Just Ask Bob: What’s the best compensation strategy for service advisors?

Management trainer Bob Greenwood has put out a call for reader questions… and they’re rolling in! He’ll be offering his perspectives in an upcoming series of videos.

If you’ve got an issue or concern, or you’re just curious about how some of the numbers in your business come together, feel free to send in your question– either directly to Bob at greenwood@aaec.ca, or in the comment section below.

Here’s a question from Larry Mitton, owner operator of Larry’s Auto and Truck Repair in Mississauga, Ont.:

Hi Mr. Greenwood,

After 38 years of running our shop, my wife and I want to slow down a little and be able to work more ON the business rather than IN it. We’ve decided to take on a service advisor / service manager, but cannot come up with a good compensation package to offer. I think a basic salary with a commission package should work, but we’ve never done this before. How can we make this work? Any help would be much appreciated!

Sincerely,

Larry

Bob will offer a full answer in the next season of Greenwood’s Garage, but for now, here’s a teaser. Bob writes:

Larry, many shop owners are looking for ways to bring in incentives to motivate and reward their teams.

Service advisors occupy a very special position within a shop because they set up the “experience” for the client. That includes counseling and educating the client about safety, reliability, and the ongoing efficiency of their vehicle. Their recommendations need to be based specifically on how the client uses the vehicle, as well as what the client’s expectations are about the vehicle. We call this is a “Service-on-Need” business model. An educated client does bring more business to the shop.

That being said, I’m not a believer in putting an incentive (commission) on total sales. Total sales measures “activity.” You can have a lot of activity and still not produce a bottom line for the business.  I believe the incentive should be based on total billed hours of the shop because billed hours measures “productivity” which builds a shop’s bottom line (net profit).

Do your own math and calculate the current site efficiency number of your business. Once your number of techs, labour rate, and days open per month are set, then the site efficiency number is only changed by increasing the total billed hours of the shop.

You could very easily pay the service advisor an extra $25 for each hour over the total billed hour monthly objective in addition to his or her salary. But work out the details of the arrangement. For example, all hours must be billed out on the last day of the month (some vehicles you are working on may be carry over into the next month) so there are no carry-over hours into the next month (that would create a sandbagging situation).

This is only an example. The best solution for you would be one customized for your specific operation. I do believe, however, that focusing in on total billed hours is the way to go in this knowledge-based profession.

Thanks for your question, Larry, and if I can be of any further help, don’t hesitate to get a hold of me. I hope you have a productive week!

—Bob

Stay tuned to Greenwood’s Garage, here on AutoServiceWorld. And send in your own question for Bob!