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OK, I Raised My Labor Rate: Now What?! [THA 355]


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Raising labor rates is not just about increasing prices. It's about finding more value in the industry and positioning ourselves as professionals. Join our panel as they highlight the need for understanding the concept of effective labor rate, ensuring services are charged appropriately, viewing the business as a professional entity, providing a positive customer experience and addressing core business problems before raising labor rates. Our panelists encourage shop owners to take a comprehensive approach to their business strategy, considering all factors and not just focusing on raising labor rates. Aaron Woods, X-tra Mile Auto Care, Stillwater, OK. Institute for Automotive Business Excellence. Listen to Aaron’s previous episodes HERE Brent Fleischman, Yocum Automotive, Republic, MO. AutoFix Auto Shop Coaching. Listen to Brent's previous episodes HERE Jennifer Hulbert, Service Plus Automotive, Calcium, NY. Institute for Automotive Business Excellence. Listen to Jennifer's previous episodes HERE Show Notes:

  • Raising Labor Rates: Importance and Impact (00:00:01) Discussion on the reasons to raise labor rates, the impact it can have on a business, and the need for a long-term strategy.
  • Factors to Consider Besides Labor Rate (00:04:14) Exploration of other factors that contribute to a business's success, such as overall business strategy and addressing pain points.
  • Calculating Effective Labor Rate (00:07:34) Importance of understanding and calculating effective labor rate, including the need to charge appropriately for all services provided.
  • The mindset shift and the need to raise labor rates (00:08:33) Discussion on the importance of raising labor rates and positioning the industry as valuable and professional.
  • The impact of undervaluing the industry (00:09:52) The negative effects of undervaluing the automotive industry, including difficulty in attracting technicians and obtaining loans.
  • The bottom line and approaching the business as a business (00:12:10) The importance of considering the bottom line and treating the automotive business as a professional enterprise rather than a hobby.
  • The importance of customer experience (00:17:59) Discussion on how people buy feelings and the need to focus on providing a positive experience in the automotive industry.
  • Sharing new labor rates with the team (00:18:39) Importance of communicating labor rate changes to the team and how it helps maintain profit structure and make investments.
  • Effective labor rate and its impact (00:19:03) Exploration of effective labor rate, its calculation, and the need to consider menu jobs and their effect on gross profit dollars per hour.
  • The importance of personnel and procedural issues (00:27:40) Discussion on identifying whether the problem lies with personnel or procedural issues in a shop and the need to align the shop's mission and vision statements with its culture.
  • Addressing cultural issues and offering training (00:28:50) Exploration of the top-down approach in addressing cultural issues, identifying personalities, offering training, and monitoring staff to create long-term relationships with customers.
  • Considerations before raising labor rates (00:30:07) Importance of analyzing gross profit percentages, solving core problems, and focusing on profitability and core processes before considering raising labor rates.


Thanks to our Partners Shop-Ware and Delphi Technologies Shop-Ware: More Time. More Profit. Shop-Ware Shop Management https://getshopware.com/ Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. http://DelphiAftermarket.com Connect with the Podcast -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections Delphi-Call-to-action.png       ARN-Website-Banner-July-2022-1200x400-1.

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  • Have you checked out Joe's Latest Blog?

         3 comments
      Got your attention? Good. The truth is, there is no such thing as the perfect technician pay plan. There are countless ways to create any pay plan. I’ve heard all the claims and opinions, and to be honest, it’s getting a little frustrating. Claims that an hourly paid pay plan cannot motivate. That flat rate is the only way to truly get the most production from your technicians. And then there’s the hybrid performance-based pay plan that many claim is the best.
      At a recent industry event, a shop owner from the Midwest boasted about his flat-rate techs and insisted that this pay plan should be adopted by all shops across the country. When I informed him that in states like New York, you cannot pay flat-rate, he was shocked. “Then how do you motivate your techs” he asked me.
      I remember the day in 1986 when I hired the best technician who ever worked for me in my 41 years as an automotive shop owner. We’ll call him Hal. When Hal reviewed my pay plan for him, and the incentive bonus document, he stared at it for a minute, looked up, and said, “Joe, this looks good, but here’s what I want.” He then wrote on top of the document the weekly salary he wanted. It was a BIG number. He went on to say, “Joe, I need to take home a certain amount of money. I have a home, a wife, two kids, and my Harly Davidson. I will work hard and produce for you. I don’t need an incentive bonus to do my work.” And he did, for the next 30 years, until the day he retired.
      Everyone is entitled to their opinion. So, here’s mine. Money is a motivator, but not the only motivator, and not the best motivator either. We have all heard this scenario, “She quit ABC Auto Center, to get a job at XYZ Auto Repair, and she’s making less money now at XYZ!” We all know that people don’t leave companies, they leave the people they work for or work with.
      With all this said, I do believe that an incentive-based pay plan can work. However, I also believe that a technician must be paid a very good base wage that is commensurate with their ability, experience, and certifications. I also believe that in addition to money, there needs to be a great benefits package. But the icing on the cake in any pay plan is the culture, mission, and vision of the company, which takes strong leadership. And let’s not forget that motivation also comes from praise, recognition, respect, and when technicians know that their work matters.
      Rather than looking for that elusive perfect pay plan, sit down with your technician. Find out what motivates them. What their goals are. Why do they get out of bed in the morning? When you tie their goals with your goals, you will have one powerful pay plan.
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