Flat Rate Pay Can Influence Perception and Performance
By Tom Dwyer
One of the major differences between Tom Dwyer Automotive Services and many other auto repair businesses is the fact that we do not rely on Flat-Rate Compensation for our Technicians. It may not sound significant, but I think it is and I think you should know why. Good income is a critical part of a job, but it’s not the only component in a satisfying career.
Technician’s wages increased in the 80’s and 90’s as vehicles became much more technologically challenging. Technicians now needed more than basic electronics and mechanical knowledge; they needed to master the concepts of computer control for each manufacturer’s vehicle. The repair industry faced a workforce challenge; finding and maintaining the technicians required to take care of these techno-mobiles. How do new technicians move from the understanding of a lawnmower engine (the basics) to the level of ability to diagnose intermittent, no code, computer control drivability problems (a serious modern challenge)? The industry experienced a major downsizing as technicians unable to keep up with the rapidly changing vehicles dropped out. Goober doesn’t work at the fillin’ station anymore (no disrespect intended to Goober). Automotive technicians currently rank at the top of the charts for technically challenging careers; equipment, knowledge and synthesis intensive. Wages increased as the pool of skilled professionals dwindled. The vehicles became more expensive and packed with the latest electronic wizardry. There had been a serious shortage of technicians in general, and now especially of those that could quickly and accurately sort out the problems with these pre-OBD II (on board diagnostics first generation 1989 thru 1996) computer control nightmare cars. Shops performing technical repair still battle to keep the best of the best on board. “Unless all you do as a shop is basic maintenance, no real repair of any depth; then the skilled people that have the knowledge are required.”
When I say “technician” I’m referring to experienced professionals that perform multi-carline, broad range, mechanical and technical services. Professional technician’s expect and deserve good compensation for the demanding work they do. Technicians can be compensated in many ways; you will find hourly, salary, and commission based pay systems or combinations of them out there. “Flat-Rate” is a very common form of commission based compensation. I hate Flat-Rate! I don’t like the unintended consequences of Flat-Rate compensation. Production-based pay plays a part in the mindset of the Flat-Rate technician, affects the work being done and brings problems to the work environment.
Flat-Rate compensation has been around since before I started turning wrenches in 1975 and seemed to be the most common form of compensation. It is very common for auto dealerships, retail chain service providers, independent facilities and others to pay their technicians Flat-Rate compensation. The system is designed to compensate technicians for the completion of specific labor or technical operations, piece by piece, to build a paycheck. Normally the operations are coded alpha / numerically and there may be little or no description, just a code or category number. Each operation is tracked with the corresponding “book time” used for calculating technician compensation. The estimated times used to calculate Flat-Rate pay are listed in labor estimate data bases like Mitchell, AllData, and Chilton. It’s funny that the term “book time” is still used when the book has long faded away in favor of the computer data base estimates.
Flat Rate technicians are paid using labor guide time estimates not the physical time they’ve invested. Labor guide-driven pay systems may benefit the consumer by providing the data for good estimates and some potential price cap effect, but that’s not my point. My point is not based on the financial fairness of the system but the negative effects that Flat-Rate pay can have on the technician’s job perceptions, responsibilities and performance. Flat-Rate compensation can influence technician motivation, working speed, attention to detail, distractibility, and overall sense of responsibility to client and vehicle. Flat-Rate technicians are, after all, being paid to perform very specific labor operations; they are not being paid for sidetrack details. The Flat-Rate technician is paid for the completion of specific labor operations; PERIOD. The labor guide may dictate that a given alternator replacement requires 1.9 hours to perform. This time estimate will be used for technician wage calculation whether it actually takes the technician .9 hours or 2.9 hours; the mission is clear and the field of vision understandably shrinks. The quick completion of individual labor operations becomes a focus, potentially at some sacrifice for the broader concept of taking care of someone’s vehicle. Craftsmanship and attention to detail are not rewarded by Flat-Rate compensation. Exactly the opposite effect is reinforced; speed becomes the basis for reward. There are technicians that can work successfully while being paid Flat-Rate but they are the exception.
Flat-Rate pay issues are intensified in businesses with narrow areas of service coverage like tire and brake stores or chain store retailers where their specialization removes responsibility for complete vehicle care. They may not feel responsible to help the client make good, prioritized decisions based on the knowledge of the condition of the whole vehicle. When you work in a business that doesn’t do timing belt replacements, timing belts are not considered; they don’t factor into any decisions that are made for sales recommendations. Timing belts can be very expensive, extremely expensive when they fail; before a budget is blown on things that can wait it’s best to have the complete list needing consideration presented.
I have jokingly said before: “when you’re a left-side of the car, specialized car shop; you can hardly be responsible for any of those pesky right-side details and how they relate to the integrated function of the vehicle can you?” Same for a technician; when you‘re being paid on Flat-Rate to perform a brake job, understandably you are not going to take time, unpaid, for other work; you need to draw the line somewhere! It is not the Flat-Rate technician’s responsibility or concern that work is being performed on a vehicle that is economically totaled; the rolling illusion. (My term “the rolling illusion” describes the vehicle that is being driven despite its dilapidated and potentially unsafe state. The cost to perform a list of needed services and repairs outweighs the value of the vehicle.)
Flat rate makes sense to the numbers crunchers and has been used forever, it’s great for businesses; overhead and cost of labor floats with business demand level. You don’t pay a flat rate technician whilst he is idle. In fact you can have excess work force; the expense of having two flat rate technicians waiting for work to do is no more expensive for the business than one. When you’re “on Flat Rate” you ebb and flow with the business, “no turn no earn”. Sometimes there is more work than can be done and at other times you’re going home early. There can be slow periods during the year that last for weeks. Flat rate pay competition can cause problems with the staff getting along as well. Competition for the distribution of good paying work can become quite political. These unpredictable pay variables can make it pretty hard on good workers; not the way to keep your best people happy and performing for the long-term.
Good income is an important part of worker satisfaction, but wage is only part of the picture to motivate long term performance and insure a steady competent work force. Everyone prefers to do a good job in a logical context. A professional would not remain happy in an environment that does not provide true value to the client. There is nothing worse than being forced to go thru the motions of an inconsistent, needless or poorly done thing. When things are done right there is a sense of purpose and satisfaction, it’s not just about production; it’s about value, craftsmanship and using expertise to help others. It is critical and technicians enjoy being involved with a comprehensive process; keeping a trained eye on the vehicle, helping determine the sales recommendations and involvement with the records management. Participation in a meaningful process is more fulfilling than fixing something that breaks and just sending a vehicle back out the door till the next thing fails. Technicians not paid by Flat-Rate are more likely to take the time to perform better service.
I believe working in an environment with steady compensation, an honest mission statement and clear job description serves the client best and can help keep staff loyal and happy. Salary or hourly pay helps reinforce the perception that each (complete) vehicle is our responsibility. Thru Industry leading inspections, honest advice, precise estimates, professional guaranteed service, records management, assuming the responsibility for the complete vehicle and making sure the client understands what is needed; we deliver. It is our job to keep our clients informed; what and when it’s time to repair. It is also our job to tell a client when it is time to replace a vehicle and not to repair.
Would you prefer that your automotive service technician be compensated for how fast the work is done or for successful participation in a process with a deeper purpose than just profit?