Lithia Motors Inc. has a new pay program for managers, designed to help retain top talent and improve store performance.
Under the Lithia Partners Group program, which was launched last month, the dealership group selects top managers who then get increased stock ownership in lieu of cash. It is a way to retain the best talent and inspire better store performance, Lithia CEO Bryan DeBoer told Automotive News.
"You're going to be more autonomous," DeBoer said. "You get to make your decisions just like a normal dealer does and you're going to grow your part of the business, together" with support from the head office.
Lithia offered 24 selected store general managers the chance to participate in the new program. They will get two to four times more stock ownership than those general managers typically received in the past. Under the new plan, the received stock could equal one to two years of salary in about four years, DeBoer said. The stock vests 25 percent a year; as it vests it can be converted to cash at any time.
DeBoer said that if any of the general managers opts to cash out early, Lithia can absorb it.
"We are confident that the long-term benefits of retaining these leaders will offset any short-term impacts on our financials," he said.
The program currently is offered only to managers of Lithia stores, not managers at stores previously owned by DCH Auto Group Inc., which Lithia bought in October.
Those selected for the program were measured on about nine "fact-based, as well as some intangible-based" accomplishments made over a two- to four-year period, DeBoer said. One great year would not prove they are stable leaders, he explained.
DeBoer said DCH leaders are working on a similar stock compensation program to offer to its top store leaders. They are also adopting Lithia's management approach, which gives stores a lot of autonomy and lets general managers be entrepreneurial.
DCH had 27 dealerships in Southern California, New Jersey and New York when Lithia acquired the group. Lithia has 130 stores now since the acquisition. Its stores are mostly in the West. Lithia, of Medford, Ore., ranks No. 8 on the Automotive News list of the top 125 dealership groups based in the U.S., with new retail sales of 67,177 vehicles in 2013, before the DCH acquisition.
About seven years ago, DeBoer started what he calls "managing by thirds." He said: "It means, what's good for one person isn't always best for another."
The 24 people in the Lithia Partners Group are in the top third of the company, or the "highest echelon performers." This program is a way for them to become partners in Lithia. The next third are people who are talented, but their performance has reached a plateau. They need motivation through more challenging opportunities, DeBoer said. Finally, the bottom third of people need ground-level "nuts and bolts" training, he said.
DeBoer said if Lithia's partnership program works, it will mean that he and his corporate leadership team can spend less time traveling to Lithia's stores. The stores also should be able to grow without the corporate staff having to grow.
"We're in the infancy stage of this, but it was very well-received by our leaders," DeBoer said. "We were at that stage where we could actually message with money rather than just messaging through communication and actions."
It also will allow store managers to send a message, he added, "that you've proven you have advanced to a level that can inspire the rest of the organization to want to achieve something."