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H Gregory Gershman

H Gregory Gershman Managing Partner

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Don't let your dealership become a welfare state

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One of the hottest topics in the Automotive Industry is compensation.  What promotes productivity and retention?  

Should it be a Tea Party approach of minimal government and complete free market, which is commission or flat rate only positions coupled with a completely open floor?  Many are advocating a left leaning socialist solution, with salary positions, closed rotating showroom floor traffic management, and managers finalizing all sales.  I think the former is actually the more dangerous of these options.

Don't let your dealership get sucked into becoming a welfare state!  There is a better answer.  It all revolves around a psychological truism for all people.

A person will be productive as long as they feel their energy will receive an acceptable immediate guaranteed return and they have a positive view of success in the future.  

Let's relate that to compensation.  An employee will not show the proper motivation to work without a guarantee of income.  The answer in the Automotive Industry has been a draw to protect a worker, and guarantee they have an earning for the time they work.  Giving an employee a draw does guarantee an income, but it lowers the perception of future success.  What happens when an employee has to take advantage of the draw?  They owe it back against future earnings.  This creates a cycle of poor sales, where an employee feels there is no point to attempting to succeed because they will only owe the employer their future gain anyway.  Here is a case of giving away welfare that creates a negative atmosphere.

There is the other end of the spectrum, giving an almost total salary based plan.  Some dealerships are adopting this, and you can find an article a day on social media claiming Millennials will be attracted to your store if you pay the majority of their income in salary.  This does give the employee a guarantee of pay for giving time.  There is a gigantic hole in the theory!  These primarily salary positions come with a reduction in financial responsibility to the store, most times a manager is both providing traffic and closing the deals.  The future available income is minimal.  You end up with a complacent employee, with no positive outlook on future income, and getting paid more than the employee with the draw to do less.  More welfare, more problems!

It is time for a true work and produce for pay solution.  Give your staff an hourly wage that pays them for what they do besides selling cars.  If your sales staff does nothing else, than you shouldn't have them working at your store!  They should merchandise, market, prospect for sales and service, spend time on product knowledge, and provide customer service to any and all clients that walk through your door.  Pay your staff the going rate in your market for a presentable person to perform those tasks.  If you can hire someone at $11 per hour for this job description then pay your sales staff that.  Don't turn your store into a welfare state, make your staff actually perform the work to get paid.

Now choose either a commission or flat bonus based plan to compensate for sales and follow up.  If you want your sales staff to have the eager edge to sell you need to have a reasonable carrot.  This can be 10% of the gross, or $175 per car.  Provide enough upside that an employee is excited about the future earning prospect.  Again make them earn it.  Have a set of standards that make a payable sale.  Having a salesperson give terrible customer service, never follow up, just happen to be the person on record and still paying them is giving welfare!

The more welfare your business doles out, the lower the production and morale of the staff.  We need to evolve to a compensation model that pays our workers for their time, effort, and production.  You will find engaged hard working employees, and the best talent in your market applying to work at your store.

H Gregory Gershman - Managing Partner - Recruitment HQ

Alex Lau
Yes, but the decision makers probably don't have the time to read this article. :-)
H Gregory Gershman
Lol, have to get good insight to grow.
Alex Lau
Hey, I get it. Pay your people well and they shall stick around and be happy. Losing employees, especially to competition will end up costing you more, in the long run.
David Hatch
$11.00 Bucks an Hour won't keep good Sales People.
H Gregory Gershman
David, you are right. Dealers need to pay commission or bonus on top of an hourly wage.

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