Four rules that can help your shop get a better grasp on KPIs

Aug. 1, 2019
In place of simply treading the rough seas of information overload, shops struggling with transforming KPI data into business could benefit by taking a few steps back to rebuild their knowledge of their business numbers while taking in some training on how to use this knowledge effectively in the short and long term.

Imagine if repairers suddenly were asked to return to school to take an advanced calculus class. Those with a particular penchant for math would thrive. Most would struggle and need to return first to algebra and trigonometry before taking on the far more sophisticated concepts and functions associated with calculus.

What does this have to do with collision repair? It goes back to understanding foundational principles.

Consultant Riley Fondriest uses this metaphor to describe how shop owners are challenged with utilizing complex business metrics. “With so much already on their plates, shops can struggle to be on top of the latest business practices guiding the industry,” says Fondriest. “What you end up with is the industry where people running shops know the terminology but simply don’t process it in a way that contributes significantly to their businesses.”

(Photo courtesy of CCC) Seek expert help when managing your KPIs. Most paint vendors provide coursework and onsite training.

“This is especially true with understanding and using KPIs,” he adds. “[For many shops] it’s like going through the motions to solve an algebraic equation while having little concept of why the solution is important and how it can be applied in the real world.”

This is where a return to basics approach is necessary. In place of simply treading the rough seas of information overload, shops struggling with transforming KPI data into business could benefit by taking a few steps back to rebuild their knowledge of their business numbers while taking in some training on how to use this knowledge effectively in the short and long term.

Whether your shop could falls into this category or you could simply use a refresher on building business with KPIs, refer to the following four rules to help move your operation to the head of the class.

Rule 1: Always get help. There’s a wide chasm between knowing what your KPIs are and understanding both which KPIs to focus on first (which can be different for each shop) and how to improve them. A wide range of books, articles and other resources can help you identify KPIs and determine what your numbers are. What matters even more is figuring out how to use them to transform your operation—which is the key here since utilizing KPIs is a transformative process. To do this right, most (probably all) shops need expert help.

“This is difficult work. If remaking your business with your KPIs was easy, everyone already would have done it,” says Fondriest.

Shops fortunately have access to all kinds of help. For many, the first stop is with a paint vendor. Every paint manufacturer offers help (much of it on-site) to assist shops with determining and using KPIs. Contacting your local shop association also can turn up help, as does speaking with your colleagues.

“One of the best things you can do is have discussions with another shop who made this journey,” says Fondriest. “Bring them into your shop to talk with your employees. It really brings to life what using your KPIs can do for you, and it’s an important part of setting expectations.”

He adds, “You have someone who went through this process who can vouch for the outcome and give you a real-world idea of how a business can change.”

Competition can be red-hot in the collision repair market, but you’re not alone in finding ways to survive. Fondriest says even someone you might regard as a competitor could be willing to help since making your shop better creates a better repair market, which is good for everyone.

Rule 2: Get your entire shop on board. Speaking of not being alone, when you start training on KPIs, get everyone in your business involved. That means managers, techs, painters, assistants, detailers and even your administrative staff. While many KPIs may not touch an employee’s particular job area, Fondriest says it’s critical for everyone to understand (accept!) how these numbers measure and contribute to a business’s success.

Lee Hightower, manager of A&C Collision in St. Paul, Minn., vouches for this approach. When he started KPI coursework with his shop’s paint vendor in 2010 and sought to bring these lessons back to the shop, he received almost immediate opposition from ownership and staff alike. Hightower says that while many at his job understood how KPIs like average repair dollars and gross profit on parts and labor could be important, a significant portion of the staff balked at making operational changes because they couldn’t see any immediate financial benefits.

(Photo courtesy of Mayfield Collision Centers) Regular morning meetings are a great place to discuss KPIs with your entire staff. They can be a necessary part of using KPIs to transform your operation.

“Maybe half our guys in the paint department would use what I was trying to teach while the others wouldn’t,” he explains. “The results were mixed so the owner lost interest because he wasn’t seeing any real benefit.”

A year later, new ownership took over and made Hightower’s recommendations a mandate. The shop worked daily on measuring KPIs and discussing lessons they could take away from the numbers. Everyone attended some form of KPI training and took part in morning meeting discussions on what their KPIs indicated, especially where improvements produced lower costs and more revenue.

“It was like a light went on all at once,” says Hightower. The shop invested in monitors and whiteboards to display KPIs. It also set up competitions between staff, especially in the paint department, to determine who could show the most improvement in KPIs, with scores posted by employee lockers. Small cash prizes and gifts were presented to competition winners. Hightower says those payouts were small investments compared to the results of having an entire crew of employees all reinvigorated with the same focus.

Rule 3: Use realistic benchmarks. Pop quiz: What are arguably the most popular benchmarks used today? Hint: They’re pretty the same ones shops have been looking at for five years. 

  • Paint Hours per Repair Order – Over 10.0 for top performers
  • Booth Cycle Time – Less than 1.9 hours for top performers
  • Paint and Material Gross Profit Percentage - Over 40 percent, again, for top performers.

Fondriest says these numbers create serious hurdles for many shops since they simply may not be attainable. Not meeting them, he says, is no sign that a shop is failing.

“Every shop is unique. It does no good to assume that any shop, regardless of its market and factors such as the experience and talent of its crew and their ability to work together, can attain the same level as the top percentage of the industry that has access to the best innovators and best educated crews,” Fondriest declares.

“It’s like thinking your kid has failed in school because she got an A or B instead of straight A pluses.”

Fondriest says shops would be better off first setting more realistic benchmarks, ones that present them with significant goals but that are still reasonable. Shops can determine these by, again, working with a trainer or someone in the industry with a similar shop who worked through a similar situation.

Down the road, shops can set tougher benchmarks if they have the people power and resources to hit them without sacrificing the gains they’ve already made. Slow and steady really does win the race.

Rule four: Similarly focus on the KPIs that offer a shop the biggest gains. As with benchmarks, there are three main KPIs that shops typically are directed to when seeking operational gains:

  1. Paint and Material Gross Profit Percentage. Calculated by first dividing sales revenue of paint and materials by the cost of each to determine their profits and then dividing that number by sales to determine gross profit percent.
  1. Paint Hours per Repair Order. Calculated by adding applicable paint hours using only those repair orders with paint hours.
  1. Booth Cycle Time. Calculated by adding up cycle times in minutes and dividing by the number of cycles to reveal the average time.

While these three KPIs are useful, and shops certainly should track them, their value isn’t going to be the same for every shop. Again, every shop is unique. Focusing more on one or two or looking at still other KPIs could be more beneficial.

For example, booth cycle times could be good while gross profit percentage on paint and material could fall under 40 percent. In this case, spending time looking for the reasons behind the low profit percentages and finding ways to address them would help a shop much more than trying to lower booth times just a bit more.

The higher the throughput a shop has could make taking this course especially profitable (since significant revenue is being lost) as would extremely low profit percentages since this would indicate serious waste and training issues. Indeed, probing much further into some KPIs to turn up the source of lagging numbers likely will be necessary.

Whatever your shop does the main goal is improvement. “Fix what you can. If it puts more money in your pocket, it’s working,” says Fondriest. “There’s a science behind using your numbers effectively, but trial and error are going to be a part of it. It takes time and steady effort.”

It’s best done by leaders and staffs who are dedicated to managing their most important KPIs and who understand the commitment necessary to reset the direction of a business. Survive by making the most of what you have and then get a little bit better every day. All this starts with a basic foundation.

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