What KPIs mean to your business

What KPIs mean to your business
Panel shop consultant, Alan Shotton, analyses the meaning behind one of the industry's favourite current buzz-words and makes an offer for group participation.
In some ways we have done the key performance indicators (KPI) thing to death. However there is still a lot of confusion as to what is actually a KPI. Let me define it. In general business terms, a KPI is a marker point used to measure the result of a specific toThe most important rule that applies to KPIs are that the items that go into each are the same as the sample (or benchmark). In other words, it is pointless measuring, say, labour gross profit in one business against an average if the next business is not supplying the correct information.
The most common and most useful KPI that relates to the collison repair industry is 'average repair cost' (ARC) Within the ARC are several other KPIs like average panel labour per job average refinish labour per job, average parts per job, average sublet and miscellaneous Ð remembering that we need to specify what is exactly is a miscellaneous sale.
Over the last few years we, at Boss Australia, have noted several key changes in the body repair industry. Currently the biggest is the increasing cost of labour versus production return. The new rules surrounding work providers and their changing measurement guidelines seem to be confusing.
At Boss, we are extremely focused on measurements of our industry and have measured several hundred body shops over several counties including the Middle East (United Arab Emirates), England, cotland and New Zealand. While the counties are different in culture, repair techniques, labour skills and costings, one thing that remains the same is that they all have to measure their business against a benchmark or key performance indicator.
It is good business practice to have a totally clear understanding of what your business should be producing each and every month. In fact, we have noted that businesses that measure their data for some time and then stop, feel almost out of control after a while because they have no guidance systems to allow them to make key critical changes in their business.
Every time a new technician is employed (or one leaves the business) the 'hours required' budget and therefore labour invoice value must change accordingly, either up or down. Remembering that the expenses of the business will virtually reamin the same, special thought needs to be considered regarding the actual amount of labour sales need to cover the business requirements after the technician head count is lowed.
All this is fine, but we must firstly establish a starting point.
While our industry is no different to any other in principle, it has its own set of KPIs.

At Boss we have chosen the following structured process to assist the industry. It is summed up by a coined word 'DMAIC'. It runs like this:
D: Define the key issues affecting the performance of the business
M: Measure the Key Performance Indicators
A: Analyse the KPIs and determine the real issues impacting the success of the business
I: Improve the processes to address the identified issues
C: Control the improvements by the implementation of recognized business processes

Here is an extended version of DMAIC

This involves a meeting with the principle owner base followed by key management and defining their particular issues and challenges surrounding the need for change in the business
This were we, as an independent, can measure the business from an unemotional, objective and confidential position.
This is the point were we will start to compare your data to the recognised industry averages; we measure them against the desired target of what the brand should be producing.
This is the hard part and is usually the point we see business struggle But remember, if it were easy everyone would be doing it. It's the old cliché: if nothing changes, nothing changes. This is the most important part of the DMAIC process.
Once the business is on the way to improvement, and the people understand the reasons surrounding the need for the change processes, we must have the mechanism in place to control the change. Too much change in a small period is not good for all concerned. This is where the KPI monitoring and control will take over.
It is all about setting KPIs at a realistic level that the business can achieve, and the people can understand. Yes, like any industry there are low, medium, high and best practice targets to achieve, but the base KPIs remain the same.
Another important point to remember is the training and coaching of the people. If they do not understand the KPIs set and the results they are to achieve it will more than likely fail. There is a lot of talk at the moment surrounding some of the new management computer programs on the market and the fact they all claim to make you more profit, but if the staff in the business are not open to making change to their behaviour and therefore being responsible for their own actions the program will not make more profit. If you give a software program to your staff without training them in the basic needs of the business,there is a better than average chance all you will have done is provided them with a tool to essentially measure what was already happening before anyway.
KPIs that should always be managed are:
(1) Paint gross margin
(2) Paint consumption per hour versus hourly allowance
(3) Consumable consumption per hour versus allowance
(4) Parts to labor mix
(5) Labor gross margin for both refinish and combined repair
(6) Labor gross margin minus material sales (this is a true labor gross margin return
(7) Repair days or cycle time
(8) Target hours per job in both refinish and combined repair
(9) Fixed expenses per job
(10) Average repair cost external (ARC) this is your average repair cost paid to you by your work provider.
(11) Gross Profit
(12) Net Profit

AN OFFER FROM BOSS
Boss Australia has developed a web site that allows the body shop owner to conduct measurement for all the KPIs listed above, plus several others.
As a special offer to all Australasian Paint & Panel readers Boss is offering a special trail period for the program. Along with this we are asking for an expression of interest for a benchmarking forum in conjunction with Australasian Paint & Panel. Boss Australia already has a benchmarking group called the 100 Club with a very professional membership base. The concept of the 100 Club is simple: to create a best practice group of bodyshops that are committed to measuring their business from a key performance indicator perspective. The philosophy of benchmarking within Boss Australia is to firstly set the scope or benchmarks for each participating business. The most important thing when benchmarking is to establish a fair and reasonable target to achieve for your business given the current challenges that are local to the businesses? needs. The best business to measure yourself against is your own.
For more information on this group please contact us at www.bossaustraliaservices.com.au or by calling Alan Shotton on 04120797066