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Don’t Fire Your Best F&I Manager

Judging F&I pros by PVR alone can lead to bad personnel decisions. Analytics expert charts an F&I department’s per-model production with shocking results.

June 2017, F&I and Showroom - WebXclusive

by Rahul Saxena

Your people make or break your business. Your weakest F&I manager costs you lost profit every month. They also cost you future streams of opportunity. It is inevitable that someone will be your worst performer. The only question is how to be sure if letting that person go will improve the department’s overall performance.

Let’s take a look at an example that proves your data can lead you to the wrong answer.

We Need to Talk

Let’s say you have five F&I managers. Bill appears to be the worst performer with an F&I profit per vehicle retailed (PVR) average of $657, compared to a department average of $856 average — a difference of $199. He worked 568 deals. You calculate that, if you fire Bill and give his work to the others, your profit will increase by $199 times 568 or $113,000.

Time for Bill to go! … Or is it?

Let’s do a bit more analysis. When we look at your team’s PVR on a model-by-model basis, a different answer emerges. It turns out that Bill is the best performer for three vehicles!

Why is it, then, that Bill has the worst PVR? The mix of deals that he does skews heavily toward ones in which he does best: Accord and Civic. These two happen to be the low-margin and high-volume vehicles for the dealership. The model mix drags down his PVR score.

Let’s sharpen our pencil and figure out what would happen if we moved Bill’s deals to the others, but this time we account for the PVR by model. We find that PVR reduces for four models and improves for three.

The detailed analysis shows that the total profit would fall by $262,000. The estimated benefit of removing Bill turns out, on further analysis, to be a big loss. This is why you must always dig deeper.

It is difficult to see the combined impact of PVR mix and volume mix by model. F&I manager performance becomes a four-dimensional matrix, with manager, model, PVR and volume as the dimensions. How can we quickly see these four dimensions all together in a two-dimensional chart?

Hoop charts to the rescue! Instead of using a point, we can use a hoop whose size depicts another dimension of the data. The F&I manager becomes a color code. Now you can see the four-dimensional information contained in these tables in one view.

In the hoop chart, you can see that Bill rises to the top of the PVR chart for Accord, Civic and Odyssey. The size tells you that, if you burst those bubbles by removing Bill, the gross on those models will fall substantially as those hoops drop down to the average PVR for the remaining managers. The hoop for the Fit won’t move much. The tiny hoops for the CR-V, Pilot and Ridgeline will be outweighed by the big ones. The chart tells you to keep Bill.

Keep It Complicated

Removing or retraining poor performers is a big lever in the hands of a dealer or F&I director. Applying that lever correctly requires you to analyze performance data with great care. Business performance is multidimensional. Simplistic tools are not useful for critical decisions that impact employee morale, performance and loyalty.

I tailored this data to cast Bill in a bad light using the most common performance metric, and then to recast him as a good performer based on the detail. In real life, you must look at the key metrics and into the details before you make decisions. It takes time and effort to do calculations involving different tables, and it becomes difficult to do on an ongoing basis under work pressure. Automated performance monitoring gets you out of the “no time to calculate it” trap, and lets you make employee performance management decisions with confidence.

Rahul Saxena is the founder and chief analytics officer of FrogData. Contact him at rahul.saxena@bobit.com.

Comment

  1. 1. Ian [ June 15, 2017 @ 03:46PM ]

    if my F&I dept had an average of $856 they'd fire the entire dept. Are those accurate for Honda? wow.

  2. 2. Richard [ June 16, 2017 @ 09:12PM ]

    Each dealership is different. We are high volume used cars only with a lot of second chance. We are quite adept at maximizing the front first, then scooping the rest on the back, so $856 AVERAGE would be fine for us. Why? Because many times there is no room left on the back with 2nd chance. Sometimes there is, and we get it, but what's the 1st rule of gross??? The front is FOREVER! And we get paid accordingly.

  3. 3. Andrew Wright [ June 19, 2017 @ 12:05PM ]

    Richard makes a good point, Its not always what can be sold, its what can be financed. If you are using banks making loans on wholesale values for advance, you are loosing your forever money. This is the reason CU's are gaining market share. Many CU's are 120% of retail + cancelable backend on the better credits. If you are using CU's then sell away finance and increase your PVR!

  4. 4. Spattman [ June 30, 2017 @ 02:34PM ]

    Excellent article. Notice that Rahul is not comparing the mythical "Bill's" results to a national or even regional average. He is only comparing them to the other producers in his dealership. In my experience, PVR differs greatly among dealerships based on market, region, and especially based on the way it is calculated. The point to "dig deeper" when translating the results is a good one. However, I think that product mix should also be examined. An F&I Manager who is producing a high PVR that is fluffed up by rate, is not benefiting his customers, or dealership as one who is selling more product.

  5. 5. GLENN [ July 01, 2017 @ 09:33AM ]

    My fi did 2501 a copy last month in June. MY Hyundai/ Kia dept did around 1640 per copy. How does that rate among others. For the yr, at my CDJR store, we have avgd 2k a copy. I'm the director or all 3 stores

  6. 6. Zane [ July 03, 2017 @ 09:23AM ]

    If anyone of my Finance team put up 850/unit, they wouldn't last long. Expectations for us will be anywhere from 2500-3000/unit. However you plug in those numbers to the math done above it makes a larger long-term impact on the performance. When we have underperforming F&I it tends to be much more noticeable.

 

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