We’re going to talk about the thing that everybody hates– pay plans. We’re going to give you a little insight into why the pay plan keeps changing. Whether you’re under Service Advisor pay plans or Service Manager pay plans, it doesn’t matter what position you’re in. Because we have all experienced confusing changes to our pay plans. And our industry often changes pay plans. But why?
Reason 1- Focus On Employee Expenses, Not Performance
The first one is that often managers typically focus too much on what people make, and not the return on performance. I remember during the recession, I interviewed two advisors in a row that brought in their numbers. So I’m sitting there interviewing these advisors and they were number one in the dealership by a mile. And I said, “Why did they lay you off?” They said, “Because I made the most money.”
This happens all the time. Somebody comes in, and they know nothing about the car business. And they’re like, “Hey, this advisor is making 150 grand, get rid of him. And let’s keep the guy making 40.” But they have no idea that the guy making 40 can’t write an oil change, but the guy writing 150 is actually keeping the lights on.
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I’ve also had it many times where you put it in place, the people perform, and then the dealer has this idea like, “Oh, an advisor can’t make more than 7500. Or a service manager can’t make more than this.” And you’re like, “Yeah, but look at the numbers we’re doing.” And they’re like, “Nope.” These types of owners focus on the expense, not the return or the performance. This type of pay plan where advisors can’t make this much also creates tons of turnover.
Oftentimes when we go into a market, we’ll try to figure out who the top advisors are within the market. So we’ll call those advisors and be like, “Hey, Christian, this is Chris over here at Bulldog Volkswagen. I hear you’re a really good advisor, and we’ll take you to lunch” And we go to lunch. And Christian’s like, “Ah, I like it, Chris, but I don’t want to leave.”
And then five months later, he’ll call me like, “You got a spot for me?” And I’m like, “Yeah, what happened?” Christian says, “They changed my pipeline.” So this opens the door more to steal top performers. If you’re working overtime, and you’re networking, and you’re just touching them every once in a while, you eventually will get the call. And 90% of the time when you ask why now, it’s because they changed their pay plan.
Service Advisor Pay Plans Are Recruiting Tools
Pay plans can be recruiting tools for getting the best of the best of the best. Let’s say you’re me in this example, and are trying to convince a top advisor to come work in your shop. At that lunch, show him the pay plan that he would be on when he comes to work for you. And this pay plan should be very simple. It’s on one piece of paper. It’s easy to read. And it’s really easy to understand.
Because it’s probably low 60% of the pay plans out there for advisors and service managers who can’t figure out what they’re tracking to make on a day-to-day basis. For example, they typically plan good advisors on gross. Which makes no sense because they cannot control gross. It’s just buffoonery.
Reason 2- Attempt To Manage Behavior
Second, they try to manage behavior with pay plan changes. My opinion is that the service advisor pay plan does manage behavior. But what happens here is just like the first one, in that they’re not paying attention to the ROI on the pay plan.
They figure out like, “Oh, hey, we changed the CSI bonus and CSI has been up. So now let’s change it if somebody shows up late or somebody that has too many customers with a shuttle.” And then they basically start micromanaging through the pay plan. Then the change has no effect because they’re more confused than they were before. They try to micromanage employee behaviors through the pay plan, instead of driving their performance.
However, changes to the pay plan can drive behaviors as means of management for setting the minimum standards. Everything else is buffoonery. Like the trip wires that I’ve seen people put in the pay plans are just ridiculous.
Avoid Putting These In Service Advisor Pay Plans!
Other super interesting things that I’ve seen in pay plans include sending videos to make your money. And then another weird thing is, instead of like a $1 bonus, you can get more percentages, which makes it really hard to calculate if you’re an advisor.
Another is the grid thing. I always thought that whoever made that had too much free time. And they were like, “Hey, how do I create a pay plan? That’s tricky.” But I never do a pay plan where the percentage is variable. It’s not like you make this percentage, whatever it may be, it’s base.
Reason 3- Response To Lack Of Technicians
Then the next reason why your pay plan changes ties to an inherent flaw in our industry. And it is becoming more and more prevalent than ever before; it’s due to the lack of techs. The power dynamic flips to the technicians who see there aren’t enough of them to get all of the work done.
I had a strategy session with a guy the other day where this was clearly going on. So what happens is, you have a service department where the customer demand goes up a little bit. Meanwhile, at the same time, you lose a couple techs. And the manager running that department says, “I can’t hire techs, can’t replace those techs.” Then the technicians that you currently have realizes that the department needs them more than they need the department. So then they’re a little bit more of a pain in the butt than they should be.
Simple Solution: Add Techs Instead Of Changing Service Advisor Pay Plans!
Now the shop is not a collaboration, it’s kind of like the techs are holding it hostage a little bit. And now the Service Advisors can’t get the work done. So they stopped selling work, and they just try to get diagnostic or warranty work done. And so their average per ticket goes down, and it’s taking longer and longer for them to get a job done. So now whoever’s running the service department says, “We’re losing advisors. Because they’re not making enough.” So then what do they do? They add things like guarantees or percentages, which is paying more money for less work, basically.
