Your Pay Plan Is Driving Talent Away

According to a WardsAuto survey of dealers, retaining talent is their No. 1 challenge right now, with 45% of dealers choosing “personnel/turnover” as one of the top three issues that keeps them up at night.

With good reason. The average turnover among salespeople is 80%, according to NADA’s 2018 Dealership Workforce Study, and the average turnover among female sales consultants is an astounding 106%! (No, that is not a typo.) With unemployment at the lowest rate we have seen in nearly 50 years, it’s getting more difficult to attract and retain top talent.

If your store is suffering from a talent train, look no further than your outdated pay plan. The average starting salary for a college graduate is more than $50,000. For them, having a steady and reliable income is critical, because they start out their career averaging over $37,000 in student debt. What does your dealership offer entry-level salespeople with no experience? If your only answer is “commission,” you are going to struggle to compete.

The trend toward salaried salespeople is well underway. If you haven’t yet considered moving to a base-salary pay plan, now is the time. Here are a few compelling reasons why.

1. People Aren’t Motivated by Commissions.

The auto business has historically relied on commissions to motivate salespeople. As a result, many principals and senior managers still hold the old-school belief that this pay plan is best. But just because you were once motivated by commissions doesn’t mean that the majority of people are — nor are commissions your only path to profitability.

When AutoNation introduced Pay Plan Plus, 70% of its salespeople opted for the plan with a base salary plus bonuses. The fact is, most people would rather make a guaranteed salary of $50,000 with the potential for bonuses up to $80,000 than stay on a commission-only plan with the remote potential to earn over $100,000.

So if commissions don’t motivate salespeople, what does? The O.C. Tanner Institute conducted a survey and asked the question “What Motivates You?” Here are the results:

• Recognize me: 37%
• Nothing, I’m self-motivated: 13%
• Inspire me: 12%
• Give me autonomy: 12%
• Pay me more: 7%
• Train me: 6%
• Give me a promotion: 4%

As you can see, recognition, inspiration and autonomy are all important motivators. This is particularly true for millennials, who now make up 61% of the dealership workforce and have a disproportionately high turnover rate of 60%. Only 13% of respondents said they were self-motivated, but you can’t afford to have just one out of 10 people maintain the energy level they brought to your store.

The best way to motivate your employees is to build a workplace culture with a mission, a vision, and a set of core values your employees can buy into and feel proud of. They need a sense of purpose and to know they will be recognized when they hit their goals or demonstrate behaviors that are in accordance with your core values. For dealers, it’s important to note that commission is a form of earned wages, not a means of recognition.

2. Transparency in Pay Is Increasing.

Let’s face it: Car dealers continue to face difficulties in hiring talented workers because we still have to struggle with a historically negative perception of salespeople. Green peas tend to come in with their senses heightened, looking for shady practices. One area where dealers inadvertently validate their fears is with pay.

Only 14% of car salespeople earn more than $100,000 a year, yet I would bet that more than half of dealer employment ads promote the potential to make more than $100,000 a year. If your ads include that line, and your average salesperson is only making $60,000 a year, you are not being truthful.

Is it any wonder that sales turnover is so high when someone is hired and quickly discovers that it could take years of hard work and long hours to earn $100,000?

It’s also important to realize that younger workers today discuss salaries amongst themselves quite freely. It’s no longer a taboo subject like it was with previous generations.

3. Accountability Is the True Path to Profitability.

You hire accounting personnel. You pay them a salary and, if they don’t do their job, you let them go, right?

It’s the same with salespeople. Pay them a salary, expect them to sell a minimum of 10 cars per month — or however many units will prevent you from losing money — and if they can’t meet this expectation, you let them go.

Of course, this only works if you have strong sales leaders who know how to set performance benchmarks, motivate their teams, and provide training to lagging team members.

One of the biggest problems that dealerships have is the “sink or swim” mentality that has long dominated the sales profession. Salespeople are hired and, if they make it, great. If they don’t, well, it was nice knowing you.

The reason why this attitude is prevalent is because dealers tend to promote their best salespeople into management. These people know how to sell, but they don’t necessarily have the leadership skills required to hire, train, and motivate a sales force.

Your best salespeople should only be promoted if they demonstrate the skills necessary to be a good leader. If they don’t have the skills, offer to send them to a leadership training program. You could even create your own management mentorship program. Make sure the salesperson you’re promoting is committed to learning these skills. They are critical to their development into an effective leader.

If your dealership still offers a commission-based pay plan for salespeople, you might want to rethink how this is affecting your bottom line. If personnel and turnover issues are keeping you up at night, it’s time to make a change.

Dave Druzynski serves as chief people officer for Auto/Mate Dealership Systems. Contact him at [email protected].