Out of the Crisis.Org

[Louis Altazan]

Many times I have spoken with business owners who are clearly not doing well. When asked about efficiency they normally quote some figure around or above 100%. When I ask where that figure comes from, I normally get a blank stare. Then some foolishness about dividing book-time by working time. While that method has long been accepted in the trade, it is actually meaningless, in my opinion. A labor guide may specify two hours to perform a task. The tech may complete that task in one hour. That does not make the company 200% efficient. It only measures the error of the guide compared to actual, in this instance.

By taking annual sales and dividing by the total staff of the company, a more meaningful figure may be arrived at. When I say total staff, that means everyone employed by the company (e.g., techs, service writers, parts people, porter, owner, etc.) In every case I have seen, where a company is doing well, this number is relatively high, over $200,000 per employee.

Returning to the 200% example, the company may have seven total employees, yet annual sales are less than $1M. That is not efficiency and the company will not do well. That is under-utilization of staff and the result is lack of profit. Two of the leading reasons are techs lacking adequate work and unproductive support staff. Both clearly scream poor management.

Perhaps rating technicians against book time is popular because it makes management feel they are effective and the problem is with the tech? Efficiency of a company may be far more dependent on marketing, office operations and support staff than on technical effort. Current ratings do not address this, thus few seem to be working in these important areas. Point five, Point nine and Point eleven of Deming’s fourteen points all speak to this problem. As Deming often asked, “Doesn’t anyone care about a profit?”

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA