How Do Labor Times Work?

Recently, on Facebook, an old neighbor and friend of mine posted a comment discussing his frustration with a local dealership service center and the labor he was charged on the services provided.

His concern was that the labor charge represented more time than his vehicle was actually in the service center!  A potentially alarming situation for sure.

On Facebook he was quick to adjust his statement to reflect the fact that although he felt cheated in that instance he did actually feel that there are other service centers that don’t cheat their customers.  (Whew!)

It is an interesting topic though and one that I thought maybe an industry insider should explain further.  So, here goes:

“THE BOOK”.  It is common for consumers and auto service professionals alike to use the term “the book” or “book time” when discussing labor charges.  There are labor guides that we use in the industry to help us bid or estimate service.  There are multiple such guides though, and some that are dealership specific.  Porsche, for example, use the term “labor units” but intentionally don’t publish how much clock time a labor unit represents.  The thing to remember with “the book” is that it is only a guide.  The times that it suggests for services are derived by having a technician perform such tasks on a new vehicle in a lab environment.  This does make for a good starting point but as vehicles age it becomes less and less acurate.  On one hand as pattern-failures are discovered on vehicles the service industry usually responds with creative procedures or special tools to perform the repairs for those pattern-failures quicker.  On the other hand older vehicles become more brittle in nature and what was once easy to service becomes a much longer process due to rust or other aging characteristics.

Labor overlap:  A more service-driven shop (like Integrity First Automotive) is constantly looking for ways to save its clients money – one good way to do this is to perform related services at the same time.  The savings are in the labor overlap.  For example, when changing a waterpump its drive belt has to be removed – if that belt is worn it’s a great time to replace it since the labor is effectively free.

Complications:  Sometimes a task on a vehicle can take longer than book time due to complications.  Much of the time this is never billed back to the client but, occassionally, it is.  Performance modifications, for example, can add a lot of extra work to a service that would be easier on a non modified vehicle.

Ultimately the question becomes:  what to charge?

The process is exactly like having a remodeling project done (something we’re having done with a bathroom in our home right now):  The job is looked at, the client’s needs assessed, and then a bid is created.  Typically there is some discussion with the client to consider what is and isn’t optional and then a game-plan is agreed upon.  At Integrity First Automotive the rule of Win-Win dominates this process where, as Steven Covey describes it, we want “Win-Win or No-Deal”.  To further quote Covey “this is the only sustainable business relationship”.  Wise words.

Of course it goes without saying that once an agreement is made it has to be upheld.  Sometimes re-negotiations may be necessary due to unforseen complications but in our business this is unusual.  In fact in our business we make it standard practice to over-deliver on our commitments because we place a very high value on client-loyality and word of mouth reputation.  Additionally, like all good service providers, we strive to minimize any inconviences to our client during the service process, and we stand behind the work afterwards with an exceptional guarantee.

So far this is all pretty straightforward right?  So – what happens in the case where a job comes in under budget?  In the case of parts that were on the bid but not needed this saving is handed directly back to the client.  The parts weren’t used so the client is not charged for them – easy.  In the case of labor though, this isn’t as straight-forward.

Most of the time, in our shop, what appears to be a labor saving really isn’t.  We believe in teamwork and often have helpers lightening the load.  In fact, in many dealerships, there are formal team structures where senior technicians have junior understudies that work with them – this can create some great business efficencies when done well.

But still – should a team of two be billed the same as individuals?  Should the client receive some type of discount for a team or, perhaps, some type of surcharge? 

Teams aren’t the only way to add efficencies to productivity – tools and equipment play a large role as well.  I remember years ago when a new tool came on the market called HubTamer.  It was an amazing new tool that allowed technicians to replace wheel bearings (in certain situtaions) in approximately half the time it used to take!  I think the tool debuted with about an $800 price tag but, used enough, it would certainly pay for itself.  Today HubTamer is a common-place tool and “The Book” labor times reflect its advantages.  So what used to be a way to increase income for a technician has become the expected procedure.

If you think about it, this was probably the case with all tool inovations.  Snap-On invented the concept of removable sockets and ratchets (with sockets and extensions that you clipped together or “Snapped On”.)  I’m sure this represented a leap in service technician productivity and I’m sure Snap-On managed to sell their tools because of this productivity increase.

So what do we do about my friend’s problem with the dealership appearing to charge more time than his vehicle was in the service bay?  He feels he should have been given a discount on his bill to adjust for the labor difference.

If the service was simply easier to perform than expected then the rule of Win-Win still applies and the ‘winnings’ in this case need to be shared.  This is our policy at Integrity First Automotive.

But, in the case where some innovative new procedure or tool has been used to help that technician gain a productivity advantage, that saving doesn’t have to be shared.

Here’s why:  if there was no incentive for the technician and the industry in general to create these innovative tools and procedures they would not get created. 

Why buy a HubTamer, for example, if the technician is required to give the savings back to the client?  HubTamer and other tool innovations would never get created and ultimately the market would suffer for it.  “A rising tide lifts all boats”.

As an innovation ages or a shop gets better and better at something they have a competitive advantage at, they will probably start to share that saving with their clients.  Why?  To get more business.  Once the innovation is widespread it becomes necessary to share it with the client or the shop would no longer be competitive (since the shop’s competition is willing to share).  EG:  there is no labor savings anymore for using snap-together sockets.  But equally true:  there are new innovations on the market that do create labor savings for the technician.

And let’s not forget about the times when a technician takes longer to do a job than was bid to the client.  If the invoice should reflect the real labor no-matter-what how would any efficencies ever be created?

I’m no economist but this just feels to me like a free market doing what it’s supposed to.

At my home, with our bathroom remodeling, we have a top notch contractor who is clearly over-delivering on his commitments.  I would expect his staff are using various innovations in their trades to produce this exceptional service.  As long as we get what we paid for we’re happy.  If we get more than we paid for we’re even happier.

What matters is:  Win-Win.