Get Your Payroll Under Control
Let your managers manage
Larry Edwards, founder of Edwards and Associates Consulting, says body shops should aim for having a single support staffer for every three productive employees.
That rule of thumb, however, doesn’t apply to managers.
That’s because managers should be managing, he says, and not taking on support work such as writing estimates or placing parts orders. Managers sticking solely to leadership is more common in larger body shop chains and MSOs, he says.
“There’s no reason a small body shop can’t have that same kind of structure,” he says.
How your shop does business directly affects your payroll–wasted time leads to wasted money.
One way to waste time and profitability, Luehr says, is through something he calls “monkey management,” which manifests as the manager who is always busy, putting out fires all day, and doing other people’s work for them.
“When people grow a business they need to be able to hire people to do a job, train them well, and then get the hell out of the way and let them do their job,” he says, adding that clearly defined roles and repeatable processes support that goal.
Adopting the “Do It Once” mentality will also save on both direct and indirect costs. Luehr says one way to do so is getting away from estimates and into repair planning–ordering parts a single time and having a single delivery is more efficient than 10 supplements and returning parts.
“Those things will elevate your administrative expenses,” he says.
A strong repair planning process limits technicians’ interruptions during any given job, Edwards says, which has its own benefits.
“What a lot of managers don’t understand is that unless that technician is working on a vehicle, we aren’t making any money,” he says, adding that some technicians are productive just half the time they’re on the job, due to interruptions.
Though keeping technicians busy is vital, work that requires lots of administrative backup can also lead to higher payroll costs.
Some shops have too many DRPs, Luehr says, leading to administrative bloat.
He says shops will hire a dedicated employee to handle a single insurance company’s account, a situation that can lead to competing priorities in a shop’s front office, affecting which vehicles get repaired, and when.
Shops can be balanced in terms of administrative staffing, Edwards says, but still pay out too much in payroll because of overtime.
To avoid overtime pay, which is often double an employee’s regular hourly wage, Edwards recommends staggering shifts throughout the day, with some employees coming early and leaving early, while others start later and stay late.
“Employees don’t all have to march into the shop and march out together,” he says.
Not only does splitting up schedules reduce overtime hours, Edwards says, but it also reduces staffing redundancies and can improve employees’ quality of life through shorter shifts.
Shops can also improve their payroll situations by looking at who is doing what job.
“Highly skilled techs performing lower skilled work is a waste of money,” says Luehr, noting that only a small percentage of a typical repair job requires a highly skilled technician.
Moving toward a team of technicians and away from individual A-techs, he says, can improve a shop’s gross labor profits by 7 to 10 percent.
Luehr recommends employing techs of different skill levels and specialties with the end goal of your employees “learning together and growing like a pit crew.”
That’s not to say that body shops should hire just anyone.
“People hire the cheapest people they can get, which ends up costing them more,” Luehr says, pointing out shops will often hire inexpensive CSRs, make them their public face with little training, and wonder why the situation doesn’t work.
“Pay [employees] what they’re worth, treat them well, and they will always make you money,” he says.
“Find a person who has the right attitude, who wants to grow. If I can help them reach their career goals, they will help me reach mine as a business owner.”