If we are going to attract, train and develop young talent, we have to show them that we are an industry with a path from entry level to retirement and that retirement isn’t defined simply by “the end of your ability to produce hours.”
Let’s just be honest and lay out the cold, hard facts: Yes, we are in the relationship business, but at the core, we are in a production-based industry. Our profit model begins with labor and relies heavily upon having productive technicians that can “beat the clock” or at the very least, maintain a reasonable pace of an hour billed for an hour worked. The success and profitability of a shop relies in very large part on the ability of your technicians cranking out more hours than they are on the floor.
Techs, like tools, wear out. When we talk about a tech that is past his or her prime, we are not talking about age. But, much like a professional athlete, peak physical condition and peak knowledge and experience rarely align.
Let’s be honest, this is a tough industry. The physical demands on our bodies are extreme. Just when your superstar is at his or her mental and practical experience prime, the aches and pains start, and his or her body often begins to betray them. Little by little, production slips until you arrive at the tipping point, when the lack of production causes the scales of equitable exchange to become unbalanced. Your superstar becomes a falling star. Although the skill, experience and know-how are there, the speed and physical pace aren’t, and productivity inevitably suffers.
Next comes the moral and ethical questions: What should I do? In a production world, your tech (like the shop) begins to suffer as their production and income drops. In an hourly world, your aging tech may not suffer financially, but his pride and morale likely do. Unfortunately, the shop feels the financial pinch either way and now begins the difficulties. You simply can’t afford to keep them in production and expect 40 hours per week and it becomes an untenable labor cost that is no longer supporting itself. The system that has allowed them to make money for you for years is the same system that is causing you to lose money on them now.
As a real-world example, I recently helped a fellow shop owner work through this situation with his long-time lead tech, Bob. Bob declared production has slowly eroded the profit margin. We were able to measure this by using Bob’s “true-cost” KPI of loaded labor cost per billable hour:
2017: $34.24 per billable hour
2018: $40.38 per billable hour
2019: $46.32 per billable hour
Because Bob has a guarantee, the fewer hours he produces, the higher his actual cost for his billable hours becomes. Considering this shop’s hourly rate is $100 per hour, it is very easy to see that there is a real and building crisis in the basic business and profit model.
Bob is a loyal and dedicated tech that just can’t produce anymore. From a labor profit margin viewpoint, it is evident that a change had to be made. Certainly, a labor rate increase could help in the near term, but the trend with Bob’s production is downward. A rate increase to address this issue would be akin to a dog chasing its tail. Taking Bob off a guarantee and putting him solely on a production-based comp plan is not an option because we know it is not a matter of will or motivation—Bob has several physical issues related to the wear and tear of the profession. So, the only other solution is to replace Bob, right?
For the vast majority of shops with a Bob, none of the above would likely be a viable solution long-term. Putting the moral and ethical questions aside about how to treat the “Bobs” of the world, our industry is facing a large and very real labor shortage. With our current technician talent pool aging and the physical challenges of the job, our industry is losing quality technicians at a rate far greater than our industry is currently recruiting, training and developing. We simply do not have a surplus of available talent out there to plug and play with an equal-talent replacement, and our current model of young tech development does not work.
We must get creative and think about new ways to bridge the gap between our aging talent pool (in which all the experience and knowledge of our industry rests with young and energetic, yet less experienced, technicians. Our labor shortage and our suffering profit model might be addressed by better utilizing our existing master techs to manage, mentor and inspire the next generation of rock stars.
If we are going to attract, train and develop young talent, we have to show them that we are an industry with a path from entry level to retirement and that retirement isn’t defined simply by “the end of your ability to produce hours.” A foreman position may not fit your current size or fiscal model, but there is a huge pay-off if you can start to look at your cost in more of a team-based model and figure out how to create a culture of mentorship by taking your aged, slowing talented technicians and better utilizing them to create an environment of collaboration, engagement and team.
Keeping our experienced and tenured talent engaged and contributing is a win-win for everyone. It allows you to continue to profit from the rock-star tech that has stood with you all these years and take advantage of experience and wisdom he has gained and in which you have invested. It also creates a career path for everyone at your shop to see.
As a coach, I recently made a shop visit to one of my great long-time alumni members, Sloan’s Automotive in Orlando, Fla. Terry, and his son, Kenny, who is the GM and a partner, recently expanded their shop. Their challenge in spooling up to the new capacity was, of course, to add technicians. As with Bob, they similarly faced the challenge of aging long-time technicians and having to populate the expansion with younger, less experienced candidates. They came up with a daring, yet highly creative, solution that has paid off in spades.
What Kenny was challenged with was a staff of five-plus younger technicians, who, without the same experience and knowledge as the master techs, struggled with productivity and with comebacks. His solution was to take his two most senior master techs off the “production line” and transition them into a working shop foremen role. They are involved in all diagnostics and checking out cars, dispatching work and mentoring/developing techs. As foremen, their individual production has dropped below 25 hours per week, but the shop has increased its productivity from 64.9 percent to 77.91 percent. Billable hours have gone from 165.63 last year to 253.06. The quality of work is top-notch, profits are up and comebacks are down. The shop is growing and expanding with great word-of-mouth and an excellent reputation.
By applying the same formula I used to calculate Bob’s cost per billable hour, I was able to clearly see how this new model made the Sloan’s more profitable. In 2018, Sloan’s average loaded labor cost per billable hour was $44.24. This year, after implementing their new model, their cost is $36.36. Not only did they decrease their billable cost per hour, but they also decreased comebacks and increased productivity. The moral to the story? Work smarter, not harder, and invest in making your crew better.
