SALARIES SUCK
Extracted comments from the post Dealers in California… by Arnold Tijerina.
Levi Arevalo commented, “Commissions are an archaic form of compensation that need to be eliminated. Salaried workers with reasonable quotas would be more adequate.”
Jim Kristoff commented, “I believe the “NEW” model of automotive sales professionals need to be compensated in this way.
- Salary – (majority of their pay)
- Small volume bonuses – (both individual and team)
- CSI Bonuses – (both individual and team)
The “NEW” model emphasizes a professional person. One that works 45 hours per week.”
“Arnold – I believe the time has come to STOP paying a Salesperson a “commission” entirely!
The model is too old and worn out……”
Hmmm! To the proponents of salaries for the sales staff I submit the following:
Dealership Profile:
The month has ended and the numbers shake out thusly.
Units Sold Department Gross Gross per Unit
135 New Vehicle 245,619 1,819
135 New F & I 86,627 642
135 Total New Vehicle 332,246 2,461
41 Used Vehicle 80,983 1,975
41 Used F & I 39,478 963
41 Total Used Vehicle 120,461 2,938
176 Grand Total 452,707 2,572
Commissions 97,537 554
% of Gross 21.5%
COMPENSATION TOP 5 SALESPEOPLE:
Salesperson Units Sold Commission per Unit Hourly Rate**
Order Taker 25 7,928 317 40.97
Top Gun 24 14,624 609 75.58
Dink 11 6,033 548 31.18
Grosser 10 7,002 700 36.19
Single Mom 10 5,280 528 27.29
Total 80 40,867 510 42.23
**Hourly Rate Calculation: 45 hours per week times 4.3 weeks in a month equals 193.5 hours per month.
PAY PLAN
The salesperson’s pay plan is your typical “archaic form of compensation”.
Commissions
Volume Bonuses
CSI Bonuses
Spiffs
F & I Commission
Etc.
SALESPERSON BIO:
Order Taker – 60 year old male, 35 year veteran
Top Gun – 26 year old female, 18 month in the business
Dink – Double Income No Kids
Grosser – Gets it all
Single Mom – 3 kids, 12, 14 and 16 years old
QUESTIONS:
With facts in hand, how could this “archaic form of compensation” be transitioned into a pay plan with a salary with “reasonable quotas”?
And with a “NEW” model, what would be the salaries for the TOP FIVE? And what would be a reasonable small volume bonus - $500, $1,000?
Would it be fair and reasonable to pay Top Gun a $12,000 monthly salary, a small volume bonus of $1,000 and a CSI bonus of $1,624 to equate to her $14,624 commissioned compensation?
Would a salary motivate DINK whose wife works at the Defense Department and earns $60,000 annually. And what about Grosser would a salary motivate him?
It may work for Single Mom but then again if her $5,280 is annualized, her W-2 would show $63,360 compensation for the year.
And finally would a salary motivate and elevate Order Taker to Premier Order Taker? Or would he just grunt and keep on taking orders.
Just Asking.
Have a good day.
Comment
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Comment by Douglas R Manley on August 1, 2011 at 8:45am
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Bobby:
Your 250/500 example reminds me of an incentive program we put in play in 2002. It was the usual incentive program, most units, highest gross, most F&I, etc.; however, in lieu of paying out dollars we paid the sales staff with one ounce gold coins. At the time gold was selling for about $275 an ounce. We bought 18 one ounce gold coins with a market value of $5,000.
When we distributed the coins to the staff we suggested they might want to hang onto the coins.
Ya right. With typical salesperson genius within 3 days all the coins were cashed for dollars at the local coin shop. Today at about $1,600 an ounce the value of the coins had appreciated $1,325. Not to shabby. And yes gold is speculative and the value could have gone south.
With no out of pocket investment one would have thought holding onto the coins would be the way to go. But I should have known better. Salespeople have that “NOW” mentality. Ya gotta luv ‘em.
But in the salesperson’s defense they are pretty much following the leader – The Dealer. The dealer sets the agenda. In most stores I have been in, the agenda is “NOW”. Never mind yesterday, that’s history and tomorrow, well it may never come. So it comes down to “what have you done for me today”.
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Thanks Jim:
Oh yeah. An interesting debate, you betcha. As I reflect back on those salespeople who were the cream of the crop there is a common thread. Not one of them ever received or wanted a salary and many, many of them refused a draw.
They knew a salary meant less percentage of the gross. And they wanted their washouts to be pure free from deductions for weekly draws.
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Tom:
Order takers are a dime a dozen. I have often said give me a person with average intelligence who listens and wants to work and I will make them a superstar.
The key being wants to work.
The employee provides the energy and the dealer provides the tools - training and compensation. Training speaks for itself, but why compensation. You can train all you want but if the dealer isn’t willing to compensate it’s all for naught.
A properly trained person that is rewarded for their efforts is a winning combination. You can’t have one without the other.
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Comment by Jim Kristoff on July 31, 2011 at 1:15pm -
The topic is certainly fodder for a good debate.
There is a HUGE turnover rate among most sales floors.
I am NOT a proponent of salaries for salespeople.....I thought it would make for an interesting debate on salespeople of today.
Good blog Douglas!
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