From Unconscious Incompetence To Unconscious Competence In F&I – Measuring The Path of F&I Performance From Poor To Outstanding

By Myril Shaw - Dealer Profit Services

While it is easy to become offended when someone starts talking about your "Competence", in this context it is a highly effective measure based on a widely used model – and it is not personal.  In fact, the personal part is that this model can drive unbelievable growth in your F&I success in a highly measurable and replicable way.

So – this is not insulting – it is profitable.

Scientists say that it takes 66 days to turn a new behavior into a habit.

In Psychology, in training, and in business there is a theory which is widely referred to as the "Conscious Competence Theory Of Learning A New Skill". 

From a visual and basic understanding perspective, the following image presents the stages of development:

The image above accurately depicts all the stages involved in-process and result in understanding, path to improvement and achievement.  It shows all the types of "pre-understanding" emotion, through the process of understanding, learning, mastery and complete incorporation.

Now, imagine applying this model to your F&I – and further imagine that there are three distinct areas within F&I, each with their own set of measurables (and so "manageable") – and finally, each of these can be viewed from the lense of Competence growth.

Stop imagining! 

There are F&I Profit and Profit Drivers.  These are:

·      Cost of F&I including but not limited to: salaries and other processing personnel expenses, bureau pulls, filing cabinets, shredders, and other compliance costs, paper and supplies, floor space, etc.

·      Gross F&I Profit on Amount Financed

·      Gross F&I Profit on Unit Sales

·      Protective Product penetration rates on financed units sold

·      Protective Product penetration rates on cash units sold

·      F&I results reviewed and accepted as "good" by disinterested and respected industry observers (being viewed and measure externally provides need perspective – this can include 20 Groups, MRAA, Boating Industry, and others)

Three specific areas of measurement among these are:

·      Cost of F&I – 25% of F&I Gross Profit or less

·      Gross F&I Profit as a Percent of F&I Profit – 8% or more

·      Protective Product Penetration Rate on Financed Deals – 65% or more

The Competence Model helps measure and track your growth through these measures.

There are F&I Processes.  These are:

·      Number of deals being turned over to F&I (finance and cash)

o   There must be a simple and well-defined process to make turnover easy

·      F&I Personnel availability

·      Service level commitments and are honored in the F&I Process

o   Rapid indicators of  customer qualification

o   Immediate customer conversations concerning financing once a credit application has been submitted

o   Time to prepare contract after customer approval and acceptance

o   Length of time to resolve funding delays

·      Frequency of automatic reviews and feedback on every deal

A few sample  areas of measurement are

·      Turnover to F&I – 85% or more of all deals

·      Are F&I Personnel Available During Sales Time – Yes in virtually all cases

·      Automatic Success Review on Every Deal – Yes over 99% of the time

 Once again, the Competence Model makes all processes completely measurable.

Finally, there is F&I Compliance (boring, I know – but failure here can be fatal).  There are measurable here too:

·      Number of Credit Applications processed by unknown third party

·      Compliance officer in place

·      Compliance manuals bound, signed and in place

o   Red Flags Rule

o   Disposal Policies

o   OFAC Policies

o   Safeguard Rule Policies

o   USA Patriot Act Policies

·      Initial compliance training complete

·      Ongoing compliance training available

While, as with all of the above, every one of these elements is measurable, some interesting ones are:

·      Understanding of external application processors – None

·      Compliance Officer Named – Yes

·      All Compliance Documents printed, bound and signed by Compliance Officer – Yes

·      Annual Compliance Training plan in place – Yes

Once you are measuring all of these F&I elements against specific targets (and these targets are clear in the Competence Model), it becomes easy to see the areas needing improvement are focus attention them.

The is a much more detailed White Paper describing all of this available – just click here for the White Paper.  Even better, there is a Competence Level Report Card available online (it is easy, you can pause and resume, and in addition to seeing your specific results online, you can have them emailed to you.)

Grow your F&I Competence – GROW YOUR F&I PROFITS!

When Is Good Enough Not Good Enough For Your F&I Results – When It IS Worth Rocking The Boat To Improve Your Profit, Process and Protection!

By Myril Shaw - Dealer Profit Services


It is remarkable how often Dealers settle for "good enough".  Their comments go something like this:

·      Our results last year (or over the last six months) have been good (or good enough)

o   This description by itself says that the results were not great and could have been better

·      We don't think that it is worth "rocking the boat"

o   This means that change is scarier than improvement – while self-protective, this is pretty far off the path of continual improvement

·      The way we are doing things is okay – or – everyone is comfortable with the way things are going

o   This means that the process could be better and that comfort trumps excellence

·      I'm pretty sure that we are in compliance

o   This means that compliance has been thought about, probably, and that while the rules are unclear, the current position is good enough

You see where this is going.  Good enough is interesting, but is it really good enough?

Are you satisfied with where you are - really?  Are you content saying that continuous improvement is not a goal?  Are you satisfied that your processes are the best they could be?  Are you truly convinced that you are in compliance?  Are you really willing to say that your store is as good as it can be because you don't want to take the steps, and the risks, to make it better?

Yes, all improvement comes with risk – that is why it is called risk and reward.  What happens when your improvement attempts don't work out?  Well, there is a stumble – then you get up and make things even better.

Settling for good enough is settling for failing.  Remember, if you are not growing you are dying!

So, to the heart of the issue, how do you know if you are even good enough?

You are not good enough if any of the following are false:

·      You are making 7.5% Gross F&I Profit on the Amount Financed and/or are making 5.7% Net F&I Profit on the Amount Financed

·      You are making 2.7% Gross F&I Profit on the Amount Financed and/or are making 2.0% Net F&I Profit on Unit Sales

·      You are contracting 55% of all Finance applicants

·      You are turning over 100% of all buyers to your Finance Manager/Business Manager/Delivery Coordinator prior to finalizing any sale

·      You are reviewing performance on every deal – including communications and results

·      You have five (5) compliance manuals in each store (Red Flags, Disposal, OFAC, Patriot Act and Safeguard Rule), you have a Compliance Manager who has been trained and you have training capabilities

So…are you really good enough?

Continual improvement is not easy…it is necessary for survival.  Once you decide that you are good enough, especially when you are below the guidelines presented above, this is the clear indication that your future is bleak at best.

You can be your best…you should be your best…you should continually seek ways to improve and you should hold your vendors to the same level.

Good enough is not good enough…continual improvement without fear is the way to lead your organization!