Flat Rate Doesn't Work?

Aug. 1, 2019

Can you sense the sarcasm?

Here is what you’ve probably heard about flat rate⁠: It’s a way for owners to get rich off of the backs of technicians. It makes technicians greedy, dishonest and it allows them to make horrible decisions. You’ve probably also heard that, on flat rate, technicians will treat each other and service advisors horribly. They will be more prone to lying, and they will not lean on their better, more sound judgment⁠—all because their pay plan has told them to do so.

But, have you heard the positives of flat rate? 

Flat rate can get somebody who is usually unmotivated, to stay late or come in early and get the job done. It can get a technician to be a little more accountable about selling diagnostic time and encourages technicians to think like business leaders.

But most owners are wary of flat rate because of fear.

Fear that they can’t keep their technicians busy or that they won't be fast enough, and fear that their technicians won't be able to be managed.

Most weak leaders will flee from flat rate.

Now, I know there are strong leaders out there that do hourly pay plans plus a bonus and do well. But what I have seen 100 percent of the time with shops that I coach, is that if an owner runs a store with an hourly plus bonus pay plan⁠, and they are not the strongest of strong leaders⁠, their technicians end up walking all over them.

Flat rate is similar to the effects of having a few drinks; if somebody is a jerk when they are sober, they will be even more of a jerk after knocking a few back. When somebody is nice when they are sober, they will be even nicer tipsy. Flat rate is the same thing; it just takes the personality traits somebody has and exaggerates them. 

Flat rate actually gets people to tell the truth about what they think about you as a leader⁠, and what they think about your business⁠ through their behavior. They will now be up in your office, marching back and forth waiting for the next ticket⁠, wanting more hours. 

How is that a problem?

Everybody I have talked to wants more money and more time. If you want more time, you have to get a self-managing company, and if you want a self-managing company, you have to get a self-managing pay plan.

People manage their behavior through their pay plan. If you pay your technicians hourly, they milk the clock to get overtime, and if you don't give them enough per hour, they’ll start coming in late and leaving early. Everyone manipulates their pay plan⁠—everyone.

I’ve noticed that the shy owners that struggle with leadership are the ones that usually have technicians that take advantage of their pay plan, and, ultimately, flop. 

If you're an owner with strong leadership skills, and you have an hourly plus bonus pay plan and it’s working for you, great, keep doing it. But, if you are thinking about going multi-location and your presence won't be at the shop very often⁠—or as much as it has been in the past⁠—it'll be very hard to keep that pay plan in place. If you're a weaker leader, and you’re trying to manage your crew and get things turned around, you may want to consider going to flat rate. It will help you as you develop your leadership skills in the shop.

Flat rate doesn’t make the shop more profitable because the owner is paying the technicians less. It makes the shop more profitable because the shop’s capacity is now increased. Technicians can get more done in a day because they are motivated. You can say “yes” to more cars every day. 

Shops⁠—and dealerships⁠—all around the country pay their technicians flat rate, and just about every state has a way to pull it off ⁠—even if you have to pay a minimum wage hourly plus a really large commision. 

Have a pay plan that a technician thinks is so simple that he or she can do the math in their head and know exactly what they are about to make on a particular job. A good labor law attorney can help you craft this. 

I know, I’ll probably get a lot of blow back on this column but if it only helps a few owners⁠—it was worth it. Please keep an open mind. Your own poor experience with flat rate may have been because of poor dispatching, bad billing practices or an overstaffed shop. Contrary to popular belief, on flat rate technicians actually get to share in the profits with the owner if done correctly. Just don’t be “that owner,” that takes advantage of your employees.

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