Flat-Out Fair: Break Up Labor and Pay Everyone Fairly - BodyShop Business

Flat-Out Fair: Break Up Labor and Pay Everyone Fairly

How do you break up labor and pay everyone fairly? While converting his shop from all combination techs to a departmentalized metal shop and paint shop (a process he refers to as “Armageddon”), this shop manager developed a system to pay techs what they deserve while motivating them to work as efficiently as possible.

It seems that not a week goes by when I don’t read about some shop owner paying his painter an astronomical salary. I read it on the discussion boards and in the trade magazines and hear about it through the autobody grapevine. At first I thought it was just some urban legend cooked up by underpaid techs trying to justify their woes. But some of the sources are getting more and more credible.

Just stop and think about this a minute. The painter – who may be very talented – has a limited number of needed skills to do his job well. On the other hand, think about all the skills your metal techs need to do their jobs well. I’m in no way trying to shortchange the value or the importance of our painters. They’re just as vital to our success as anyone else in our shops. I am trying, however, to put something into perspective. For those of you shop owners and managers who are paying your painters more than your metal techs or worse yet, yourselves, this is merely a wakeup call. You may need to consider a more equitable method of distributing your labor dollars.

Problems With Payment, Therapy For Me
I ran into the problem of fair compensation in my flat-rate shop several years ago. I had just taken over as manager of a small shop in a dealership. The shop had only three techs, and each did everything from start to finish. Their work was excellent – some of the best quality I’d seen – but quantity was something else. The shop had a month-long backlog and plenty of space. We needed a fourth tech desperately, but there was no way I could hire another combination tech. Three guys working out of one spraybooth was the maximum. So I decided to take that great big step toward modernization and hire a full-time painter.

OK, sounds like a good idea, but how do you break up the labor and pay everyone fairly? Excuse this brief tangent, but anyone in this position needing to convert from all combination techs to the more departmentalized system of a metal shop and a paint shop should be prepared for Armageddon. Generally, collision techs aren’t the easily adaptable sort. And it may be easier to ask them all to get a sex change than to tell them that someone else will now be painting all their work and getting a good chunk of their labor hours to do it.

I couldn’t even consider hiring a painter until I learned from someone how to split up the labor between the painter and my other techs. Ah, the wonders of the flat-rate system. I started calling everyone I could think of who might be able to help me. I called other body shop owners and managers. I visited a few shops that were gracious enough to let me take a look at how they did it. I harassed my paint supplier every time I saw him, trying to enlist him in my mission. I surfed the Internet and surveyed the discussion boards. I got so many different answers and opinions, yet no system seemed fair. Some shops gave all the paint time to the painter. Some gave 20 percent of the paint time to the metal techs because the metal techs did their own priming and finish sanding. Others had secret formulas and gimmicks.

I was desperate. I hired a painter and tried several of the systems other shops used, hoping one of them would work out. Did they? Well, let’s see. Two of my techs quit, my new painter turned out to be psychotic, I fired my new painter, hired another painter, hired a prepper to clean and mask the cars for the new painter, the new painter enlightened me on what a real psychotic was, I fired the new painter, stuck a spray gun in my new prepper’s hand and told him to make me proud, hired a new prepper, hired back the two techs who had quit and began therapy. A pretty dang smooth transition if I say so myself.

After plenty of school and hands-on training, my prepper turned into a great painter. And after plenty of mistakes and lots of aggravation, I finally came up with a flat-rate system that I – and my employees – think is fair. Not only is it fair, but it’s also simple and promotes teamwork among all my employees. Quality has improved, efficiency is better, profits are up and employee morale is the best it’s ever been. We’ve continued to grow and prosper, and my technicians continue to work together to come up with more efficient ways of doing things. The technicians who work the hardest make the most money. Distribution of labor hours is equitable, based on what the technician has actually invested in any given repair. My system is open, honest and most importantly, the technicians trust it because they can see with their own eyes how it works.

