is flat rate becoming a dinosaur?

with more and more revolution happening worldwide perhaps this grassroots unrest is seeping beyond just the newscasts. It would seem the oft dismissed chafing that a Service Manager hears from the ranks of technicians (especially when traffic slows down) is now moving beyond mere words to action. Our dealership has had no less than 3 technicians in the past month depart to other ventures all with the same victimology (flat rate will not allow them to feed their families). we have also had two potential candidates turn us down because of flat rate.

We have tried straight time for a short period with those three prior to their departure, but found the resulting drop in productivity to be financially unpalatable. however we are now finding the devil we did know to dance with less vigour than the message being spread- with warranty times continually being slashed, tightening budgets and higher expectations on fixed operations, the pressure i sbecoming hard to contain.

Has anyone had experience with any form of blended pay plans, or found a way to make straight time profitable without constant micro-managing? I have managed Service departments with both types of pay plans and found by far flat rate to be the best system to keep all three parties (customer, technician and dealership) in balance, but the trend (uprising) seems to be growing. thoughts?

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Permalink Reply by Joe O'Connell on March 16, 2011 at 9:35pm

I have managed in a flat rate, blended, and fixed rate shop. Flat rate's primary advantage is that it self-manages productivity with little or no actual managerial involvement: Darwinism takes over. I would guess that the technicians that you are losing are either younger techs that are unfamiliar with slow times, or lower performers. Both of these classes are more susceptible to the Darwin theory.

In my experience, the best pay plan is the one that is both fair to the employees and fair to the facility. Though I manage in a straight time shop now (which requires micromanagement), at my last flat rate shop, I installed a "safety net" for my high performers that aided in retention and overall morale. I guaranteed my top 30% of technicians a minimum number of hours per week to allow them to survive the slowest times in the shop. Their guarantee was substantially less than their normal productivity, and I set each tech's guarantee individually based on their performance in the prior year. It is critical to set the guarantee BELOW your tech's long-term comfort level for this to be effective, and in order to do this you have to truly know your techs...

The effect of this was two-fold. First and most obviously, it protected my top performing technicians from starvingly low paychecks. Second, and more importantly, it inspired many of my lower performing technicians to become part of the top 30 percent, and earn the right to share in that protection. Of course, it was a morale bust for some of the lower 70%. In my honest opinion, though, the techs that saw this as a negative were undesirables anyway.