Sonic Takes The High Road

Communication is approached with a “tone from the top” mentality. Whether you’re the CEO of a large consolidator or the individual owner of a family business, you must constantly and consistently communicate your expectations regarding business ethics to employees, Rachor explains.

He adds, “It’s impossible to expect your employees to do it right if they see you doing it wrong or even if they see you tolerating somebody else doing it wrong.”

At Sonic, the “tone from the top” is communicated through a Code of Business Conduct & Ethics signed by each employee once a year. Furthermore, a framed poster of the code signed by Sonic’s CEO is posted prominently in two locations in every dealership in the organization.

A detailed F&I compliance statement must be signed by all F&I interface associates before they can receive their first paycheck as Sonic employees. This includes general managers, controllers, sales managers, front-end managers, F&I department personnel and even billing clerks.

Furthermore, every Sonic F&I office displays a 22 in. x 30 in. “Taking the High Road” poster, which gives helpful disclosure information to consumers and promotes complete transparency. The framed poster must also be posted in at least one other prominent location in the dealership.

Putting Processes in Place

Part of the organization’s proactive compliance measures involves the hiring process and pre-employment screening. According to Rachor, “One of the great threats to doing it right and achieving top F&I performance and compliance is turnover in your F&I office and management ranks. That’s one of our big initiatives, and we’re putting a lot of investment into doing a better job of hiring, orientation, recruiting, training and retaining F&I professionals.”

All prospective employees undergo a comprehensive background check, which includes driving record, criminal record and drug testing. Candidates for positions that handle company funds are also required to get a financial background check. Sonic’s hiring procedure begins with a disciplined interview process, significant due diligence and reference checking.

To further control F&I practices, a menu is mandatory to present products to customers. Sonic has also implemented self-imposed profit caps on all F&I products, as well as self-imposed interest rate caps before the captive finance companies made this a requirement. Billing clerks review every deal based on a checklist before the transaction is consummated and they are empowered to send any deal back to the F&I department that contains a problem.

Like most F&I pay plans, Sonic’s standardized compensation scheme focuses on performance. However, it also factors in product penetration and customer satisfaction based on the F&I portion of the manufacturer’s survey. There are penalties for cancellations and chargebacks, which are additional deterrents to excessive F&I performance.

“I’ve always said that in our industry, a pay plan is a job description,” Rachor says.

Finally, any Sonic associate can report unethical business practices or other concerns anonymously through an 800 number.

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Training, Audits Guide Associates

Employee training is an ongoing process that constantly emphasizes the balance between profitability and compliance. New associates attend a five-day comprehensive training course and receive additional instruction from an F&I DVD that reinforces Sonic’s commitment to doing things right. In addition, all front-end managers receive quarterly compliance training.

Regional F&I directors (one for every 12-15 stores) serve as in-house consultants to provide training and development to F&I professionals throughout Sonic’s 177 franchises. And the company has developed its own Sonic Dealer Academy, Sonic University, Leadership 101 and Honors College.

Once associates understand what is expected of them, Sonic conducts internal audits. This is done by a 12-person auditing staff and the F&I directors who conduct ongoing operational audits quarterly. Each month, an exception report is sent directly to Rachor and Sonic’s senior management team highlighting over achievers.

“If we see somebody over achieving on a per-retail-unit basis or who has excessive product penetration, we see that as an early red flag, and we immediately engage our audit function,” Rachor explains.

The organization has even invested in mystery shoppers through an independent service that test the dealerships. These shoppers go through the entire sales and F&I process, actually purchasing a vehicle in some cases. General managers provide a further safeguard by randomly inspecting at least five deal jackets every day.

Finally, Rachor says he draws on the words of one of his heroes, Ronald Reagan, in his approach to managing an organization: “Trust, but verify.”

“We want to empower and support our people,” Rachor says, “but we want to verify after the fact that they are in fact committed to taking the high road with their compliance efforts.”