How can you create a compensation plan that attracts top talent?

1 Assess your goals and budget

Before you create a compensation plan, you need to assess your goals and budget. What are your sales targets, profit margins, customer retention rates, and market share? How much can you afford to pay your salespeople, and how will you allocate your resources among fixed and variable pay, benefits, incentives, and bonuses? You need to have a clear vision of what you want to achieve and how much you can invest in your compensation plan.

2 Benchmark your competitors

Another important step is to benchmark your competitors. How are they paying their salespeople, and what are the industry standards and trends? You need to know what your salespeople expect and what your competitors offer, so you can create a competitive and fair compensation plan. You can use sources such as trade associations, industry reports, surveys, and online platforms to gather data and insights on compensation practices in the automotive sales industry.

3 Choose a pay structure

Next, you need to choose a pay structure that suits your dealership and your sales team. There are different types of pay structures, such as salary, commission, salary plus commission, draw against commission, and team-based pay. Each pay structure has its advantages and disadvantages, and you need to weigh them carefully. For example, salary provides stability and security, but may not motivate high performance. Commission provides incentive and reward, but may create unhealthy competition and stress. Salary plus commission provides a balance of both, but may be costly and complex. Draw against commission provides cash flow and flexibility, but may create debt and resentment. Team-based pay provides collaboration and alignment, but may reduce individual accountability and recognition.

4 Align incentives with performance

Another key element of a compensation plan is to align incentives with performance. You need to set clear and realistic goals for your sales team, and reward them accordingly. You can use different types of incentives, such as cash bonuses, non-cash rewards, recognition programs, contests, spiffs, and trips. You need to make sure that your incentives are timely, transparent, consistent, and meaningful. You also need to monitor and evaluate your sales team's performance, and provide feedback and coaching.

5 Communicate and review your compensation plan

Finally, you need to communicate and review your compensation plan. You need to explain the rationale, benefits, and expectations of your compensation plan to your sales team, and answer any questions or concerns they may have. You need to provide them with regular updates and reports on their pay and performance, and solicit their feedback and suggestions. You also need to review your compensation plan periodically, and make adjustments as needed. You need to keep your compensation plan relevant, responsive, and rewarding.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?