Break Out Your Calculator
Here’s how the system works. As I mentioned, the distribution of labor hours is equitable and based on what each technician actually has invested in each repair. One caveat: All your techs must be proficient at their particular job. If you have a tech who’s not proficient, pay him hourly until he can contribute positively to the repair process of each vehicle. You can still use this system with an hourly tech in the repair process, as I’ll show you later.

The best way to illustrate this system is with an example. If this seems complicated, don’t worry, you can download a free calculator I developed from my Web site to help you.

Let’s say we have a repair that pays a total of 40 hours. It doesn’t matter if the repair could have 30 hours metal labor and 10 hours paint labor. With this system, it’s all the same: 40 hours of labor.

Here’s how the repair turned out:

  • The metal tech contributed 20 hours to the repair.
  • The prepper worked on the car for 1.5 hours
  • The painter spent 2.5 hours painting the car.
  • The detailer worked on the car for 2 hours

This gives us a total of 26 hours invested in this repair. If we divide this figure into the 40 hours we were allowed, we get an efficiency of 154 percent. That’s pretty good. Now, if we’d used one of the traditional methods of distributing labor, we’d have to decide what’s paint labor and what’s not. The prepper’s labor would probably fall under the paint category, but what about the detailer’s labor? Does that get charged to the paint department, the metal department or is it shared somehow?

In this example, let’s give the advantage to the metal technician and say that the detailer’s work is charged to the paint labor. If we add the prepper’s labor, the painter’s labor and the detailer’s labor together, we get a total of six hours charged to the paint department. The repair paid 10 hours of paint time. If we divide the six hours of actual time worked into the 10 hours we got paid for, we get an efficiency of 167 percent. Did the prepper, the painter and the detailer work any harder or faster that the metal tech? How do we justify giving them a bigger piece of the pie?

Meanwhile, the metal tech spent 20 hours of the 30 hours allotted in this repair, giving him 150 percent efficiency. Did he work less hard or less efficient than the guys in the paint department? What if all the techs involved in this repair did their best and performed proficiently? How do we justify paying our paint department a larger percentage of the labor dollars? Why do we let our database providers determine how we distribute labor hours and compensate our employees? How do we get our employees to think and work like a team if we favor one department over another?

Dividing the labor up using this method looks like this:

  • The metal tech gets a total of 30 hours (all the metal labor);
  • The prepper gets 2.5 hours (1.5 x 167 percent);
  • The painter gets 4.2 hours (2.5 x 167 percent); and
  • The detailer gets 3.3 hours (2 x 167 percent).

If your shop is departmentalized, every repair that goes through it is a team effort. And if you want your employees to work more like a team, you need to compensate them as a team.

So let’s take another look at the above example, using a more equitable method of distributing the labor hours. Remember that there were a total of 40 hours paid for this repair and we had an overall efficiency of 154 percent.

  • The metal tech contributed 20 hours to the repair.
  • The prepper worked on the car for 1.5 hours.
  • The painter spent 2.5 hours painting the car.
  • The detailer worked on the car for 2 hours.

If we treat this repair as the team effort it really was, we’d pay every tech involved in the repair based on the overall efficiency and on what each team member contributed to or invested in the repair. So the metal tech gets 154 percent of the 20 hours he had into the repair, giving him a total of 30.8 hours. The prepper gets 154 percent of 1.5 hours he worked, equaling 2.3 hours, the painter gets 154 percent of 2.5 hours for a total of 3.8 hours, and the detailer gets 154 percent of 2 hours, which translates to 3.1 hours. What could be more fair unless someone screwed up his or her part of the effort?

What do you do if you have an hourly tech working in this process? Let’s say your detailer is paid hourly, and he also cleans up the shop, runs errands, etc. How does he fit in this system? You definitely want to track his time. If you’re running a flat-rate shop, even your hourly techs should punch on and off any vehicle they work on. You have to bill out their labor to be profitable.

