Part III: Key Performance Indicators
As we briefly mentioned in Part II of this blog series “The Importance of Systemizing Your Diesel Repair Shop – Part II”, system inputs, outputs, and costs comprise the Key Performance Indicators (KPIs) that need to be identified, analyzed and measured in order to determine the effectiveness of the systems that run your diesel repair shop.
A countless number of things can be measured in any given system, but most of those measurements will be irrelevant. Just like in a diesel engine, most systems only have a small amount of measurable KPIs that will give you the pulse of the system, or tell you if the system is running smoothly. These are the KPIs you should identify, and “Quantity”, “Quality”, “Timing”, and “Intangibles” is how you describe and measure them.
Key Performance Indicators (KPIs):
Quantity is the amount of something: How many technicians were working? How many hours did they work? How many parts were purchased? How many parts were installed? How many vehicles were serviced? How many days was the shop open? It can even be the numerical measure of length, weight, or temperature.
Quality defines excellence or consistency, or lack thereof: How well was the part made? How well was the part installed? How consistent was the service? Does the system meet your quality control standards? Quality is typically what your customer says it is.
Timing is the speed of the system, or “cycle time”. This is the time it takes to install one part, service one vehicle, process one customer, or make one sale.
Intangibles are the aspects of the system that can be observed and described, but not directly measured. They can include the attitude of your employees, the appearance of the repair shop, or even the weather. While intangibles can’t necessarily be quantified, they can be given a rating that you can use to make an objective observation regarding their impact on the system.
You need to view your systems as objectively as you can. Observe them dispassionately. Measure what you can and quantify what can reasonably be given a rating. This will give you the facts about your systems, as best you can determine them.
The point of Key Performance Indicators is objectivity. You need to remove yourself from wishful thinking, biases, or any attachment you have to “the way we’ve always done it.” You may not reach total objectivity, but KPIs will get you very close to it.
For example, maybe you have always used a particular diagnostic system because your repair technicians are familiar with it, and it seems to be very reliable. For those reasons, you haven’t considered changing brands or models. But if you took a step back and looked closely at its features, and then compared them to other brands, you might discover that another diagnostic system has features that would make your technicians more productive, get faster results, provide more data, and even diagnose more problems than your current system does. For a modest investment, a new diagnostic system would save time and pay for itself quickly by generating more revenue for your repair shop.
The best way to judge the effectiveness of a system after you have measured and analyzed the Key Performance Indicators, is to ask these questions regarding the system:
1. Did the system produce the desired result?
• Did it meet quality control standards?
• Did it meet the required profit margin?
2. Did the system make the best possible use of your resources?
• Did the most skilled technician perform the work?
• Was the proper equipment or technology utilized?
3. Are the inputs, outputs, and costs appropriate to the result?
• Was an adequate number of technicians or employees utilized?
• Was it completed on time?
• Was it completed under budget?
4. Is the system humane and satisfying for the people who operate it?
• Do the tasks involved match the employees training and skill level?
5. Is the system easy to understand, operate, and follow?
• Were any mistakes made?
• Did it take too long to complete?
• Is more training required to learn the system?
6. Is the system easy to monitor, track, and quantify?
• Were the most relevant Key Performance Indicators identified?
• Is the record keeping process out of date?
• Can new technology be utilized to input and track KPIs?
Evaluating your systems would be easy if you knew what the data should be. Unfortunately, you don’t have that advantage. Ultimately, the effectiveness of your repair shop systems is a matter of your perception of what works best in your business. In the end, it’s your understanding of your business and your market. Good judgment and common sense will tell you if your systems are what they should be. Systems evaluation is a tool to help you view your systems objectively, and gain the knowledge required to improve them.
Please visit our blog post weekly to learn more about how systems development and innovation can benefit your diesel repair shop.