Three Keys for Measuring Success
When it comes to gauging the success of his shop, Jeff Odom knows exactly where to look. He is a master of measurement, capable of setting and achieving goals with remarkable precision, month after month, year after year.
“We say we’re going to dominate the world from right here in Mill Creek, Washington,” jokes the owner of Evergreen AutoWorks. “We’re definitely dominating the market.”
Odom doesn’t really have Earth-conquering ambitions for his business, set in a 17,000-square-foot facility split into mechanical and collision repair divisions. But he does have reason to boast. Inspired by key performance indicators (KPIs) that are increasingly important for insurer relationships on the collision side of his business, Odom honed in on a few metrics on the mechanical side of his shop that have helped him build that segment to $1.6 million in annual sales.
“In the body shop we always talk about KPI numbers … because we’re trying to get the throughput,” Odom says. “I really think that’s something that’s lacking in the mechanical repair field. People don’t think about throughput as much as they think about how much did they sell that part for, that transmission for, that sort of thing.”
Odom says achieving maximum throughput requires a firm understanding of KPIs and how to measure them. There are many performance metrics a shop can and should track, he says, but three are critical for determining success.
What it is: “Employee efficiency is basically the horsepower of your engine,” Odom says. “That’s how fast you can fix cars.”
Measuring the efficiency of each employee—the total number of hours it takes them to complete a job versus the number of labor hours sold—allows a shop operator to set a benchmark for capacity. Efficiency boils down to how fast a tech performs the labor compared to the time allotted for the job in a flat-rate manual from the factory or an independent company. Odom knows that the average efficiency of his technicians is 130 percent, so he uses that knowledge to maximize the amount of jobs scheduled at his facility on any given day. Without measuring efficiencies, he might not schedule enough work, or he might try to push more jobs through the shop than his techs can handle.
Flat Rate Hours Produced ÷ Actual Hours Worked = Efficiency
How it’s measured: Efficiency is determined by dividing the flat-rate hours produced by the actual hours worked. Odom says there are multiple ways to measure this. He started out by having employees punch in and out of specific jobs on a time clock. He would then manually calculate the efficiency of each technician based on the allotted times for each job. Now, he uses a Web-based program called QuickTrac that records the work of individual technicians in real time and automatically calculates their efficiency levels based on goals that Odom sets each day using flat-rate hours.
The benchmark: Odom says a 130 percent average is a good goal; it’s a level achieved by top shops in his 20 Group through Elite Worldwide. The absolute bottom efficiency level for any shop should be 100 percent, he says.
Tips for improvement: “Hire the superstars,” Odom says. “And [measuring efficiency] is how you’re going to be able to identify them.”
He says shops likely won’t have a stable full of superstar technicians, but having one or two will help bring the average efficiency to where it needs to be. Measuring efficiencies will also uncover underperforming technicians who might need to be coached or replaced.
What it is: Odom calls productivity his “factory efficiency.” It allows him to see whether his shop is offering enough work for technicians and whether that work is ready for them. Simply put, it is the actual time his technicians work in a day versus the clock hours in a given day. If he sees that a technician is only 50 percent productive, for instance, that could indicate a problem in getting parts, or an inability to feed enough cars to the employee.
Hours Worked ÷ Hours Available = Productivity
How it’s measured: Productivity is measured by dividing hours worked by hours available in a day. As with employee efficiencies, Odom used to measure productivity using a time clock. Employees were required to clock in and out of jobs for breaks, lunch—even a trip to the bathroom.
“Techs never want to clock in and out on a job, but I feel that it’s so important … since 60 percent of all sales are labor,” Odom says.
Today, Odom uses QuickTrac to monitor productivity.
The benchmark: Odom says shops should shoot for 90 percent productivity. That assumes an eight-hour day with a couple of breaks and bathroom time. His shop’s average productivity is 87 percent.
Tips for improvement: “Look at yourself,” Odom says. If productivity isn’t where it should be, shop operators should ask themselves what they are doing to hold it back. Maybe there aren’t enough cars, or there’s a problem with the parts ordering system, or work is being dispatched incorrectly. Owners and managers should look at what they can do to ensure technicians always have work to do.
What it is: Car count is the number of vehicles needed to maximize the potential of a shop’s technicians. But determining an ideal daily car count is only possible if a shop measures the performance of its techs.
How it’s measured: Odom uses his technicians’ efficiencies and productivity to determine how many hours he can sell per day and how many cars he needs to reach that mark. His technician staff of five, working at 87 percent productivity and an average efficiency of 130 percent, can produce 48 hours of work a day, requiring a car count of 22. With that car count and a $99-per-hour labor rate, his shop routinely reaches or exceeds daily labor sales of roughly $4,750.
The benchmark: A shop’s car count will vary depending on staff size, efficiency and productivity levels and typical repair times. The goal, Odom says, should be to provide technicians with enough vehicles to stay productive throughout the day, but not so many that the shop becomes overburdened.
|Determining Car Count|
|Here’s a hypothetical scenario to demonstrate how daily car count should be calculated, using shop owner Jeff Odom’s methods and a staff of three technicians working a typical eight-hour day.|
(at 90 percent productivity)
= Potential Sales
= Cars Needed
(Average RO of 2 Hours)
|Total Car Count:||13|
Tips for improvement: A shop that is unable to reach a car count that will maximize the potential of its technicians might need to make adjustments in a wide range of areas, from marketing initiatives to staffing levels. But that’s the whole point of measuring this KPI—a shop operator with a good handle on car count, and the staff efficiency and productivity levels needed to determine it, will have a better understanding of their operation’s capabilities, problem areas and potential.