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Trader Tales: Full labour rates for internal work are outdated

Time 7:46 am, October 2, 2013

littonI AM not one of those sales managers who embodies the stereotypical conflict between the sales and after sales departments. I have worked with some great service managers who have recognised the futility of pillaging stock cars and working toward short lead times to hasten stock turn.

However, my issue is the practice of charging full retail labour rate for internal work. The concept is as old as the hills — my cynical salesman’s mind assumes it was to reduce new and used car profitability and thus commissions.

Now, two factors mean it is time for a change. Firstly, the reduction in vehicle gross profit on both new and used cars. Many commission structures work on a unitary basis, with only additional commissions available for negotiation and having no effect on profit.

Pay plans which conform to a percentage of profits are based on the effectiveness of upselling to reach OTE rates, rather than a small volume of profitable deals, or more likely large volumes of base commissions. This makes the retention of good sales people and sales managers difficult.

Secondly, and crucially, is the increased reliance of internal work to make up workshop labour and part sales. Instead of targeting retail customers with robust offers for any age of vehicle, first-time fix targets and general customer satisfaction, many after sales managers prefer the more lucrative recovery rate and increased efficiencies of routine stock vehicle jobs.

The same could be applied to the parts department. Facilitating internal sales is not enough. More parts managers should be active in the recruitment of parts salespeople, working with bodyshops and independent repairers. There is the problem of keeping a reduced lead time for internal work but night shift working or dedicated internal technicians can solve this. The solution is not simply to reduce labour rates but to introduce targets based on volume and efficiency.

I would like to see internal budgets for labour sales for both the service and sales managers. Then stepped threshold rebates based on additional volume. This would also be the case for the parts departments.

My second fundamental change would be to set financial penalties for delayed internal preparation and cars which are returned after poor repair.

These measures are enough to reward dealerships which have good operators.


James Litton's avatar

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