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Case Study: Parts Department Pay Plans

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In the May issue of Fixed Ops Business, we will take a look at one parts department’s decision in choosing between a segmented parts staff or a single parts team serving all segments. There are numerous schools of thought regarding staffing—and just as many approaches to pay plans in the parts department, whether it’s salary, commision or team-based. One parts director explains his decision to change his department’s pay plan and the impact it’s had since.

The Problem: J.D. Ipsen joined Ken Garff West Valley as parts director six years ago, where he manages 23 employees doing 60 percent wholesale work at the Dodge, Chrysler, Jeep, Ram dealership in West Valley City, Utah. At that time, parts department employees were paid strictly on individual commission, and Ipsen says it caused a lack of cohesiveness throughout the department.

“You’ve lost the customer,” he says. “You’re more of an order taker. You do as much as you can because that’s how you get your paycheck. I don’t think you’re giving the customer a fair shake. You’re not taking the time to say, ‘That’s probably not your problem’ or ‘You probably need more parts than that’ because you never have time. You’re looking over your shoulder expecting someone to come steal your sale.”

Besides a culture problem—which Ipsen says caused some longtime employees to contemplate leaving—the department was also losing thousands of dollars every month, leaving Ipsen in a position where he says a major overhaul needed to occur.

The Solution: Ipsen had worked at other dealerships where the pay plan of choice was salary plus a group commission, and he says it always worked effectively. While he was sure of the benefits, he says convincing the dealership general manager and controller was more challenging than anticipated. In particular, Ipsen says the higher-ups questioned what would motivate staff to sell more if they were always getting paid.

“I said I would rather manage one or two people that have a problem and tell them that they need to get on board or they don’t have a job, than try to manage a dozen-plus people going in their own direction,” he says.

With their permission, Ipsen made the switch to a new pay plan six years ago. While the parts department is still set up in a traditional sense—employees sit at the shop counter, retail counter and several answer the wholesale phones—the phones now ring throughout the department.

“When someone sees the phone ringing and they’re not doing anything, they’re expected to pick it up,” he says. “Now, if one of the wholesale guys isn’t doing anything and they see a line of techs, they’re expected to dive in and help out. If it’s not doing what they normally do, they’re making money while someone else is selling the part.”

The Aftermath: The sense of camaraderie is the biggest benefit of the new pay plan, Ipsen says: All employees know that if they don’t get to a phone call in time, someone else will take care of the customer and it will benefit everyone in the department.

“They know they can go to lunch and the person behind them is going to pick up any phone calls while they’re gone. It’s not one guy’s responsibility,” he says. “You can go kick your feet up for an hour for lunch, come back and you didn’t miss out a beat or lose out on money.”

Allowing more time for customer interactions and putting the focus on building relationships during the selling process has also paid dividends when it comes to profitability. Ipsen says the department has reversed the previous downward trend and is now netting millions of dollars throughout the year.

 

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