Issue Date: Service Manager Dec 1, 2010, Posted On: 12/2/2010
Service Manager Case Study Altering flat rate to fit the shop; change in pay causes production to soar This is not a case study about alternatives to the flat rate pay system. Rather it is the story of a service manager who crafted ways to alter his technician's pay plans and in the process came up with a winning formula.
For years now, we've heard of the impending demise of the flat rate pay system for automotive technicians. But let's face facts. Flat rate has stuck around because it works well in most situations. But that doesn't mean that service managers haven't looked for ways to improve the process to stay in step with the times.
Depending on the needs, skill level and productivity of individuals on your staff, there has to be some flexibility on pay issues. For many stores such flexibility has proven to be the key to their success. Service Manager consulted with a dealership a few weeks back and found that the service manager had decided on two different levels of pay plans. Currently in his eight-tech shop he has techs split down the middle and pays them on two different foundations. Actually, weâ€™ve heard and reported on similar plans in the past with comparable good results.
Essentially, the service manager found that the personalities in his shop indicated two types of technicians: those who are good at diagnosing problems and those who are good at repairing them. The diagnostic techs were paid flat-rate and the repair guys were paid hourly. This was a Ford shop, and with the various changes that have occurred with their factory flat-rate manual over the years, this approach made sense. Generally speaking, Ford's diagnostic allowances are more generous than their heavy repair or replacement times are.
Can hourly pay plans work?
But depending on the work mix of the week (between warranty and customer pay jobs) some techs could find themselves prospering one week and starving the next, so some more tweaking was necessary. The service manager wanted to compensate his techs regardless of the factory allowances, but he also wanted to reward high productivity. Since he paid the hourly techs between $13 - $18-an-hour, he kicked in a productivity bonus after 45 flat rate hours were booked per week. For every hour booked over the 45, added a variation on flat rate - paying them $10 per additional hour flagged. "What has happened is the hourly guys are now more willing to stay late and make sure they hit 50 hours a week," he told the Service Manager.
Of course, all this requires proper planning. If a tech has only 15 FRH flagged and it's noon on Thursday - it's really hard to motivate them to kick it in to make the 45-hour threshold. Jobs are carefully assigned during the first few days of the week to give everyone a running chance at meeting their goals.
The pay off
The result was to that he helped satisfy techs who were losing their shirt under tighter factory labor allowances, while providing incentives for good production. That means the earning potential is there, but the worry and pressure of making factory time has been removed. Currently, this shop maintains about 110% efficiency shop wide. The diagnostic techs are happy continuing to receive flat rate time for their work and prefer to stay on that system.
Does it all sound like a bit of work to track and compensate the techs? It is, but the pay-off of having techs eager to go to work is worth it. This exact pay plan might not work for every shop out there. The point was to look at the strengths of the technicians, pay them fairly for what they are good at, and reward exceptional efforts with additional pay. Again, they key for this pay method was that scheduling and dispatching was done carefully early in the week to make sure techs got a running start towards their goals.