So, how do I pay my Service Advisors? What’s the best pay plan that will work for both the dealership and the advisor? This is a great question that sometimes is viewed as a plug and play fix; “Not a big deal, we’ll just pay them on gross like everyone else does”; “It’s the easiest way to do it with not a lot of effort on the Service Manager’s part to figure it out at the end of the pay period.”
This is the common and unfortunately most used strategy, and the simplest way when creating a pay plan for Service Advisors. Let’s take a look at another option. Paying advisors on Gross Profit is the most common way service departments are paying their advisors but, in doing so, the advisor would get an automatic pay increase each time you raise your labor rate and parts pricing (if paid on Parts gross as well). Employee expense would grow, leaving you wondering why. Some say, “well the more the advisor makes, the more the dealership will make” A true statement to a point, but where’s the incentive for growth?
One way to remain or become profitable in service is to be sure that the pay plan you choose is built on a performance structure basis rather than just a percentage of something. One of the many ways to do this is to build a pay plan based on what your goal for service growth is; more production?, a target customer pay effective rate?, hours per RO? When choosing this option, first the goals must be attainable. Having say, a goal of $75.00 for a CP effective rate target as part of the pay plan will not work if it’s so out of reach that it would be impossible to hit. What’s a good target effective rate? This will vary by store and location. For instance, the customer pay effective rate target may be different in NY City than it would be in Mayberry, NC. Just be sure to do your homework before you decide on what is attainable.
Another ingredient that you may want to consider is shop production. If you’re looking to try to increase shop production, what better way to do it than make it a part of a pay plan? Again, just be sure to do your homework before you decide on what is attainable.
If you think about it for a moment, if an advisor is paid on gross profit for labor and or parts, his focus is on what? Gross profit, and how does an advisor typically have a high gross profit dollar amount? He adjusts the charge per hour rate to a higher amount. Could this not affect CSI? Could this not affect pricing labor by the advisor to suit the pay plan? Now what you could also be facing is inconsistent labor pricing by the advisors; one advisor would quote labor for a water pump at $300.00, meanwhile that same water pump labor quoted from another advisor may be $450.00.
So, when developing a pay plan that works for everyone, be sure to first know what your goals are for the department and begin development of the plan based on those goals. When done correctly, everyone benefits. Moving away from paying on gross can also create an environment where there is a more consistent billing and pricing structure among the advisors.