The Path of Least Resistance Leads to Low Profits

by: Jan Kelly

Often nature takes over and when it does, people take the path of least resistance. When they fall into this long dark pit, the profitability of the department suffers. How does the owner or senior management identify when an employee is taking the path of least resistance?

Let’s Review a Case Study
F&I percentages are down, profitability is off pace, and everyone points the finger at each other’s department as to why the current situation exists.When taking a closer look, it is discovered that the sales department is not turning every customer to F&I. It appears the F&I manager has made some previous statements about the difficulty in securing financing when a customer has negative equity in the trade, or when the loan on a trade is tied to multiple pieces of collateral.

Please note that most sales consultants will not pursue a deal when they think there is no hope of closing it. The result is the customer is invited to return to the dealership when they are in an equity position.

Diagnosis
The F&I manager seems to have become selective in the deals they choose to work on. Anyone can do the easy deals, it takes work, and some thinking outside the box to get the more challenging deals approved. Some of you may refer to this action as “Cherry Picking” on the part of the F&I manager.

This same manager seems to scoff at new products, finding every excuse why not to add it to the presentation.

Be mindful that people only sell what they have faith in, what they are compensated for, and most desire high profitability with low aggravation. With companies closing, some of the products and policies that were once sold will provide some aggravation. A best practice is to jump in early and do what you can to keep the customer happy and save the relationship. The answer is to work through the situation, not stop selling. Remember, life happens to everyone, we really have no guarantees.

As I counsel new hires into the world of F&I, this position is not for the faint of heart. It is not easy, it is taxing, brain draining, and at times frustrating. Yet that being said, every deal is different, it is like putting a different puzzle together every day. Yes, you are selling the same products, and the customers are buying different things the products can do. F&I is a unique position for those who thrive on working with the unknown. The world of F&I is filled with possibilities. It is the job of the F&I manager to find those possibilities and work them until they become a deal or they have exhausted every avenue.

Solution: Attitude Adjustment
While some of you reading this may have an opinion to rotate managers, say “Adios,” cast off the old, bring in the new, remember you have time and money invested in this particular manager. For better or worse this manager knows your culture and system. Additionally, it is always a plus saving someone than replacing them. Think where will you be if the manager is invited to complain elsewhere?

Step 1: Have a meeting and point out that there will be 100 percent turn over to the F&I department, no exceptions. Remind the manager(s) that the sales consultants’ job is to sell the unit to the customer. It is the job of the sales manager and F&I manager to find a way to honestly and ethically secure funding. Perhaps even senior management might get involved, if the circumstances of the deal are really difficult. Many hands make light work, and more than one pair of eyes looking at the facts of a deal can often be the magic to identify a way to get the deal done.

Step 2: Listen to the F&I presentation. Tape it, film it, do something so that the F&I manager and you can play it back and listen to the words. Then ask the following questions:

• How is the value being presented in the products?
• Are the needs identified before the presentation of the solutions? (Solutions = your products or services)
• Are the products being presented as a solution from the customer’s point of view?
• Is the F&I manager using the word “I”? i.e.: “I think, I bought, I would do…” Please note, the word “I” makes customers stop listening.

Step 3: Ask you vendors to provide copies of claims that have been paid. The F&I manager should update their proof statements books at least once a year if not semiannually. Viewing the paid claims will renew the F&I manager’s faith in the products and services being sold.

Step 4: When was the last time the F&I manager was out of the dealership for some education and motivation? They need to get away from the daily routine at least once every 18 months for a few days.

Recently a dealer told me, “Jan, my F&I manager has 15 plus years experience, he does not need to attend any training. Most likely he could train the participants...” Yet the F&I manager has a 15 percent closing ratio on service contracts and takes up to 2 hours to close a deal. The F&I manager works with a sales department that is wondering why he is employed.

What this dealer is thinking about is his expenses; he does not want to spend any money on improving the situation.While he is not happy with the performance, he will not do anything to improve the situation. Mean time the days tick by, sales are lost, and revenue potential is not realized. The atmosphere between F&I and the sales department remains toxic.

Step 5: A pay plan change might be in order. F&I managers are pay plan driven employees. The pay plan will tell the F&I manager what products the dealer wants sold, in addition to the order of importance to the dealer. An annual review of the performance and pay plan is always sound counsel.

F&I is often a department of one, that manages no one, yet answers to everyone. They need exposure to ideas, different processes, and sometimes a little motivation.

Not every deal will get approved, but every deal must be worked as if there is a chance of approval. The sales personnel must see the F&I manager making every effort to make the deal happen, otherwise the sales personnel begin to cherry pick the customers, and the F&I manager begins to cherry pick the deals. The result is lost deals, and lost revenue.

In these times, every dealership needs every department to maximize their efforts and work together to make every opportunity happen. This is a time of action, not settling.