Every year, we collect and collate data on behalf of the MTA to provide industry benchmarking. The Auxo team contains individuals with significant industry experience, both on the tools and in service management. They understand that Productivity and Efficiency in a workshop are two measures intrinsically linked to a workshops success.
Understanding, measuring and analysing both of these KPI’s can bring significant improvements to your business. Our industry experienced staff and data analysts have curated this article collaboratively. We hope it offers you some new insights and food for thought on these key industry measurements.
Understanding the differences
Productivity is the main KPI for a workshop. It gauges profitability through the sale of available labour. It is one of the more easily calculated and understood KPIs. It is a matter of scale, but generally higher productivity % = greater profitability.
Productivity measures the percentage of ‘available’ time you are actually selling. It’s not just a measure of technician output but also a measure of successful marketing and the selling capability at the front counter.
For example, if a technician charges out 4hrs of work during an 8 hour shift, he is 50% productive (half of his worked hours were billed).
This output is less than ideal, however it may be impacted by factors outside the technician’s control. Locations affected by seasonally quiet periods, or workshops facing slow business due to ineffective marketing, uncompetitive pricing (whether or not this is a matter of customers’ perception) and various other factors, can all reduce the amount of work coming in the door.
Simply put, a technician cannot produce 8hrs of chargeable time if there is not 8hrs of chargeable work there to complete.
Of course, there are factors within the technician’s control. Some techs can spend too much time on non-chargeable work (inefficient work on internal tasks and idle time). Or, charged time can be written off or written down due to low efficiency.
Efficiency analyses how efficient (or skilled) a technician is while clocked into chargeable work. Efficiency is a valuable measure of a technician’s capability that they can be held accountable for and improve on. Skill, focus and work ethic are core values intrinsically linked with a technician’s efficiency.
There is a misguided idea that efficiency compares a technician’s output to manufacturers’ book times. But, book times are not always the same as the hours quoted or charged to the customer. So, this idea is not strictly true.
If the technician only clocked in 4 hours of time on chargeable work, but billed out 6 hours of work during this time, his ‘efficiency’ is a commendable, extraordinary, 150% (they billed out 150% of their 4 productive hours). This is possible by completing the work quickly. It’s done by working skillfully, having a sound understanding of the correct troubleshooting method, and applying the fix efficiently. It’s also done by multitasking concurrent work (e.g. draining oil on one vehicle while turning spanners on another).
It is possible for a tech to achieve 150% efficiency on jobs they hold specific expertise in (providing no unforeseen issues, e.g. something is seized). This, however, is not realistic on all jobs.
We see this with our MTA benchmarking analytics; generally efficiency is around the 90% mark and productivity around the 60% mark.
Measurement
A key difference between efficiency and productivity is the time/date ranges typically used when reporting on these. Productivity reporting is often useful over larger date ranges (a week or more) because looking at small periods can result in fluctuations so large that they make the report useless.
For example, if a four technician workshop has one technician away on annual leave and another is in a half day training session, productivity figures for the day in question are obviously going to look poor. No manager would make any permanent changes to the business because of this. This is why longer report periods generally give more meaningful results for productivity reporting.
Longer reporting periods improve productivity reporting, making it more accurate and useful. However, this is not the case for efficiency reports. When reporting on efficiency, it is usually more useful to look at SMALL periods – even focusing in to individual job level. Imagine looking for an identical job that all technicians have done a few times each and comparing their times – this might be VERY useful information to the knowledgeable service manager.
Productivity: A simplistic approach to measuring overall productivity can be extracting ‘total hours worked’, captured through payroll, and dividing this by labour sales figures from sales reports. To derive more meaningful results, you will need to elicit a few key figures; total hours clocked and total hours charged by all technicians.
Capturing and reporting on these figures will need a good service management system. It must track the availability and hours worked for each technician. It must also keep a link to each technician for all labor sales from the billing system.
When the figures are known, the calculation is simple;
Productivity % = Hours Charged / Hours Clocked x 100.
Example: Technician charged out 36hrs, but has worked 40hrs.
Hours Charged =36. Hours Clocked = 40.
36 / 40 x 100 = 90
In this example the technicians productivity is 90%.
Efficiency: Because we are potentially looking at small periods, absolute accuracy is needed. We need to adjust work in progress changes into the reports. Efficiency reporting depends on chargeable/sold time, so if the time hasn’t been invoiced and is still sitting on a job, we won’t be able to correctly calculate efficiency.
The most accurate means of dealing with this is to calculate the work in progress at the beginning and end of the date range in question (the difference between the two being the work in progress “change”) and factoring this WIP change into the calculations. \
For example if a technician works 40 hours but 30 hours of this is still in WIP (ie not yet invoiced), our technician has worked for 10 chargeable hours – if this 10 hours has resulted in 12 hours charged, he is 120% efficient in this period.
