You Get What You Measure – So Measure Correctly!

POSTED October 25, 2021

There is an old adage that if you want a business result to improve, start to measure it. I believe that is true, and the insurance and collision repair industry is obsessed with measuring and ‘scorecarding’.

Having been on the data side of the claims business for a very long time, I have queried data, created reports and scorecards, and presented results to various constituents of the industry. I have seen several senior claims executives approach their measurement of key performance indicators in the same way the industry did 20 years ago, which is to say, doing fairly basic measurement that can often be misleading.

Two quick examples:

At the top of every collision repair relationship seems to be the use and measure of alternate parts.

The industry has for far too long measured alternate part utilization by the metric of ‘percent of parts dollars by part type’.  While measuring percentages is common, the error of measuring parts dollars can be simply illustrated below:

Measuring Parts Correctly

In this example, the lower price aftermarket part produces a lower usage percentage. So, while saving more money, the percentage is lower and would be perceived as poor performance, while it produces a better result in savings. So, by measuring percent of parts dollars, selection of the most expensive alternative part is what is ‘rewarded’.

I have also seen average paid repairable severity used as a top metric, without regard to the population breakdown. A seasoned APD manager I encountered was about to put a DRP repairer on warning, solely for having a higher average severity than other shops in the same city. Luckily, by presenting him with the number of parts per repair and vehicle mix, we were able to show that he took a newer vehicle mix, with more parts per repair because of ADAS equipment such as bumper sensors.

Our advice? Measure the actual core of what you are after: discounts received. Many use the number of parts by part type as a barometer of performance. This is better than percentages, but with conquest or price matching of OEM parts, it may cause a repairer to mislabel the actual part installed for fear of being called out for higher OEM usage. A much more accurate indicator of performance is to measure the average dollars below part price.

So, what you measure will potentially improve performance, provided you measure correctly!

Greg Horn
Greg Horn is PartsTrader’s
Chief Innovation Officer.

PartsTrader Team - AUTHOR