Time to Pay the Piper

I’m sure you’re all familiar with the story of the Pied Piper of Hamelin. Although more legend than truth, it’s based on events dating back to the Middle Ages, around 1284.

As the story goes, the German town of Hamelin hired a piper who promised to solve it’s rat infestation by luring them into the Weser River with his magical pipe. As the story goes, the dastardly Mayor of Hamelin refused to pay the piper the gold he had promised. In retaliation, the piper used his pipe to enchant the children of the town. They followed him to Keppenberg Mountain, where they were magically swallowed up.

One theory is that the piper was a professional rat catcher, and the children who disappeared were actually victims of the plague the rats carried. The earliest known record of this story is from Hamelin, where the piper’s image was set in stained glass in the town’s now-destroyed church. So, yeah, the pied piper was a real person.

No, I’m not using this month’s column to analyze this Brothers Grimm fairytale. I just see some parallels between the Mayor of Hamelin and the modern car dealer, with the piper being that salesperson or manager who was run out of the business because of an increasingly reduced pay plan.

There is an accelerating trend in the car business. Manufacturers and vendors are telling dealers they can make less gross per unit and sell more cars if they pay their people less — the reduced pay plans justifying the reduced profit per unit.

One of the pitches is that dealers can dismantle the F&I office and eliminate this highly paid position by having salespeople handle the finance transaction and the sale of F&I products. Their claim is that technology can replace these highly paid F&I pros by helping these lower paid employees deliver a higher net profit.

Sounds ridiculous, right? Well, dealers are biting. I’ve written about it, talked about it in every speech and seminar, and predicted it exactly as it is playing out today. The damage is done, and it’s reaching critical mass, and, many dealers are about to discover that they won’t be able to unwind this mess.

When I wrote “The Prosperity Equation” nearly 20 years ago, I noted that my philosophy has always been to hire the best people and pay them too much. There simply is no substitute for highly trained people. But now we’re seeing those high-quality people retiring or leaving the business for another industry.

In fact, I’ve written about the talent drain the car business is now experiencing. The problem is there’s no serious money to be made in many dealerships today, and the industry has not developed qualified replacements for the skilled people who are leaving.

The other problem is there are no competent schools teaching real-world dealer management skills. Instead, theories are being taught by instructors who couldn’t sell rifles during a prison break. It’s probably why my sales manager seminars are always sold out.

So dealers are now paying the piper, and it’s going to get a lot more expensive to right the treachery that got us into this mess. Why is that? Well, because talented managers are going for a premium. I am seeing dealers attempting to get managers from their crosstown rivals to jump ship by offering stupid money. Yup, the piper is getting paid.

As for the big publics, they can’t buy more stores because they don’t have anybody qualified enough to run them. The general managers who are qualified are now demanding — and getting — upward of $1 million a year. And you can forget about landing one of these high-qualified GMs without offering a partnership or an equity stake in your operation.

Nothing symbolizes this trend more than one of the big public groups, which continues to fall deeper into the toilet the more it adopts these wage-cutting technology solutions and new-age theories. Heck, your kids could buy this group’s stock with their lunch money.

My prediction is we’ll see this trend reversing in the near future. I’m already seeing the topic addressed by this magazine’s competitors, as well as at a number of conference and dealer 20 Groups. Until that happens, dealers will have to pay the piper. Keep those emails and Facebook messages coming.

Jim Ziegler is the president of Ziegler SuperSystems Inc. Contact him at [email protected].