View Cart (0 items)

Creating win-win incentives

October 11, 2010
/ Print / Reprints /
| Share More
/ Text Size+

Summary: This month, Professional Carwashing & Detailing® asked Christopher Brown, vice president of organizational development for the Khoury Group, to answer a question posted on PC&D’s online Bulletin Board.

Question: I’m trying to set up an incentive plan for my service advisor. Does anyone have any suggestions on how to go about doing this?

Chris Brown: Creating an effective incentive program that drives manager and service advisor motivation, while protecting one’s profit stream, is one of the greatest conundrums for today’s operator.

If a program is set too liberally, the employee may be happy, but the owner is pinched financially. Conversely, if the incentive is set too conservatively, it may be disregarded entirely.

It is critical to rivet employee bonuses to the company’s financial drivers, primarily:

  • Revenue/ticket average;
  • Labor percentage;
  • Cars per man hour;
  • Damage per car; and/or
  • Customer service.

Beyond these drivers, manager/advisor incentive programs should always increase net profitability/scalability of the owner, should exist within the employee’s direct area of influence, and be easy to understand and implement.

Do the math
First, progressive manager/advisor payouts should consistently result in quantifiable increases for the owner, whether in increased income, increased free time or both.

For example, if a location traditionally generates 8,000 tickets per month at $20 per ticket, it is grossing $160,000 in revenue. If the location usually runs 30 percent labor, that equates to $48,000 in manpower expense.

If a strong manager can run the same revenue with the same or better customer service, but at 28 percent, a portion of this 2 percent savings ($3,200) should be shared with the manager who is controlling that expense.

If the percentage is lowered further, the bonus should be increased progressively. The portion of this labor savings an operator should pay depends on the overriding goal of that owner.

If his or her primary objective is to keep as much profit as possible, the percentage is kept smaller. However, if lifestyle (money plus time) is the greater goal, it might make sense to pay a little more to drive additional motivation in the owner’s absence.

Progressive performance in revenue, ticket average and damage control can generate other sources of found money that can be used to fund these types of bonuses.

Small improvements to the bottom line should result in small payouts, while large improvements warrant larger ones.

In essence, this creates “intrapreneurs,” or entrepreneurial employees that work toward their own goals and dreams, but in the context of their employer’s business.

Be specific
Second, incentive targets must be S.M.A.R.T:

  • Specific;
  • Measurable;
  • Attainable;
  • Realistic; and
  • Time-bound.

Over-generalized targets lose their punch and ability to motivate because they are too arbitrary and difficult to latch onto.

Incentive targets must also be measurable. Measurements provide a continuous gauge that challenges your employees. These objectives must also be attainable, or within the employee’s area of control.

Basing a disproportionate amount of a manager’s reward on car count that is dramatically influenced by weather — something completely out of manager control — may create a feeling of helplessness instead of motivation.

Simply put, in certain months, high car counts are just not attainable given external circumstances. An incentive must not only be attainable, but realistic.

Whereas unattainable targets are ones completely out of the person’s direct area of influence, unrealistic ones are within the area of control, but are set so high there is no reasonable chance to achieve them.

If our theororetical carwash historically used 30 percent labor, and has always ranged between 27 percent and 32 percent, it would be attainable, but unrealistic to set a bonus target at 19 percent.

Time is money
Lastly, ensuring short time limits on your bonus periods keep your team interested. Limiting incentives to annual assessments and payouts usually contribute to periods of mediocre performance when participants lose the ability to see how their daily actions affect the year’s outcome.

Easily, a manager with this type of program can fall into an “I’ll make it up tomorrow” mentality and get so far behind they cannot catch up.

Monthly objectives for managers, and weekly to bi-weekly ones for advisors, are your best bet.

Accurate calculations
If an owner’s plan is too complex and/or not easily understood, it will not have the desired impact.

In fact, there is an inverse relationship between the level of complexity a bonus/commission system has, and its ability to drive behavior.

Usually, the more complicated and difficult a program is to understand, the less it will motivate.

A good rule of thumb is to have incentives that can be calculated anytime in the month in five minutes or less by the people they affect; if it cannot, it is too complicated.

When faced with this challenge, most will just throw up their hands and give up. Keep in mind, complexity can be made simple through technology.

A bonus matrix can be multi-faceted, including many variables. Providing a tool to perform the intense calculations (perhaps in Microsoft Excel) to the bonus recipient helps make the calculations easier.

In closing, it is important to note that each carwash market is changing. Incentive plans, regardless of their structure should be reviewed quarterly for effectiveness and modified as necessary as the industry evolves.


Christopher P. Brown is the vice president of organizational development for the Khoury Group. Christopher can be contacted at cbrown@khouryconsulting.com.