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Key Performance Indicator (KPI)

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18 views

Key Performance Indicator (KPI)

Uploaded by

mahmadatef300
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Key Performance Indicator

(KPI)
Introduction
KPI stands for key performance
indicator, a quantifiable
measure of performance over
time for a specific objective.
KPIs provide targets for teams
to shoot for, milestones to
gauge progress, and insights
that help people across the
organization make better
decisions. From finance and HR
to marketing and sales, key
performance indicators help
every area of the business
move forward at the strategic
level.
Effective Labor Rate
• Effective labor rate is a calculation that reveals the revenue produced per billed hour. To calculate the
effective labor rate, divide total labor sales by total labor hours billed.

• Your effective labor rate is directly proportionate to revenue. Service managers must calculate their facility’s
effective labor rate regularly and determine what improvements are needed.
Hours Sold Per
Repair Order
• Time is the product of the service department. Hours Sold Per Repair Order (RO) measures how well the service
department makes the most of each opportunity. Like Effective Labor Rate, this KPI is also directly proportionate to
revenue.

• Not only is this metric a good indicator of service department profitability, but by capitalizing on each RO, a service
manager can be sure there is enough work for each technician. While profit is a prime motivator, seeing that each team
member can put food on the table should be just as important to all service leaders.
Gross Profit Percent
Gross Profit in a service department is the Gross Profit Percent is the percentage of
labor sales revenue for a RO minus what is revenue that is turned into gross profit. A
paid out to the technician to do the job. For Service Manager must handle the work
example, if a repair brings in $200 in labor distribution with efficiency and match the
revenue and the tech is paid $60 to do the work required for the ROs to the
job, the Gross Profit is $140. Divide $140 by technicians’ skill levels. A gross profit
$200 to get your Gross Profit Percentage percentage benchmark in the service
which is 70% in this example. department is 76%.
Client Satisfaction and Retention
Keeping customers happy keeps them
coming back, and returning customers
is required for a service drive to prosper.
Each OEM measures retention
differently, and some incentivize
dealerships to meet retention goals.

Retention might be one of the more


difficult areas to manage as it comes
down to the people. A Service Manager
must have systems in place that provide
consistency from one team member to
the next.

Everyone should be on the same page in


all areas of customer service.
Answering the phone, communicating
with the customer throughout the repair
process, and providing quality work are
all areas that must be ingrained into
each team member to encourage
customers to return for service.
Fixed coverage is the ability
of fixed operations (service
and parts, and body shop if
you have one) to cover the
entire dealership adjusted
overhead expense. The
Service and Parts
departments are considered
the “fixed” sources of
income (fixed operations) for
a dealership.

The more of the above KPIs


achieved, the more likely
your service drive is to meet
100% Fixed Coverage as it is
a direct effect of each of
these metrics.
Conclusion
Understanding the dealer objectives
and reverse-engineering the
marketing strategy around driving
these KPIs is the best and most
effective way to reach service
department success. Communicate
these objectives and the expected
processes to every team member
who will impact achieving these
goals.
Without setting these specific goals
and measurements in front of your
team, you will have individuals
creating their own missions that may
or may not align with the dealership
goals leading the dealership to miss
the KPI mark.

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