CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
It's very easy to get caught up in the short term: the end of the day, the end of the week, the end of the month, even the end of this quarter. But this short term focus is just that-- short term. Do you want your business to exist just until the end of the week, the month or the quarter? Of course not! Then why would you focus and direct your time and resources over such a short period of time? Short term focus creates long term difficulties in all areas.
For example, let's think about compensation plans. Do they offer any long term benefit to help motivate your employees to stay, or are they merely one time, at the time of sale compensation? A good sales person can probably make as much, if not more, money at a dealership other than your own, at any time. And we all know that employee turn-over is a big issue in our industry. Why not structure a pay plan with a long term component in the compensation? Certainly the sales person should receive the majority of their compensation at the time of sale, but you can also tie a portion of to annual or semi-annual milestones. What if they receive, for example:
1. 5% of their total sales commissions at the end of their first year? Let's say that their total commission for the year was $50,000, then they would have a check for $2,500.00 waiting for them at the end of the year. Assuming you don't have a really terrible work environment, a check like that is enough to help motivate most folks to stick around.
2. Let's say your regular sales commission is 25%. I would start the commission at 22.5 % and allocate an additional 2.50 % towards the sales person's longevity pool, with the condition that sales person completes his 12th month of service at the dealership. Then he will receive that additional 2.50 % on the 13th month's commission check. And once he has achieved that 13th month, on the 14th month sales person will receive his 2nd month's longevity 2.5% and so forth. Once a sales person achieves that every month, he or she will be receiving the additional 2.5 % carrying over from 12 months ago. This should be understood that at anytime salesperson leaves the organization there is no money accrued for him and that this was simply a bonus for the current 12th month's cycle.
Smart dealers (or any successful business people) take the long view and let it guide their short term decisions and activities. Take time to think about your dealership and the industry a year from now, two years from now, even five years from now. Resist the temptation to fall into the trap of policies that address only next week, next month or next quarter. This is especially important for employee retention. You lose so much money each time you lose an employee and it's easy enough to establish compensation plans that help keep good employees at your dealership. You just need to take a little time to determine the best policies for your dealership's needs.
We'll talk more about specific pay plans in upcoming blogs. And please comment with any plans that you've had success with!