Performance Based Technician Compensation Really Works!

Have you ever stopped to consider what motivates Service Technicians to be productive and to perform the utmost quality service calls on a daily basis? If you have, all you need to do is follow the money! How a technician is compensated can heavily determine the quality of work performed by and for your company.

With increased competition between dealerships, more and more are turning to implementing a performance-based technician compensation program to increase profitability and keep a leg up on the competition. Technicians who have skin in the game make decisions like business owners, because it now affects their own wallets. They will also help the company perform better overall because again, it affects their personal income.

Q: What is the goal to implementing a performance- based technician compensation plan?

The goal behind implementing a compensation program is motivating technicians to change their behavior. The idea is to change the break/fix mentality to which most technicians are accustomed.

You want technicians to:

1.) Take ownership for their productivity in the field.

2.) Practice effective time management.

3.) Perform a quality service call at EVERY call.

4.) Make the right parts decisions.

There are two ways to achieve a change in behavior. The first is punishment or reprimanding technicians for poor performance in the form of a verbal/written warning or monetary deduction. This approach, however; has its disadvantages. It does not tell the technicians what to do, it just tells them what not to do, which also fosters negative emotional reactions. The second method is through positive reinforcement: Providing praise for good behavior in the form of recognition, reward, or monetary bonus. Implementing a performance-based compensation program and providing positive reinforcement is the key to motivating technicians to be more successful, which in turn makes your company more successful.

Q: How does a performance-based technician compensation program work?

Performance-based technician compensation offers technicians a benefit and reward based on how well a machine runs after a service call is performed. This incentive will motivate technicians to WANT to perform a quality call (every call) because they will in turn receive a financial benefit.

The way programs such as BEI Services Performance Based Technician Compensation are designed, pay technicians a small commission for each page generated by a device between service calls. This increases technician ownership of the equipment they service because once they perform a service call on a device, the pages produced until the next service call will be credited to that technician. However, they will only receive the commission if the device passes a pre-determined call back criteria. This means the device must run a certain number of days or produce a
certain number or pages before the next service call occurs. This will ensure more high quality service calls are completed by the technicians on a
daily basis.

Technicians are transformed into entrepreneurs, and can receive additional commission by doing more quality calls per day and making each machine work longer between calls. Essentially, they have control over their how much additional income they want to receive!

Q: Does parts usage play a role in the program?

Absolutely. A proven way to take control of your company’s parts expense is to hold technicians accountable for the parts decisions that they make. However, this must be done in a way that provides incentive to use the right parts when they are needed. We know that not using the necessary parts will cause machine performance to deteriorate. Conversely, there is also a point where excessive parts usage does nothing to improve performance.

Using these type of programs (such as BEI Services), techs receive a commission for every copy they manage. The program takes accumulated copies and weighs them against the parts used, to obtain a parts cost per copy. The technician’s parts cost per copy is then measured against a pre-determined goal for the volume of copies managed. If the technician is under the goal, a percentage of the savings is passed back to them, if they are over the goal, an equal percentage is removed from their total bonus.

Technicians are rewarded for making the right parts decisions and using the correct parts, no more, no less, substantially reducing parts cost.

Q: Is First Call Effectiveness (FCE) accounted for?

BEI Services defines First Call Effectiveness as the ability for the technician to fix a machine correctly the first time without incurring a call back (CB) or a hold for parts (HP) call. Low FCE percentages are usually indicative of lack of training, motivation, or a poorly managed car stock inventory. Identifying and targeting the root causes of low FCE percentages and fixing those issues are imperative to sustaining a profitable service operation.

This is why achieved FCE percentage has a direct impact on the percentage of bonus paid. For example, a technician that has 40% FCE will only earn 60% of their total bonus. A technician that has 70% FCE will earn an additional 105% of their bonus, a 5% increase. The higher the FCE percentage, the more bonus technicians will make.

First call effectiveness is relative to how many times that a customer is going to see the technician and is also relative to call load. One of the key components to understand is that call load equals response time because you have a certain number of technicians, and a certain volume of service calls. If you can decrease the call volume, response time will improve. Additionally, technicians will have greater opportunity to manage more pages and earn more money. [See FCE Matrix chart]

Q: What are typical results for the dealership after implementation?

Typical results include a reduction in parts usage of nearly 10% and an overall decrease in service cost of 20% or more. Additionally, overall call volume is reduced and as a result response time and customer satisfaction is improved. The secondary benefits are decreased turnover, better morale and the ability to attract the best technicians to your company.

The case studies below demonstrate how a performance-based compensation program can dramatically decrease service costs to dealers. In this first case (Copy Products Inc.) the dealer decreased service technicians by 4 techs, reduced monthly parts spend by more than $17,000 while increasing machine count by nearly 1,000 machines. In the second case study (Des Plains Office Equipment) they reduced 12 technicians; reduced monthly parts spend by more than $2000, while increasing machine count by nearly 2,000 devices. [See Figure 1 and Figure 2]

If you have been looking for a solution to turn Service Department performance around, performance-based technician compensation is the answer. Incentive is the key, and by rewarding technicians for increased productivity you will ensure quality service calls are completed,
manpower and parts spend requirements are reduced, and customer satisfaction is improved.

Figure 1 Copy Products Inc.

Figure 2 Des Plaines Office Equipment