Fixed Operations
Tracking Productivity, Efficiency, and Technician Output Creates Profit Part Four
By Ed Kovalchick
This segment in this series, analyzing how technician performance and the related time-management measurements affect the service and parts bottom line, is the final measurement: technician output.
If you read this column the past three issues, you know that productivity is the measurement of how effectively technician attendance time is applied to work time. This is accomplished by measuring attendance time versus repair order clock time. It helps provide the answer to the important question, "How much of the technician's clock time is spent working?"
We also reviewed that efficiency measurement differs from productivity, in that it is the measurement of how successfully a technician applied repair order clock time. Here, repair order clock time versus paid time is measured. This helps answer another important question, "How well is the technician performing?"
The third and most critical profitability measurement is technician output, a combination of productivity and efficiency measurements. Some manufacturers refer to technician output as proficiency, since it includes both.
A common error though is to label technician output, "productivity," used interchangeably in the United States.
This measurement is not actually productivity as universally applied elsewhere in the world. The formula for calculating technician output is: Paid Hours Produced / Technician Attendance Clock Hours
Every opportunity for producing income is taken into account (attendance clock hours), and compared against every collected-income hour (paid hour). The percentage resulting from this calculation can be applied to the labor rate to establish the true clock-hour rate the technician produced for the company while in attendance.
Simply stated, Joe works eight hours today and completes four hours of paid time. Four hours of paid time divided by eight hours of clock time equals 50% technician output today. At a labor rate of $60 per hour, Joe's output only provided $30 in actual income for each attendance clock hour.
50% Technician Output X $60 Hourly Labor Rate = $30 Income Per Technician Attendance Clock Hour
Since the parts department is dependent on Joe to produce labor sales in order to produce parts sales, the parts department sales would only be 50% of what they could have been, had Joe produced at 100% technician output, a much more reasonable figure. As you can see, parts as well as service, has a vested interest in Joe's daily technician output performance.
Even if the productivity and efficiency measurements are ignored, the technician output measurement must be made on every technician everyday by the service manager. In the first part of this series, we calculated how much daily technician output percentage was necessary to break even financially, and how much technician output was necessary to create a 20% bottom line in each and every occupied service stall. Every professional service manager should make these calculations to establish performance targets, communicate these targets to each technician, and then continuously measure each technician's performance against the target everyday.
The foundation of service and related parts profits is the measurements of time. The communication and management of those measurements are the first set of blocks on that foundation. When profit is generated without these important tools, the true profit opportunity remains an unknown, and frankly the profit is more luck than anything else.
Next time we will identify the top items that affect technician output, and discuss how they can be effectively managed to drive profitability upward.
Ed J Kovalchick is CEO of Net Profit Inc, an international automotive manufacturer and dealer training and management-consulting firm, located in Alabaster, Ala. Mr. Kovalchick is a featured speaker and instructor at conventions, 20-Groups, associations, and other automotive related events worldwide. He is also a former six-franchise new car dealer, and independent shop owner. ekovalchick@dealeronline.com
