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Automotive Pay Plans That Work: 4 Elements For Success

Written By: NCM Associates
Posted on December 15, 2015

Developing an effective compensation strategy is an ongoing issue for most dealerships. You need a plan that drives solid performance from sales. And you want to motivate employees … but you can’t afford to overspend for the market. So, what do you do?

NCM’s experts always advocate keeping pay plans simple and making sure that the criteria you select allow employees to track their earnings on a daily basis. Choose items that are under the direct control of the employee—after all, they can’t develop buy-in without feeling a sense of ownership!

Whenever possible, NCM believes you should limit automotive pay plans to four criteria. Here are some examples:

1. Volume

  • Unit deliveries for salesperson
  • Same-store sales and/or market penetration for Department Manager
  • Hours sold for Service Advisor
  • Total hours produced by Service Department for Back Counter Parts Person

2. Margin

  • Income per delivery for F&I Producers
  • Effective labor rate for Service Advisors
  • Gross profit percentage for “Front” Counter Parts People
  • Controllable profit for Department Managers

3. Customer Satisfaction or Customer Retention

  • Regional or zone average at a minimum
  • Compensation rewards tied to “world class service”

4. Miscellaneous Incentives

  • Immediate department initiatives
  • Specific goals to drive short-term performance

Sales compensation is a tricky subject for everyone in the automotive industry. Learn pay plan secrets of top performing dealerships in the NCM Institute class, Success-Driven Pay Plans. And discover how to hire motivated high-performing employees in the first place with our class, Hiring Top Talent.

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