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Let the Heart Surgeons Operate

Is the perceived shortage the result of too many shops using highly skilled technicians to perform low- skilled work?

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"Nobody gets into this industry anymore.
Where are we going to get our help in the future?"
— Robert E. Showers, shop manager, Plaza Ford Lincoln Mercury, Lexington, N.C.

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Is there a shortage of skilled technicians in the collision repair industry? A consensus says yes. At the risk of going against popular beliefs, stop and ask yourself the following question: Is the perceived shortage the result of too many shops using highly skilled technicians to perform low- skilled work?

Imagine for a moment that physicians working in hospitals mirrored the way technicians work in our industry. If this were true, the cardiologists would not only perform heart surgery, but also diagnose ear infections, repair broken bones, and perform physical exams and other duties.

As a result, the medical industry would be faced with a shortage of skilled heart surgeons.

Hospitals use specialists, with varying pay scales according to their areas of expertise. You may not agree with comparing the health care and collision repair industries — since there are major differences between treating human medical conditions and repairing collision-damaged vehicles — but hospital and collision shop managers do face many of the same issues:

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• Increasing cost of employees;

• Decreasing profit margins;

• Recurring education requirements;

• Insurance reimbursement policies.

To compete and adapt to a changing marketplace, service-related industries have developed new staffing strategies. But before proposing any new strategies for our industry, it’s important to explore how we arrived at our current dilemma.

The Mess We’re In
It wasn’t too long ago that a technician could establish a shop with little business knowledge other than knowing how to do the technical work. Labor hours represented the major portion of repair costs. Technicians, using their own tools, were hired with a compensation arrangement that simulated that of an independent contractor more so than an employee relationship.

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The payment system of yesteryear (commission or a percentage of labor) worked well for the shop, since little personnel management expertise was required. The more labor hours the technician produced, the more money that person and the business made. And the percentage of expenses related to equipment and administration were much lower than today’s. Frankly, the strategies used to make a profit were uncomplicated by today’s standards.

Entry-level apprentices received their training and shop skills primarily from vocational or trade schools. After graduation, the apprentice would also work for a commission, or percentage of labor, but for a lesser amount than an experienced technician received.

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The type of repair dispatched to the apprentice and his ability to get the work done significantly determined his income. And the extra time it took an apprentice to complete the repair wasn’t as critical to profitability as it is today. (As we said, labor hours dominated the total repair cost.) Therefore, those extra labor hours could be more easily absorbed. Even then, however, an entry-level technician didn’t have an easy transition, but if he worked hard and learned from his mistakes, he had a bright future.

Starting with the increased number of unibodied vehicles, replacement of damaged components has steadily risen, while repair of those components (and the corresponding labor cost) has declined. In essence, the collision business has changed from a labor-intensive industry to a parts-intensive industry. And the profit margin on replacement parts and their installation is far less than the profit on labor to repair those parts.

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Because of this, collision businesses have steadily been forced to increase their investment in administration and equipment, which has affected profitability. Shop owners reacted by reducing the percentage of labor paid to technicians. Increasing efficiency and production became the primary avenue for the technician and owner to maintain their standard of income.

Still, the more severe the damage, the higher the skill level required to fix the vehicle. And a more difficult repair also makes it more difficult for a skilled technician to achieve efficiency goals. It’s by repairing a proper mix of "light hits" and major damage jobs that a technician can attain the expected production and income level.

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The increased pressure on profitability and productivity also created added difficulty for a vocational school graduate to transition into the workplace. The skilled technician views an entry-level technician as competition for a vital portion of income, and the shop owner or manager is impatient when the less productive apprentice adversely affects efficiency and productivity levels — both of which are vital to economic and production demands. Yet, the entry-level technician expects a decent income to live on and to help recoup the investment in tools and tuition.

This catch-22 has resulted in fewer and fewer entry-level technicians remaining in the industry long enough to become highly skilled.

What’s the Solution?
Many managers have attempted to copy the procedures used in the various Youth Apprenticeship Programs ("school to work"), in which entry-level employees are paired with a skilled technician. Results of this "team" concept have been successful if:

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• The skilled technician sees a benefit either economically or professionally.

• The skilled technician possesses the management skills to work with the entry-level worker, or the collision organization will devote the resources necessary to develop those skills.

• The organization properly identifies and hires the entry-level person with the required skills.

Both members of the team repair the damage that corresponds to their respective skill levels. The journeyman collects a percentage of the labor produced by both workers — less an hourly wage paid to the apprentice, which may or may not be subsidized by the business.

Established, long-term methods of compensation to both skilled and unskilled workers must be addressed. As the replacement-to-repair ratio of damaged vehicles continues to increase faster than a raise in labor rates, total gross profit related to labor will continue to decrease. And eventually, collision repair organizations will be forced to switch to an hourly or monthly pay program with some type of production incentive bonus.

