Labor Efficiency

Service Departments the world over are concerned about efficiency and effectiveness. There is a very easy method in which we can measure and manage the labor we offer to the marketplace. There are two critical pieces of information from which we must start. The first is called Gross Profit Potential and the second is the actual gross profit.

Gross Profit Potential is the number that you would obtain if you took all of the labor in your department at the published labor rates and the average wages of the technicians employed. From these two numbers you would get the potential gross profit. Take that number and divide it be the published labor rate and you will get the gross profit potential.  That is very straight forward and very easy.

The actual gross profit you can get from your financial statements. Just be sure that it is only labor.

Then a simple division will lead you to labor efficiency. Divide the actual gross profit by the gross profit potential and there you are – labor efficiency. How do you stand up in this measure? You must be over 90%. The time is now.