Technician Incentive Plans Drive Performance - Management
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Technician Incentive Plans Drive Performance

CED Magazine, April 2007

Article Date: 04-01-2007
Copyright (C) 2007 Associated Equipment Distributors. All Rights Reserved.

A properly designed and executed technician incentive program will promote happier technicians; happier technicians will result in happier customers; happier customers will drive service revenues and profits.

A properly designed and executed technician incentive program will promote happier technicians; happier technicians will result in happier customers; happier customers will drive service revenues and profits.

If you have an effective technician incentive plan (TIP) in place, you’re using one of the most powerful tools in your management arsenal to drive a high-performance service department. If you don’t have one, it may be time to put a plan to work to drive the behavior you need to develop a more profitable service department and to accurately reflect your dealership’s priorities and initiatives.

If you have a plan in place, remember that incentive plans have a shelf life and need to be kept fresh to remain effective. Just because it worked last year, or five years ago, doesn’t mean it will work this year or next.

The Benefits
The most important benefits of a well designed and executed TIP is to reward your best technicians. Face it, top technicians are in high demand and you can probably ill afford to lose one who already knows your products and customers. Your TIP should reward top technicians so they feel appreciated and are not looking for jobs with your competition. If your TIP only does that one thing, it will probably be successful. But a good TIP does far more.

One thing we often see in a struggling service department is a high turnover of technicians. Turnover affects the quality of work performed, increases training costs and lowers technician efficiency. A good TIP will give technicians a reason to stay –not just your top technicians, but your mid-level technicians as well. Retention will improve with an effective TIP. 

When recruiting technicians, a TIP can give you an edge your competitors may not offer. Highly qualified recruits, no matter what the experience level, are always attracted to a company that offers an incentive for doing good work. And that’s probably the type of new hire you want.

For any service department to be profitable, they must pay attention to and drive a high revenue recovery. That is, they must be charging out a high percentage of their labor hours. A TIP can be a useful tool in driving a high revenue recovery. If an element of the TIP drives billable hours, you will find non-revenue hours are minimized, and margins and profits improve. 

A side benefit of a TIP is that it can provide an objective evaluation and measurement of your technicians. Too often when it comes time for a review for technicians we depend on subjective observations. A TIP, if consistently executed, will give you the data to evaluate technicians on the criteria that is being measured and monitored. 

Training technicians is absolutely vital to retaining technicians and making sure they keep up to date with the newest technology. If you don’t train them, someone else might.  

Many TIPs make it easier to spot areas in which a particular technician might need more training. TIPs can provide the structure for evaluating the types of jobs a technician does well and the ones he doesn’t. Both the technician and the department will reap the rewards if you invest in training in areas in which a technician is struggling.  

And, by determining your training needs based on known deficiencies, you will be able to maximize the impact of your training dollars. 

In short, TIP benefits are so numerous and potentially profitable, they should be considered by every management team. A properly designed and consistently implemented TIP will improve your service profitability and should pay for itself many times over.

Elements Of An Effective Plan
The most important element of any incentive program, especially one for technicians, is to have 100 percent support and buy-in from all levels of dealership management. If there’s any doubt about this support, it’s unlikely the program will be long-lived and successful. Upper level support will ensure the TIP is kept intact and becomes an established program at the dealership. 

TIPs can take the form of virtually any element of the dealership that is important to management. They promote and encourage any behavior you want to focus on. What are your departmental weaknesses? Revenue recovery? Gross margin? Revenue? Training? Safety? Cleanliness? Teamwork and co-operation? Quality? An effective TIP can promote any of these, as well as many others. But it will not and should not do them all.  

A TIP must be focused. Pick no more than three areas to focus on or you’ll dilute the program. Remember, you can always change the program in the future to reflect other priorities as they become important. 

No two TIPs are the same; they must reflect the differences and variations in each dealership. What works at one dealership may not be effective at another. And what works this year, may not be the right program next year. 

Keep your TIP simple. If it’s hard to understand, hard to explain or difficult to monitor, the chances of success are doubtful. If your mid-level managers and technicians don’t have a full understanding of the program and confidence that it will be administered fairly and consistently, it won’t drive the behavior you desire. And if you have to run complicated programs or design spreadsheets that need massive input to monitor your TIP, you’re adding unnecessary burden to your staff. 

By keeping it simple, you have a greater chance of success. Try to use the existing data and programs from your business system if at all possible. 

Execution of your TIP is critical to its success. Fairness and consistency are a must. If a technician, or any employee, thinks the data being collected is not accurate, they’ll quickly lose interest in your program and the damage can be long lasting. Keep it as visible as you’re comfortable with; open communication builds trust and confidence. You don’t want to take a chance that the results can be manipulated. 

No matter how hard you try to design the program to be fair and drive good behavior there will be those who will try to beat the system. Try to anticipate these eventualities and keep them at a minimum, and be prepared to face them when they occur. Do not let the effectiveness of the whole program be jeopardized by the few.  

The best TIPs reward individuals, not groups. If you’re trying to motivate and reward your best employees, don’t attempt to share the rewards with everyone equally. An argument can be made that a program can encourage teamwork, and if that’s the goal, a portion of the reward can go to the group, but it should always reward exceptional behavior and exceptional employees. 

Some of the many areas you can measure and reward are revenue recovery, re-do times, training levels, technician efficiency, customer satisfaction index, safety compliance and records, billable hours, response times, and up-sales. Just make sure the information you’re gathering is easy to access and accurate. If your business system doesn’t support segmentation and your vendor doesn’t support standardized labor times, you might be able to get the necessary information from payroll and accounting to implement a TIP. 

And when it’s all working and you’re having some success, make sure you celebrate. When your TIP has achieved its goals, it’s time to enjoy it and be happy about the technicians who have achieved their goals. Share the good news.

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Article Categories:  Workforce  »  Management