Muffler Magic is a fast-growing chain of25 automobile service centers in Nevada. Originally started 20 years ago as a muffler repair shop by Ronald Brown, the chain expanded rapidly to new locations, and as it did so Muffler Magic also expanded the services it provided, from muffler replacement to oil changes, brake jobs, and engine repair. Today, one can bring an automobile to a Muffler Magic shop for basically any type of service,from tires to mufflers to engine repair Auto service is a tough business. The shop owner is basically dependent upon the quality of the service people he or she hires and retains, and the most qualified mechanics find it easy to pick up and leave for a job paying a bit more at a competitor down the road.It’s also a business in which productivity is very important. The single largest expense is usually the cost of labor.Auto service dealers generally don’t just make up the prices that they charge customers for various repairs; instead, they charge based on standardized industry rates for jobs like changing spark plugs or repairing a leaky radiator.Therefore,if someone brings a car in for a new alternator and the standard number of hours for changing the alternator is an hour, but it takes the mechanic2hours, the service center’s owner may end up making less profit on the transaction. Quality is a persistent problem as well. For example, “rework “has recently been problem at Muffler Magic. A customer recently brought her car to a Muffler Magic to have the car’s brake pads replaced, which the service center did for her.Unfortunately,when she left she drove only about two blocks before she discovered that she had no brake power at all. It was simply fortuitous that she was going so slowly she was able to stop her car by slowly rolling up against a parking bumper.It subsequently turned out that the mechanic who replaced the brake pads had failed to properly tighten a fitting on the hydraulic brake tubes and the brake fluid had run out,leaving the car with no braking power. In a similar problem the month before that,a (different) mechanic replaced a fan belt, but forgot to refill the radiator with fluid;that customer’s car overheated before he got four blocks away, and Muffler Magic had to replace the whole engine.Of course problems like these not only diminish the profitability of the company’s profits,but,repeated many times over, have the potential for ruining Muffler Magic’s word-of-mouth reputation.Organizationally,Muffler Magic employs about 300 people,and Ron runs his company with eight managers, including himself as president, a controller, a purchasing director,a marketing director, and the human resource manager. He also has three regional managers to whom the eight or nine service center managers in each area of Nevada report. Over the past 2 years, as the company has opened new service centers, company-wide profits have diminished rather than increased. In part, these diminishing profits probably reflect the fact that Ron Brown has found it increasingly difficult to manage his growing operation (“Your reach is exceeding your grasp “is how Ron’s wife puts it). The Company has only the most basic HR systems in place.
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