The Collision Repair Industry’s Shrinking Labour Pool

History has demonstrated many times that what happens in the wider context of the auto insurance claims industry can and does affect us within the collision repair industry. The most recent example is workforce shortage within the collision repair industry. Just as the insurance industry is coming to grips with a predicted labour shortage in the future, so, too, the collision repair industry is discussing how to retain employees and maintain a strong labour force in the not-so-distant future.

HISTORY

The current condition of the collision repair industry has not crept up on us overnight — far from it. Over many years, a variety of external influences have caused us to look for good people, with very few to be found. One of the barriers has to do with people’s perceptions of the industry. Many don’t see the industry as particularly glamorous. For the most part, over the past two decades, the industry’s image was dirty (both physically and figuratively), so it did not appeal to many — especially when an alternative to physical labour was presented in the form of an up-and-coming, exciting world of computers. As a result, new recruits were thinner in number than what was needed to fill the ranks of older, retiring tradespeople. Working conditions have improved a lot over the past two decades. The industry’s image has improved enormously, but the damage has already been done. It takes time to get beyond the stereotype developed as the result of shop work in decades gone by.

BARRIERS: POOR IMAGE

A poor image was only partly responsible for the difficulties in recruiting new members to the industry. Also, the industry made very poor efforts at recruitment. The result was that fewer new bodies were being funnelled into the field to fill up the opening spots.

To be fair, a number of factors act as barriers to recruitment. The wages a technician can command are quite low, for example, when compared to other trades — trades that may not be as challenging as collision repair. Despite the low wages, the level of knowledge required of technicians is very high. Coupled with this, tooling and technology have also contributed to the difficulties in recruiting new members. Given the complexities associated with vehicle manufacture today, the bar has been raised for entry-level training of technicians. Such training is costly: there is a protracted apprenticeship that may not appeal because of the lower wages that go along with junior positions. It doesn’t help that tool purchase does not come with any tax relief, causing financial strain on a technician. And the education does not — nor should it — stop at licensing, since vehicle technology has changed rapidly at the manufacturer level. New materials in steels, plastics, composites, paints and substrates, as well as repair methods have demanded continuing education for professionals in the field. These kinds of changes and challenges are comparatively minor for other trades.

BARRIERS: PERCEIVED HOMOGENEITY

Another potential barrier is when consumers lump all shops into one category, despite the reality that all shops have individual differences. Shops are responsible for this problem if they do not take the time to educate the buying public as to the differences between shops. Process-focused shops that are on the leading edge of technology, education and process development can actually strip out costs, even if their door rate appears to be more than their competitors. Highlighting nuanced differences between shops is one way in which national accreditation could be helpful. I have been asked to chair a committee formed of Canadian Collision Industry Forum (CCIF) members that is developing a very easy-to-use identification system to help identify the differences between shops and their qualifications. More on that later.

REMEDIES: COLLISION INDUSTRY

Dedicated professionals are employing multi-faceted remedies to counter the potential barriers to recruitment noted above. Solutions include cleaning up the shops they own, both physically and from a business reputation perspective. If you have the opportunity to tour a modern, well-managed shop, you will be surprised at how clean they can be and how smoothly they operate.

The clean operations I mention above are due in part to a culture shift within the industry. Top-level shops are adopting the lean manufacturing model; they are eradicating inefficiencies from their operations. It has been a revolutionary-style of change in production procedures, and gains have been made. The method may not be as effective as it is in the manufacturing sector, because collision repair is actually a re-manufacturing process so absolute consistencies are not possible. But facilities that have adapted this model for their use are increasing their efficiency, thus “doing more with less.” As a result, sales-to-technician ratios rise when lean principles are implemented.

Better specialization and delegation of tasks within the employee pool is found in shops that are working hard at improving flow. By switching to “High- Low” technical team categories, many shops have kept the experienced techs working on high-skill tasks, while giving more junior and lower-paid technicians experience by working on less advanced tasks. This can be likened to a dental hygienist doing the skilled but lesser tasks for the dentist who stays concentrated on the more difficult parts of the job.

Networks originally created with the intention to leverage purchase power also bring an opportunity to distribute best practices. Such shared education has helped once-isolated and very independent businesses learn how to do things better. Along this same line, many training programs are available to help businesses increase their professionalism. Networks can also help with naming and co-branding, as well as in not-so-obvious ways such as shops participating in a paint company’s “20” group.

Smart scheduling is another technique in workflow management that has helped to reduce cycle time. The principle often seems counter-intuitive to many, but the facts show that with better scheduling, two days can be shaved off the cycle time, floor space can be freed and higher levels of concentration can be achieved, thus resulting in higher efficiencies.

REMEDIES: INSURANCE INDUSTRY

What can the insurance industry do to help? Plenty.

First, I would recommend that insurance companies need to abandon the old idea that vehicles need to be dropped off on Monday to avoid a weekend rental time.

Second, insurance companies should reward the professionals that invest in system development, facilities, equipment and training. All shops are not created equal. This is where the CCIF national accreditation effort will pay dividends. When the time comes for insurance companies to examine the finished product of the ultimate accreditation program, they should stand up and support the program as a whole. It will be good for all.

Third, one of the more creative methods now taking root is moving the threshold for total losses to a higher percentage of the vehicle’s actual cash value (ACV).When the total loss is considered in this manner, it becomes more beneficial to repair the vehicle quickly to achieve lower administration, rental and customer retention costs. Rumour has it some companies have gone to a 105% of ACV ratio, and yet they have nevertheless come out ahead on the claims’ total cost picture.

Fourth, insurers should be looking for opportunities that can build a closer relationship with their suppliers. If, for example, they can devise ways to eliminate red tape that adds costs and increases delays in delivery, they can actually beat their competitors in claim cycle times and associated costs.

Fifth, insurance companies need to get used to the idea they will have to pay more for high-quality, safe repairs. They need to stop looking for bargains and instead f ocus on finding value. Value is achieved through the balance of three things: timely delivery (cycle time), quality (the repair itself) and budget (competitively priced services). Many times, when the peripheral costs of a claim are factored in — i. e. rental vehicles, loss of customer satisfaction index (CSI) values due to a long time taken for repair, etc. — it is cheaper overall to pay a higher repair price to ensure well-qualified technicians are working on an insurer’s vehicle than to write off a vehicle or seek a cheaper door rate. Balance these three items first, and then make your decision. Measure these things objectively; move away from any system that resembles a “good-old-boy” way of picking suppliers. Look at all the numbers, including internal costs, and see what can be reduced. It all helps in the solution to “do more with less.”

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One of the more creative methods taking root is moving the threshold for total losses to a higher percentage of the vehicle’s actual cash value (ACV). When the total loss is considered in this manner, it becomes more beneficial to repair the vehicle quickly to achieve lower costs. Some companies are rumoured to have set their ACVs as high as 105%.

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Insurance companies should reward the professionals that invest in system development, facilities, equipment and training. All shops are not created equal.