In many dealerships, the technicians are hourly employees without any formal bonus incentive structure offered. I have heard the view expressed that “We pay technicians by the hour to do their job, so why should they get a bonus?” While I can understand that argument, I am convinced from experience that it negatively affects the bottom line. I have seen the impact that an effective bonus program has on both customer satisfaction and productivity. Focusing on technician activity that produces effective results and rewarding achievement of those results is a win-win for the technician, the customer and the company.
Everybody Works for Their Self Interest
When my previous employer hired me, my manager told me that he would like me to spend two days at each dealer I visited. He then reviewed the bonus structure that was in place. The bonus structure was based on the number of visits I made and the cost per visit. I told him that he was paying me to do one-day visits. I suggested modifying the bonus structure, but that was not acceptable. So I did one-day visits. This was not what he wanted, but it was what he paid me to do.
I am not aware of any dealership that pays sales people by the hour. There is a reason for that. Sales people are paid based on what they sell, which gives them a strong motivation to go out and sell to the best of their ability.
Technicians are no different. They will work to their compensation plan. If they are paid by the hour with no bonus structure, they will work their 40 hours, but they will have no motivation to work in the most profitable way for the company.
Move the Carrot and Reap the Benefits
I worked with a dealer principal who initially opposed the concept of paying a bonus to technicians. During our discussion, I asked how he felt when he paid a sales rep a big commission, and he said that he felt great. The reason was that he knew the sales rep had earned the company a large profit. I explained that with a proper technician bonus program, he would be paying bonuses to technicians that earned the company a large profit.
A couple of years into their technician bonus program, I was discussing how things were progressing with the service department. The service manager showed me that they’d doubled the copy volume per technician. This had saved them from having to hire ten more technicians. They gave very generous bonuses, but the savings in payroll paid for that and much more.
Constructing the Program
It is important that companies take the necessary time to determine which expectations have the greatest impact on their service parts, labor, and performance and business plan objectives. They must also clearly communicate these expectations. Without clearly defined and communicated objectives it is easy to confuse activity with results.
When constructing the bonus program consider clearly understood objectives that will improve the profitability of the dealership, and behaviors that affect productivity. Avoid including factors that might have a negative impact on these. The perfect bonus program would focus on the overall profitability of the technician. This is almost impossible to measure directly, so we need to look at other items. One other factor to consider is the ease of retrieving the data used to calculate bonuses.
Things to Include
The most important metric for profitability is copies between visits. It makes sense for this to be a main component of the bonus program. The challenge is accurately measuring this value. Most back office systems look at the information incorrectly.
Another factor in profitability is the correct use of parts. As we have discussed previously, we want the technician to put in the necessary parts. But we do not want the technicians using parts to troubleshoot problems. If parts usage is used to calculate bonuses, base the metric on individual models, because the parts cost varies by manufacturer and model.
There are also behaviors worth including. Some examples are: average arrival at first call, average completion time of last call, average documented hours per day, and car stock variance. All of these have some impact on profitability.
Things to Avoid
It is important to avoid including metrics that might be counterproductive, such as calls per day or parts cost per call. Also, avoid metrics that could result in technicians trying to cheat the system, such as net calls, or effective calls. Remember that you hired your technicians because they were intelligent.
It is worth considering how the bonus program affects the service department as a team. It is important to avoid discouraging teamwork. If the bonus program creates dissension in the department, the company will lose overall.
Other Factors
If the service department is large enough to have supervisors, base their bonuses on the performance of the team. This will motivate them to help their team get better. Base the service manager’s bonus on the department’s profitability and this will motivate him or her to focus on what is important.
Use a Big Carrot
One thing worth considering with a bonus program is the size of the bonus pool. Most individuals will vary their effort based on the size of the reward. They will work much harder for a large reward than for a small one.
The dealer mentioned earlier had technicians earning bonuses in excess of $500 dollars per month. The results he achieved show the value of a large potential bonus.
Measure the Results
Always measure the results of the changes you make. It does not matter if it is a bonus program or different criteria for technician performance, the only way to evaluate the effect of the change is to measure the results. Most initiatives require modification to achieve the maximum results. Making these changes too frequently can diminish the results. After implementing a program, give it time to achieve results. Changing behaviors, habits and the culture in a service department takes time.
Put your big carrot where you want the technicians to go. Remove any obstacle that hinder their ability to succeed, and be prepared to be amazed at what they can achieve.
