June 2008, Auto Dealer Today - WebXclusive
No matter how you cut it, the ultimate accountability will always be your bottom line. The salespeople’s paychecks are their report cards. The doc is ours. I hate to admit it, but I have made many mistakes with pay plans. I have paid through the nose for those mistakes, too. Aside from overpaying people (thinking I was an advocate to the sales staff and causing my net to be an embarrassment), I have lost good salespeople when I have had to adjust those pay plans. So, with that said, here is a plan that worked in my department.
I was the special finance director for a franchise dealership with a separate department from the main showroom. The easiest way to explain how it was set up is to say that it was a dealership inside a dealership. We had our own CRM, advertising budget, phone lines, fax, offices, etc. We usually worked by appointment only, but on a very rare occasion, a direct mail customer would walk in without an appointment. There was a staff of managers, sales staff, BDC staff and a secretary. The pay structure was much different from the front, including our pack, but our business was also different.
I had a percentage that I worked from to pay my personnel and myself. If you want to make money, you have to be willing to spend it on what you need. I loved this setup, and it kept me very sharp and on top of my expenses at all times. The managers, both desk and finance, were paid on the entire deal, front- and back-end (or, as we said, the round trip). That way, they were always maximizing the deal instead of just lining their own pockets. It was very important to make sure the management staff was highly motivated to look at the best interest of the dealership and not just work the pay plan that fit their own personal needs. It made for a very healthy, family-like environment.
The salespeople had two facets to their pay plan. First, we had a fast start bonus. This encouraged them to get their tails in gear early. It makes me insane when salespeople come off a “FAT” month and glide through the first week of the new one. It was easier to adjust the bonus plan than bang my head on my desk until the pain stopped. When they hit an assigned amount of vehicles by the 10th, they got a flat dollar amount. What a nice way for us to say, “Thanks for doing your job early.”
It got them pumped up right out of the starting gate, and it made for a nice jump on the month. We all had our goals to reach each month. You know what it feels like when the 15th rolls around and you’re already behind the 8-ball; it is a never-ending battle of the uphill climb. I wanted to do everything in my power to prevent people from chasing their tails around in tight little circles and going nowhere fast. They also liked the extra cash, too! Who wouldn’t?
The second half of this plan was based on a unit scale of 8,12,15,20, etc. It is amazing how easily you can turn a 12-car guy into a 15-car guy with this program. This is also an excellent way to make sure your sales staff doesn’t get complacent. I found out the hard way what happens when you pay on a gross scale instead of units. Can you say "ouch"? So, for the sake of numbers, let’s say the unit scale break is 20 percent to 30 percent; they hit the 30 percent. On bonus day, they would get the retroactive 10 percent if they hit the next level. It makes for a nice bonus payday when your grosses are good!
Let’s not forget the BDC staff; they got an hourly wage plus a bonus determined on if the customer showed or if they showed and bought. It kept the BDC staff very motivated to get those folks through our door. The sales team loved it and it made perfect sense for everyone. We did adjust our pack when the BDC was put in place, but the staff understood the importance of having the BDC and was willing to take the increase in pack to accommodate them.
So, in what was a special finance thunder dome, everyone left standing was in high spirits. We all knew what we had to do to be accountable for the dollars – both those given to us to work with and those we earned. The owner loved the net retention, the comptroller did not want to choke the life out of me and the team was as happy as could be!
Special Finance Insider Vol. 2, Issue 3