Measuring and driving performance is something that I see in sales departments but not in most service departments. However, I can tell you that the most profitable and successful dealers track and drive production in all areas of the dealership. As consultants we work with dealers to implement the tools of the Hubbard Management System, developed by world acclaimed author and administrator, L. Ron Hubbard.
One of the key principles in the Hubbard System is a strong focus on measuring and driving production. There is a very basic but powerful connection between rewards and production. Hubbard states that “When you reward non-production you get non-production” and “when you penalize production you get non-production.” So if you have a technician who has not produced any more for you this year than he did last year but gets a raise anyway, don’t be surprised if his production drops. And similarly if a technician does produce more but isn’t rewarded for the increase his production too will drop. The only way to increase production on a regular basis is to recognize and reward increases in production.
This is where many dealers have a hard time. I am often asked, “how do I create a reward system for my technicians?” So, to help those of you who have struggled with this dilemma I will outline a plan you can follow.
There are some key performance measures that should be tracked and driven on a weekly basis. By measuring the performance of the service team on a weekly basis you have the ability to make adjustments more often. When production is measured on a quarterly or monthly basis you only get 4 or 12 opportunities each year to coach the technician and act on the numbers. I suggest weekly tracking and review with quarterly bonuses available as a reward for each technician based on all or some of the key measurements listed below.
Total Service Calls – This is simply the number of calls that the technician is dispatched to and closes during the period. Each call is counted regardless of the type of call or the outcome of the call. It is pretty obvious why we track this number. It is important that technicians complete the correct volume of calls to keep customers happy. However, keep in mind that it can be just as bad for a technician to complete too many calls per day as not enough. If technicians take a “hit and run” approach, only fixing the immediately problem their repeat call rates (covered later) will rise. A good target for this measurement is 5 total calls per day, but this can vary based on territory covered or type of equipment serviced.
Incomplete Service Calls – This is the percentage of calls done by the technician where the problem could not be completely solved. The most common reason for an incomplete call is the need to order parts and return to install them, however, a call can be incomplete because the technician ran out of time or needed assistance from another tech to solve the issue. This is a negative statistic in that an increase is bad. Returning to finish a call is very costly in service labor and travel time. A good target for this measurement is 5% of the total calls.
Repeat Service Calls – This is the number of calls received for the same machine within a specified period of time or specified number of copies regardless of the reason for the call. This, too, is a negative statistic. It is counted against the technician that did the call prior to the repeat call. Like the incomplete call this is a very costly situation for the dealership. In calculating repeat calls I suggest counting any return call within 30 days as a repeat call. A good target for this measurement is 10% of total calls.
Parts Usage per Call – This is the dollar amount of parts used per service call. Unfortunately some technicians who have difficulty troubleshooting a machine become “part replacers”.
They replace unneeded parts in an attempt to correct the problem. This costs the dealership a tremendous amount of money. By tracking the average parts usage per call you can identify technicians in need of additional training. A good target for this measurement is $18.00-$20.00 per call. This statistic can have large swings when tracked on a weekly basis as a costly part will have a big impact. This can serve as a good review for the technician showing the huge cost of certain parts like boards. Though the number can swing widely week to week it works into a better average over a quarter which is why bonuses are suggested on a quarterly basis.
Technician Mechanical Time – This is the percentage of time that the technician spends actually servicing equipment, from the time he/she arrives at the customer’s location to the time he/she leaves for the next call. By measuring this number you can see how productive the technician is. It helps to minimize time wasted. A good target for this measurement is 65%-70%.
Technician Travel Time – This is the percentage of time that the technician spends traveling between calls. It is important to understand that drive time to the first call of the day and home after the last call of the day is not considered travel time, this is commute time and is not counted.
If the dispatcher doesn’t route technicians properly this number can be very high. Time spent sitting in the car instead of servicing equipment is very expensive. A good target for this measurement is 20%.
Weekly Hours Worked – This is simply the number of hours a technician worked during the week. When a technician completes a call at 4:30 they very often are not dispatched to another call for that day even though the work day goes until 5:00pm. This creates a loss for the dealership. In the ideal situation the technician would make up the half hour on another day that week by staying until 5:30pm. However, this doesn’t typically happen. By measuring the hours worked you can bring visibility to this situation. When working out bonus programs this statistic is often used as a qualifier. If a technician doesn’t have an average of 39 hours per week or higher they don’t qualify for other bonuses.
As mentioned earlier you don’t have to use all of these statistics listed when creating your tracking and bonus program. You can choose the statistics that will work for you. Making the decision of what works or doesn’t work typically starts with determining how you are going to capture the numbers. If you use an automated software system like OMD, LMS, e-Automate or others you will be able to capture all or some of the numbers very easily. Simply look through the service reports in your system to see what is readily available. For those of you that don’t have a system like this manual capture of the numbers is not difficult. The best method for this situation is working with the call based numbers. The dispatcher would keep a running count of all calls for each technician throughout the day. They count total calls and add incomplete, repeat and parts usage when closing calls. It is more labor intensive but works well. It will probably give you an incentive to move your dealership to an automated software system.
Now that you’ve captured the data it is time to create a reward system. My recommendation is a quarterly bonus program. You set quarterly targets for each statistic you have chosen to track. The ideal target would be one based on an increase over actual past production. If you have the ability to go back to previous quarters and see what the numbers were, you can set targets that are slightly higher. This ensures that bonuses are only paid for increases in production as stated above. If you don’t have the ability to get actual past performance numbers you can start with the number suggested, just be ready to adjust them once you generate your own history.
Now that you have targets set you can tie financial bonuses to them. A system that has worked well assigns technicians 5 targets; for example total calls, incomplete calls, repeat calls, parts per call and hours worked. As mentioned earlier hours worked is used as a qualifier. If the technician doesn’t have a weekly average of 39 hours or more they don’t qualify for any bonus regardless of the rest of their performance. The other four targets are assigned quarterly bonus amounts. For each category that the technician achieves 100-105% of the target they get a $ 75 bonus, for performance from 106-110% they get $100 bonus and for performance that exceeds 110% the get $125. With this program each technician has the opportunity to earn up to $500 per quarter.
Now for the most important part of the technician reward program. Though money is important to everyone I have found that it is not as much a motivator for technicians as it is for sales reps. A successful technician reward system MUST include recognition as a reward. Weekly, monthly and quarterly public recognition of the technicians who are producing is critical. This starts with posting of each technician’s numbers. Those that are truly producing at a high level will revel in the attention they receive. Those that aren’t will absolutely work harder to get their numbers up to par. You can also add to this by offering a technician of the month, quarter and year as an award to shoot for. Of course the award must go to the technician with the best statistics, not the only you like the most.
I have seen tremendous changes in service departments where this system was implemented. These changes start with dramatic increases in overall profitability. It is not uncommon for service profit to rise by 20, 30 or 50% when this plan is really worked. The other change that I often see is based on another basic principle outlined in the Hubbard Management System. That principle is that “Production is the basis of morale.” An individual or team that is producing has a much higher morale that one that isn’t. Tracking and recognizing production will bring up the overall morale of your service department very quickly.
So, if you’re looking for increased profits and better morale implement a service production reward system. If you need help don’t hesitate to call on us. I would be happy to give you more information on the program and email a sample with the details clearly outlined.
Jim Kahrs is the President and Founder of Prosperity Plus Management Consulting, Inc.
If you have any questions please don’t hesitate to call 631-782-7762 or email.