Dealers regularly ask me about the number of administrative staff required in the well-run bodyshop operation. Like most questions there is no absolute answer. However, we have developed a way of measuring something we call "Administrative Labor Performance." Essentially we measure the number of administrative hours required per $1,000 in sales.
Accountants often want the "overhead" to be low and encourage a lean staffing density. We, however, want you to have the "right amount" of administrative staff dedicated to bodyshop operations. The price that is paid by not having enough office staff is subtle but nonetheless real. When a bodyshop is understaffed customer service suffers dramatically. When the bodyshop office staff is overworked the gross profit drops significantly. Most notably, the final invoice for repairs going through the shop is not scrutinized diligently. Hence legitimate supplemental charges are missed. Supplements account for a 25% sale upgrade in a well-run dealer shop. Bodyshop managers who are overworked or not supported with the proper amount of staff barely have time to write a final bill, let alone scrutinize the incidental legitimate charges they could be getting paid for. One of the biggest challenges a bodyshop manager faces is tracking of costs and profits. The bodyshop manager deserves to have the training, tools, and people to get the job done:
Training: Does he or she know what the standards are and what mechanisms to use?
Tools: Does he or she have the right systems in place to track results?
People: Does he or she have enough staff dedicated to bodyshop office operations?
Here is a formula you can use to assess your Administrative Labor Performance:
Administrative Labor Performance
Statement
(Monthly Sales divided by Y = Administrative labor ratio)
Formula
· Total # of Administrative Staff multiplied by # of Hours Worked Daily = Total Administrative Hours Worked Per Day.
· Total Administrative Hours Worked Per Day multiplied by Number of Days in Average Month (usually 21) = Administrative Hours Available in Month.
· Monthly Gross Sales divided by $1,000.00 = Y
· Total Administrative Hours available in month divided by Y = Administrative Hours Per $1,000.00 in Business
General Standards
Dealership Bodyshop should range from 5.0-6.5 hours per $1,000.
· Too low indicates lack of adequate staffing to achieve optimum level of customer service, quality, and tracking of profit.
· Too high indicates too much overhead for present sales volume, or inefficient management procedures and methods.
Remember to count the administrative staff dedicated solely to the bodyshop. This formula is for administrative staff only. Managers, assistant managers, estimators, receptionists (if in-house at bodyshop), and other employees dedicated to the bodyshop office should be figured. Payroll clerks and similar employees working primarily in the dealership office would not be calculated. The aforementioned standards are based on the typical dealership scenario.
Once you know your Administrative Labor Performance Ratio you will be in a better position to assess your needs.
Dave Dunn is the collision industry's most respected management consultant. Dave is a shop owner from Galesburg, Illinois, and president of Masters Educational Services with offices in California and Illinois. Masters specializes in all types of consulting, training, and education within the collision repair industry. Please direct questions to Dave using the appropriate check box on the reader response form. ddunn@dealeronline.com