If you ask 10 service managers to define the perfect pay plan for service advisors, you will get ten different answers. Few topics stir the emotions of management and employees more than that of personal income.
Over the years, I have worked with thousands of dealership personnel. I’ve gotten an earful on this subject from both sides. It basically comes down to this: the advisors complain that just when they start making good money they get the rug yanked out from under them. Management, on the other hand, is always looking for ways to cut expenses…and personnel costs are always the number one expense.
In the automotive industry, and in most other business ventures, money is used to influence behavior. Personally, I think that is a good thing.
I have heard countless managers complain that, “My advisors are constantly working their pay plan.” They say this as if it was somehow bad for the dealership. If you have put a solid pay plan in place, then the more your advisors “work the plan,” the more successful you are going to be.
I personally oversee a sales staff of 25 automotive professionals that serve dealerships in Oklahoma, the Texas panhandle and metro Houston. My company set up a pay plan over 30 years ago and we have never changed it. I want my guys to “work their pay plan.” The more they “work it,” the higher our sales. The more they “work it,” the more money they make. It is a winning proposition for everyone.
Many top notch service managers and advisors have found the only way they can get a raise is to go to work at a different dealership. This is tragic. I think this is one of the primary reasons there is a revolving door on so many service department office doors.
Don’t get me wrong, there are some people that need to be shown the door. If someone isn’t pulling their own weight, if they aren’t producing the numbers, if they can’t get along with the customers, then obviously, they need to go. I just hate to see good people leave because of an ever-changing pay plan.
One argument I’ve heard to justify changing the pay plan is that it keeps things fresh and provides renewed motivation. I believe it is far better to leave the pay plan alone and create excitement with incentives, spiffs and promotions.
So, what is the best pay plan? Rather than get specific, in the interest of space, let me give you a few observations. The top performing dealerships are set up so that at least 80% of the compensation for advisors is based on production. The primary objective of a service advisor, item number one on their job description, is to sell service. The service drive should actually be seen as the service “sales floor.” The service department is, first and foremost, a sales organization.
Therefore, you should reward sales performance. The more they sell, the more they should make. There should not be a ceiling on how much money a good advisor or service manager can make.
Some of you are shaking your head right now thinking, “No way!” You are thinking if you implement this strategy the advisors will get pushy, over sell and abuse the system. A small percentage of advisors will probably try, but that’s why you need a strong management team. The best service advisor I have ever known was a powerful sales producer. He had a high CSI, incredible customer loyalty and the techs loved him. His service manager said sometimes this advisor would get a little too aggressive and the manager would have to do a little damage control. “I get three or four heat-cases per year because of him,” the service manager said, “but hey, it’s worth it!”
I’d rather have a strong producer on the drive, with a strong manager, than have a wimp that only knows how to write up orders.
An advisor making a six figure income is producing incredible revenue for the parts and service departments while generating significant labor hours for the technicians. Everyone wins.
I cringe whenever I hear an executive level manager say of his people, “They’re making too much money.” Another often repeated phrase is, “The position is only worth this much money.” These statements are usually followed by a massive restructuring of the compensation package, which is typically detrimental to the employees, and ultimately detrimental to the dealership.
In 2008, one of my clients, a rural Ford dealership, had service absorption of 68%. Their advisors were paid a salary of $48,000 annually. In 2009 they adopted the concept of production-based pay with no limits on income.
That year the advisors earned over $70,000 and service absorption was 99%. RO count, customer retention, dollars per RO and service gross all increased along with the absorption.
Let’s face it, money motivates people. You want more revenue produced today than was produced yesterday, don’t you? When will it be enough? It will never be enough. That’s what capitalism is all about; it is one of the primary reasons you are in the automotive business: the harder you work, the more money you make.
The Bible says it best, “Don’t muzzle the ox as it is treading out the grain (I Corinthians 9:9).” In other words, let the employees reap an unlimited harvest and enjoy partaking in the fruits of their labor. Mr. Manager, “Take the lid off the jar,” and let your personnel reach their maximum earning potential. When you do, you’ll see an increase in employee morale, an increase in customer satisfaction and an increase in dealership profitability.