A wrong incentive plan can demotivate service advisors. But more often than not, I see the opposite, where the pay plan is overpaying for the results being produced
Today we will look into pay plan incentives for service advisors and/or managers.
First, let’s describe what results and base actions top-performer service advisors typically produce. This is not the all-and-all list, but covers the larger points we want to make sure they produce:
- Dollar-hours per repair order (RO) at 3.5 to 4.0 for shops that work on most makes and models. European shop advisors will typically be 4.0 to 4.5. Diesel shops it can be closer to 5.5 to 6.0 hours per RO. For today’s conversation we will be talking about a general repair center.
- At 3.5 to 4.0 dollar-hours per RO, a top-performer advisor will process 12 to 14 ROs a day and close out 6-8 daily.
- On a monthly average they are at, or above, gross profit (GP) forecasted percentages.
- 30 percent of their ROs have three or more preventative maintenance labor lines.
- Prep estimates for all appointments and books the next appointment at the end of a repair visit.
- Remain positive, self-motived and are on a journey of self improvement.
This is a skilled person in not only in the ways of the automobile, but also in entrepreneurial in spirit and, most importantly, in people skills.
There are lots of advisor incentive plans out in the marketplace. Many are based on sales, some on gross profit, customer satisfaction index (CSI), comebacks/quality and individual and/or team levels of a wide range of different metrics, to name a few. Some combine all the above.
“All incentive plans need to be matched with a marketing plan that can feed the incentive plan with car count and customers.”— Dave Schedin
As I analyze the myriad of different advisor plans, I find most don’t have a good ROI in dollars and, more importantly, a good emotional ROI for either the advisor or the shop owner. With some plans, the advisor loses at one end of increase and it only benefits the shop. The advisors end up being frustrated, feeling ripped off and typically forces them into excuses why they can’t produce or, worse, leave and now tell everyone how cheap the shop owner is. The wrong incentive plan can actually demotivate the very results wanting to be increased.
More often than not, I see the opposite, where the pay plan is overpaying for the results being produced. The advisor seems happy and now the owner is upset. The owner can easily start being frustrated with the advisor as they are making good money and not putting in the full effort — and the shop ends up losing out.
AND, all incentive plans need to be matched with a marketing plan that can feed the incentive plan with car count and customers. Incentive plans were not meant to be a standalone system to drive to profitability and sustainable cash flow.
Context is key. A “sales-only” context can hurt the shop. Have oil services, tires or battery sales with a low price to attract a lot of business and your advisors will sell a lot of them in a month. It can look impressive in how much your sales went up, but your gross profit is so low on those items. Subtract advisor incentives and you’ll find they now used up the majority of that GP increase that in reality you didn’t really make anything more than before the sale.
From analyzing results, the best context for an advisor incentive plans starts with a gross profit focus. Remember sales sets up gross profits. Gross profits set up net profits. Advisor are responsible for gross profits. Set them up for a win so you have a win in the net profit.
I have found these five elements are powerful in motivating and sustaining higher levels of performance. When done right, and in alignment with a deep forecasting, these elements will only pay when the money is there to pay. Incentive plans should have at least a minimum of 300 percent ROI as the GP volume increases is strategic segmented levels. The elements are not the complete list, for sure, but are what has proven to work well in motivating. After the list, we will look a bit deeper to understand each one:
- Base salary or wage
- Ability for an advisor to increase base, based on GP dollar volume
- GP(s) volume
- GP overall percentages
- Variable “fun” bonuses targeted for a month, quarter or year.
Base salary or wage: The context for this is really based on the advisor having some sort of “a safety net” feel to their earnings. Can they provide for themselves and/or their family? If set too low, they can feel stressed and that stress is then carried into their selling experience your customers feel and it typically is not a good experience. If set too high, then they relax in effort and never quite reach the levels they should be doing. They are making good money and they settle for not putting out maximum effort and now YOU are frustrated.
NOTE: Salary versus an hourly wage works best, and it should be above national or local requirements for an exempt employee. Wages can drive an advisor to abuse overtime.
Raising the base: Since the base is in the context of “a safety net,” giving the advisor an ability to have some sort of “say” in setting their base by the GP volume gives them — or the team — a feeling of empowerment and accomplishment for their livelihood.
Gross profit volume: Again, after an in-depth forecasting for your specific business model, setting GP dollar volume levels with a rising percentages for each level, the advisor will get to have a “say” based on their or the team’s effort on producing results. The rising percentages greatly enhance the motivation.
Gross profit overall percentage: While GP dollar volume is first and foremost, having a focus on the percentage as a SECONDARY will help ensure maximum profitability from that GP dollar volume.
Variable “fun” bonuses: Make your workplace a fun place and part of that is having variable different focus bonuses. The best place to find out what they should be, look at current metrics in your shop that need elevating. Over my years of coaching and using these plans, the variable is often the place where shop owners get very creative and actually have fun in blessing their employees with ways to bring increase.
In the end, most shop owners really do want to hand out big pay checks. Done right, you can know that they created the money to be there, so it doesn’t feel like you are reaching into your wallet to pay them and it feels like genuine blessing from your heart to them.
We have just touched the tip of the iceberg of advisor pay plans and how to make it fun. All pay plans need to have the ROI calculated so you can monitor it. They will get you where you want to go and only pay when you get there.
Just because a pay plan works well in one shop does not mean it will work well in another. Take time to think it through and get input and coaching before you implement to ensure you don’t go broke or you present an incentive plan that makes you look “cheap.” Our advisor/manager pay plans help implement and facilitate these five elements into your pay plans. You are a professional and your incentive and pay plans should also be on the professional level. You are not alone. Hire a coach!
Next from Coach Dave in the Enhanced Incentive Plan Series: Part 5 – Super charging IP’s with benefits
** Forward this “Aftermarket Matters Weekly” to another shop BEFORE August 31st and cc Coach Dave (copy and paste the email below) will receive a Level One Shop Evaluation including your current advisor incentive plan review.
Dave Schedin can be reached at 800-385-0724, email@example.com, and www.computreksystems.com. A complimentary 30-minute discussion is available for the asking.