Parts pay plans tied to Service labor hours

[eweirick]

At present we are paying off of combined Service and Parts gross profit. This has worked well for us, but we have to rewrite the pay plans due to labor rate increases. We thought that by paying off of labor hours we could avoid this problem.

Anyone out there currently using a parts advisor pay plan based on shop labor hours? If so, how do you like it? What do you consider the benefits? Have you identified any negatives?

Thanks for your input.



------------------
Ed Weirick

[TomB]

I am a Fixed Ops consultant and have installed parts many counterperson payplans that that are based on a combination of an hourly rate plus a commision of a $ amount for every flat rate hour closed during that pay period.

The advantages are many: 1) The faster service to the techs, the more monet they make. 2) You do not have to change pay plans if your ELR goes up. 3) The tech's FRH production is usually posted daily/weekly so everyone can see how well they are doing. They know that no one messes with the tech's FRH's, but do the parts counterperson get to see the financial statement? 4) It focuses them on things like repulling maintenance and special ordered parts for increased productivity.
The only negative is that parts management has to monitor/control how the counterman acquire parts, such as getting one from down the street or ordering from the factory.

------------------

[cwalden]

We have used this pay plan before but we paid
the parts person a spiff only if the shop
hit a pre set weekly total labor figure.
The down side is just what TomB says,the parts were aquired any way possible.
But managed correctly it was a good situation
for bolth.

[RICHLOWE]

There certainly can be big benefits to the shop by paying the parts counterperson on labor hours sold. Here are some tips I found useful when installing this plan.

1.) Watch the ELR. On certain systems, it is possible for the service writer to set a dollar sale amount, but increase the hours sold. It drops the ELR significantly, but the service advisor takes a kickback from the counterperson. Set an ELR benchmark in the plan to avoid this.

2.) It is also true that the counterperson may start getting parts anyway possible to fill the order. Parts from downtown don't carry much gross, but gets the job out the door and in their pocket. To avoid this, set a benchmark for parts sales gross and watch the parts being put on ROs.

3.) Make sure that the counterpeople are not trying to micromanage the techs. This can be a major source of ugliness. The counterperson may tell the tech to perform the function a particular way to maximize hourly sales and make the tech quite angry. To avoid this, make sure the counterpeople keep their hands off the repair procedure.

4.) To go along with #3, counterpeople may start pushing parts replacement to increase their sales of parts to hit the sales gross benchmark. They may even suggest replacement of unneeded parts. To avoid this, watch the parts sales/gross daily. Towards the end of the month, if the sales gross take a sudden up turn with labor hours sales declining, this is the first clue.

5.) Make sure there is not a tremendous difference between service advisor pay methods and parts counterpeople pay methods. This can be a major sore spot if there is a great differnce.

Having said all this, if you keep your eyes open and watch for signs and encourage the good stuff, this method can be very profitable.

rich

[eweirick]

TomB, cwalden, and Richlowe;

Id like to thank all of you for your very useful input. Here is what we are thinking of doing.

1)70% of pay based on total shop hours, 20% based on parts department total gross profit, and 10% based on CSI.
2)Set an ELR benchmark and monitor.
3)Publish benchmarks for outside purchases and gross profit percentage, which will be reviewed at monthly parts department meetings.

To Richlowe,

RE: items 3, 4, and 5 on your post.

I dont believe that we will have any trouble with these items. We use ERO and deliver parts to our technicians so our parts advisors have very little contact with the technicians. As far as items 5 goes, this type of pay plan will closely mirror the way our service advisors are paid.

Once again, my thanks to the three of you for you help.


------------------
Ed Weirick