in their 70s now. I said, okay.

Let's you and I go sit at a table out there and play cards for four hours and see what you feel like. Not doing work, just go out in the heat or the cold. I had a cousin who was a mechanic for the Caterpillar dealer up in Canada. He had rheumatoid arthritis from being on the ground underneath machines for so many damn years. It's a tough damn job. But the technicians generate more company profit than any equipment salesman out there.

Absolutely. Not even close. So if I'm going to hire anybody, I'm going to hire technicians. So here comes Alex Kraft and a little company called Heave that's an Uber for technicians. A customer puts online that he needs a repair or he needs a maintenance service. And technicians tell him, well, I can be there tomorrow at 10 o 'clock. And they can consummate the deal and they get the repair done and everything's fine. They give them invoices and here we go. That's going to grow like a... That's a grass fire in the, in the planes. So how does a dealership compete with that?

Right. Okay. So stay there for a second. What control does a customer have of the quality of the technician that comes from the dealership?

Well, I used to tease, you know, I've stood in as a service manager in hundreds of dealerships around the world for a long time. And I tease most of them. They have tail light warranty. Once the trailer carrying the machine is, I can't see the taillight anymore, the warranty's done. And what I like to say to people is, okay, I'm going to give the guy on a repair a one-year warranty except for defects in material and workmanship. And everybody says, you can't do that. And so tell me, Jim, if you're going to have a failure on a machine that you've repaired in your shop, what's the probability it's going to happen in the first 30 days?

And if there is a failure, when's it going to happen? Is it going to take 30 days or longer?

I agree with you. The trouble is the statistics are more than 95% of the failures are within the first 30 days. Ouch. Yeah. There's, there's again, because we don't necessarily have a good definition of warranty. I get guys that, and you're going to have seen, you've seen this. God, the machine failed. It should have been in warranty. And the salesman gets involved and the boss gets involved and all of a sudden it's worrying. It never was. I can give a lifetime warranty.

Yeah, I can. Well, yeah, but it's called warranty. It ain't called goodwill. Agreed. Yeah. I can give a lifetime warranty on a machine against defects and worksmanship and material, period. And I could do that all day long. So in America, on warranty, there's a number of states, say 10 out of the 50, that require by law that warranty is done at retail prices, reimbursed for the dealer at retail prices. There's only one manufacturer that works within that law and has done for a number of years. You know who it is?

It's kind of billy.

Their warranty is a percentage of the machine cost.

Every other one pays a percentage of the labor and parts. So John Deere is an example. I'll give you 1.33 of the labor at their standard time. At retail price, they give you 10% on parts. So every dealer that has a failure, every customer that has a failure in warranty is subsidizing the manufacturer's quality. Again, there's so many things in the service arena, which is the perspective change, that dealer leadership isn't paying very few of them or paying any attention to it. Training of employees, working conditions, benefits. What about maternity leave for men, paternity leave with the birth of a child, like a lot of European countries? There's so many things that are at play right now that the younger generations are thinking about, talking about, and requiring that our generations didn't even, that wasn't even our radar, was it?

You know, you're, you're preaching to the choir, but the spectators aren't there. This isn't a Taylor Swift concert. They're jammed. So what you're saying is absolute truth. So one of the things that I like to do is create an incentive program for technicians. I'll have a shop that works on standard times that we all agree on, and I'll have shops work on quality measures. So I got labor efficiency on one side and I got quality on the other side. If your efficiency is 90% or lower, you're not getting any incentive. If your redo or failure rate is greater than 99%, you're getting nothing. If you get 95% labor efficiency, I'm going to give you 50% of the incentive. So 90 to 95 will give you, if you get 96, I'll give you 100% of the incentive. Quality side, if it's 99 to 99.5, I'll give you half. If it's 99.6 and up, I'll give you all of it. And I'll give you 50% of your hourly wage as your incentive.

So if you get 40 bucks an hour, in a month you work 40 hours,160 hours, that's going to be 6,400 or whatever the hell the number is. I'm going to give you half of that as an incentive on a monthly basis. I'll give you the check this month, right now. I got a bunch of dealers that do it.

Well, the way we sneak up on it is say, okay, I'm going to give everybody eight hours of labor on standard time that we've all agreed on. And if you finish earlier, you can go home. Or you finish after six hours, I'll give you two hours worth of work and I'll pay you for 10 hours instead of the eight.

They like that.

But what's also interesting is, it's Thursday night. I'm going to take my wife to dinner. I'm going to leave at 3. I'm finished. I'm gone. And you know what happens? The good guys leave early. The guys that aren't so good is, geez, I'd like to be like that when I grow up. Now they've got an incentive. Now they've got a model. Now they've got a target. Now they've got a purpose. And a lot of guys say, oh. Bull, you know, keep it going. So, you know, a typical approach on a shop floor, I give a guy eight hours of labor. I check with him at the end of the day. It's six hours of the day's gone by. You got two hours left. I have a very simple question. Will you finish everything I gave you to do today? And there's two options. Yes. And in that case, my quote's good. My schedule's good. Everything's good. No. Okay. So I'm in front of a class, Jim. And I got 20,30 service managers there. I said, what's the first question you ask the guy who says no?

What happened? That's not the right question, is it? Right question is, how much longer is it going to take for you to finish it? And 90% of the guys have no idea about this. And so now the training cascades down. The manufacturers do go to a big extent of having technical training for technicians. That's good. They do hardly anything in supervision.

Being a person, doing a performance review. You know, all of this stuff that is part of creating and maintaining a culture. We got big gaps there.

It's a serious problem. I'm not sure that it's going to be a problem 10 years from now. I think the dealer is going to be gone because they haven't looked after this properly. Is that too radical a thought?

I say it a different way, but it's the same end result. In every job I had, I worked myself out of it.

Okay. What you should do. That's just my perverse approach to life. So I did that and I go to my boss and I say, I've got my job done in four hours. I don't need any more time and I've got it done. You need to give me more work. And he didn't. So I stopped. going in, I'd leave at noon. That lasted two or three days before I was called into his office. I said, what the hell are you doing? You're leaving at noon. We've worked till five here. I said, no, I told you I only had four hours worth of work and you were going to get me more work or I was going to start going home. I guess we didn't understand each other. He says, go back to work. Don't leave. I'll get you more work. He loaded me up, felt cocky about it. Six months later, I went and did it again. He said, get the hell out of here. I would love and I try and do that with everybody. You know, and having performance reviews is an important part of it.

All of this wraps up in a very nice little package that says we're people first, damn it. Let's start acting that way. Agreed. Help each other get better. That's for the betterment of everybody. And never forget the relationship between a dealer and a customer is built by the technicians, by the parts people, the people that touch the customers the most. And we pay the least amount of attention to those guys and gals. Drives me crazy.

Exactly. The answer is no.

That's a good place for us to stop on this. I think that we've covered a whole bunch of what I call pain points or fear points or whatever. But thank you very much for your time. And anything you want to say in wrapping this thing up?

Oh, James, thank you. You didn't need to do that. That 100 bucks I sent you worked, didn't it?

Well, thank you, Jim. And thank you, everybody who's been out there listening to this candid conversation. I hope to see you at our next podcast. Mahalo. Thank you for listening to our podcast. We appreciate your support. Should you have any thoughts or comments, please don't hesitate to contact us at www. learningwithoutscars. com. The time is now. Mahalo.