Bonus Article: Rethinking the Pay Plan
find the right balance and improve your bottom line

For many dealers, making changes to the F&I pay plan is about as pleasant as having a root canal. As a result, it gets put on the back burner, and then it’s just easier to leave everything the way it’s always been.

Optimally, dealers should review and tweak their pay plans at least once a year, says Jim Mueller, Vice President, Northeast  Zone at JM&A Group.  A review should take into consideration both the store’s operational goals and its circumstances. What are other dealerships doing? Is the store having trouble keeping key managers? Is management trying to attract new people? Is there a lot of talent available? All these factors need to be considered. 

Pay plans should also be reviewed if there’s an event that changes the dynamics or the bottom line of a store.

“So much has changed in the last couple of years,” Mueller says. “Dealers are losing franchises, and many still haven’t changed their pay plans. Or you could have the city come in unexpectedly and change the traffic patterns in front of your store that can negatively affect your dealership for short periods of time. Take a look at your pay plan sooner than later.

It can be difficult to find the right balance when crafting a pay plan, says Travis Mazza, JM&A Group Division Manager. Make it too simple, such as a straight 20-percent commission on whatever an F&I manager generates, and the plan will be missing components to drive performance and behavior, such as menu selling and legal compliance.

Make it too complicated, and the F&I managers won’t be able to follow what they’re being asked to do.

“Sometimes dealers put so much in the pay plan, the F&I managers are confused,” Mazza says. “They scratch their heads and say, ‘I’m just going to do the best I can and hope I make enough at the end of the month.’ It needs to be fairly easy to understand and calculate.”

The best pay plans are weighted, Mueller says, to drive both the desired performance – selling more cars – and behaviors, such as customer retention, dealership CSI and service walk-arounds. They also include contests with incentives for extraordinary performance.

“We believe in short-term contests that you can change quickly as the dealership’s goals change,” Mueller says. “If you do them monthly, adjust the contest to dovetail into those changes. We also do contests within contests for a shorter period of time – maybe a holiday weekend or the end of the month when you want to kick performance up even higher.”

Whatever elements a dealer chooses to incorporate in a pay plan, there are two important steps to take. First, take the time to fully explain the pay plan to the employees. Show them the benefits of the plan for their earning potential, give them time to digest it, make sure they understand it and let them ask questions.

Second, provide them with the proper tools to meet the goals that have been set for them. If the dealership has been running $400 a car and management wants that number to be at $1,000 a car, the staff is going to need a new process, additional training or both.

“There’s nothing wrong with setting a high benchmark,” Mazza says. “But if you’re going to move the number, you need to give them the resources to get there.”>>>

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