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Are Your Using a Labor Matrix?

Joe Marconi
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Transmission Repair Experienced

Transmission Repair

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50 minutes ago, Joe Marconi said:

I am hearing more and more about shops using a Labor Matrix to increase labor profit. 

I have been a long time proponent and have used different labor tiers. For example, we worked on passenger vehicles and heavy trucks. The labor rate was higher for an F500 Dump Truck than it was for a Honda Civic.

The labor matrix is a different, it allows your business system to factor in more hours for either longer jobs, vehicles over 20 years old, or any other criteria you decide. For example, if the labor for a job is 8 hours, that job may be billed with an additional 10%, making the job 8.8 hours, not 8.

I would like to hear from shop owners using this strategy and tell about the impact on their labor profit. 

 

We used a labor matrix as a "filter" to filter out jobs we either didn't like, took more time, or were a higher risk as far as warranties go.  We were a transmission shop.  Regular plain vanilla jobs received the lowest labor matrix.  The next step above that were European vehicles.  Above that were highly modified/chipped vehicles.  Above that were older, worn-out vehicles, typically vehicles older than 20 years old and pre-OBDII.

Our invoices didn't show the number of hours or the hourly rate.  It would show only the dollar amount of labor to keep customers from complaining or comparing our shop labor to other shops' labor.  For the most part, it was a successful method.  We all get jobs that go hay-wire somewhere during the repair and I wished I would have billed more hours, but that's just the way it goes.  Win some; lose some, I would say.

I loved writing estimates and I tried to keep it that way for our counter people by giving incentives for well-written estimates.  Generally speaking, the more text an estimate has, the higher perceived value the estimate has in the mind of the consumer.  We rarely under-bid jobs.  Estimates were also rare to be only 1 page.  2 to 3 pages was the norm.  Well-written estimates ensured a successful shop operation.  Most of our competitors would write what I called "1-liners" for estimates and lump everything together, labor, parts and all, into one lump sum.  Pitiful, I'd say.  Invariably, they were the lowest bidders of the neighborhood.

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  • 3 weeks later...
southendautocare Rookie

southendautocare

Posted
Posted

We have about 8 different labor matrix's.  We are more and more introducing previously unthinkable labor rates, mixed with little to no parts mark up (that's our "matrix!") . Sometimes we charge a little below our cost on parts, and adjust the labor rate accordingly!  We arrive at the same profit dollars per job, and it is more of a challenge. We do this mainly to avoid the parts "mark up" challenge with extended warranties, as well as customers.  I think a more important number than "gross profit" for the job, is having a gross dollar profit goal per technician hour spent on job.  Hard to achieve on oil changes, and certain jobs, but can make a drastic improvement in bottom line on "no or few parts" jobs, long diagnostic jobs, etc.  Hardest challenge is changing the thinking with service advisors to implement this.  Change is usually hard, but can help alot. 

 

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southendautocare Rookie

southendautocare

Posted
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Been using it 2-3 years, most commonly on jobs we know might be challenge with the owner or insurance company. Many don't come in as a result of the quote. The ones that do, approximately 50% more gross profit dollars on those jobs. 

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Gary Childs Explorer

Gary Childs

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Posted

Yes we use a strong labor matrix manly being in a salt belt state the labor guides do not compensate for the rust problems around here. Times should not be the same in per say Arizona versa upstate NY. Many techs I know when I lived in Arizona would quite on the spot then work on a upstate NY car or truck. They would run away screaming. :) 

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Transmission Repair Experienced

Transmission Repair

Posted
Posted
1 hour ago, Gary Childs said:

Yes we use a strong labor matrix manly being in a salt belt state the labor guides do not compensate for the rust problems around here. Times should not be the same in per say Arizona versa upstate NY. Many techs I know when I lived in Arizona would quite on the spot then work on a upstate NY car or truck. They would run away screaming. :) 

Being near Salt Lake City, they use salt on the road quite liberally because salt is so abundant, local, and cheap.  We are in the affluent suburb of Draper, Utah and never see the rust bucket vehicles of other lower income areas.  We were a transmission shop and worked predominantly on 10-year-old and newer vehicles that hardly ever had any rust.  However, I once worked for a shop in a lower income area and we saw quite a few older, rust bucket vehicles.  Change your demographics and you'll change the types of vehicles you work on.

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      The Technician Shortage Is Our Fault, And It's Time We Own It
      By Joe Marconi in Joe's Blog
         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.

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