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Track Your KPIs

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How much do the insurance companies you work with—DRP or not—like your collision repair shop? Do they prefer your shop to the competition?

In the past, it was the personal relationships between repairers and reps that earned an insurance company’s favor. Some of that holds true today, although it’s more likely this relationship is driven by a set of numbers. These are the standards by which repair shops are judged by insurers, but key performance indicators (KPI) are also touchstones which, carefully tended by shop owners, can lead to bigger profits and breakthrough proficiency.

Things like cycle time, customer-satisfaction indexing, ratio of repaired parts to replaced parts, repair costs per claim—these are KPIs that insurance companies commonly use to determine a shop’s DRP status and to compare shops with one another.

Steven Feltovich of Sherwin-Williams, who conducts training in lean principles and efficiency, compares KPIs to the gauges on a vehicle’s dashboard: meters that let you know what’s needed under the hood for the car’s components to run smoothly. It’s a good idea to keep your eye on them as you go, but there’s such a thing as too much, he adds.

“Now, we’ve become so inundated with them, and some managers can be driven by them,” says Feltovich. “But, like driving a car, if you study the gauges for too long and you don’t look out the windshield, the inevitable happens.”

Obscuring The View

With improved vehicle safety performance, tougher DUI laws, higher repair costs and the like driving a business decline in the collision repair industry, keeping up on the KPIs is considered imperative to a collision shop’s survival. But were shops looking at these numbers before the insurance industry regarded them so keenly?

Whether they were called KPIs or something else, in most cases, the shops were ahead of the insurance industry on this one. Feltovich recalled a program by 3M, the world-renowned innovations company in St. Paul, Minn., widely known as the ARMS course. An acronym for Auto Repair Management Systems, ARMS grew out of 3M’s recognition in the early- to mid-1980s that many body shop owners were talented technicians—masters of their craft—but didn’t know a thing about running a business.

Like driving a car, if you study the gauges for too long and you don’t look out the windshield, the inevitable happens.

“It brought an awareness to the industry that it was important not only to repair cars, learn how to work with the insurance companies and reach a high level of customer satisfaction, but to be profitable, too,” Feltovich says. “That was the beginning of the enlightenment of shops and performance enhancement.”

A second round of KPI progression came with the computer age, he adds, with a profusion of software to automate every system and to compute the numbers and require less effort to do it.

“That was the next evolution of awareness, and that allowed better analyzing of the numbers,” Feltovich says.

Evolution came with a price, however, and with body shop KPIs, it’s the danger of drowning in the sheer volume of information that technology can bring right to your laptop. Shop owners and managers today have to keep their perspective on these numbers and columns in check.

“It’s important to have a balanced business perspective,” Feltovich says. “We’re out of balance as an industry.” This is because countless facts and factors that drive business success these days simply don’t translate into an Excel spreadsheet.

Repairers can achieve overall high marks in many different ways. A shop may have low recycled-parts usage but high marks in other key categories.

“A dissatisfied customer doesn’t show up on a KPI report,” he says, or how that customer was handled and whether the business was recaptured. “Shop owners today have to balance operations with financial astuteness.”

Ever the efficiency expert, Feltovich says that fixation on the gauges can obscure the road ahead; despite the fact that what drives the KPIs is what’s happening on the shop floor. “Be aware of the gauges on the dashboard,” Feltovich advises. “But if you pay attention to the operational needs on the floor, the numbers take care of themselves.”

Balancing Act

Once you’ve found a balance between looking at the gauges of your business and watching the road ahead, it’s time to work on improving those numbers: What’s your paint-booth throughput per day? P&M costs per hour? Ratio of technicians to support staff? Sales per square foot? Sales per employee?

There are so many areas for concentration, it would seem there’s potential for “not seeing the forest for all the trees”—again, like the dashboard scenario Feltovich presents above. Besides discerning which ones are most vital to improving your business, you’ve got to figure out which ones carry the most weight for each of the insurance companies, which all seem to emphasize different aspects of the KPI spectrum.

State Farm Claims Consultant George Avery agrees with Feltovich, saying that while insurers value varying KPIs, and some even demand specific thresholds for their DRP repairers to meet, the company he represents prefers to look at the range as a whole.

“We probably look at some of the same KPI indicators that everybody does, but we understand that they all kind of interact,” Avery says.“ And we don’t feel comfortable demanding a certain percentage, because we don’t fix cars. What we’re looking at is comparing the repair facility across the board with the industry.”

Avery says that an over-simplified system of demanding specific KPI results from repairers isn’t in the best interests of State Farm’s customers.

“It makes it easier if we were to say we want a certain percentage in each column. But we don’t think we’re in a position to tell a repair facility what their recycled parts usage should be. How do we know that?” he says. “I can ask them to use it when it makes sense; I can tell the repairer how it compares to the industry; I can tell them how they compare to other Select Service repairers. But to put a number on it, we don’t think that’s in the best interests of repairers.”

Instead, repairers who do well when evaluated across-the-board bring the most benefit to State Farm’s customers.

Repairers can achieve overall high marks in many different ways. For example, a shop may have low recycled-parts usage but exceedingly high marks in other columns; another might have a fantastic relationship with a recycled parts dealer and get the best deals on great parts, but sports average numbers in the rest of the columns. This, too, could be considered a high-performing shop by the insurance industry.
As the complex relationship between insurers and repairers continues to evolve, so will KPIs and other benchmarks for success that each industry faces. As Feltovich emphasizes, it’s easy to become so focused on the numbers that we don’t see what’s happening on the shop floor. And while gauges on the dashboard aren’t the most important components to driving a car, you wouldn’t want to take a road trip without them.

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