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Your Bonus Program May Be Hurting Your Business

It happens every year without fail. The days get shorter, a little bit cooler, and depending on your region of the country, you might have snow coming down about now. The year-end brings excitement and a fresh opportunity for your shop as you look at the start of the new year. 

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Our thoughts turn to the giving season that includes Christmas and Hanukkah even while we’re within the midst of planning our Thanksgiving celebrations to see family and friends and eat copious amounts of food. 

The season is a festive time that brings a warm feeling inside and, with that warm feeling, a spirit of generosity. Just as with our family and friends, we often look at our employees and try to decide what to give them to say thank you as the year comes to a close. We usually pick an arbitrary dollar amount and make sure everyone in the shop gets the same thing.

Is this really the best plan for your business and your team? Here are a few things for your consideration.

  • Are all technicians created equal with the same talent and productivity?
  • Do all service advisors possess the same level of skill and level of sales?
  • Are all managers at the same sales level?

As you likely have such diversity of skill and production regarding their sales impact, why are you treating them equally when the business says thank you in their year-end bonus?

I’ll attribute it to the herd mentality; it’s the proverbial, “Well, that’s the way it’s always been done,” or “My father did it that way” or “The shop I came from did it that way.” You get the point: but just because we’ve always done it that way or it’s the accepted norm, should we continue on our current path?

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The Bonus Becomes An Entitlement

If your shop is handing out year-end bonuses that are not tied to any component of employee performance, I would like you to consider halting your current program at this year’s end, and in its place put in an employee incentive program tied to their specific performance and reward accordingly.

Here’s why. When anyone gets a reward regularly (in this case at year’s end) without having to put any effort into achieving it, they consider it an entitlement. Instead of appreciation, they expect to receive it from then on. In turn, the “bonus” that you gave in good faith, is now “expected” by each employee, and any goodwill you expected to receive is often met with half-hearted thanks.

My Personal Example

In the late ’90s, my shop was thriving and growing. Our sales were on an upward trend and we added bays and staff to meet the demand. Then 9/11 happened and things were pretty rough for a couple of years. As Christmas rolled around that year, I continued to hand out year-end bonuses but due to cash-flow concerns, these bonuses were reduced for two subsequent years following 9/11.

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My wake-up call came when Charlie, one of my technicians, received his Christmas card and bonus. Instead of thanking me for the gift, Charlie said, “I guess next year I’ll probably get a bill.” 

Needless to say, that was the last year I handed out bonuses that weren’t connected to a performance metric that the employee had some impact on. It wasn’t until I had a coach that we came up with a plan for handing out bonuses that became an incentive plan which drove the results I desired.

My wife and I still handed out individual gifts, but these gifts were from us personally, not the shop. Delineating yourself personally while maintaining a business persona is helpful as you make decisions that impact the day-to-day operations of your shop. You are making them based on the health of the business and not in favor of any specific employee. But, don’t lose the personality that caused the employee to choose to work for you. It is a core reason they chose your shop.

What To Incentivize Going Forward

How do you determine what goes into you bonus plan? Keep the focus narrow and on things that are in the control of the employee. Here are a couple of suggestions and thought starters.

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For Service Advisors

  • Gross sales
  • The conversion ratio of estimated work to sold work
  • Email collection
  • Positive posted reviews to your Google My Business page
  • Gross profit percentage on parts

For Technicians

  • Gross sales
  • Number of sold hours
  • Efficiency-billed hours/actual hours
  • Well days (sick day not taken)
  • Comeback-free year

Put the focus on what’s important to your shop. As you look ahead to 2021 consider creating a bonus plan that rewards the metrics you value in your shop. Metrics that will enhance the level of service that is offered, by keeping everyone focused on the performance and improvement of your chosen metrics. There will also be an ancillary benefit: your employees will function as a closer team as they pull together to achieve the goals you have set.

I’d like to personally wish you a wonderful completion of your year 2020 and a fantastic start to 2021.

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