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Mad Marv

It Takes Two

The magazine’s F&I columnist revisits pay plans and offers some food for thought before, during and after negotiations.

July 5, 2011

I know I’ve been hitting pay plans pretty hard lately, but we’re not through with the topic just yet. This month, I’d like to focus on the negotiation aspect because I believe that’s where most pay plan-related problems can be avoided.

In the heat of negotiations, we sometimes lose sight of our ultimate goal. Dealers want to create a workable program that fairly compensates the employee while the company retains a handsome profit. F&I managers want a reasonable incentive to keep those profits rolling in. There’s no telling how many pay plans have been formulated over the years, but I’ll bet no two are exactly alike. It all depends on the store.

As for me, I’m an ordinary F&I manager who gets paid the old-fashioned way: one deal at a time. I believe that pay plans that promise high incomes and fat guarantees work fine for the first few months of a new hire, but after that they tend to foster apathy. The exception to that is a small store selling less than 30 units a month, because one bad month could really be painful for an F&I pro.

I’m not going to sit here and tell dealers how they should pay their F&I managers, nor will I try to teach my fellow F&I managers how to undermine their dealers when discussing pay. There are plenty of so-called experts out there who will do that job for a hefty fee. My goal is to sketch out some common scenarios and raise some points to consider.

1. Making the Change: There was nothing your last F&I manager — or you as their boss — could do to pick up his or her production. Now, you and the new employee you hired have to figure out a pay plan, but neither can say whether the current program will fix the situation or turn out to be the cause of it.

That’s the time to take a step back, because it’s easy to give away too much in your attempt to fill a vacancy. If the pay plan is too generous and the new guy or gal hits the ground running, you’re bound to have second thoughts every time you have to write a huge check when the producer hits the upper limits of the plan. Hey, I get it. It’s just too difficult to justify the pay.

The answer to most situations can be found at the desk of the comptroller. He or she can determine what the maximum payout would be with any given pay program. Whether it’s a percentage of departmental gross or a total dollar amount, be certain to make the adjustments that you can live with so you don’t face this situation again. You may even want to consider incentives and perks that will motivate your manager to give you the extra effort. Doing so will keep employees in the game.

2. Striking a Balance: On the other side of the table, the F&I manager must realize that few dealers come to the bargaining table with a blank check. Some F&I managers are only looking for the bigger, better deal, but the career employee looks at adding to the dealer’s bottom line. Whether by training or by nature, they see their position in the store as a support role, and they’re continually searching for ways to enhance the dealer’s philosophy.

3. Need vs. Want: Just as the dealer must give careful consideration to the design of the pay plan, it is equally important for the F&I manager to consider that you have to strike a reasonable agreement that will keep everybody in business. Oftentimes, F&I managers come to the table with the sharpest of negotiating skills. It’s as if they’re facing a customer.

That’s why careful thought must be given to what you want from the dealer. As the store begins to grow and volume is added, be prepared for the dealer to hire an additional staffer to maximize productivity. I know the idea of having to share a piece of the action with a newbie is disappointing, but you have to remember that, as the business grows, so will the opportunities. This is where winners rise to the occasion and do what’s best for the organization.

At the end of the day, pay plans — however complicated — should be a win-win for the dealer and the F&I manager. Both ends of the pay spectrum should be discussed and analyzed thoroughly. If the F&I manager hits the outer limits of the program, write that check with pride and remember that you get to keep a pretty good amount yourself. Be certain that the manager doesn’t starve on short months either. Attach a congratulatory note as well. It will amaze you how much more production you will see from your manager.

Marv Eleazer is the finance manager at Langdale Ford in Valdosta, Ga. E-mail him at marv.eleazer@bobit.com.

Comments

  1. 1. John Bethea [ August 03, 2011 @ 03:47AM ]

    I have always wondered at the Dealer's logic when as you said, "you’re bound to have second thoughts every time you have to write a huge check when the producer hits the upper limits of the plan". The bigger the check you write the more $$$$ the F&I Manager is making for you. But the most unrealistic idea is to "Cap" any salesperson's commission. F&I Manager are a critical piece of your profit pie so why do you want to take any action the will cause your slice to be smaller. What other one person in your dealership produces more profit?

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Author Bio

Marv Eleazer

Finance Director

Marv is no insider. He’s an actual F&I manager with more than 20 years of experience. Get his from-the-trenches take on the industry every month at fi-magazine.com.

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