Don Pascoe has a choice bit of advice for other car dealers: 'Pay your people in a manner consistent with how you want them to act.'
Heeding his own advice, the president, dealer operator and minority partner of Serra Chevrolet in Miamisburg, Ohio, adopted a one-price selling strategy and instituted a salary pay plan in 1999.
'We talk a lot about professional salespeople,' says Pascoe, 51.
'Yet we don't tend to pay them like they are professional salespeople.'
A commission arrangement tends to discourage salespersons from working in the best interest of customers because the salesperson relies heavily on a percentage of the profit from each sale, he says.
'It's difficult to resolve the conflict of charging more for a car than you should in order to get a better commission,' Pascoe says.
'We pay our sales consultants in accordance with their abilities, not their ability to overcharge the customer.'
Percentage of gross
Rather than being paid a commission based on the profit from each car sold, salespeople are paid a salary based on a rolling six-month average of the number of cars sold each month.
The salary - paid weekly - is adjusted every three months. If a person increases his or her average monthly sales, the paycheck will increase right away.
If the average falls, the consultant has three months to improve before taking a pay cut.
In addition to salary, each sales-person gets a bonus for each car sold. The per-car bonus changes monthly because it is related to a portion of the gross profit for any month.
Using Pascoe's formula, salaries for salespeople range from $15,000 to $60,000 a year. With the addition of bonuses, total pay ranges from $30,000 to $85,000.
The majority owner of Serra Chevrolet is Serra Automotive Inc., which operates 17 stores throughout the United States.
Although Pascoe has shared his ideas with some of the other dealerships, each operates under its own selling strategy and pay plan.
At Serra Chevrolet, Pascoe believes that paying people weekly, even though their check is based on longer-term performance, provides more stability for employees and is likely to keep them motivated throughout the month.
Salespeople also know in advance they are expected to sell at least eight cars a month.
If they sell fewer, they will get only the per-unit bonus with no salary.
If they repeatedly fall below that level, they will be out of a job.
'It takes the personalities out of it,' Pascoe says.
'You know in advance what's going to happen if you have low sales.'
The challenge is in creating an atmosphere that is attractive to the customer and motivating for the salesperson.
'We want the salesperson to find the right car for the right customer, whether it's new or used,' Pascoe says.
'That's difficult to do if I'm paying straight commission. This way, the sales force truly focuses on the customer's wants and needs.'
Although the program is relatively new, Pascoe says he believes it already is contributing to better employee retention. The average tenure of the sales staff is nearly four years.
Geared to one price
He says he developed the program by looking at ways to eliminate conflicts with the one-price sales approach.
'It all came down to the same thing: I've got to pay a salary and bonus that is consistent with the level of sales.'
Advisers and salespeople in the service, parts and body shop departments are all paid a salary as well, plus a portion of the profits.
Sales managers are under a plan that more closely resembles traditional commissions.
Pascoe believes a salary plan will work in any market but is best in a dealership with a one-price selling environment.
'I'm not going to tell you that everybody loves me for this program,' he says.
'It's interesting to watch. A good program ought to be one in which people can figure out how much they're getting paid. Plus, they shouldn't have to feel they have to sacrifice themselves to do a good job for the customer.'