It’s Your Business
- Subject: Paying technicians on the basis of productivity
- Essential Reading: Shop Owner
- Author: Terry Greenhut, Transmission Digest Business Editor
Many of our younger technicians are the product of trade schools that are sponsored in part by automobile manufacturers. As such they are exposed to the concept of becoming line mechanics in dealerships after they graduate. Many are promised the opportunity to make a really good living, but for a significant number that never materializes.
Dealerships pay on the basis of productivity. Although there is nothing wrong with that – and, in my estimation, everyone working almost anywhere should be paid on that basis – when a job is advertised to make candidates believe they can make a certain amount of money, the opportunity needs to actually exist. Many shops and dealerships that advertise for help quote the amount their highest earner makes to entice technicians. There may be only one technician in the entire shop earning that much. He or she would no doubt be an “A” technician given the opportunity and having the capability to flag 70 or more hours a week. Younger, less-experienced technicians are given the small jobs that don’t allow them to pile up hours.
If technicians come out of trade school, heads full of promises, and go to work in an environment that doesn’t pay as promised and isn’t providing a reasonable chance for advancement, it will be difficult to get them to accept another job that pays on the same basis. They will be looking for some kind of a set salary or at least a guaranteed minimum.
I like the concept of paying on the basis of flat-rate hours flagged, but I also understand how people feel about security and the need to bring home a real paycheck. I know that if they can’t crank out a decent living their minds won’t be on their work and they will continually be looking for other positions, so any money invested in additional training will be wasted when these employees leave.
When I interviewed new prospective employees, one of my questions – to make sure what I was about to offer them was in the right ballpark – was, “How much do you have to take home in order to live?”
I learned early on that if an employee can’t possibly survive on the amount he or she makes they can’t stay. The problem is that when people are looking for a job they won’t tell you what they have to make for fear you won’t give them a tryout. They tend to accept almost any amount to get a foot in the door, hoping they will be recognized for their good work and offered an increase shortly after being hired. If that doesn’t happen they have to go. Since going through the hiring process again in another month or two to replace those employees costs way too much in time, money and emotional stress, I figured it was better to find out up front what the minimum number really was and see whether I wanted to meet it.
If a prospect gave me an outrageously high number, one that was way out of sync with the job classification and/or the area, or if this person came off like a know-it-all prima donna, it would indicate that I shouldn’t go too much further with the interview. Having had some of that type of employees in the past I knew that nothing good could come of it. If the number was something I could live with, I would continue. If the number was on the high end of the acceptable scale I would then ask: “What makes you feel you deserve that much? What can you do for me?” I would then let the prospect tell me exactly how he or she was going to make me enough money to justify the salary request.
I tried several different methods of compensating technicians over the years, but the only one that has ever made sense and could be counted upon over the long term was and still is the “flat-rate-hour” method. It can be tweaked or modified somewhat to suit individual or group circumstances, but in all it makes far more sense than any other type of incentive program. That isn’t to say that it is the only compensation a technician can receive. There can be incremental bonuses for reaching certain plateaus or additional spiffs for finding and/or selling supplementary repairs and services, but it is an excellent base and a plan that you don’t have to keep changing.
There’s a lot that I like about the “flat-rate” method, but mostly it’s that the technicians set their own pay by the amount of work they produce, which means I never have to give anyone a raise just for being with the company a certain amount of time and I don’t have to concern myself with how high their pay goes. In fact, the more they make on that basis the happier I am, because it just means that they are making me more.
It all sounds very easy, but there are control factors to be considered, such as: How much per flat-rate hour should you pay? What actions would allow a technician to get an increase in the hourly rate? At what point would any bonus money kick in? What shop rules would apply so that the technician has to act as a part of the team and not simply bury his or her head in their own work without a concern for other technicians or the shop in general? What would a technician’s minimum pay be if there weren’t enough work to allow for flagging a full week’s worth of hours? Does the service adviser sell the proper number of hours for each job? Does he or she assign the right job to the proper technician? Are the normally replaced parts for any job preordered or in stock to speed productivity?
The service adviser has a much more integral role in this type of pay process than if the technicians were salaried or on an hourly wage. He or she has to answer to not only the boss for the hours they sell but also to all the technicians. If the service adviser doesn’t sell on the basis of the book time, adding any degree-of-difficulty time noted in the book or on account of the technician’s experience with the hassles of a particular job, then he or she is cheating the shop and the technician. If the service adviser is scared of the customer and deducts time, thinking the customer wouldn’t pay that much or can’t afford it, everyone is likewise being cheated. Service advisers need to communicate well with technicians to ensure that the right amount of time is sold and that parts are ordered correctly. Nothing slows production more than having incorrect parts delivered, and it’s especially silly when it could have been avoided by a 30-second conversation.
So how would a technician get a raise? That’s the best part of the plan. Technicians receive increases in their hourly flag rate for performing certain actions that make them more valuable to their employers. The actual amount of money they make depends on how many hours they can flag, so any increase means only that they have an opportunity to make more if they maintain a good production level.
A raise in the hourly flag rate should be given when the technician can demonstrate mastery of a new skill that will make the shop more profitable. The transmission business easily lends itself to that scenario because there is a lot to be learned at all technical levels. For example, an installer can demonstrate better or faster ways to perform certain difficult installations and repairs or can increase diagnostic skill by attending and passing classes. A rebuilder can learn to do another type of transmission or two and become more skilled at diagnosing comebacks and “never-leaves.” A diagnostician can demonstrate faster and more-accurate techniques for finding causes and cures. All technicians can take and pass ASE certification tests, which was one of my favorite things on which to base increases in flat-rate hour.
To get my guys to pass the certification tests I would bet them significant amounts of money that they couldn’t, but I wouldn’t set them up for failure. Instead, I would try to make them succeed by studying with them using old tests and any literature I could find. I wanted them to win for their benefit and mine as well.
Bonus levels can be set for the number of hours flagged. For example, a base amount can be used as the multiplier up to the first 40 hours, then a higher amount for hours between 40 and 60, and yet an even greater bonus amount for hours over 60.
Since this plan basically makes technicians think as owners who have to be responsible for productivity and doing the job right the first time, they have to be made responsible for their own comebacks, because you can’t have technicians racing through jobs sloppily with no fear of recrimination. Owners will be responsible for providing technicians with good and reliable information systems and parts, for removing bottlenecks from the shop’s activities, and for training service advisers to assign the proper job to the right technician on the basis of skill level and to price properly without fear.
All this taken into account, the “flat-rate-hour” pay method is simple, it tracks easily, it gives technicians a feeling of purpose, and it makes service advisers sharpen their skills. Looks like a win-win-win to me.
One caution: Check the labor laws in your state before initiating this type of program. There may be issues with employees working past 40 hours a week without being paid in the traditional method for overtime.
Terry Greenhut, Transmission Digest Business Editor. Visit www.TerryGreenhut.com.
