February 2011 Newsletter

The Crucial Transition from Vertical to Horizontal Pay Plans

Written By: Jeff Sacks

Are your dealership’s pay plans aligned with the objectives and culture of the organization, or are they designed merely to reward for transactions, such as volume or gross? Is it possible to accomplish a mixture of all of these attributes? In looking to the future, we would like pay plans to foster a behavior that enables us to concentrate on improving the transaction process, as well as the loyalty of our customers so they may continually, and without interruption, return. The dealership needs to function as a cohesive unit – all departments working in unison – to bring to the table an experience for the customer that is positively memorable. This means that not only the sales transaction should be well performed, but the transition from sales to service, as well as all communications thereafter should be seamlessly undertaken. In many instances, we hear of the ball being dropped with our customers, the disconnects, and the face saving gestures to redeem ourselves. Is that due to lack of caring or could this be a function of vertical thinking mentality where we are only connected to a customer within our own department, and we don’t have the concern or consideration once they have left our area of influence? This vertical thinking mentality is pervasive and invariably costing us an enormous amount of hidden costs in the form of high customer attrition. Thinking vertically, and behaving vertically, is invariably a direct result of being paid vertically. As pay influences behavior, so our behavior is influenced by pay plan design.

The essence of linked pay plans is to break down inter department barriers so that all departments work cohesively and seamlessly together, with customers, as they move from one department to another. Therefore, paying a salesperson on a greater than 80% first appointment show rate may appear strange at first, but it has an inherent logic to it that should improve customer retention in service. Paying sales managers on customer pay labor may encourage sales managers to make sure that salespeople do an exceptional job in presenting service in a favorable light to their customers when delivering a new vehicle. The examples of linked pay plans go on and on, but the prime reason to put them into place is really to improve the relevance of the dealership to its customers and to overcome inter department rivalry and conflict as people and departments vie to own the customer when, if fact, it is the dealership that should own the customer.

The statement, ‘Show me your pay plan and I’ll write your job description,’ merely brings to the forefront that well designed pay plans will have the beneficial result of making your dealership the primary choice amongst your customers. The manual, Dealership Pay Plans That Work, may help you redesign your pay plans and lead to improved personnel productivity and customer retention. It can be purchased by going to www.jeffsacksauto.com to view the excellent training products offered by Jeff online.