When negotiating with car companies in the 1950s, the late Walter Reuther, United Auto Workers president at the time, called on management to “open the books.”
He believed that if management shared financial information with employees, those employees would better understand the company's position and possibly even help find solutions.
If a parts department is to be profitable and successful in this competitive market, the dealer should make financial information available to the parts manager who, in turn, should discuss it with employees.
By doing so, employees will gain a better understanding of, for example, how wages and expenses affect the business. Problems will be better understood and more fully discussed, leading to better solutions.
Opening the financial books to employees does not mean merely showing them the numbers. It also means everyone, from the owner on down, understands and shares responsibility for those numbers.
Employees are expected to think and act as if they are partners in the business rather than only hired hands. Everyone should have a stake in the success or failure of the dealership, and it should be reflected in bonuses, profit sharing or some other ways tied to how employees are paid. Employees like to be involved. When they are, they are more likely to go the extra mile.
To the parts manager in particular, financial information, specifically the profit and loss (income) statement, is an essential management tools needed for informed decision-making. In fact, for the parts manager, two of the most important pieces of information are the financials and the dealer management system's month-end departmental report.
With these two management tools, the parts manager can extract much performance information about his or her operation. Many of the calculations the parts manager must make to analyze operational performance, not to mention trend analysis, relies on information contained in the financials and DMS management report. No doubt the other dealership managers would agree and benefit from the same information concerning their departments.
Unfortunately, for many dealerships, old habits are hard to break. For some dealers, it is difficult to share responsibility and to give up control. For others, the dealership expenses may not be fairly apportioned among departments, or upper management is hiding something they don't want the department managers to know, leading to restrictions on the distribution of the financials.
Dubious practices concerning the dealership financials notwithstanding, when the the financial information is made available, the results can be positive and profitable.
This point is illustrated in the following case history, based on one of my dealership consultations:
The parts manager and counterpersons were paid bonuses on the department's net profit. But when the income statement was completed at the end of the month, the parts manager received only sales, gross profit and net profit figures. The dealer principal felt that was enough to provide.
The parts manager thought he should get the whole statement, including expenses, because he was responsible for controlling those and for the overall performance of his department, not to mention being paid from the bottom line.
Finally, after some coaxing by me, the dealer principal agreed to give a copy of the entire statement to the parts manager. He promptly shared all information with department personnel on a monthly basis.
Three months later, without significantly increasing sales, the manager and his team had increased the net profit by 2%. Working together, they identified some expenses that they thought could be reduced without adversely affecting the department's performance. They were right.
Gary Naples is a parts consultant to dealers and manufacturers. He's authored two books on parts management. He's at 570-824-1528/[email protected].