We measure the return on our assets -- our trucks, equipment, etc. -- because we want to know what our payback on the investment is. We try to predict what the return will be even before buying some equipment to see if we will be ahead financially in the long run. You know me, I measure the effectiveness of advertisements in the Yellow Pages. Anything I can measure, I can better manage and produce better results for the business.
Yet, when it comes to evaluating the performance of the people in our company, it becomes a more difficult challenge to determine what the payoff is from our employees.
Performance appraisal systems for office personnel have been available for years. Goal achievement and compensation are often tied together; good performance is rewarded and unsatisfactory performance is measured and action taken.
However, implementing a system to adequately measure performance and recognize specific, measurable accomplishments is not as easy for technicians. It would be ideal to have management information that included precise values for the performance of each technician -- values that you select.
All of us can list which technicians are good performers and which may need some assistance in producing more revenue and profit for the company. And our listing would be relatively accurate. Using a commission type of system for paying technicians in combination with a menu pricing system, we can better determine what they produce, from a job-selling perspective.
Other than commissions on jobs and sales produced, there are other aspects of a technician's performance that we don't always keep track of. Companies that use time and materials billing with hourly payroll charges have an even more difficult time assessing individual technicians' performances -- other than billable hours.
For the most part, we make subjective evaluations based on the data we have. Personal opinion may also enter into the performance measurement process, which, although not altogether bad, still doesn't provide a good assessment. A better approach would be to use an objective system that would provide concrete information.
Objective SystemHow can we get the kind of data we need to produce a fair and accurate system? First, we need to determine what kind of information would be valuable, not only to evaluate technicians but to run the business, too.
For example, a good starting point would be to record the number of sales calls made by a technician. This category is a good illustration of information that is important, but should not be the sole criteria for performance. Some technicians make fewer calls but produce more overall sales. So an objective system measures many facets of a technician's job.
Let's review the information, looking at several categories of data, so we can see how to assemble a bigger picture of a technician's performance.
Effectiveness Criteria -- Other criteria that would be important for any manager to know would include the data necessary to determine the overall effectiveness of a technician. Let's start with the number of calls, then expand the information gathered to include the number of diagnoses completed, the number of estimates given -- all which lead to a key value, the closing ratio.
Putting this bit of data in perspective, it's not the number of calls, the number of diagnoses completed or estimates given that produce profits for our company, it is the number of closed sales that give us significant input to determine how effective our technicians are at generating business.
By comparing the calls made, diagnoses completed, estimates given and closing ratios, we learn a great deal about any given technician. For instance, if the technician makes more calls than other technicians and conducts more diagnoses but does not close sales, we know that his weak spot lies in giving the estimate to the customer and closing the sale.
On the other hand, if we have a technician who closes a sale on almost all of his calls, but only averages one call per day, we can identify another problem.
Profitability -- Being effective is a part of any technician's job. Additionally, we need to consider profits generated for the business. It naturally follows effectiveness. Let's progress from the data we have so far from the "sales closed" category. If we simply log the size of each sale that a technician makes, then average the amounts over all the sales in a given period, we have an "average invoice" amount.
Obviously, between two or more effective producers with similar, high-closing ratios, the one with the highest average invoice is producing more business for the company.
Product/Services Mix -- There is another category we can measure that helps us determine the profitability of the sales of technicians. When we look at parts sales and the ratio of parts sales to services and the size of the jobs completed, we can add one more dimension to our assessment of performance. This breakout becomes more relevant to us when we examine our margins on parts and labor.
If a technician has a notably lower average parts sale for each job, it may be important to determine why the number is where it is. Of course it is the averages that are important, since it is difficult to ethically increase parts sales on a given job. Maybe the technician is overlooking easy add-on sales. Maybe he stays away from recommending jobs he is uncomfortable doing.
Knowing the reasons behind the data is important so you don't improperly assess a technician. However, if you don't have the data in the first place, it is impossible to attempt to correct weak areas and maximize the profits of your company.
Not every company owner or manager may choose the exact same performance to reward, but certainly the data available from an objective performance measurement system will permit managers to note any major deviations from the activities and the performance of technicians, as desired by mangers.
There is something about being aware of data that encourages us to take action to improve our profitability. Maybe you have never looked at average invoice amounts or number of calls; it is unlikely that you have reviewed closing ratios with your technicians. Now might be a good time to start acquiring and then applying this valuable information.
Using The Performance ReportFrom our Maio University training programs we have developed an easy-to-use form that helps you accumulate the data needed to make better decisions--and evaluate each technician's performance at the same time.
Simply fill in the blanks for each technician on a monthly basis. All the data comes to life with nothing more than basic arithmetic. For example, to get the closing ratio, just take the number of closed sales and divide by the total number of calls. To get the parts to sales ratio just divide the parts sales by the total sales.
One of the ratios we have relied upon in the past (remember, no one ratio is so important that it is used without some comparison to other data) that has been particularly valuable is the average invoice. By focusing our efforts on attempts to increase the average invoice -- by ethically encouraging technicians to look for all legitimate work that needs to be completed in the customer's home -- we increased company margins dramatically.
Keeping tabs on technicians' performance for the month will enable you to:
- Set target goals.
- Accurately determine your technicians performance.
- Provide incentives for improved performance.
- Train technicians weak in identified areas of performance.
- Reward excellent performers.