To accurately determine the repair’s overall efficiency and then fairly divide up the labor hours among your flat-rate techs, simply include the hourly tech in the equation. You can either keep the extra time the hourly tech would have coming and apply it toward the shop’s gross profit, or you can do like I do and make the compensation package more competitive by dividing the hourly tech’s extra time among the remaining flat-rate techs.

For instance, let’s say we use the above example again and this time we treat the detailer as an hourly employee. The detailer’s additional 1.1 hours could go directly to the shop’s gross profit or could be evenly distributed to the other techs based on their contribution to the repair. This calculation can get complicated, but my calculator does it automatically.

Below are two views of my calculator. The first distributes the additional labor to the hourly technician, which can then be put toward the shop’s gross profit.

The second view shows the hourly tech’s extra time distributed to the other flat-rate techs.

As you can see, the techs with more hours invested in the repair get a larger chunk of this extra labor. Again, an equitable distribution.

Making It Work
The key to this system – and helping techs understand and trust it – is efficiency percentage. Techs must understand the dynamics of efficiency. While a paint technician may only get an hour or so of extra time on each repair, he’s working on many more cars during the course of a week than your average metal tech. What’s important is his efficiency. The tech must focus on that figure and not on the actual amount of extra hours he gets for each repair. Techs must understand that if they earn $14 per flat-rate hour and they have an average efficiency of 150 percent, they’re actually earning $21 for every hour they work.

So how can a system like this promote teamwork and increase efficiency? Let me give you a couple of examples. When I first got this system figured out and running, a couple of my techs – who thought they were real clever – tried to outsmart the system or manipulate it in their favor. But no matter what they tried, they just ended up hurting themselves.

For instance, one of my metal techs thought that if he passed off work he should be doing to the next tech in line (in my shop, that would be my prepper), he’d increase his efficiency and make more money. But all he did was decrease the efficiency of the entire repair, thus decreasing his own efficiency since he was part of a team effort. My prepper would do the work the metal tech was supposed to do, but it took him much longer because he wasn’t as skilled as my metal tech. It took awhile for the metal tech to figure this out, and now he doesn’t try to pass off his work to someone else.

The same metal tech started to get a little sloppy because he knew the prepper was trained to fix any minor defects in the metal tech’s work. But this also ate up precious time in the repair. Eventually, the metal tech understood that to maximize his earnings, he had to do everything expected of him – and do it carefully – because if someone else had to carry his slack, it was coming out of his own pocket by hurting the overall repair efficiency. And it would cost everyone else money, which didn’t make him a very popular guy.

My painter tried a couple different ways to get a larger share of the pie, too. At first he started punching off a repair before he was actually done working on it. He’d actually punch off the clock completely or punch on to W-time (clean up time). Sure, he increased the actual repair efficiency, but because he had fewer hours into the repair, he didn’t get his fair share of the additional labor distribution. When this didn’t work for him, he tried staying punched on a job longer than necessary. All he did then was hurt the overall repair efficiency, which cost him money and created some unhappy co-workers.

All my techs soon learned that keeping a meticulous and honest timecard was essential to maximizing their earnings. They understood that there was no way to beat my system. And every car was leaving repaired properly, since re-dos cost everyone dearly.

My techs also learned to work together. If my metal techs see the paint department is getting jammed up and they have a few extra minutes, they’ll actually ask my painter if he’d like them to finish sand and wash the car before sending it to the paint department. And if the painter has some spare time, he’ll jump in and help the metal techs. The metal techs and the painter now confer with each other about how things should be done. No more passing the buck because they just hurt themselves doing that. They’ve figured out that they rely on each other to make a living.

Writer John Shortell is body shop manager at Secor’s Collision Technology in New London, Conn. He’s been in the collision industry for 20 years and has developed computer software for body shop scheduling called BodyShop Schedule Pro. For more information on the software, visit www.bodyshopsolutions.com.

Shortell’s flat-rate calculator is available for download free from his Web site at www.bodyshopsolutions.com.

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