Jim and I really rocked and rolled, as we continued to build the dealership to a record month. We sold 256 vehicles and averaged over $3,000 per copy! Both of us were on performance-driven pay plans, so the more the dealership made, the more we both made. We were ecstatic about this incredible month, especially as we would both benefit personally just as the dealership benefited.
A few days into the next month, I was called in to the dealer’s office, where the dealer and GM congratulated me on the terrific month, then asked the question: “Do you realize how much money you made last month?”
Well, of course I did because I kept impeccable records and always knew how much I was making. They informed me that they thought I had made too much!! Remember, this was a strictly performance based plan, but now we had apparently over performed!! Then came those words I mentioned earlier: “We are going to change your pay plan!”
Ziegler had the exact same meeting with the dealer and GM, and that was the last day either of us worked in that dealership. The dealership lost two of their best managers that day because they didn’t want to continue to pay for overachievers.
My point with this story is that you need to be prepared for extraordinary performance. In fact, you should want to pay big commissions (if you have your people on the right pay plans).
If you want to get the most out of your sales team, you have to motivate them with compensation. I do not have a perfect pay plan that works for everyone because every dealership is different and you need to look after your people accordingly. You cannot have the same pay plan for a sales manager whose team sells 300 vehicles a month as a sales manager whose team sells 50 a month.
To determine whether a review of your pay plans may be needed, consider the following criteria:
1. Your people should earn more as the dealership earns more.
2. Their earnings should be commensurate with the amount of money they earn for the dealership. A set amount per vehicle sold matches the first criteria, but not necessarily the second.
3. If they are selling 18 or more vehicles a month, every month, they should not be able to do the same elsewhere and make more money.
4. If your managers look after a team of quality salespeople who consistently perform, they should not be able to do the same elsewhere and make more money.
5. You should have bonus programs for overachievers, not for the average.
To finish, here are just a couple of examples of effective performance-driven pay plans:
Salespeople should make a percentage of the gross profit (both front and back) that increases as the volume increases. For example:
| 0-15 units
| 10-14 units
| 15-18 units
| 18-25 units
| 25+ unts
These percentages need to be retroactive. This means that in order for the big volume salesperson to make real money, he/she has to gross more for the dealership.
Sales managers and F&I managers should make a percentage of the gross profit (both front and back) that increases as volume increases. This will vary a great deal according to the size of your dealership. Figure out how much the job is worth; then work out what percentage of the gross profit you are currently doing that figure equates to. Then, as your dealership makes more, the manager is compensated accordingly. This percentage will normally range from 3 percent to 10 percent.
If you feel you need to re-vamp some, or all, of your pay plans, spend time to make sure you get it right for all parties. Do your calculations, using “what if” scenarios. You need to be comfortable with pay plans that could make your employees more than they have ever made before as long as that means your dealership makes more.
Vol 5, Issue 8