As U.S. dealerships see an increase in younger employees who want a steady paycheck, some of the best dealerships in the country are trying new payment models that offer stability but still reward highly motivated staffers with more earnings potential.
And employees who work at the 2018 Automotive News Best Dealerships To Work For appear pleased with those models. In a survey conducted by Best Companies Group, which compiles the list, 95 percent of employees at the winning stores gave positive responses to questions around pay and benefits vs. 81 percent for those at stores that didn’t make the list.
A clue to that satisfaction? Many of the winning dealerships are using pay plans that provide a base salary and bonuses for hitting targets on criteria such as volume or customer satisfaction. Though commission pay plans are still widely used even among the Best Dealerships To Work For, they don’t seem as popular as the nontraditional plans.
Of the winning dealers who answered compensation questions for an Automotive News survey, 61 percent said they use traditional commission plans. But even more — 77 percent — said they use nontraditional plans. Respondents could choose both kinds of plans, and many did, reflecting that they offer both traditional and nontraditional models.
AutoNation Inc., the nation’s largest new-vehicle retailer with 17 dealerships on the list, offers both types of plans. The company announced new compensation plans offering base pay plus bonuses in 2016. Those plans have been successful at attracting more and different types of candidates than the retailer experienced with just commission plans, according to Mark Akbar, AutoNation’s vice president of sales and customer financial services.
“In addition to attracting sales associates from other dealerships who are looking for a change, these pay plans invite people with varying backgrounds that may otherwise shy away from the car business,” Akbar said in a written response to the Automotive News survey.
Toothman: Offers salary plus volume
J.R. Toothman, general manager of Toothman Ford in Grafton, W.Va., says the hybrid pay plan for sales consultants implemented at his store several years ago has helped attract younger talent. The store offers a base salary that pays on average $30,000 a year, plus a volume-based component.
Old-guard commission-based compensation plans don’t attract younger employees seeking stable incomes, Toothman said. But he feels confident pitching his hybrid plan at college job fairs.
“In certain environments, you can almost smell the desperation when people are paid on commission,” Toothman told Automotive News. At Toothman Ford, “they’re not splitting deals; they’re just taking care of the customer. And the customer doesn’t feel like they walked into a shark tank.”
Speedy enough?
There has been a rise in unorthodox pay plans in the auto retail space, said Fleming Ford, vice president of workforce optimization for ESI Trends in Largo, Fla. But the change is not happening as quickly as she expected.
In a recent survey conducted by ESI, almost 45 percent of dealer respondents from 30 dealership groups are still at 100 percent commission in pay plans. Meanwhile, for many who adopt nontraditional plans, the base salary offered is well below the norms of other industries or phases out after 60 or 90 days.
“We’re limiting our pool of candidates just by how we’re setting our pay,” Ford said.
Dealerships may have to adjust their approach to be successful, she said, pointing out in the case of Toothman Ford that Toothman “knows what he wants, and he’s paying for it.”
Island Honda General Manager James Woods, second from left, revises his pay plan constantly.
Warren Henry Auto Group said in the Automotive News survey that it tries to create performance-based pay plans for every position in the dealership. Additionally, it factors brand and market conditions in to the pay plans to ensure that employees are protected from issues out of their control such as market demand or inventory constraints.
James Woods, general manager of Island Honda in Kahului, Hawaii, said in the Automotive News survey that the pay plan at his store, part of Lithia Motors Inc., is revised constantly, shifting as rapidly as month to month.
“The idea is to keep it motivating and focused on the store’s needs,” Woods said. “The pay plan, even with revisions, is not against the salesperson’s favor — the bonuses are modified to focus achievement in areas that we are focused on during a particular month.”
Changing demographics
The shift toward base pay is in part influenced by changing demographics and even the Great Recession, ESI’s Ford said.
The new generation of automotive retail employees all experienced the recession in some form, Ford said. It has affected their comfort with taking risky jobs, and they dislike the volatility of commission plans. In 2017, Ford said, 53 percent of new dealership hires were millennials — defined as employees between ages 22 and 37, while 14 percent were Generation Z, those born after 1996.
For dealerships considering a change, Ford advises that new compensation models must incorporate both staff and managers. If a sales staff is compensated on units sold, and the sales manager is paid on gross profit, it causes friction on a sale-by-sale basis.
David Lewis, an independent Pittsburgh-based dealership trainer, says pay plans alone aren’t the problem.
Flexible hours and extra perks are becoming the norm in other areas of retail, Lewis said, but the dealership world is adapting too slow to retain employees.
“We can’t pay them enough. This is the problem we’re running into in the industry with the millennials,” Lewis said. “It’s killing us. Because a millennial would rather make $20,000 less and be home every day at 3:30, 4 o’clock. They’ll go to other industries.”
Changing that is incumbent on dealers to remake the work environment for their employees.
“I tell dealers, you don’t have a turnover problem,” Lewis said. “You have a leadership problem.”
Myers: Open to flexible scheduling
Quality of life
Some of the stores named Best Dealerships To Work For have found success with offering benefits designed to enhance quality of life rather than increasing cash bonuses or guarantees.
Capitol Auto Group of Salem, Ore., said in the Automotive News survey that it offers a salary-plus-commission plan, but that enhancements such as two options for insurance and paid legal services are bolstering employee satisfaction. The company also offers employees eight hours of paid time off for community service work, and it has changed its approach to scheduling.
“With an overall eye to the changing demographics of our employees — their ages and their needs — Capitol … has become more open to flexible scheduling,” COO Bob Myers said in the survey. “This includes job sharing for our support staff, more part-time positions available for our sales staff, allowing for better scheduling options for those employees with young families and children in school. This allows them to complete their work later on in the evening or on the weekend.”