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Brief History of General Manager Compensation Plans
Most GM compensation plans were pretty simply crafted. They paid a base salary and a percentage of net profits and were designed so that the GM, whether it be family or not, was able to generate enough savings or “buy in money” to facilitate the dealer’s ultimate succession plans.
However, as operations became more complicated, compensation did not keep pace with the auto group structure of newer dealership organizations. What worked decades ago is not the best plan for today.
Things like compliance, employee satisfaction, Google rankings, productivity are much more complicated than they used to be and success in those areas is frequently not factored into the compensation plans.
Similarly, consolidation and the Owner’s “ideas” of fair compensation have evolved; with the original goals of facilitating a “buy in/ buyout” succession fading in importance.
This changed the nature of GM compensation to where it became a “really great job”, but usually not with equity acquisition as the end goal.
So, as conditions change, what is the current strategy for General Manager Compensation?
Current Pay Plans address “Net Profit” however many GM’s do not actually control the ENTIRE situation such as fixed costs, moneys that are “below the line” or don’t make it to the statement at all.
In short, current comp plans simply do not address operational excellence, requiring a more “business-minded” person to manage the complexity of today’s retail automotive.
So, what’s an Owner to do?
It starts by recognizing that most General managers are “battlefield” promoted when their predecessor leaves the organization. However the new manager may not have the knowledge base to effectively understand the ‘business within a business” that impacts dealership net profits.
Defining Pay Plans that Work:
“Rewarding performance that meets or exceeds expectations AND employees earn approximately what the dealer/owner thinks the job is worth.”
Pay for the position not the person
Step 1: Job Descriptions should CLEARLY outline expectations.
Then…
Step 2: Evaluate the job:
What does that mean?
What level of Skill and/or Education should the successful candidate process?
What level of decision making will the successful candidate be expected to make?
What impact on results will the successful candidate be expected to have?
What is the level of human interaction and leadership skills expected pf the successful candidate?
The complexity of the GM’s job: Consider this job description from a well-known but unidentified auto group.
Current Job Description for General Manager:
Oversee daily operations, remedy customer complaints promptly and ensure that customer satisfaction metrics are achieved.
Recruit, hire, and train service managers, office managers, and sales/finance department managers to standards that meet expected profit levels.
Assist with the creation of affordable advertising campaigns and programs to increase sales and brand visibility for the car dealership.
Attend manager meetings and establish good working relationships with owners, managers, and dealership staff to establish sales processes and recommend daily unit sales expectations.
Implement growth strategies that align with automotive group objectives by carefully assessing profit and loss while maintaining vehicle inventory that meets the needs of the local market.
Review monthly, quarterly, and annual financial statements for accuracy and completion before sharing with upper dealership management.
Learn and comply with all local, state, and federal regulations impacting vehicle sales, and the automotive industry as a whole.
Actively participates in recruiting and hiring process for all positions; ensure performance reviews or coaching session are completed as scheduled; development of short- and long-term goals for each department manager.
Directs and monitors all dealership management or supervisory personnel functions and completes formal performance evaluations of all department managers at regularly scheduled intervals.
Develops merchandising strategies and assists in creating effective, cost-efficient advertising programs.
Coach salespeople on best practices for closing more deals and provide advice and guidance to improve sales performance.
Set sales goals, track progress, and lead team to achieve and exceed those quotas.
Forecast sales for upcoming months and quarters and compile the necessary reports for dealership management to review.
Participate in development and execution of compensation plans; all changes to plans and/or promotions must be approved by Platform Manager and HR Department.
Manage a CRM platform to retain customers and seek out new prospective sales.
Maintain a strong focus on satisfaction of all employees and customers.
To hire someone able to excel in all these areas, be prepared to offer a compensation package worthy of their talents.
Establish baseline expectations for your operation. To begin the creation of a pay plan that works for this GM you first need a baseline measuring stick:
What is your Current Net profit?
What is your Desired Net profit?
What are your Current operational metrics?
What are your Current Customer and Employee satisfaction metrics?
When these are established, compensate from your “baseline” and then compensate on the difference between the baseline and desired profitability. This gap between baseline and desired defines where your set your target numbers.
You you might be interested in 2 DealersEdge Guides that offer in-depth details of how to achieve General Manager Excellence and how to Compensate effectively and competitively for the best talent. See below for details:
DealersEdge asked a number of our Subject Matter Experts to offer their views on the evolution of Pay Pans in the 21st Century Auto Dealership.
Specifically we asked them to address on the changing landscape of retail automotive and how they would design Pay Plans that deliver consistent results while making sure everyone is treated fairly and feels lucky to be working for your organization.
The automotive General Manager's core responsibility lies in safeguarding organizational processes by skillfully leveraging the expertise and intelligence of team members.
Through effective delegation, collaboration, and communication, they foster a dynamic work environment that promotes innovation and ensures the organization's resilience, ultimately driving success and long-term sustainability.
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