“Forecasting Service Net” - #4 Proficiency

There are seven things you control that directly influence your Service bottom line.
    1    Calendar Utilization
    2    Daily Clock Hours
    3    Number of Technicians
    4    Proficiency
    5    Effective Labor Rate
    6    Gross Retention Rate
    7    Expenses

This installment deals with Proficiency.

Why is it important? 

You have begun to measure “Utilization” of time. You have decided how many days you will be open, how many hours you will be open each day and how many technicians you will employ. If you have ever built a race engine, this is similar.  There was a lot of anticipation. You took every detail into consideration, matched up the best available parts that compliment each other and learned the best techniques to put them all together.  At some point you needed to move past the anticipation, start the engine and see how much horsepower it produced. Many an engine builder has been surprised (negatively or positively) at the output of their project.

When Ron Stoner and Skip Vandervall wrote “The Seven Controllables of Service Department Profitability” they called this measurement “Productivity”.  When I was a service manager it was the primary measure I was most interested in.  In its simplest form it is the billable hours produced as a percent of clock hours available.  i.e. 10 techs - 8 hour day - 100 hours billed - equals 125% productivity.  What do you do if the productivity is low?

You quickly learn that there are actually two very important elements that make up productivity.  Thus, the heated discussions that always come up whenever it is mentioned.  People are talking about three different things.  Folks can’t even agree on what to call them. Some people came up with “Proficiency” as a way to explain the combination of the two key elements. Ron & Skip had it wrong. There are 8 controllables.   They talked about, but left out technician efficiency.  I have changed the forecast tool to utilize it.  

Let me explain.  You will remember I drew an analogy between a combustion engine and a service shop.  The combustion engine draws in air, mixes it with fuel. lights it up and converts the heat to motion.  A service shop engine opens the doors, adds some techs, gives them what they need and converts time into money.  Once a technician arrives, any time not spent working on a job is lost.  You cannot recover it.  I see this in shops where techs come in late because they have gotten used to advisors not having jobs ready to hand out when they arrive on time.  It is especially evident in Marine where large amounts of time can be lost moving boats to and from the water or storage.  I also see it at parts counters where nothing starts until a tech requests a part and discussions of weekend activities begin to add up into mountains of non-refundable hours. How effective an organization is at keeping technicians productive needs to be measured.  It is the first important element and is what I now refer to when using the term, “Productivity”. In its simplest form it is the hours spent working on jobs as a percent of clock hours available to work on jobs.  The second and missing element is technician “Efficiency” or how fast they complete jobs.  In its simplest form it is the hours billed as a percent of hours spent working on jobs. 

So, what would high productivity look like? A technician arrives and has a job in their bay.  He punches in the time clock, punches on that job and starts working.  He doesn’t need to stop to obtain parts or find tools.  When he is done there is another job waiting.  What is efficiency?  Once on a job he works smart and completes it quickly and accurately the first time.
Previously, in the forecasting tool we would multiply the total clock hours available by “Proficiency” to determine how many billable hours the shop will produce.  In the new version we multiply the total clock hours available by “Productivity” to determine how many of those hours the techs will spend working on jobs.  Then, we multiply that by “Efficiency” to determine how many billable hours will be produced in that amount of time.  i.e. Previously a store may have been open 24, 8 hour days a month with 6 technicians for a total of 1008 clock hours. We multiplied 1008 by 90% Proficiency and it equaled 907 billable hours.  

How do you improve it? Are the techs the issue or the organization? Now you will be able to apply the “Efficiency” metric as well as the “Productivity” metric and see how each individually impacts your bottom line.  i.e. 1008 clock hours times 85% Productivity = 857 hours on jobs times 106% technician “Efficiency” = 907 billable hours. 

Next:  Controllable #5 - Effective Labor Rate.