We’ve broken down how you can achieve higher efficiency and start bringing in more cash. Read our guide below on how mechanics can use this measure to increase profits.
Part 1: What is efficiency?
Efficiency is a key performance indicator (KPI) that tells us how well our teams are working and performing their jobs. A high efficiency would indicate someone is very proficient in their role, and can complete their jobs in the charged-out time (or even better in less time⏱️). A low efficiency indicates that someone requires more training or there is another barrier to them completing a job in the expected timeframe.
How is efficiency measured?
Workshop efficiency is measured by a technician’s charged/sold hours (input) measured against the time spent on jobs (output), this is represented as a ratio or percentage.
The efficiency formula
Efficiency = (hours charged / chargeable hours clocked)*100.
The ideal ratio is 1:1, or 100%. This is when your tech is charging out every hour that is clocked against a job
Why is it important?
This KPI is used to monitor the performance of a team. Ideally, a tech should be charging out every hour they work on a job onto a customer.
If there is a gap, then you are paying for this gap. This may not seem much week to week, but over a year this could have an impact of a drop in thousands of dollars of revenue.
If there is an excess, then you may need to lower your time estimates on certain jobs.
What is “good” efficiency?
Each year we publish data with the NZ MTA from workshops around New Zealand. In 2020 the average workshop efficiency was 97.02%, which over a week is 43 hours and 40 minutes charged out (paid) compared to 45 hours clocked against jobs (worked). The upper standard deviation of the data sits at 114.32% and the lower at 79.72%.
Part 2: How to increase efficiency
Establish performance benchmarks and goals with your technicians
Leverage your teams competitive spirit and give them clear targets to work towards for efficiency. Next time someone asks for a payrise you can set a target for them to start achieving on a regular basis and set the expectation that they need to earn you more before they can earn more.
This is also an effective way to address poor performance with a technician. Rather than relying on a hunch that they’re not working well, you can present them with data that they’re not performing at the standard at which you expect (as outlined above).
We recommend starting out by tracking the efficiency on a job-by-job basis. Follow the steps below to work out the efficiency benchmarks on a job:
- Measure each technician’s efficiency on this specific job over a week
- Average these out to find the average for each tech
- Do the same to find the average for your team
- Enter the benchmark into your tracker spreadsheet
- Enter in stats for your team each month to track your teams progress
- Repeat for your common jobs