The 30 hours is completely ignored as it will turn up later (in the period in which it is invoiced and its efficiency can then be calculated along with any other chargeable time from that period. Often the final chargeable amount for this 30 hours (written up or down) won’t be known until the time of invoicing – adjusting for WIP removes this as a potential inaccuracy in the reports.
External factors that don’t interfere directly with the job at hand aren’t factored into efficiency figures. For example, if a technician works for one hour and produces two hours of chargeable time, he is 200% efficient. If the workshop has no more work and the technician is idle for the next three hours and then leaves work sick for the last half of the 8 hour day, they will be only 25% productive – having “sold” two hours of eight. Their efficiency, however, remains 200%. Efficiency calculations only measure their conversion of TIME SPENT ACTUALLY WORKING.
When you calculate efficiency, it’s important not to confuse it with productivity. Only the time allocated to a given job is used to compare against the chargeable time produced. Also, if management decides to change the chargeable time for any reason other than “what the job is really worth”, this should be IGNORED in the calculation.
For instance, the manager might give Client X a 10% Christmas discount. This reward acknowledges the client’s loyalty. Yet, it doesn’t reflect the workshop’s efficiency. So, it should not be included in the job’s efficiency calculations.
On the other hand, if the technician has taken 1.5 hours to do a job that is “worth” and can only be charged at 1 hour – this 0.5 hour write-off SHOULD reduce his efficiency.
Idle Time: You should be looking to achieve efficiency of high 90’s and productivity of mid/high 80’s. Clearly, higher tech efficiency should mean higher productivity. The problem is often external. Things like “are we booking enough work” or “what non-jobs are taking too much time.” Here, you should be looking to identify excess idle/unsold time and convert it to labour sales.
In order to analyse idle time, it is imperative to have the tools available to extract the required information. Outside of SAM & Orion, many workshop software systems do not provide this, or do not do it well.
There is a further KPI, “Available Recovery”, which measures the hours clocked onto jobs vs. hours available. This helps to quickly see the workload of the tech as it excludes time written up or down.
This video demonstrates the SAM Time Clocking system and touches on measuring and reporting on productivity:
Identifying & Executing Improvement
Productivity: To boost it, we focus on maximising Hours Sold. This means closing the gap between Hours Available and Hours Sold. If the Technicians only work faster, no more revenue will be generated; they simply complete their jobs in a faster time. Efficiency, will show an increase but you will not generate any more profit.
Using tools like Time Clocking can help sell more hours. This can boost productivity by supporting best practices that capture all worked time. Techs should remain “clocked in” to the job at hand until all activity is complete — job card completed and returned, work space tidied, vehicle off hoist and parked.
In some cases, a technician starting a job at 10:58 might be inclined to say the start time as 11. A digital time clock system would record the exact start time. It would recover the minutes lost at the start and end of each job. A Time Clock application can be set to automatically round up labour charges, rounding up to the nearest ‘unit’, generally in 6, 10, or 15 minute increments.
Peter Morton, of Herbert Morton Accountants, advises they see “30 minutes per day, per fulltime tech on the floor” in additional charged time when our time clocking systems are implemented. For a team of 5 technicians, this could mean an extra $50,000 income per annum*.
These steps combined help maximise labour sales. Peter Morton, of Herbert Morton Accountants, advises they see “30 minutes per day, per fulltime tech on the floor” in additional charged time when our time clocking systems are implemented. For a team of 5 technicians, this could mean an extra $50,000 income per annum*.
Efficiency: Efficiency rates can be an extremely useful service management tool, especially for comparing technicians with one another and identifying particular areas of strength and weakness among staff. For example, if a technician is very good at brake servicing, the service manager could assign them to this work whenever possible. Or, perhaps studying why this technician is so effective. Then, training or explaining this to other staff may be worth considering.
Armed with comparative efficiency rates, the service manager can make better decisions about work flow, and assign the most appropriate technician to each task. Identifying a star performer across specific service tasks may present an opportunity to facilitate cross training; utilising their relative expertise to cross train others in how they plan and execute their work to try raise overall efficiency across the team.
Efficiency is a useful management tool. It’s the only part of workshop labour that the employee can fully control and is thus responsible for. One qualification to this statement should be noted: efficiency depends on the quantity and types of training the technician receives. All labour reporting aspects are somewhat inter-dependent. Also, the relative efficiency rates of various technicians can be a very powerful and undeniable measure when it comes to salary/wage reviews, disciplinary action etc.
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