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Money is what people often "say" is the reason they change jobs, but studies in all industries show that income ranks No. 3 on the list of reasons why people leave. Reasons ranking ahead of compensation are:

• the employee thinks his hard work makes no impact and isn’t appreciated by the organization.

• the employee doesn’t see a future with the company.

Former collision business owners who’ve sold their businesses to consolidators point out that their barrier to achieving greater success was that they couldn’t "grow" their own employees at a fast enough rate. How can this "growth" be accomplished? The key ingredient to future growth and success in your organization is the creation of a career system.

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How do you create a career track for your technicians?

Using the metal shop as an example, we’ll define the following issues:
1. Repair categories.
2. Volume required to meet profit margin.

Establishing Repair Categories
The industry-accepted practice for identifying and defining repair categories is vague and inconsistent. If you ask most collision shop and insurance managers to name repair categories, the usual answer is light, medium and heavy hits. And the categories are defined by the total cost of repair or labor hours. But the make of vehicle has a drastic effect on the dollar amount of the repair bill. For example, there’s a tremendous price difference on fenders for a Porsche and a Pontiac.

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The type of replacement parts has an impact on the skill level required for repair, as well. For example, bolt-on assemblies, weld-on assemblies or a door skin replacement all require varying skill levels. Changing a bumper, a hood and a fender requires different expertise than replacing a quarter panel and a door skin.

The various types of repair play another major role in determining a properly defined repair category, such as:

— Metal repair of flat panels;
— Metal repair of curved panels and/or with body lines;
— Sheet-metal alignment;
— Structural repair;
— Mechanical repair.

To establish repair categories for your organization, base the description on the type of skill level required to complete the job, with the lowest category number assigned to the lowest skilled job. For example, begin by assigning two category levels to "light hit" jobs.

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Light Hits:
— Category 1 (jobs consisting of the following):
Removing and replacing of bolt-on parts.
Light body repair and feather edging of flat panels.
— Category 2 (jobs consisting of Category 1 and the following):
R&R or R&I of bolt-on assemblies.
Body repair of curved panels and/or with body lines.

Medium Hits:
— Category 3 (jobs consisting of Categories 1 & 2, plus the following):
Aligning sheet metal.
Replacing door skins.
Replacing radiator supports, quarter panels, rear body panels.
Advanced panel repair.

Heavy Hits:
— Category 4 (jobs consisting of Categories 1 through 3 plus the following):
Structural repair.
Replacing structural components.
R&R or R&I mechanical components.

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Refining the categories’ definitions will evolve over time. Many shops use only three categories, while others establish more than seven. Start with the supplied example and build your descriptions based on what makes the most sense for your organization. But remember, categories should remain simple. Everyone in the organization should be able to understand and identify the category of each vehicle your shop repairs.

By defining the types of repair — light, medium or heavy — and the categories for each, you create a platform to establish job descriptions for technicians performing each level of repair.

In theory, using the described categories to establish a career track is simple. The career track might specify that a team system of a skilled and an entry-level worker repair only Category 4 jobs. Once the entry-level technician meets the established skill level and employment time frame, he’s promoted to join the other Category 1 and 2 technicians. The next promotion step is to a Category 3 position, etc.

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Going back to the medical analogy, cardiologists are paid more than general practice physicians or interns. But if you’re not ready to convert to hourly or salary wages, you may have to pay the skilled technician repairing Category 4 vehicles more as a percentage than your current rate.

The Category 1, 2 and 3 technicians are paid on a tier system. The difficulty is making sure the combined payment percentage meets the labor gross profit goals of the organization.

Determining Category Volume
The next step is to determine how many vehicles of each category the shop repairs. Identifying the total body labor hours by category will also help establish a metal shop staffing model.

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If you have a management system, consult your vendor for the best available report to analyze your category information. Auditing your past files and creating a journal or computerized spread sheet is another proven method.

The more information you compile by category and technician, the less difficulty you’ll have in establishing how to properly staff and pay your metal shop employees in the future.

When you analyze your metal shop’s work by category, you’ll be able to schedule the best combination of work and the correct number of staff to repair the vehicles. This will enable your business to operate at full capacity using the necessary resources.

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Let the Heart Surgeons Operate
The severity of collision damage claims continues to increase, while the insurance claims frequency continues to decline. And with the increased focus on efficiency and improved cycle time, the balance of available work will shift to the most productive organizations.

What does this mean? The current U.S. collision market is a $25 billion industry, but 10,000 collision repair facilities — each generating $2.5 million in business — could virtually repair all of the vehicles. So what would the other 75 to 80 percent of the shops do? With no available work, most would go out of business.

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There’s little doubt that the U.S. collision repair industry has an over-abundant supply of shops, most of which employ technicians who perform repairs for every type of job that enters their doors. So, does the collision repair industry truly have a shortage of skilled technicians — like we’ve heard for years — or are our "heart surgeons" not efficiently utilized?

Writer Ron Kuehn is the Director of Business Development for Sherwin-Williams Automotive Finishes Corp. His e-mail address is ([email protected]).

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