Compensation & Employee Retention
So far, we’ve outlined why employee retention is important for dealerships and reviewed strategies that can help increase retention and engagement, but we saved a big piece of the puzzle for last: compensation. Who doesn’t love to talk about money, right? Kidding aside, part of running any business is managing wages for employees, and ultimately their salaries are a vital part of whether your efforts to engage and retain employees succeed.
A recent survey by Glassdoor found that 45% of employees who left a job did so because of their salary. When it comes to pay, it’s not necessarily that the highest compensation always retains employees: it’s that offering too little is a surefire way to demoralize and drive away excellent candidates.
If the subject of how important compensation is to employee retention has got you wondering if your pay plans are holding you back, consider implementing strategies like these to make your compensation package the best it can be.
Tiered or Advancement Pay Plans
In a recent conversation with NAC’s Corey Smith, Nimble CEO Zach Spangler pointed out that dealership employees often hit a ceiling in role and pay advancement. This can lead to quality employees looking elsewhere for the increase in responsibility—and the commensurate pay—they seek.
He suggested a strategy for keeping employees on board and happy with their pay, even if they don’t advance in title: implementing tiered, “advancement” pay plans. As an example, a salesperson who is newer would start on Tier 1 but would be moved up to Tier2 (then 3, then 4, and so on) once they have enough experience and/or hit certain sales milestones.
Zach also suggested starting brand-new sales personnel out on a fixed rate of pay rather than the commission-based structure that is typical for their first 90 or 180 days. This will minimize anxiety and help them build confidence, while also demonstrating that your store is investing in their success via pay plans tailored to every phase of their career at the dealership.
Everyone loves a bonus: it’s not rocket science! But if your goal is employee retention, tossing a modest courtesy amount at your employees isn’t going to cut it. Instead, Zach suggests a year-end longevity or loyalty bonus: these payments would grow with your employee’s tenure at the dealership. It not only increases your staff’s pay but rewards them for their loyalty to your store.
Most of us are familiar with performance reviews, but salary reviews are a related—and often neglected—way to check in with your employees about their responsibilities and compensation. Adding these reviews to your annual review process will illustrate to every employee exactly what expectations factor into their rate of pay rather than more subjective areas often discussed in a year-end review.
It also opens a line of communication between employees and managers about their pay and goals, which can help increase engagement. A successful salary review should touch on the responsibilities and requirements for an employee’s current role and pay band as well as higher pay bands that they hope to reach.
For more insight into how compensation and younger generations impact employee retention in dealerships, check out Corey Smith’s interview with Zach Spangler of Nimble in the latest video from NAC’s Fixed Ops 5 podcast. And be sure to subscribe to the podcast on Spotify, Apple Podcasts or wherever you listen, so you never miss a new episode!