NMEDA Pay for Performance Pilot Study-2012
Purposes • Pay for Performance (PFP) Pilot was launched in May 2012 to test this hypothesis: • “A Tech with targeted training and incentive pay tied to efficiency scores will outperform a Tech with out targeted training and incentives tied to efficiency scores.” • “And the net effect of the PFP hypothesis if proven true will be to add more revenue to the Dealer’s Service Department.”
Purposes • Therefore the purposes of this 2-phase project: • Phase 1: Test the above hypothesis via the PFP Pilot, and if true: • Phase 2: develop the NMEDA Certification Pilot to standardize targeted training associated with improved Tech efficiency scores and increased SD revenues
Current Situation • Hourly pay packages are typical for Service Department (SD) Techs in Mobility Equipment Industry • Because most SD Techs have little at stake in the business and are not always trained or held accountable for performance, many SD’s are supported by Sales and are not operating as profit centers • And since many Dealers neither invest in targeted SD Tech training, nor track / reward performance, there is high Tech turnover through transfers within and without the industry
Current Situation • So, Dealers are less likely to recruit new highly skilled Techs because there is no industry-wide standard certification pathway to reward and retain them • Therefore the need for Phase 1 to test the PFP hypothesis and Phase 2 NMEDA Certification to standardize technical competence and attract and retain the best possible talent for our members
Study Design & Background • Three NMEDA Member Dealers in US/Canada invited to participate in Phase 1 PFP Pilot in Jan.2012 • These Dealers were invited to intentionally represent various sized member operations: Small / local single site = Courtland Mobility (Burlington, Ontario) Medium /regional multi sites = Superior Van (Northern Indiana) Large /national multi-sites= MobilityWorks (US)
Study Design & Background • Project Team met Jan.-Apr.2012 to design Pilot and selected 7 products to be measured for Test Tech efficiency scores (with required trainings & incentives) against Control Tech efficiency scores (no training or incentives) • The 7 products selected to measure over 6 month pilot: MPD/SureGrip HC at 5.0 Std.hrs. Bruno Joey Lift at 4.0 Std.hrs. Bruno TAS Installation at 7.0 Std.hrs. DPA Braun lift and Interlock at 8.0 Std.hrs. Bruno Curbsider installation at 4.0 Std.hrs. Generic Inside Scooter Lift at 4.0 Std.hrs. SureGrip or other Left Foot Accelerator at 2.0 Std.hrs.
Study Design & Background • “Test Technicians” were given targeted training and Pay for Performance incentive bonuses based on improved efficiency scores during the 6-month Pilot • “Control Technicians” were paid hourly and given no PFP incentives or targeted training • Each Pilot Dealer devised a customized PFP plan for their Test Tech • Two of Three Pilot Dealers had both Test & Control Techs
Study Design & Background • Efficiency scores for Test and Control Techs were tracked monthly in a Pilot Scorecard spreadsheet • Efficiency definition used for the PFP Pilot: Efficiency = Billable Hours Produced (BHP) / Clock Hours Worked – Comebacks Example: If a Tech installs a Hand Control in 4.25 hours and creates 4 billable hours with no comebacks, he is 94.1% efficient for that job. (4.0/4.25-0.0 = .941) Efficiency scores were stored and compared against Manufacturer Standard Hours
Study Design & Background • The PFP Pilot was conducted from May-Oct.2012 at: Superior Van & Mobility, Northern Indiana, with Test Tech 1 (South Bend, IN) and Control Tech 1 (Fort Wayne, IN) Courtland Mobility, Burlington, Ontario, with Test Tech 2 and Control Tech 2 MobilityWorks, Jacksonville, Florida, with Control Tech 3
Phase 1- PFP Pilot Objectives: 1. To test and prove the PFP hypothesis 2. To measure potential revenue impact of PFP on a typical NMEDA Dealer Service Department 3. To compare Test and Control Tech performance levels during the Pilot 4. To confirm need for Phase 2- NMEDA Certification Pilot
Phase 2-NMEDA Certification Pilot Objectives: 1. Create a “standardized level of competency” for Technicians 2. Give Techs strong incentives to improve work performance and productivity 3. Attract best & brightest recruits to our industry 4. Increase Dealer SD BHP and efficiency scores through better trained NMEDA certified Technicians 5. Give Dealers control by linking NMEDA Certification ownership to Dealer (i.e., Tech loses Certification if leaves company)
Study Findings: “Apples to Apples” • Mike Murphy, Superior Van, selected “Test and Control 1” • Test 1 and Control 1 Techs shared similar skills, experience, knowledge in the industry • Because of these similarities, represented best “Apples to Apples” comparison • This pairing explored the question, “how will 2 very similar Techs perform given one has PFP and targeted training and the other doesn’t?”
