As salaries diminish keeping good staff has become challenging
Some dealerships still have a good market share and strong bottom lines, but they appear to be getting fewer in number and there are others that could be running in the red. A consequence of that fact is that employees pay-cheques in some cases have also been getting smaller, and that’s a quick recipe for staff dissatisfaction.
Technicians
In the past it was not unusual to have a technician on flat rate averaging 120-percent efficiency or more; for example, working a 40-hour week and being paid for 48 hours.
In this example, if their rate was $25 per hour they would be paid the equivalent of $30 per hour (48 hr x $25/hr = $1,200 = 40 hr x $30/h). The impact of that on a month would be an additional $800 (4 weeks x $1200 = $4,800 vs 4 weeks x $1,000 = $4,000).
The problem in many shops today is that the average technician is often lucky to be running with an average efficiency rate of 90 percent: working 40 hours and being paid for 36 hours. In that case, he or she is earning just $3,600 a month (4 x 36 x $25/hr = $3,600) a decrease of $1,200 per month – $14,400 per year – from the previous high-point.
You could, of course, change the pay plan from flat rate to a straight salary of $25/hr, but that would still be a decrease of 20 percent from the peak.
Service consultant
Let’s talk about service consultants with a pay plan comprising a combination of base salary plus commission geared on hours per work order.
Here is the challenge: they recommend a fuel filter for 0.4 hours labour only to find out it’s in the fuel tank. Or they sell a power steering flush for 0.5 hours but, whoops, the vehicle has electric power steering. On top of that, the factory zone manager was in last month, complaining that they were selling services not recommended.
For many years a good average for hours per work order was 2 hours-plus. It has now dropped to 1.8 hours and is still on the decline. Yeah, yeah, don’t tell me NADA is still talking about 3 hours-plus per work order. Our customers in Canada are more sensitive to that kind of gouging.
The net result is, many service consultants have seen their salaries declining over the last several years.
Service Managers
Recently a service manager told us his salary, which was largely based on bottom- line performance, had been in free-fall for two years, to the point that his wife told him they could no longer manage to pay the bills. His question was a simple one, “Do you see any light at the end of the tunnel?” The honest answer was, “no!”
Parts manager
Years ago the parts-to-labour sales ratio ran around 1:1. Then the average dropped to 80 percent – 80 cents in parts to a dollar in labour. Now some stores are running under 60 percent. The main cause is simply better quality vehicles. We don’t sell the big ticket items like engines and transmissions like we did. Service department work is largely maintenance, which has a tendency to generate more labour than parts. Sheet metal has also taken a hit, with insurance companies demanding parts from the local scrap yard or China, which has created another negative impact on salaries.
Body shop
Which brings us to the body shop. We thought about skipping this department in an effort to avoid depression and having to find the Prozac. Many dealerships have either closed their body shops or sub-contracted them out. This is an interesting business where if the body-shop manager leaves, the insurance companies leave as well. To say it is a tricky business is probably an understatement, as dealers often get the short end of the stick on both labour and parts. When a vehicle does come in where you could make money, it gets written off.
Having said that there are a few dealerships making profit from their body shops, but there are others keeping them open for convenience or because of the rent factor. All of the above have made a negative impact on staff salaries.
Vehicle Sales
One dealer told us recently that he didn’t care about the technicians running out of work because they were making more money than the sales staff. Our reply was, “They are worth more than your sales staff!”
We were recently talking to a salesman we have known for over 20 years. He is a professional and has a good customer following. He told us that we would not be seeing him again, as he was changing his career to sell furniture. The reason was simply that he could not sell enough vehicles to get off his salary draw, resulting in him owing the dealership money. He said that the previous month he had sold nine new vehicles, two with a flat commission and three used vehicles with hardly any gross. He stated that if he had sold that many vehicles five years ago it would have resulted in a decent pay cheque.
One interesting approach
We talked to a dealer in Thailand who had an interesting pay plan. He sits down with the managers and tells them how much return on his investment he wants to make this year. Any money generated over that can be shared with the staff, which gives them a sense of ownership. One manager told us that everyone is motivated, staff turnover is low and performance is driven mainly by peer pressure.
What’s your solution?
If you have any ideas you would like to share that work well for you e-mail me. Those with the best ideas will be invited to join a roundtable discussion group.
