To Commission or Not To Commission By RD Hopper
T
RD Hopper is the owner of Sonny’s Auto Salvage in Jacksonville, AK, the company he and his wife Jennifer bought in 1998. Hopper is also a past president of the ARA.
o commission or not to commission, that is the question. This was the most popular debate among recyclers when I was traveling around the country as president of ARA. I loved to watch this debate. As they say, it
made for good entertainment. I have learned a lot from people on both sides of this issue. In my opinion, there is no right or wrong answer. A business can be run in a professional and profitable manner using either method or with a hybrid of the two. This is already getting controversial!
Making a Decision We would all like a simple “to-be-or-not-to-be” black and white answer. Personal experience tells us that we must consider our strengths and weaknesses when making these kinds of decisions. It can also help to find other people who have similar busi- nesses and draw ideas from each of them to come up with a game plan that will fit the current needs and future goals of your organization. Being willing to try different things and mea- sure the results is critical to growth and to meeting future challenges. The question of the best way to pay each department comes down to the personality of you and your team. Do you tend to focus on quality, and not have enough production to cover over- head? Or, do you tend to emphasize production, but have a high return rate due to poor quality? When dismantlers are paid on 100% commission, they have a tendency to sacrifice quality for quantity because they are paid per vehicle, not per hour. To counteract this tendency, uniform processes must be put in place to ensure a consistent quality, as well as quan- tity, is produced. When dismantlers are not on commis- sion, quality is not as big of a problem as is the rate of production.
It is a Numbers Game Regardless of how they are paid, before we beat up dismantlers for issues, we must be sure we are doing our part to support them. What do we know for sure? Number one, the profit on the cars we run through our factory must cover the lion’s share of the overhead necessary to pay the bills. Number two, the quality and reliability of the parts we sell must satisfy the expectations of our customers or they will choose another alternative, whoever or what- ever that may be. To make these two things happen and give dismantling the tools they need to play their part, we must think in terms of buying sales instead of vehicles and we must know our numbers. What is our sales goal each month? This should be a well thought out number. What percentage of our sales come from our dismantled vehi- cles? What is our cost of goods? How much overhead must our vehicles cover monthly? How many sales do I need to buy each month? How many sales does dismantling need to dismantle each month to cover the cost of inventory and overhead? Only when we know these numbers, can we know if dismantling is meeting sales and production goals profitably.
Either/Or?
Regardless of how they are paid, before we beat up dismantlers for issues, we must be sure we are doing our part to support them.
Paying by commission is not an either/or proposition. Two of the people in our industry that I respect the most are on complete opposite ends of the spectrum on this issue. They each have totally different approaches to managing their teams and their businesses. They have two totally different ways to come up with the same result; two different ways to be very successful in providing for their team and their families. Each have given back immensely to this industry and their communi- ties. Through sleepless nights, much blood, sweat, and tears, they both found a way to succeed! The question is are we going to put in the time and effort to do the same? Are we going to experiment,
If your strong point is quality control, then straight commission might be the right fit for your company because it will increase production. If you focus primarily on production, but you have a problem with quality con- trol then paying by some other method than commission might work best for your company. You must play to your strengths, and by doing this, it will give you a better understanding of how to deal with your weaknesses and improve the production process overall.
46 // May-June 2021
measure results, and find the right combination for suc- cess just as they did or are we going to take the path of least resistance? We as business owners, managers, and team members do not have control over many of the things that affect our business every day. On top of that, we can put ourselves out of business in a thousand dif- ferent ways. Determine not to allow that to happen and be open to new ideas, experimentation, and yes, even fail- ures that cause us to regroup and try another approach. Don’t be afraid of change and see it as adversity. Look at it as an opportunity to grow, improve your business, and adapt in our ever-changing industry.
Automotive Recycling
PERFORMANCE
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