What is Hours per Repair Order, and why is it important?
This is one that Service Advisors and Managers get beat up on all the time– and rightly so. It’s kind of confusing. Hours per Repair Order, also abbreviated as Hours per RO, HPRO, or H/RO, is the average amount of time your Service Advisors and Technicians spend on a single Repair Order (RO). It is one of the Key Performance Indicators (KPIs) of your Service department, and it impacts every other metric in your shop… most importantly, profitability. So, how do you calculate Hours per Repair Order?
How do you calculate Hours per RO?
If you ask a Service Advisor or Manager for the formula they use to calculate Hours per RO, they’ll respond with something about hours… and I’m just going to stop there, because calculating Hours per RO has nothing to do with hours! Hours are a piece of the calculation, but a very small piece.
The real formula for Hours Per RO is as follows:
Labor Sales ÷ RO Count
Effective Labor Rate
That’s Labor Sales divided by your RO Count, and then you divide the result by your Effective Labor Rate. So, if you had $20,000 in Labor Sales, 20 Repair Orders, and your Effective Labor Rate was $100, it would look like this:
Your Hours per RO would equal 1.
Why do we calculate HPRO this way?
Most shops calculate Hours per RO by pulling their billed hours from their management program, and dividing that number by their RO Count. By calculating this way, you’re leaving out the most important part of the measurement– profitability. You will achieve a much more accurate reflection of your department’s profitability by including the Effective Labor Rate in the calculation.
Where can I learn more information like this?
This calculation was originally featured on our Service Drive Revolution podcast, and you can watch the full episode here. We pack every episode of Service Drive Revolution with tons of valuable information just like this, so make sure to subscribe today on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts!
If you’re in need of Service Advisor training or Service Manager training, or professional coaching for your Service Drive, you can learn more about Chris Collins Inc. by browsing our products and services. Our motto is: “Training isn’t something that we did, training is something that we do!”