Should dealers consider a pay-for-performance culture?


The great recession has caused all dealers to run lean and mean. That’s not been all bad. On the plus side, the “dead wood” should have gone out the door some time ago. And, employees who remain have been generally content just to have a regular paycheck.

However, as the recovery moves forward, thoughts will logically turn to raises and future income growth. How dealers can address such concerns, in a foreseeable future that remains seriously clouded with slow recovery expectations, should be contemplated now.

Enter the concept of pay-for-performance? Sure, such programs are common in some parts of the business such as the revenue-based functions like sales personnel and, sometimes, service managers. But, could the concept of pay-for-performance also be instituted for the non-revenue-generating staff?

There’s no question dealers will only be able to keep good employees by rewarding them. Bonuses, once frequently used, have probably gone the way of the dodo, and well they should. Bonuses become entitlements in the eyes of non-revenue-generating staffers. I know – for years I gave bonuses for what I thought was a way of saying thank you for a good job and sharing in our success. When earnings dropped and I opted not to give bonuses I quickly learned they were viewed as entitlements, not rewards. I never brought them back.

Developing a pay-for-performance system has an upside for employees and the dealership. On the employee side, it can generate a team enthusiasm for working better, more efficiently with a stronger commitment to the success of the firm. For the dealership, it’s a shelter from committing to raises and, then, experiencing a longer and more difficult recovery than expected.
How can it be done? It will vary, of course, because dealerships are often unique. But here are some considerations:

First, determine how all these staff members are now compensated (perhaps, as percentage of gross revenues, or as a factor in a department’s income, or as a percentage of department cost reductions, etc.) You will, then, have to give the employees enough information to understand how they're compensated and how that can grow in the future.

Next, recognize you can’t expect employees to help the dealership maintain profitability if you fail to teach them what profitability means. So says Jack Stack, co-author of “The Great Game of Business,” who successfully advocates the concept of “open book management.” In its simplest form, “The Great Game of Business” is a way of running a company that gets everyone focused on helping the business be successful. Cash flow and balance sheet statements tell a story, but employees will never pay attention to performance if they don't know the difference between revenue and profits, Stack contends.

Finally, forget giving a Christmas turkey to employees that don’t have an oven! Instead, whenever possible, learn what matters to each employee and treat them as individuals. For example, young parents often put the highest value on flextime. Older workers will rank comp time on the top of their list, and so on. Top performers deserve top rewards, monetary and otherwise. As we recover, it’s all worth serious consideration now.