Training Yourself and Your Staff to Win Part 2
Elements of a Formal Training Plan
Today, we are continuing our article from last time on the elements of a formal training plan. If you missed the last post, please click here.
When it comes to affording training, many shop owners simply look to their checking or credit card balances to see if they have enough funds available to invest in training.
A better way to afford the training and make it an investment that will generate a return instead of an expense that may generate a return is to establish a formal training plan that includes a budget. Our experience is that 3% of sales should be allocated to training each year.
Example: A shop employs two technicians, one clerical person, one service advisor, and one maintenance person, and has one owner, for a complete staff of six. Let’s further say that the shop has an annual sales volume of $800,000.
Most industry leaders would agree that 40 hours of annual technical training are necessary for a well-qualified technician to hone his or her skills, learn to utilize new equipment, and learn new techniques to service and repair today’s vehicles. Let’s further state that the technician is paid $30 on a performance-based compensation plan (flat rate) and that he or she routinely bills 50 hours per 40-hour week worked. That would equate to an “effective earnings rate” of $37.50 per hour.
The shop labor rate is $100 per hour, and the parts-to-labor ratio is .8 to 1, equating to revenue of $180 per production hour ($100 labor and $80 in parts). The shop generates a 60% gross profit, or $108 gross profit per production hour.
Let’s also assume that there will be some expenses involved in having the technician attend training. They could include airfare, ground transportation, meals, lodging, parking, etc. Even if the training was offered locally, some of these expenses might still apply. For the purposes of the example, let’s assume those expenses to be 50% of the wage investment.
Wages: 40 hours @ $37.50 = $1500
Expenses: 50% of wages = $750
Lost production profit: 50 hours @ $108 = $5400
Total investment: $7650 per technician
Question: How much additional sales would be required to recover the original investment plus a 20% return ($1530) on the investment in training for one technician?
Question: How many additional hours would this technician have to bill over the course of the year to offset the investment and provide the desired return?
Answer: 51 production hours. Put another way, that’s an hourly productivity increase of less than 3/100 of an hour!
Calculation: $9180 / $180 = 51 production hours
51 / 2000 hours = .0255 hours
These types of calculations should be made routinely no matter who on your staff Is going to receive training.
Continuing Education Agreement
Many shop owners have shared with our company that they’re hesitant to make a training investment in employees because they’re afraid an employee will quit soon afterward, taking the skills and information acquired through the training on to a new employer.
That fear may be put to rest easily by implementing a document commonly referred to as a “continuing education agreement.” After this agreement is drafted, both the employer and the employee should be required to sign it, indicating total agreement. The contents of the agreement should address at least the following:
- What the company will pay on behalf of the employee in terms of wages, tuition, and expenses associated with training.
- The period of time following training that the employee is required to remain with the company, in order for the employer to not prorate the investment and seek reimbursement for that training.
- If he or she decides to leave, the employee agrees to allow the prorated reimbursement amount to be deducted from his or her final paycheck.
- That if the employee fails to attend the training agreed to and paid for, the employee will allow the employer to deduct any prepaid tuition and expenses from the employee’s next paycheck.
- That if the employee fails to satisfactorily complete the training and/or fails certification testing, the employer will require successful completion of such training and/or certification testing at the employee’s expense.
- When training or testing is required for continued employment, the training or testing will be completed at a time agreed upon by both management and employee.
- All materials received during training and/or testing, and paid for by the employer, are the sole property of the employer, and if such materials are not provided to the employer when requested, the employee will be charged for the replacement of such materials and the total cost of replacement will be deducted from the employee’s paycheck.
- That due to the many advancements and changes in the automotive repair industry, all employees are required to be willing to attend training and obtain the necessary certifications. Refusal to attend requested training and/or testing may be grounds for dismissal.
- A statement of complete agreement, signed and dated by both parties.
Continuing Education Log
In addition to the continuing education agreement, there should also be a continuing education log, which should contain the following:
- Employee’s name
- A box to check indicating the employee has signed a continuing education agreement
- The date of each training session
- The reason for the employee attending these sessions
- Total investment for each training session
- Cumulative total dollar investment of all training sessions
This log, along with the continuing education agreement, should remain in the employee’s confidential file.
We’ll be back next time with more information on what types of training are available out there, and where to find training for all the various roles in your shop. In the meantime, we’d love to hear from you! Let us know if you are starting to implement a formal training plan for your shop, and where you are in the process.