We have to talk about how to calculate Technician Efficiency, and some would argue you should also know how to calculate Proficiency. I disagree. A lot of consultants like to emphasize the importance of Proficiency as the Key Performance Indicator (KPI) for the Technicians in your Service department. Don’t listen to them. They will tell you that Proficiency is the most accurate measurement of a Technician’s time, but the truth is that there are several ways to measure your technicians’ performance, and proficiency is probably one of the least valuable and least relevant.
Proficiency is definitely not a measurement that I’ve ever seen improve the bottom line, and at the end of the day KPI’s exist to shed a light on how much the people on your team are actually contributing to the bottom line of your dealership or independent shop. If it doesn’t help you learn that, then it doesn’t help. To figure out how much a Technician is contributing to your bottom line, you’re going to want to focus on Technician Efficiency as your Key Performance Indicator, not their Proficiency. Let me tell you why.
Another part of understanding technician efficiency is understanding HOW TO CALCULATE EFFECTIVE LABOR RATE.
Efficiency is how many hours the Technicians flag vs. how many labor hours are sold. So, if they’re working an 8 hour day and they flagged 8 hours, that’s 100% efficiency. If they work an eight hour day and they flagged 16 hours, that’s 200%. 24 hours, 300%. 30 hours, 375%. You get the idea. So here is what the calculation would look like:
Hours Flagged
÷
Labor Hours Sold
Proficiency, on the other hand, is a formula of how long a Technician is clocked on a repair order, which means… nothing. If you flag 200% Efficiency, I couldn’t care less about Proficiency! If you bonus on Proficiency, but your Efficiency is low, you’re losing money! So the thing I would like you to do is just focus on Efficiency, and forget about Proficiency.
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Related Blog/Podcasts:
How to Calculate Hours Per RO | Repair Order (HPRO)
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