The goal in measuring technician performance is to end up with a month-by-month forecast of total labor and parts revenue along with gross profit for the coming year with the highest degree of accuracy and a minimum amount of effort. 

 

The recent performance of your technicians will be the most accurate predictor of future performance! 

 

 

What are the Categories of Work Mix?  

Before diving in, it is important to outline five different categories of work. Each of these categories should be forecasted independently and seen as different businesses. 

 

1. CP Competitive includes LOF or “the works” services that are nationally advertised and competitively priced. 
2. CP Maintenance includes routine services.                                    
3. CP Repairs are more complex, require a higher degree of skill, and often command a higher price in the marketplace.                
4. Warranty includes primarily work done for the OEM. 
5. Internal 

 

These different categories will be utilized throughout the process of establishing a baseline for each technician and their performance. 

 

 

11 Steps to Establish a Technician’s Baseline Performance  

 

Step 1: Find Labor Hours and Work Distribution

 

The starting point is the labor workbooks for technician number one. For every technician that we’re looking at in any given month, we’ll be able to find out from the information that’s available through the DMS, or through an analytics tool, how many hours were booked in that period of time, and that becomes the baseline. Taking a look at those hours for the month we see how many hours were distributed across competitive, maintenance, repair, warranty, and internal work.

 

 

In this example, this technician is pretty well spread out in terms of the work being performed. However, in some shops you might find that sometimes you’ll have quick lube only technicians where the majority of their work is competitive. 

 

Once we know the total hours, divide up the hours in each labor category by the total to get to a percentage. This example shows a well balanced technician.

 

 

Step 2: Examine Labor Sales

 

Next, we look at the sales per labor category. 

 

Step 3: Determine ELR by Category 

 

Taking the sales within each labor category, we can then divide those numbers by the booked hours to get your ELR. In this example, you’ll notice that the ELR is all over the place. 

 

This is fairly typical as ELR changes by category which is the reason why we can’t uniformly say what’s our total shop ELR. Instead, we want to get to what the ELR is by labor category so that we’re able to project things more accurately and satisfy that accuracy objective.

 

Step 4: Determine Technician Pay Rate by Category

 

Technicians may be paid different hourly rates, depending on the type of work they do. However, most often the same hourly rate is paid to the technician regardless of labor category, despite some shops where there is variation. If that is the case for your dealership, that needs to be reflected here as well. 

 

 

Step 5: Labor Gross Profit per Hour by Category

 

In step five, we can look at the gross profit dollars per category. If you subtract the ELR from the technician pay rate, you get how much gross comes from every hour depending on the type of work that’s being done.

 

 

Step 6: Labor Gross Profit Dollars

 

Next, you multiply the labor hours times the labor gross profit per hour. We can now see the gross profit dollars. 

 

 

Step 7: Labor Gross Profit Percentage

 

To find the gross profit percentage, take the labor gross profit divided by the labor sales. You’ll see that generally you look at that number for the total shop in the 70 to 75% range.

 

However, in our example there quite a split here. The differences across each labor category points you to opportunities just by looking at that one number.

 

 

Step 8: Parts Sales by Category

 

In step 8, we shift from labor to looking at parts. 

 

Step 9: Parts to Labor Ratio 

 

Here, we’re able to see that the gross profit or price to labor ratio is often 80 cents to the dollar. This particular example is 80.9%. But, it’s spread out quite differently by labor category. This again reinforces the need to examine each category independently. 

 

Step 10: Parts Gross Profit

Determine the parts gross profit by subtracting the parts cost from the parts sales. 

 

 

Step 11: Parts Gross Profit Percentage

 

Divide your parts gross profit by parts sales to get your percentage!

 

 

 

Let Dynatron Do the Heavy Lifting for You! 

 

Following these 11 steps for each technician in your Service Department can seem like a daunting task on top of your daily workload. Here’s the good news! Dynatron’s analytics system makes all of the data needed for steps 1-11 available at your fingertips. Our TechCF tool gives you a report that shows the baseline performance for each technician providing you with the ability to  have the framework to be able to start putting together your projection for the coming year. Let’s get started!