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Creating a Pay Plan That Impacts Sales, Compliance

July 2007, F&I and Showroom - Feature

by Becky Chernek - Also by this author

Mention pay-plan change and both dealers and business managers are likely to recoil as quickly as they would if confronting a rattlesnake. Few welcome even a discussion of this important topic. On the other hand, some brave dealers or overly zealous managers may decide their pay plan requires an adjustment and institute a passel of changes without ever conducting research to determine the outcome. Unfortunately, it’s not an all or nothing situation.

Putting full faith and trust in managers can also become the root of future problems, especially if a manager inappropriately tinkers with pay plans. Recently hired general managers who have a burning desire to add thousands to the net bottom line of the dealership by reducing pay plan benefits can be detrimental to a dealership as well, risking the loss of the company’s most valuable and experienced sales staff. So, not every pay plan needs alteration.

Why is change ever necessary? Most of us dislike change of any kind unless it is a change that puts more money in our pockets or offers other benefits. Aristotle based his thought and science entirely on the idea that “everything that moves or changes is caused to move or change by some other thing.” If this is true in business, then dealers and their managers must make a concerted effort to discuss everything — including pay plans — because they are the ones who must make the changes. Is the current pay plan working? If not, why? What changes need to be made to accomplish both the dealership’s goal of increased profits and the manager and employee goals of increased salaries and bonuses? Change can be a good thing if properly examined and initiated, especially if the changes are made for the right reasons. The key, however, is not to remain static, as not changing pay plans to meet market demands can hurt both the dealership and its staff.

Why Change?

In April 2006, Ken Thompson, an Englishman who conducts seminars in team leadership development, wrote an article on the subject of change within an organization. He stated: “When an organization or team or network seeks to bring about any form of change, it requires and expects the individuals affected to behave differently in some way.” He added that “most change is [seen as] a threat, not an opportunity. However, because most people tie up their identity with what they do, many changes are resisted if they are perceived to threaten their identity. Also, people behave in accordance with how they see the world, which is based on their experiences, skills, beliefs and values. Therefore, any required change must be in accord with this world view if it is to be sustained.”

So, why is it worthwhile to know any of this? Because in a dealership, most employees work for a universal reason: to earn a decent paycheck. The amount of this paycheck has a profound effect on their quality of life. Why do most of these employees remain in the dealership year after year? Because they view their pay plans as being fair and more than adequate. Would these loyal employees object to a change in their current pay plan if it involved only small changes, such as carrying out new processes or changing the way they perform the current ones? They would if the change reduced their current benefits.

Making Pay Plans Relative

An effective pay plan is one that rewards for superior performance and creates a positive working environment. A great finance pay plan prescribes to current market conditions and motivates every staff member to achieve excellence. If menu selling is the desired method for obtaining sales in finance, a great pay plan should reward on all products the dealer has agreed to offer. Bonus points should be applicable on target products, such as service contracts and GAP sales.

The automotive retail industry has seen countless changes in recent years, and some dealerships are having a tough time keeping up with all the trends. For instance, several products they once offered to customers are now considered taboo. Credit life and disability products were two standards on the menu. Today, these products have lost some of their appeal among customers, either because they lack the benefits they once had with customers or because the return on investment isn’t what it once was.

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