It’s time to re-think how we compensate service salespeople

This is the time of year when everyone is reviewing financial performance for the past year, and the subject of personnel compensation usually crops up early on. Unfortunately we, as an industry, are known for changing pay plans at the drop of a gross profit percent, resulting in the inevitable change in personnel in the service drive which in turn gives our customers good reason to question the stability of our service or parts staff.

Self inflicted wounds

The number one cause of customer defection is the loss of confidence in the people that they deal with on a daily basis. If these folks have a different name and face every time your customers come in to do business there is no opportunity for them to develop a working business relationship with anyone, which pretty soon causes your customers to seek a more stable environment where they can be comfortable. Let’s look at the usual reasons why this turnover happens.

• Poor hiring. How many times have you been guilty of hiring the first person that “looks good” without finding out if they have the personality to be a good and effective customer service person? Did you check their references for the quality of work they did previously? Or did you simply do a background check and send them off to pee in a bottle? Aptitude is everything, and we often don’t take it into account when we are hiring one of the most important customer retention employees in the store.
• Weak training. All too often we put a new hire out to sink or swim with little if any guidance or training, if in fact we even have a job function/sescription to work with. How many times have you employed a new service advisor (SA) and turned them loose on the drive to “see how they do.” What pre-job training do you give them? Does your service or fixed ops director perform any meaningful training prior to day #1?  Any coaching for the first three months to be sure they do the job the way you want it done (if you even know what you want?)

• Ineffective pay plans. This is probably the number-one killer of fixed operations salespeople. It could be the plan of the month, or the year, but the fact that compensation is very unstable cause’s people to chase the carrot rather than work for the long-term benefit of the store.

Let’s think out-of-the-box

The latest thinking in the new car sales department is to take sales people off commission and put them on salary with a profit sharing incentive. The objective is to focus them on the presentation process, not the closing process. Product is as important as price on the showroom floor, and by changing the focus of salespeople to one of product it creates a customer who really wants the product, making price a secondary consideration. A customer who “has to have” that vehicle makes a very co-operative buyer which improves both gross profits and CSI; not a bad daily double. Why can’t we do this in the service drive?

Traditional SA pay plans focus on sales per transaction or hours per repair order (HPRO), both of which are really report cards of how well our lane process is working. When we push the measurement, instead of the process, we often get behavior that is detrimental to our long term objectives of customer retention and high fixed absorption. How does this happen?

• In an effort to raise the HPRO bogey some SAs will push sales of service items that aren’t needed, resulting in a short term sale and ultimately a ticked off customer who sooner or later figures out they’ve been had; never to be seen again.

• If the objective is effective labor rate some SAs will raise the total price of a job by increasing the labor value, perhaps beyond the grid or menu prices to achieve a higher commission rate, once again pricing your store too high and driving a good customer away.

Traditionally we have relied on commission based pay plans to motivate salespeople, relieving management of the responsibility of training and motivating SAs and parts salespeople, and producing a cut-throat sales floor which rewards the person who gets their name on the most RO’s. Customer retention and CSI are sacrificed on the altar of daily profits, which ultimately results in declining absorption and eventually weak vehicle sales as the store’s reputation brings it down. I’d like to propose an alternative plan.

• Pay SAs a living salary, not the $1,000/month that just meets minimum wage. Remove their worries about paying their bills. Make them comfortable about doing the job correctly.

• Focus their job function on the customer process:
  • Meet and greet promptly.
  • Qualify the reasons for the visit.
  • Listen to the customer’s needs.
  • Do a proper vehicle Inspection with the customer.
  • Implement the multi-point inspection process.
  • Follow-up with the customer during the work in process.
  • Educate the customer on what was done.
  • Charge a fair price for the work done.
  • Conduct a quality active delivery.
  • Sell the ‘next service due’.

• Pay everyone a month-end profit sharing based on net profits for the whole department and CSI ratings, based on their contribution. Everyone shares in the benefits, and the failures. Teamwork becomes essential since no one person can do this alone.

• Management has to focus on the process, not the end result when it is already too late.

The supply of customer paid customers is finite, and no one can afford to squander a single one; they represent the bulk of the gross profit dollars available from any vehicle, and future sales, which re-start the service and parts cycle all over again. New customers are expensive, old customers who re-purchase are inexpensive and which way would you prefer to have it?