Service Advisor Pay structure

[imacdude]

I have read numerous posts regarding Service Advisor pay plans and am curious about a different aspect of that pay. From a payroll standpoint.
Is there a standard, national, NADA, or other that discusses the percentage of a Service Advisors pay that is charged back to the Parts Department? Are your service people paid with a percentage of dollars covered by the parts department? If so, Is their salary covered, just their bonuses, or both?

[scotstrong]

Who's accounting method are you referring to?

I've never heard of any portion of service advisor pay being charged to the parts dept.; unless parts chooses to pay a spiff themselves.

Let's see now, the gross profit on labor is usually anywhere from 60 to 75%; and the gross profit on parts is anywhere from 25 to 40%, depending on whether or not there is a split between parts and service of parts gross on customer pay.

So why would it make any sense to put payroll expense from a dept. generating higher gross as a percent of sale to a dept. generating a lower gross as a percent of sale?

I certainly wouldn't care to work at a store that doesn't account for personnel expense in the proper dept.

Scot Strong

[fburrows]

I agree with Scot. I have never heard of a service advisors pay being partially charged to parts.

------------------
Frank Burrows
Automotive Business Solutions LLC
fburrows@absdata.com

[fjfixedops]

Mercedes-Benz has a line on the financial statement for "Advisors" in the Parts Department as well as the Service Department. It is our Dealer's policy to charge a portion of the Service Advisor's compensation to the Parts Department. Part of the justification of this policy is the fact that Parts retains all of the gross profit on parts sold on repair orders. I agree with this policy, and after reviewing this with several of the Fixed Op's Director's in our 20 Group, they agree and are putting about 25% of the Advisor expense into Parts Department.
When I was the Director at a domestic store, I expensed all of the Advisor compensation to the Service Department (except for Collision Center spiffs or Parts 'special' spiffs), but with Imports I believe it is only fair that Parts share some of the burden.

[mjb]

I think you'll see more advisor pay coming from parts if GM changes the statement to the new format.As far as Scot wanting to compare gross on sales he should look at the gross generated on parts "sold" by the advisors. Very few if any parts are sold on the back counter and on the majority of statements I've seen a large protion of the gross on the parts side actually is sold on the service drive.In my opinion the advisors do sell for both depts. and should be compensated from both.

[scotstrong]

fjfixedops:

I am asking this question because I am not familiar with Mercedes-Benz accounting: Are you sure that the line on the statement in the parts section called "advisors" is not meant for "parts advisors" as counter personnel are now often called? What does the Mercedes-Benz standard accounting manual say should go into this category?


mjb:

We often get compared to the independents as our competition; so let's make this comparison: If you were an independent shop and had to buy all of your parts from independent parts stores and dealers, do you charge any portion of any of your personnel to the parts stores? Obviously not!

The primary commodity that service advisors sell is LABOR. Parts are required to facilitate the sale of LABOR. If we want to split hairs and say that the advisors are your best parts salespeople; so then we should charge a portion of their expense to the parts dept; then maybe the parts dept. should get a portion of the LABOR gross, too.

The bottom line is this: Even if there are manufacturers that condone/accomodate accounting for a portion of service advisors pay in the parts dept; that does not mean that it is an accurate reflection of the true profitability of those depts. All we are really doing is an accounting shuffle that has one department partially "subsidizing" the ability of another dept. to sell its own products.

In an age where dept. managers are expected to have their own depts. stand on their own two feet from a gross profit and expense control standpoint, how you can one be expected to control one's personnel expense when they have no control over the pay plans of people from other depts. that they are helping foot the bill for?

I guess this all goes to demonstrate that "dealership accounting" and "reality" are words from two distinctly different languages and worlds.

Scot Strong

[cmizell]

I would have to agree with scotstrong I manage three imports and one domestic and if your like every other fixed operations director your watching departmental operating expense. so lets look at the numbers. if you have a service department that makes 200,000.00 a month in gross and your benchmark percentage of sales compensation is 11% that gives you a 22,000.00 payout. now, lets use fjfixedops 25% transfer of expense this means that 5,500.00 of the service sales compensation goes to the parts departments selling expenses. lets look at that,if the parts department makes 130,000.00 a month in gross
this means 4.2% of this departments sales compensation is coming from a source outside the department. so what does all this mean ?
it gives this service department 2.8% more room to work in it's total operating expenses
while squeezing the parts department 4.2% less room in it's operating expenses.
so, is it fair? well, that depands on how you pay your parts manager and flexiable you are on operating expense I'm not.

[This message has been edited by cmizell (edited 06-11-2003).]

[Mike Vogel]

Just another thought/idea. Why pay service advisor's on parts to begin with ? In reality they are selling hours available in the shop, parts come along with the ride to complete the repairs. Since most repairs today are replacement and not overhaul/rebuild techs/advisors don't have a choice in what parts are used to repair the vehicle. I currently pay my advisors on parts sales but am seriously thinking its time for a change. Anyone have any thoughts on no parts commisions for service advisors or is anyone currently doing this ?

[scotstrong]

Mike:

Just a caution here: Many stores have a significant problem with getting service advisors to notify customers of the arrival of special order parts. This only gets worse when they aren't even paid on the parts to begin with. They all too often can't see past the "no pay for parts" to realize that it also generates the LABOR that they do get paid on.

Scot Strong

[Mike Vogel]

Scot:

That has been the only thing holding us back to date but we are figuring some kind of adjustment in pay (down) based on special order parts that are not installed lets say within 30 days max. Not quite sure yet how it will work and also the legality of it but I do feel if there is no repercussions for sop not installed it could get out of hand.
Also we currently have 2 girls that do follow up survey calls, call next day appointments and also call special order parts customers the day the parts arrive to assist in getting those customers back in.