The same thing happens on the other side. Where performance is going down, but our advisor turnover is going up. So we need to pay the advisors more. No one has said, “All these customers want to get in, and we got all this demand. So what we need to do is hire more techs, and start pumping out some work. And then the advisors will make more because they’re paid the right percentage. So the advisors can make a lot.” When you add a tech, they sell more. Move the percentage that the advisors are paid on, and they will make more money instantly.
All we did was add a tech, almost always. And so that’s the reason why the pay plan changes. This happens over time when it’s like Band Aid, Band Aid, Band Aid. And now the department’s losing money, everybody’s in a panic, and they just start cutting. With no thought of “Well, how do we create a scenario where it’s a win-win for everybody? The quick lube is the best example that I’ve seen.
Quick Lube Advisors For Example…
Another example is an extreme scenario. Take quick lube advisors for a second. So a quick lube service advisor is set up to fail from every angle there is, but a major one is the pay. So you have your lowest talent most of the time. It’s the new advisors, who are the least talented and lowest paid, touching the most customers. Now the average per ticket on a quick lube is low, like a quick lube advisor produces $20-25,000 in gross most of the time.
So now to keep a quick lube advisor, if they were going to make 5%, 8%, or some other percentage of what they wrote. They’d be minimum wage, they wouldn’t be able to survive right now. So what do you have to do? You have to pay more guarantee to him.
And so now the percentage that you’re paying out depends on how efficient the quick lube techs are. And they’re usually 50-60% efficient. Heaven forbid you have a manufacturer order so you have two quick lube techs per stall, but if so, then you’re only 25% efficient. So you got technicians that are 50% efficient. So let’s say a quick lube tech is making $18 an hour, but they run at 50% efficiency. Then your cost per hour is $36.
So now you got a quick lube service advisor that’s writing $20,000 in gross. We have to pay him $4-5000 a month to keep them because of the constant turnover. And it’s brain damage. So now you’re paying them 25% of the gross after you have spent $36 an hour to produce that.
Reason 4- Service Department Is In The Red
This last one we kind of just touched on earlier with the response to lack of techs. But most of the time, the pay plans change for Service Managers and Service Advisors because they’re not making money most of the time. The department isn’t making money, because they don’t have enough techs to get the work done. Whoever has the techs wins.
Not too long into my career, when pay plans were proposed, they’d change. Or when we say this when they weren’t right. I always came out ahead because I was a performer. If you perform, you’re way less susceptible. Because there still is a place for performers in our industry, whether you’re a tech, advisor, manager, or whatever it is.
I talked about it in the Millionaire Service Advisor book, where I believe I accepted a job and didn’t understand the pay plan was communistic. So I looked at the percentages, and I was like, “Okay, this will work.” I got my first paycheck, and I didn’t realize that they pooled all the money. (By the way, I’ve never had the pool pay plan ever work. Never had it work in principle. I’ve wanted it to work, but it’s an individual sport at the end of the day.) But it worked in a way where all the advisors, parts and labor dollars were pooled then divided by how many advisors they were. Then you got paid your percentage on that.
Avoid Communistic Service Advisor Pay Plans!
So I walked into the office and I said, “I didn’t understand that this was how it worked.” But literally the advisor in front of me when he got his paycheck said, “Chris, I hope you never leave because you made me a lot of money.” And that was the guy that wouldn’t answer the phone.
And so I was writing because I thought what I wrote is what I will get paid on. So I walked into the office, and my manager was great. I said, “Hey, this isn’t the way I understood it, but this doesn’t work for me.” He said, “I thought you were gonna say that.” And they changed me to an individual pay plan after that. There wasn’t a big debate, because I wrote so much more. And it wasn’t fair for them to pay those other people off of it either.
A lot of times those pay plan changes are from trying to fix under performance. So the over performer gets adjusted by proxy, almost. But unless they’re changing it because you make too much money, then that’s bad. It might’ve made sense to have the communal pay plan before I got there. Because they may have all had the same mindset. But for me, I was showing up to work because I couldn’t believe how great those customers were.
Recap– Why Service Advisor Pay Plans Change
Whether you’re a Service Advisor or General Manager, changes to the pay plan concern all roles in the service department. If you want to learn more on how to prevent changes to your pay plan, read this article. But the four most common reasons that explicate most changes to the pay plan include:
- Focusing on expense, and not on the return of the performance.
- Attempting to drive certain behaviors as a form of micromanagement.
- Reacting to the insufficient labor from lack of techs to complete work.
- Trying to stimulate profitability for service departments in the red.
I hope this clears some confusion for the readers who may be undergoing sudden changes to their Service Manager or Service Advisor pay plans and not being able to understand why. Or if you’re a General Manager or owner and this speaks to you, you may want to then reconsider the changes you are planning to make with the pay plan.
When we do the pay plan, it’s relative. Everybody wins. If you don’t perform, someone else does, so somebody doesn’t have to lose for somebody to win. It can be a win-win, if you know how to do pay plans right.