Technician Incentive Plans

Benefits of a well designed plan

If you don’t have an effective Technician Incentive Plan in place you are missing out on one of the most powerful tools in your management arsenal to drive a high performance service department. Technician Incentive Plans, or TIPs for short, can be so powerful they can drive behavior far beyond what you might expect from an incentive plan.
And if you already have one, maybe it is time for a tune-up to make sure your TIP is driving the behavior you need to develop a profitable service department and accurately reflect your dealership’s current priorities and initiatives. Incentive plans have a shelf life and need to be kept fresh to remain effective. Just because it worked last year, or five years ago, doesn’t mean it will work this year or next.

Let’s take a look at some of the benefits of a well designed and executed TIP. First of all, and maybe the most important, is to reward your best technicians. Let’s face it, top technicians are in high demand and you can probably ill afford to lose one who already knows your product and your customers. Your TIP should reward top techs so that they will be “appreciated” and not be looking for jobs with your competition. If your TIP only does that one thing, it will probably be successful. But a good TIP will go far beyond that initiative.

One sign that we often see in a struggling service department is a high turnover of technicians. This affects the quality of work being performed and increases training costs and lowers technician efficiency. A good TIP will give techs a reason to stay, not just your top techs, but your mid-level techs as well. Retention will improve with an effective TIP.
When recruiting new technicians, a TIP can give you an edge that your competitors may not be able to offer. Highly qualified recruits, no matter what the experience level, are always impressed by and attracted to a company that offers an incentive for doing good work. And that is usually the type of new hire you want anyway.

For any service department to be profitable they must pay attention to and drive a high revenue recovery. That is they must be charging out a high percentage of their labor hours. A TIP can be a useful tool in driving a high revenue recovery. If an element of the TIP drives billable hours, you will find that non revenue hours will be minimized and thus your margins and profits will improve.

Another side benefit of a TIP is that it can provide an objective evaluation and measurement of your technicians. Too often when it comes time for a personnel review for techs we depend on subjective observations. Your Human Relations Manager will appreciate the objective nature of your technician review. A TIP, if consistently executed, will give you the data to evaluate technicians on the criteria that is being measured and monitored.

Training your technicians is absolutely vital in retaining techs and making sure that they are keeping up to date with the newest technology. If you don’t train them someone else might. Many TIPs make it easier to spot the areas that a particular technician might need more schooling. TIPs can provide the structure for evaluating the types of jobs that a technician usually does well at and the ones that he seems to struggle with. Those struggling areas need training and schooling and both the technician and department will reap the rewards if you invest in training for those areas. By determining your training needs based on known deficiencies you will be able to maximize the impact of your training dollars.

In short, TIP benefits are so numerous and potentially profitable that they should be considered by every management team. And a good TIP that is properly designed and consistently implemented will more than pay for itself, it will improve your service profitability. It should pay for itself many times over.

TIPs will promote Happier Technicians and Happier Technicians will result in Happier Customers. Happier Customers will drive service revenues and profits.

Elements of an effective plan

The most important element of any incentive program, especially one for technicians is to have 100% support and buy-in by all levels of dealership management, even at the very top. If there is any doubt about this support it is unlikely that the program will be long-lived and successful. There will definitely be times that the plan will be challenged and tested. It will be those times that this upper level support will ensure the TIP is kept intact and becomes an established program at your dealership.

Technician Incentive Plans can take the form and shape of virtually any element of the dealership that is important to management. They will promote and encourage any behavior you desire to focus on, or any combination of behaviors. What are your departmental weaknesses, your opportunities to improve? Is it Revenue Recovery? Gross Margin? Revenue? Training? Safety? Cleanliness? Teamwork and co-operation? Quality of work? An effective TIP can promote any of these and many more. But it won’t and shouldn’t do them all.

A TIP should be focused and not try to cover everything or it will not be effective. Pick no more than three areas to focus on; more will start to dilute the program. Keep people focused on these areas which will have the greatest impact. Remember, you can always change the program in the future to reflect other priorities as they become important.
No two TIPs are likely to be the same; they must reflect the differences and variations in each and every dealership. What works at one dealership may not be affective at all in another; in fact it could be counter-productive. And what works this year, may not be the right program next year. Personnel, management, the economy and goals all change on a regular basis.

Keep your TIP simple. If it is hard to understand, hard to explain or difficult to monitor, its chance of success is doubtful. If your mid level managers and technicians don’t have a full understanding and confident that it will be administered fairly and consistently it will not drive the behavior you desire. And if you have to run complicated programs or design spreadsheets that need massive input just to monitor your TIP, you are adding unnecessary burden to your staff. They probably are already busy and won’t see this as a benefit to them. By keeping it simple you have a greater chance of success. Try to use the existing data and programs from your business system if at all possible.

The execution of your TIP is critical to its eventual success. Fairness and consistency are a must. If a technician, in fact any employee, thinks that the data being collected is not accurate they will quickly loose interest in your program and the damage can be long lasting. Keep it as visible as you are comfortable with; open communication builds trust and confidence. You don’t want to take a chance that the results can be manipulated.
No matter how hard you try to design the program to be fair and drive good behavior there will be those who will try to “beat the system”. Consider the consequences of your TIP in advance. First of all try to anticipate these eventualities and keep them at a minimum. And secondly, be prepared to face them when they occur. Do not let the effectiveness of the whole program to be jeopardized by the few.

The best TIPs reward individuals, not groups. If you are trying to motivate and reward your best employees does it make sense to share the rewards with all equally. The argument can be made that a program can encourage team work, and if that is the goal, a portion of the reward can go to the group, but it should not be exclusive. A TIP should reward exceptional behavior and exceptional employees.

Some of the many areas you can measure and reward are: revenue recovery, re-do times, training levels, technician efficiency, customer satisfaction index, safety compliance and records, billable hours, response times, upsales and others as well. Just make sure the information you are gathering is easy to gather and is accurate.

If your business system does not support segmentation and your vendor does not support a standardized labor times, you might be able to get the necessary information from payroll and accounting to implement your TIP.

And when it is all working and you are having some successes make sure you celebrate them. Your TIP has achieved its goals and now it is time to enjoy it and be happy about the technicians who have achieved their goals. Share the good news.