Put Those Pencils Down

A fellow F&I pro recently wrote to describe a pencil whipping he received from his dealer. My first response was, “Ouch!” I know that many of you reading this column have suffered the sting of a reduced pay plan, and I know it usually happens after a serious uptick in business. Signing bigger checks for the F&I manager can lead a dealer to think his or her commissioned employees are overpaid as an aggregate of departmental income.

Now, I must confess that I’ve never experienced this in my 22 years behind the desk, so I count myself as fortunate — or lucky. I have discussed the issue with my dealer, and his response is simple: “If I have to cut your pay, then it’s time to release you. So I’m not going to waste time with that tactic. I want you to make plenty of money because the more you make, the more I make.”

Many dealers take the opposite stance. I don’t want to let them completely off the hook, but peer pressure is often a factor. Remember, dealers discuss intimate details of their financial statements with consultants or in 20 focus group meetings. Every cost is dissected and analyzed, including compensation.

Even the National Automobile Dealers Association offers suggested guidelines on how employees should be compensated. Many dealers abide by the association’s advice; others don’t. The problem is dealers get antsy and start doing things they shouldn’t when an employee begins maximizing his or her pay plan and exceeds the association’s recommended amount.

In the post-recession economy, dealers are looking for ways to realign their operating expenses. That’s because volume isn’t what it used to be, but the store’s mortgage payment and equipment costs remain what they’ve always been. These fixed expenses take a large bite out of the bottom line, so it makes sense to some dealers to adjust pay plans to make up for the shortfall. 

The obvious problem with this mentality is the effect it has on the people earning their livelihoods. In fact, I listed it among my signs that it may be time to change jobs in last month’s column. Your tolerance level will dictate whether you decide to stick around. While I admire those of you who can, I, for one, could not.

Now, I realize I’m probably upsetting a few executive managers by writing on this topic, but the truth is, you wouldn’t be enjoying your current lifestyle if not for the professionals excelling in your stores. So, my advice is to pause before you get out your pencil and ask yourself, “Am I prepared to lose a top-notch performer over a few hundred dollars?”

As a dealer, if you want more income from your F&I department, incentivize your manager to produce more by upping the ante. This can be done in a variety of ways. Increase the profit-per-vehicle-retailed bonus or upwardly modify the overall payout by adding another tier level. You can also offer extra bonuses on product aggregates. 

The worst thing you can do is, as the old saying goes, “muzzle the ox that treads out the grain.” In doing so, you stifle the creative energies of the employee. Sure, the consultants who suggest you meddle with pay plans will tell you that the employee will struggle to produce more to return to the previous income he or she lost. And while that may be true in some instances, what happens when the economy changes for the better? For one, there will be plenty of greener pastures for your employees to consider, which means you may find yourself scrambling to replace a valued employee who just dropped his resignation letter on your desk.

In any event, pay-plan modifications have an impact on all parties involved. For the F&I manager, a reduction forces a decision: Make the adjustment, polish your résumé and start looking, or approach your dealer and try to find a way to make up the lost revenue.

Whatever you, the affected employee, decides, tread lightly in your decision. As we discussed last month, your decision affects those who look to you for financial support, in the office and at home. Always remember that the cream rises to the top and, as a professional, so will you.

Marv Eleazer is the finance manager at Langdale Ford in Valdosta, Ga. E-mail him at [email protected].