A
Killer Compensation Program for your Parts Manager!
By Bob Cooper, Elite
Business Services
One of the most
commonly asked questions we hear from people who have part managers
is how to compensate them. Although there is no one compensation program
that will work for everyone, here are some tips you can use to put
together a killer program. The first thing you need to do is come
to a conclusion as to what you want the parts manager to do. Here's
the list:
1. Maintain
an adequate inventory.
2. Assure the parts are of the right quality.
3. Assure the prices are correct.
4. Control the part cost.
5. Increase the labor sales.
In order to reach these objectives the
part manager must think like an owner, understand who their customers
are, and have clearly defined goals.
Now you're probably
saying to yourself … "Sure Cooper, that would be great,
but how in the world can I do that?" Well, here's your answer!
First of all, make sure your parts manager has a clear understanding
of the minimum levels of acceptable performance. Let them know what
the budget is for inventory and make sure they know they can't exceed
that budget. They also need to know what the minimum level of acceptable
performance is in regard to part profit. As an example, if your business
plan demands a 46% gross profit on parts, then make sure the manager
knows he or she is required to go over that "low hurdle".
"Goals" are what we strive toward, the "Minimum levels
of Acceptable Performance" are the "must do's" that
come along with each and every job.
In regard to "goals",
I firmly believe that part managers need to have both sales goals
and gross profit goals, but be careful! If you put together a compensation
program that rewards higher part profit, then that's what you'll get!
You may very well get a parts manager that's pricing out the parts
in a way that puts more dollars in their pocket, but at the same time
you could be losing your customers. Instead, what you should do is
have a minimum level of acceptable gross profit, as a percentage,
and a maximum level as well. An example would be a minimum gross profit
of 46% per month, with an incentive for reaching 50%. But unlike most
pay programs, there would be no further incentive for exceeding the
50%. So by now you're probably wondering how the parts manager can
earn more income if they're gross profit incentive is capped at 50%.
Well, here's your answer.
They need to be doing what you hired them to do, which is assure the
technicians have the right parts, and get them … at the right
time.
How can you tell?
It's easy! When the techs have the right parts, in the right amount
of time, labor sales … go up. So what you need to do is make
sure your parts manager is rewarded when the shop increases its billable
hours per tech. Last, and certainly not least, the parts manager needs
to satisfy his or her customer. And unlike your service advisors and
your technicians, his customers aren't the owners of the vehicles
you're servicing. Instead, they're the technicians. So what you need
to do is make sure they know that they will also have minimum levels
of acceptable performance in the area of satisfying the needs of the
techs! Feedback from your technicians will give you the information
you need to evaluate their performance. This Elite pay plan will incent
team spirit, it will reward the right behavior, and it will put more
money where is should be: On your bottom line.
Want some really
hot tips on building your business? Send an email to hottips@EliteBusinessServices.com
that say's "Hot Tips Please!" and every month we'll send
you a complimentary business management tip at no charge! Compliments
of Elite, The Success Tool ™ Company.
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