Parts Manager Compensation

[gb]

As a new parts manager (14mos) with 13 yrs industry experience in dual European car line, retailing 500 cars annually and 2.6M in parts sales (est)with growing wholesale business, what are appropriate compensation methods for a major midwestern metropolitan market? Salary + gross sales versus Salary + gross profit... Which is the most commonly used method.

[sallen1]

gb,

probably salary + % of gross profit.

Paying on gross sales, especially for parts mgrs. can be distorted by earned discounts, etc. and does not account for return reserve, inventory adjustments, etc.

scott

[Chuck Hartle]

Salary plus gross profit for parts advisors

Salary plus net profit for parts managers.

Whatever you do, don't pay off of gross sales. Paying off of gross sales means that your parts advisors can manipulate and discount parts and still make a great commission while your profit percentage dips and you lose on both ends. I will give you a simple story that bares this out.

Back in 1992 we had a military base that we had a contract with the civilian COPAR to supply parts. Basically, we gave them cost plus 10% on parts. The base was required to secure 3 bids for any purchase over $750 at that time. The military needed an engine for a vehicle that required a bid for purchase. The engine had a $1000 dealer net from Chrysler. As per our contract, we bid the engine at $1100 with the 10% markup. However, someone in our local bid $900 for the same engine. We lost the sale and our COPAR buyer was ready to drop us because he thought we were price gouging. We supplied a copy of the current price book and verified that the selling dealer was indeed giving it away at $100 under acquisition from Chrysler.
I contacted the parts manager at that dealership to ask him if he was on drugs or maybe he had purchased that engine from another dealer through a .50/1.00 buyout of something, hoping it was the latter. A week later he fired his top parts advisor, who came looking for a job with us. I called the parts manager to ask why he had fired him and it turned out that the parts advisor had been selling a lot of parts like that with no regard to profit because the parts manager and dealership was paying him off of gross sales! What a deal, huh? Not only did the dealer lose $100 on the deal but he paid commission on the gross sale to the parts advisor. End of story.....

Chuck Hartle'

[Paradise]

Chuck:

Your on target with pay plans ! I do have one comment on the reply you posted. Shame on your fello-manager that discovered "down the road" one of his employees was altering prices..and had been. With todays in house systems..there is no valid excuse for a squirrel being loose in a parts or service department for any legnth of time. As a manager..I can only wonder why part of his daily routine was NOT..obviously monitoring his "Price Adjustment" report..set up by man number. That is..if he even took the time to set his men up WITH individual man numbers. If a manager can justify or desires to pay someone off gross they can.Not endorsing it's a good idea.However, managers have the tools available to monitor any signs of abuse or creative personal payplans as I refer to them. Most of these abuses are operated under managers who are not managing. Not reading their reports..not keeping an eye on things..and not establishing a management routine of reports that should be monitored on a daily basis. Reynolds runs on real time..and if someone becomes suspect at any time..the manager can run the report whenever he chooses on an individual man number to monitor his employee's habits. It's simple. Unfortunately we all manage to hire a smarmy character from time to time. Countermen who get in bed..so to speak.. with a tech who works on cars at home.. tries to pass them parts at cost to split the profits. Dirty wholesale tricks with personal kickbacks.If we manage daily..they do it once. We catch them. They're outtahere. Auditing and monitoring. It is the primary job of why someone is given the position as manager.

[airrick]

I am paid salary, % of gross profit, % of net profit and % of service gross profit. My counter people are paid salary and % of gross profit. It works extremely well and everyone works hard to maximize sales AND gross.

[GaryE]

Do any parts managers get paid off the service labor gross? I am about to hit up the boss for a raise and was thinking how many customers we send to our service department when we could sell a hit or miss part(what the customer wants vs. what the customer needs) or writes purchase orders for ALL repiar orders, and we pull up recalls for customers. I know our service manager get a piece of our total gross profit amd the service advisors get a piece of CP r/o and warranty r/o sales.