Performance-Based Service Pay Plans

Performance-Based Service Pay Plans

Train them on how to sell, and them compensate them based on their efforts. Remember, if a good salesperson wants a pay raise he simply looks in the mirror and asks for one.

“The measure of success is not whether you have a problem to deal with, but whether it is the same problem you had last year.” — John Foster Dulles

Does this apply to your service department? If your service absorption is less than 100 percent year after year, then you are dealing with the same old problem.

Pay Plans That Take a Front End Approach to Service Success
Vehicle salespeople are paid based on how much they sell — how much revenue they generate for the dealership. That’s how you should pay your service advisors, too — as salespeople.

This “front end” approach to achieving 100-percent service absorption in the back end (back bone) starts with training your service advisors to become salespeople.

Your service advisors should dress like salespeople, follow the road to a sale like salespeople, have daily goals like salespeople, be held accountable for their daily sales performance like salespeople and they most certainly should be compensated like salespeople.

Ask yourself this question: “Do I compensate my salespeople based upon their individual sales performance?” Most salespeople are compensated for the number of units sold; gross profit produced; sales dollars produced;, a multitude of daily, weekly and monthly spiffs and bonuses; or some combination thereof. Chances are you do not have too many 20-unit salespeople working on a straight salary, right? Therefore, you compensate your salespeople based on their individual performance.

Question: Why not do the same for your service salespeople? To do so you must consider a pay plan that compensates them for their sales, including parts.

Developing a Comprehensive Performance Based Pay Plan
So many dealers who I work with pay their advisors on labor sales only. Why? Would you pay a finance manager on finance reserve only and not on extended warranties? You probably answered “no.”

Most service advisors are going to sell anywhere from $.80 to $1.15 in parts for every $1 in customer pay labor. That being said, why would you pay an advisor on only about half of what they actually sell? This encourages the advisor to focus on labor-intensive repairs and ignore the profits from additional parts sales that your aftermarket competition is stealing from you simply by offering the filters and hoses, etc., that require very little labor.

To understand better, you might want to drive one of your used cars to the nearest quick lube center and just ask for an oil change, then go back to your service department and watch one of your advisors write an oil change repair order. I rest my case.

Nationally, we know warranty revenues are going down and internal sales are really dictated by the current market trends. Consequently, customer pay parts and labor sales are where you are going to find the additional gross profit to achieve 100-percent service absorption. As a result, any pay plan should focus on the advisor’s customer pay sales performance.

Top Sellers Boost CSI
CSI is a concern for many dealers and often I hear them say, “I don’t want my advisors to sell too much because it will adversely affect my CSI.”

If this is one of your concerns, then ask yourself another question: “Who has the highest CSI on your sales force, the five-car-a-month salesperson or your top salespeople?” I find that the top salespeople in our industry have excellent CSI, because those people with the best sales skills know how to communicate with their customers professionally based on the customer’s wants and needs. That’s all CSI is — effective communication.

Your advisors, professionally trained in sales skills, can achieve similar results. The higher their sales per customer pay repair order, the higher their CSI.

Writing Your Performance Based Pay Plan
Now, let’s write a pay plan that motivates your advisors to sell and provide a high level of customer service.

  1. Pay them a percentage of everything they sell on every RO they write, customer pay, warranty and internal, parts and labor. This should be between 4 and 5 percent.
  2. Pay them a monthly bonus based on customer pay hours per RO based on your retail labor rate, not your effective labor rate.
  3. Pay them a monthly bonus based on their individual CSI score, if available.
  4. Pay them a weekly draw toward their commissions.
  5. Do not pay them a salary

You must evaluate their performance daily and your manager must review it with them in writing. Accountability for their individual performance is crucial, just as it is on the showroom floor with your salespeople.

Hold Your Advisors Accountable
Some dealers are fearful of making changes in their service operations because “these people are hard to find” or “I am afraid that I won’t be able to replace them if they quit,” yet when an automobile salesperson consistently produces five to eight units a month, you have two choices:

  1. Train and show them how to sell 10 or more; or
  2. Do them a favor as well as yourself and terminate them.

These same options are applicable to service advisors who cannot achieve 2.0+ hours per customer pay repair order. Just like the salesperson selling five to eight units a month, these “underachievers” in your service lane are costing you thousands of dollars each month in additional gross profit and thereby preventing you from achieving 100-percent service absorption.

Recruit new people who are motivated to make more money (don’t be afraid of green peas).

Train them on how to sell, and them compensate them based on their efforts. Remember, if a good salesperson wants a pay raise he simply looks in the mirror and asks for one.

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