“Apples to Apples - Results” • Test 1 efficiency improved 10.2% during the Pilot • Control 1 efficiency improved 3.2% during the Pilot • Let’s annualize Test 1’s efficiency improvement to see how it would impact a typical Service Department: Assume 40 hrs x 4 weeks/month = 160 available Billable Hrs./mo. Shop rate is $100 / hour So 160 available BH / month x 12 months = 1920 available BH/yr Net annualized impact of PFP to a small, one-Tech SD is about +$20,000 for one or +$40,000 if two Techs
“Apples to Apples - Annual Impact” Test Tech BH ava. Eff. Rate Annual Impact $178,752.00 Test 1-start 1920 93.1% $100.00 $198,336.00 Test 1-finish 1920 103.3% $100.00 Test 1- NET $19,584.00
Study Findings: “Apples to Oranges” • Tom Lancaster, Courtland Mobility, selected “Test and Control 2” • Test Tech 2 and Control Tech 2 did NOT share similar skills, experience, knowledge in the industry • Test Tech 2 was much younger and less experienced than Control Tech 2 • This pairing explored the question, “how will an inexperienced Tech perform with PFP incentives and targeted training against a much more experienced Tech who has no incentives or extra training?”
“Apples to Oranges” -Results • Test 2 efficiency was about 8% behind Control 2 at Pilot’s start • At Pilot’s end, Test 2 and Control 2 were nearly identical • Let’s annualize Test 2’s efficiency improvement to see how it would impact a typical Service Department: Assume 40 hrs x 4 weeks/month = 160 available Billable Hrs./mo. Shop rate is $100 / hour So 160 available BH / month x 12 months = 1920 available BH/yr Net annualized impact of PFP to a small, one-Tech SD is about +$5,000 for one or+$10,000 if two Techs
“Apples to Oranges” Annual Impact Test Tech BH ava. Eff. Rate Annual Impact Test 2-start 1920 97.9% $100.00 $187,968.00 Test 2-finish 1920 100.5% $100.00 $192,960.00 Test 2-NET $4,992.00
Study Findings: “Status Quo” • Ray Morton, MobilityWorks, selected “Control Tech 3” • No Test Tech available at this location • Control Tech 3 had no Pay for Performance incentives or targeted training • This case explored the question, “how will a Tech perform with no PFP incentives and targeted training in isolation?”
“Status Quo Results” • Control 3 efficiency declined -12.5% during the Pilot • Let’s annualize Control 3’s efficiency decline to see how it would impact a typical Service Department: Assume 40 hrs x 4 weeks/month = 160 available Billable Hrs./mo. Shop rate is $100 / hour So 160 available BH / month x 12 months = 1920 available BH/yr Net annualized impact of PFP to a small, one-Tech SD is about -$24,000 for one and -$48,000 if two Techs
“Status Quo” Annual Impact Control Tech BH ava. Eff. Rate Annual Impact Control 3-start 1920 107.7% $100.00 $206,784.00 Control 3-finish 1920 95.2% $100.00 $182,784.00 Control 3- NET -$24,000.00
Study Findings: “Multi - year PFP” • An Anonymous NMEDA Dealer agreed to supply recent 2012 PFP data from their SD for this report • The data compares just 4 months with PFP incentives compared to the previous 7 years with no PFP incentives or targeted training • This case explored the question, “how will an entire Service Department perform with PFP incentives and targeted training and complete top- down support?”
“Multi - year PFP Case Study Results” • This Service Department’s efficiency improved by 12.7% in just 4 months! • Let’s annualize this data to see how it would impact a typical Service Department: Assume 40 hrs x 4 weeks/month = 160 available Billable Hrs./mo. Shop rate is $100 / hour So 160 available BH / month x 12 months = 1920 available BH/yr Net annualized impact of PFP to a small, one-Tech SD is about +$25,000 for one and +$50,000 if two Techs!
“PFP Case Study” Annual Impact PFP SD Case Study BH ava. Eff. Rate Annual Impact 1920 x 2 Techs SD-previous 7 yrs. 60.6% $100.00 $232,704.00 SD- after 4 months 1920 x PFP (annualized) 2 Techs 73.3% $100.00 $281,472.00 Case Study-NET $48,768.00
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