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The real cause of the technician shortage

I saw it argued recently that the long-building technician shortage is attributable, with no qualifications whatsoever, to technician pay,” David Rogers says

Why is the industry facing a technician shortage?

I saw it argued recently that the long-building technician shortage is attributable, with no qualifications whatsoever, to technician pay. If a master technician maxes out well south of six figures, the argument goes, they’re better off in a different industry.

If it was true that master techs had a hard ceiling well below $100,000, I’d agree! The best master techs are thoughtful, intelligent, hard-working men and women, and any industry would be lucky to have them. Their earning potential should absolutely be at or above that six-figure line.

And lest you think that’s all talk and no action, each and every one of the techs in my shop have earned over $100,000 each of the last two years.

But to be clear, our labor rate isn’t $200 per billed hour, because there is absolutely no way our market could bear it. Nor do I think many markets could. If you dramatically increased your labor rates to $200/hour, it would immediately and severely restrict your sales pipeline. This isn’t about your skills at advising and selling service. Even your most loyal customer will instinctively understand that they can get service that is almost as good as yours for a significantly lower cost from the shop down the street.

So how is it possible to maintain a high labor gross profit, a market-appropriate labor rate, and techs making above six figures?

Many people, unfortunately, believe that in order to win they have to take away from somebody else. I believe that running a sustainable business means that everyone has to win in every transaction.

Case in point: diagnostic time. We seem, as an industry, to be in one of two camps — those who think the shop bears the burden for diag time and should pay the tech without charging the customer, and then those who believe the tech should eat the diag time, since it creates the opportunity for more billed hours.

But running a successful business isn’t zero-sum. You don’t have to take from one to pay the other.

Shop management is a careful balance

I teach my clients to think of shop management as a triangle, where all three sides are equally balanced between customer, employee, and company. When all three sides are equally important and equally balanced, the triangle is one of the strongest structures you can build with. Taking away from one side makes it less stable, and causes the whole structure to collapse.

This isn’t just corporate management speak.

What I mean is: making the fight over diagnostic time about whether the shop owner or the tech should eat the cost ignores the sustainable solution that keeps all three sides equal.

A sustainable solution eliminates fear

The first step in the sustainable solution is to train service advisors to sell diagnostics as an open-ended, step-wise procedure. The only reason this debate about owners versus techs exists is because fear and lack of knowledge are controlling the transaction and therefore the discussion.

This isn’t about which side should win. The owner and tech shouldn’t be fighting each other, because neither side should have to lose anything.

When we balance all three sides of this triangle, the sustainable solution becomes clear.

First and foremost, in order to increase opportunities (financially and professionally) for technicians, shops must become drastically more efficient. If a shop is able to create an efficient work pipeline — less time needed to thoroughly inspect and writeup a vehicle; faster authorizations from the customer;  much less time needed to order and receive needed parts – then techs are able to bill more hours per day. This goes doubly so when employees are incentivized to be efficient.

This is easier than you might think, because our industry is largely riding on a 25-year-old infrastructure and ideas. We are still operating on business models that require us to maintain multiple subscriptions that don’t communicate with each other, building estimates and pricing parts in wildly inefficient ways. We have collectively accepted operating at a snail’s pace as “just how things are.”

Consider this shop, and their growth in billed hours over the past two years.

Pay plans had a noticeable impact on their hours billed per day, but when coupled with becoming more efficient — in this case, using Shop4D management system — the difference is dramatic.

To make the growth in that graphic more tangible, not only have the techs increased their take home pay by billing more hours (10 more hours billed per day), the shop has grown accordingly.

Ten more hours billed per day, with a shop labor rate of $99, means additional sales of about $1,980/day (studies show that most shops sell $1 in parts for every $1 in labor). $1,980/day is an additional $514,000 in sales this year. The shop and the tech benefit, without ever taking the management triangle out of alignment.

Here’s another example:

This shop increased their hours billed per day by 4.5. At a shop labor rate of $95, that means an increase in sales of over $220,000/year.

We are wildly inefficient as an industry, and both the shop and the technician feel the result.

In each of the examples above, by increasing their efficiency sustainably, the shop has created the additional sales and profitability that allow them to increase the pay for the technicians who are generating all of these additional hours.

(Did I mention that neither of those shops had to add a single employee to achieve either of these incredible results?)

I already mentioned it above, but the other big change has to be to our training. When we allow fear and lack of knowledge to drive the transaction, we can’t keep the management triangle in balance.

In the case of diag time, not knowing how to sell it to the customer leads to a line of thinking that the company and the techs have to battle each other, because whoever takes the most from the other wins.

But it shouldn’t be about the owner trying to get the tech to work for free, or about cutting profits for the shop. We should be working together to provide the best possible service for a customer who is happy to pay for it!

Training needs to be a continual process

The fact that Covid-19 has shut down the major training conferences shouldn’t have an impact on your shop and employees’ growth, because training should be a continual process, not something undergone a few times per year.

When we built Shop4D, we filled it with clear, short, concise podcasts to teach owners and advisors how to overcome the things that are preventing them from becoming incredibly efficient and confident: how to properly advise and sell, how to lead and support the team, how to execute and manage processes and procedures in a manner consistent with the most successful shops across North America.

Which is to say: training shouldn’t be a special occasion — it should be part of your culture and daily routine.

The shop triangle must be kept in balance

It might seem like focusing on efficiency and doing constant training are a long way away from the original discussion of labor rates and tech pay, but I’d argue that they’re all part of the same discussion, and that it all comes back to keeping that shop management triangle in balance.

Technicians deserve to be compensated for their hard work, investment in tools, and commitment to education. That’s leg one of the triangle.

Shops deserve to maintain an appropriate gross profit percentage and efficient production pipeline so that sales can grow over time. That’s leg two of the triangle

Keeping these two in balance shouldn’t come down to taking advantage of the customer. This leg needs to be equal with the other two.

Which means that the only way we can grow shops, grow technician pay, and create trusting, loyal relationships with our customers is to invest in the tools and education that make our shops more efficient, allow techs to bill more hours, educate customers to make good decisions for their vehicles, and transform the lives of everyone involved.

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David Rogers is president of Shop 4D, an integrated shop management solution that leverages artificial intelligence and machine learning for repairers, and he also operates a multi-award winning mechanical repair business, Keller Bros., in Denver. Rogers is also president of Automated Marketing Group, as well as Auto Profit Masters. He can be reached at Contact@Shop4D.com

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