Last year, as Executive Vice President Jeff Dyke was visiting some of Sonic's dealerships, he found a store with sales force turnover of 260 percent. Several salespeople were making less than $2,000 per month and had moved in together to make ends meet.
Auto dealership sales staffs traditionally suffer from high turnover. But this far exceeded the National Automobile Dealers Association's estimate of typical dealership sales force turnover, which ranges from 40 to 50 percent.
This gross example of underpaid salespeople prompted upper management to review employee wages. At the store level, compensation was left up to the general manager. Sonic wanted to install a consistent pay scale.
"We asked ourselves if salespeople are selling 15 cars a month, what should they be making? It was all over the board. We came up with a number for that market and worked backward into a pay plan," Smith explains. "Some people were making $1,500 a month. We weren't creating any wealth for them. No wonder turnover was so high."
Sonic gave pay raises to the sales staff at 75 percent of its dealerships. Currently, Sonic's average annual pay for a salesperson is $58,500, Dyke says, up from about $48,000 before the new pay policy. The average annual pay for an auto salesperson is $44,990, according to federal Labor Department data.
Sonic's sales force turnover, although still above NADA's estimate of the industry average, has plunged. Over the past three years it ranged from 90 to 105 percent; now it's 58 to 65 percent, Dyke says. At some Sonic dealerships, it is less than 10 percent.
The pay boost has shifted the target demographic of salespeople, attracting older, more stable employees.
Says Smith:"We got a higher-caliber individual."