Determine an ROI for Training
Above all else, your job as a shop owner is to enable your employees to improve the sales in the front of the shop, and improve productivity in the back, says Steve Trapp, North American strategic accounts manager at Axalta Coating Systems. And what better way to achieve that than through proper training?
Of course continuous education is key for shop growth, Trapp says, but it also needs to be the right training. And the only way to extract some tangible results from training investments is to employ a system that tracks the return. Here, Trapp lays out exactly how to do just that.
First you want to ask yourself, What specific metric will this training improve? That’s really key—making sure you pick the training that improves the things you vetted ahead of time. That way you know if the training was really worth it.
You want the return to be tied to the employee’s main role at the shop:
- Marketing = increased traffic
- CSI = more repeats and larger referral volume
- Selling = higher closing ratios
- Parts = reduced cycle time and improved parts gross profit
- Production = reduced cycle time, increased productivity, and improved overall gross profit
- Technical training = reduced re-work and improved shop output
You’ll want to balance your goals, here, because there’s a relationship between your input and output. If you don’t sell more, you can’t produce more—and if you don’t produce more, you can’t keep selling more. So you have to commit across the board: I’m going to invest in training my guys, whether it be production, parts, technical or sales, and teach them how to fix cars faster and sell work better.
Knowing what you want to improve beforehand forces your employees to be reflective. A good initial sign that shows if the training was worth the time is to have your guys come back and teach everyone something new they picked up from the class that others can implement into the process.
Even if everybody knows how to do steering and suspension, what are the three to five things at steering and suspension training you picked up? It forces them to be reflective when they return.
This is where you’ll form goals with everyone. If you don’t set goals for people, they’re going to come back from training and just fall back into old routines. If it’s your service advisors and they went through sales training, implement a goal of raising closing ratios from 60 to 65 percent. For your paint team, maybe you want to try to get 10-12 hours through every booth cycle. For technicians, maybe you want to improve throughput by five hours.
Then, based on any changes implemented following training, you’ll want to track those metrics for the next year. All of it can be tracked easily by a management system. And if you don’t have one, just build a simple spreadsheet that tracks before and after.
Ideally with training, you’ll want to achieve 10 times the return within one year. But if you don’t track it, you’ll never know. Your formula for tracking training ROI will be:
The increased production or sales you attribute to training/The cost of training and any time or travel paid by shop= ROI
Then you have to factor in gross profit, which is where it gets a little more convoluted. If sales or production experiences an $X improvement, you only get 43 percent of that, because you’ve got to pay for parts and labor.
For input, which is sales, the return is found by taking the gross sales you’re going to increase, times the 43 percent gross profit, showing you’ll grow by X amount.
For any output dollars, take any improvements associated with training times the 43 percent, and then you say, Alright, that's how much more output I can get. Be sure to track any increases in metrics by increments, whether it be week or month—as long as you look at it by your annual costs.
If you ended up producing 5 more hours per week, you could break down the training ROI with a formula (see the breakout).