Connecting Production, Technician Payroll and Profit
It was a Friday afternoon in the summer of 1991, the end of a tough week. There were three more cars that needed to be checked out, so we decided to work right through lunch. I don’t know how we did it, but we finally got it all done and finished up around 9:30 p.m. As I was locking the bay doors, Bob walked over to me and said, “Boss, you have a moment?” I knew by the tone in his voice that something was wrong. Bob was a great mechanic and someone I relied on. When he told me he was leaving, I was devastated. He said he got a job at a local dealership. He also said it was a tough decision: “It’s not you or the shop,” he told me. “With another baby on the way, I need to make more money.”
Not knowing what to think or say, I shook his hand and wished him good luck.
While Bob claimed it was money, I have learned through the years that there are other reasons why technicians feel the need to move on. Perhaps the bigger reasons are not feeling secure about their job or the financial health of the shop, which leads to a lack of confidence in the company’s future. I have also learned that as shop owners, we need to realize these factors and work to create an environment that gives our technicians every opportunity to earn a decent wage and feel confident and secure about the company they work for.
Creating employee confidence and your ability to pay competitive wages and offer other benefits depends on a number of things. Is the shop achieving its gross profit margin on labor? Are the service advisors properly trained and motivated to make the needed sales? Is there a steady workflow to ensure production levels are where they need to be? From personal experience I can tell you that it often boils down to labor production. When overall labor production is low, technician’s pay will suffer along with profits. You can raise labor rates all you want, but it will not make up for poor production.
So how do we improve labor production? First, review your workflow process. Is there something in the process or the shop layout that is hurting production? Is there too much down time between jobs, such as waiting too long for parts or authorization on a sale? Take a look at scheduling; make sure it’s balanced with the right mix of repair and service work which gives the technicians the opportunity to flag adequate labor hours.
Next, look at your tracking and billing process. Are you tracking and accounting for your technicians’ hours? All too often, the killer of labor gross profit is unbilled labor time. Are there operations on the invoice that go unbilled? I am not here to dictate policy, but unbilled labor time is one of the leading causes of low billable labor dollars. Review past invoices. Are you getting the right labor time for your jobs? Little changes in this area can mean a lot in terms of gross labor profit.
Here’s something else to think about: Poor shop production is not always the tech’s fault. Most techs are efficient and can beat the time on most jobs, most of the time. In fact, efficiency—the ability to beat or match the labor time billed to the customer—is the only thing the tech has control over. The technician has little control of sales, the schedule or how the jobs are priced.
Another area of lost labor is failing to charge properly to perform diagnostic testing. Are you only billing for the repair and not charging to perform certain tests? If a tech spends time performing tests to identify a problem, then that labor operation is separate from the actual repair in most cases. One thing I can promise you is that improving billed labor hours by charging for certain tests will put more money to the bottom line. In the golden days of twice-a-year tune ups, 50,000-mile valve jobs, and oil changes every 2,000 miles, we didn’t need to worry if a few hours here and there went unbilled. Those days are gone. Every billed hour of labor is crucial to the overall profits of the business. We need to accept the fact that many of the things we let slide years back, we can no longer do.
Making the sale is the last key component. Service advisors need to have the training, the skills and marketing tools that will ensure that the right sales are being made, and that those sales are profitable. Nothing frustrates a technician more than making discoveries, only to find that the advisor didn’t sell the work.
The strength of your business and your future is dependent on the people you employ. People can do amazing things, but only if they have a healthy work environment that challenges them, rewards them and gives them the opportunity to grow, flourish and feel secure.
Joe Marconi has more than three decades of experience in the automotive repair industry. He is the owner of Osceola Garage in Baldwin Place, N.Y., a business development coach for Elite Worldwide and co-founder of autoshopowner.com. Reach him at firstname.lastname@example.org.