Charging Techs for Materials Bills
Paint and body material waste can drive a manager crazy. Things often seem to be walking off or getting thrown in the trash. Putting an end to that costly wastefulness weighs as heavily on a good manager’s mind as it does the bottom line.
Many shop operators have implemented electronic and operational measures to monitor, control and oversee materials used. Those are good ways to keep an eye on things, but it still requires your time and effort. Wouldn’t it be nice if the problem just took care of itself? When techs take care of the problem, it basically does.
Two shops—Carl’s Collision Center Inc. in Dickson, Tenn., and Toyota of Irving in Irving, Texas—have implemented processes that put technicians in charge of paying their own materials bills.
“Technicians won’t care about the costs they generate for a business until they’re held accountable,” says Randy Phillips, co-owner of Carl’s Collision Center Inc. But they’ll pay close attention to everything they use once they’re paying for it.
when it’s their idea.”
—David Shirley, collision center director, Toyota of Irving
Phillips says this system reduces waste, upholds shop profit margins and takes the responsibility of policing materials off management’s shoulders. But implementing such a strategy requires managers to do a little coaching to explain its importance—and to get employees on board. With the help of a few leadership techniques, you’ll be able to empower your technicians to change their wasteful ways.
Financial Transparency, Personal Accountability
Phillips is the first to admit that material waste plagued his shop in the past. Barely used pieces of sandpaper and rolls of tape littered the shop floor. Several hundred dollars worth of materials were being wasted every week.
So Phillips implemented a whole new approach to the shop’s materials process. Now, technicians buy everything from bondo to grinding wheels. Every purchase is tracked and tabulated monthly, and technicians foot their own bill.
Sounds like a rip-off to the technicians, right? Given the opportunity to earn a financial bonus, they see it differently. Phillips’ system tracks the shop’s monthly gross materials sales and the number of labor hours technicians produce. When the numbers work out, technicians pocket bonuses that help them recoup their material costs and then some.
Phillips says that little bit of financial motivation, on both the front and back end, have done the trick of tracking waste. Technicians now use every square inch of sandpaper because they know the cost of a new one comes out of their own pocket. And the more the techs buy, the less their end-of-month bonus will be. Waste is now down 30 to 40 percent.
This approach forces technicians to think more clearly about what they’re doing, Phillips says. They’re taking the initiative to critically think about how to make every material last longer, Phillips says. “It’s a win-win situation. The technicians have a chance to earn a bonus and they’re saving the company money at the same time.”
Driving Home the Benefits
Phillips held regular employee meetings to discuss business finances. He highlighted how excessive material costs were biting into the company’s bottom line. He invested time in explaining to employees that it’s important to drive the highest gross profit margin possible in order to be more competitive as a business. He pointed out how that gives the business extra money for marketing, technician training and other business activities.
“Financial transparency is critical,” Phillips says. “That’s the only way to get employees to understand the financial side of the business, and how their work behaviors affect those numbers.”
Phillips says technicians became more willing to take on personal accountability with material costs once they saw how their daily habits directly affected the company.
The Employee’s Idea
David Shirley, collision center director at Toyota of Irving, runs a process similar to Phillips’, called the “Painter Purchase Program.”
Shirley’s lead painter purchases all materials needed in the paint shop out of his own account set up through the paint company. The painter covers everything from liquid purchases to booth costs—maintenance, filters and gas.
At the end of every month, Shirley keeps 50 percent of the gross material sales for the company. That ensures the shop always earns profit on materials, as it should, regardless of how wasteful the paint department was with materials. The other half of material sales is given to the painter to pay his costs.
Shirley says there is always enough cash left over to use as a bonus, which the painter splits equally among the department’s seven technicians. That monthly bonus averages about $3,000, but has been as high as $5,000.
Shirley says he’s able to pay paint technicians a lower than average hourly rate since they’re actually earning profit on material sales. The going labor rate in Shirley’s market is $16 an hour—he only pays $12.50 an hour. That saves the company about $109,000 a year in labor costs.
“This system has killed multiple birds with one stone,” Shirley says. “I don’t have to manage inventory, the company earns 50 percent gross profit on materials every time and we save money on labor.”
Shirley’s new painter-pay strategy was a complete change from how his paint department was accustomed to operating. He says change is the hardest thing for employees to adapt to, so shop leaders have to be strategic with how new ideas are implemented to get employees on board.
Shirley had the idea for his program for a long time, but knew his painter would only agree to it if he felt it was his idea.
“People are much more willing to try new things when it’s their idea,” Shirley says.
Shirley held a number of brainstorming sessions with his painter. Shirley kept hinting at different ways paint technicians could make more money while relieving shop management from overseeing material usage. The painter eventually approached Shirley with the idea of the new program. Instead of just telling employees “this is how it’s going to be,” Shirley says management needs to train employees on business values. Eventually, they will come up with ideas on how to match their work behaviors with the business culture.
Coach Them Up
Employees might be a little apprehensive at first if you’re considering making them financially responsible for materials they use.
Naturally, your employees will likely ask “why?” There are a few more coaching techniques to put in play that will help you answer that question, and explain how technician habits affect business growth.
Bill Park, spokesman for consulting firm mpowerU, says it’s important for shop operators to repetitively communicate and manage business objectives to employees every day. Shop improvements can be made with some really fundamental tactics, but management must play an active role:
• Give visual demonstrations. Park suggests putting all of the materials that get used in the shop during the week in a garbage can. Dump it out on the floor at the end of the week. Look at the huge pile of waste, and have technicians identify whether any of that stuff could have been used longer or more effectively. It’s a visual way to highlight the materials—and money—regularly wasted.
• Talk openly about technician performance. Talk about how much money each individual technician spent in materials at the end of every month, Shirley says. Have an open, public discussion with your entire staff. No technician wants to be singled out as the one who used the most. That will cause them to pay much closer attention to what they use, and what the costs are for each item.
• Challenge technicians to do more with less. Teach people that it’s OK to buy whatever materials they need to get a job done, Park says. The problem is that technicians often think they need more materials for each job than they actually do. So management needs to teach how to do more work with less material.
You have to challenge employees to do this, Park says. For example, ask technicians how many pieces of sandpaper they typically use on a job. If they say four, ask them to use three. If they say three, ask them to use two. Technicians are able to meet that challenge most of the time; you just have to persuade them to try.
Free Your Time
Technicians won’t care about their material usage if there aren’t any processes in place to hold them accountable, Park says. If there are no reasons to be conservative, they won’t be. But employees will change their habits once they see the effect their costs have on the business.
That’s exactly why Shirley implemented the “Painter Purchase Program.” Now, instead of poor work habits negatively affecting the business, it affects the technicians’ personal pocketbooks instead. “They’re the ones using the materials, so they should be responsible for the costs,” he says.
And that’s taken a huge load off Shirley’s shoulders as a manager. He says there have been months when the paint department wasn’t careful with materials, and only earned $1,000 in bonus money to split amongst the entire department. That caused the department to refocus internally, assess their processes, strategize improvements and eliminate poor habits on their own—without Shirley having to intervene at all.
Shirley doesn’t have to waste energy anymore worrying about materials in the paint department.
“It’s no sweat off me when I see materials on the floor; I know the business will maintain profits,” he says. “That frees up my time to focus on other things without having to monitor daily material issues.