Trust but Verify

Increasing F&I Performance

During the Reagan administration, the Cold War struggle between the U.S. and the Soviet Union was best characterized by the phrase, “Trust but verify.” Peter Drucker’s underlying management philosophy was that you cannot change what you do not measure. Both principles exemplify the critical importance of first establishing and then defining standards. This must then be followed by implementing a system of checks and balances.

The practices of reviewing deal jackets on a regular basis (once a month at minimum, once a week is preferred), analyzing production reports, and conducting daily managers’ save-a-deal meetings continue to be the gold standards for our industry.

So this begs the question, why do so few dealerships conduct all three?

In addressing performance issues (low product penetrations and/or PVR), the first area to examine lies in the question of whether these are “knowing” or “doing” issues. While some dealerships voluntarily videotape all F&I presentations, most still do not. So how can you “trust but verify” that your process is being adhered to by the F&I department?

On a recent visit to a dealership group with 12 F&I producers, a video camera was used to record the presentations of each manager. The results were most interesting. The individuals who could present the menu and products in the manner previously established by the company were also the top producers. Managers who knew the presentation were much more effective than those who did not.

Product providers identified this dynamic more than 20 years ago, yet many managers believe they know better and just try to wing it. The liability alone makes this practice both dangerous and counterproductive.

Verification of adherence to the process starts first with establishing the standards for the presentation itself. Does everyone in your dealership or group present the same menu template? Does the mix of products change by person and location? Are the markups consistent across the product offerings? Pull some deal jackets. You may be surprised to realize the amount of variation that exists.

When examining your production reports for F&I, how do you integrate the sales department’s influence on the process?

Here are some items to consider: When was the last time you ran a report from your DMS for average cash down? The additional dollars will clearly help with both approvals and product penetrations. What is your goal for money down? Have you established a target and then created a system of rewards and consequences that correlate to the target?

Do your salespeople ask, “What would you like to put down today?” Or perhaps, “Were you planning on putting any money down today?” Instead they should state, “The majority of finance companies would like to see as much as 20 percent cash down for premium and preferred financial programs. In your case we would like to see X dollars.”

Daily managers-only save-a-deal meetings are critical to maintaining a low CIT, high PVR and high product penetrations. Sales managers must be aware of how their actions and the actions of their salespeople are impacting each deal before they enter the F&I office. Conversely, a payment-in, payment-out discussion must take place during the review of the previous day’s deliveries to examine the results for product sales and finance revenue.

The last area to monitor is the total of F&I product sales by salesperson. A report should be created that monitors each salesperson’s average cash down, front and back gross, as well finance and product penetrations. On a weekly basis, your F&I manager should review the status and ranking of each salesperson to identify opportunities for improvement. Offering a small incentive, like a $100 gift card, to the top person can go a long way to gaining some cooperation from your salespeople.

Establishing these standards and monitoring results at regular intervals will ensure your success throughout the year.

Good luck and good selling!

Vol. 7, Issue 3