What role is your compensation strategy having on your carwash success or failure? If your organization is experiencing any of these issues, a hard look at your comp models may be necessary:
- Negative car count/profit trending
- Deteriorating social media scores
- Excessive voluntary turnover as well as low applicant numbers for job openings
- High labor percentages
- Low energy levels and no sense of urgency
- Facility appearance issues
- Low sales numbers and on-site revenue generation
- High damage per car levels
- Slow, apathetic service resolution efforts
- Weak preventative maintenance adherence as well as unnecessary stoppages
- Poor administrative follow-through.
Although a well-crafted compensation plan is only one building block of a performance-igniting culture, it is a critical and complex one. Two similar employees in the same roles with equal end-of-year earnings may react and perform quite differently depending on how their overall plans are structured.
The internal components of your compensation plans (dollar amounts, measurements, pay frequencies, etc.) must all work together to achieve the desired result: an energized, focused and confident team serving the guest and growing revenue. Based on the 150-plus models we have developed, here are some essential elements to keep in mind the next time you are creating your winning comp strategy.
Be aware of competition
Be aware of the competitive landscape, both in and out of your industry. With a tightening general job market and increasing competition from new investors for experienced talent, be aware of your pay levels and benefits relative to other operators within a 60-minute drive.
Wise carwash owners should get a sense of what other competing industries — such as other auto-related sectors, restaurant, hospitality, logistics, etc. — are paying, as they can be similar threats to your employee search. Operators in harsher climates must also account for the “outdoor weather effect,” or the amount of money employees are willing to sacrifice to work in an “always comfortable” environment versus dealing with the elements.
The gap between base and incentive pay
Maintain appropriate equilibrium between base and incentive pay. If one’s base salary well exceeds 80 percent of the total comp opportunity, most people will not put forth the incredible extra effort necessary for the final, tiny five or 10 percent lift in earnings.
Further, if an owner attempts to offset a generous incentive program by dramatically lowering an employee’s base earnings, he or she can jeopardize the loyalty of that employee, who may opt to leave for a more stable income. In most cases and in most industries, hovering around the 80 percent base, 20 percent incentive potential is a good starting point. This compensation model allows for enough base pay, so the individual doesn’t have to worry and stress over paying his or her month-to-month bills.
At lower position levels, pay with high frequency. Weekly is ideal for entry-level positions. At lesser income levels, employees not only experience overall financial pressure due to smaller amounts of money to work with, but they also deal with intense cash flow stresses.
As an organization progresses through the ranks to middle management and site management, incentives can then be moved to monthly without much turnover impact. Quarterly and annual incentives may be used for upper management personnel who already enjoy discretionary income through their base salaries.
Keep in mind, however, that even though someone may be comfortable receiving his or her incentive on a monthly, quarterly or annual basis, that person should be made aware of the status of his or her earnings frequently (at least two to four times per month) throughout the bonus period. This helps leaders see the direct cause and effect impacts of their actions on their compensation in real time, which is paramount in driving daily motivation.
Align service advisor incentives with your business model. There are two primary service advisor incentive models proven effective for promoting service-based sales in today’s carwashes. The first is merely disbursing flat payout amounts on a per-sale or “tonnage” basis.
For example, an owner may pay 50¢ for a customer upgrade to the highest online/tunnel service available or a couple of dollars for a singular express hand wax or unlimited program enrollment. This model works best for washes where on-site, point-of-sales efforts contribute to a small percentage (less than 10 percent) of the overall company’s profitability.
In full-serve/detail environments, where service advisor influence can have a dramatically higher percentage impact on profits, moving to a tier-based model based on higher ticket averages may make more sense. In this situation, if an owner knows a $9 ticket can be achieved by an untrained salesperson, he or she may want to offer a more skilled person a fractional percentage (perhaps seven percent) of the ticket average generated above the base ticket.
Related: Upselling wash packages
If a stronger service advisor created $10 each on 1,500 cars in the month, that person has produced an added $1,500 for the operation. In this case, the owner could opt to pay that employee’s commission percentage on this “found revenue.” Further, if the advisor can produce $11, $12 or $13 per transaction combined with exceptional service, the owner may slide the commission percentage upward to eight to 12 percent of the found revenue, respectively.
Each of these models has potential drawbacks. The pay-per-item model rewards representatives for being fast but can leave money on the table as advisors become less focused on selling and more concentrated on order-taking quickly. Conversely, the tier-based model can push salespeople to pressure guests, “cherry pick” opportunities or show visible displeasure toward those who do not upgrade and “hurt their sales numbers.” In many cases, we find combining elements of these two models makes an excellent hybrid option.
Focus on profitable priorities
Avoid cluttering your key performance indicators (KPIs). Most owners want three primary deliverables from their carwash managers:
- Drive car count
- Maximize revenue
- Control labor percentages.
Although such tasks as maintaining a clean facility and managing chemical orders are also necessary, they pale in comparison from a relative profit impact perspective. Therefore, it is essential that owners avoid adding too many areas of focus to a manager’s incentive.
The adage, “if everything is a priority, nothing is,” applies, but many owners are still guilty of convoluting their incentive objectives. Out of their zeal to focus on everything, they end up de-emphasizing the most important things.
A solution is to separate performance categories into critical ones that directly impact incentives and secondary ones that can be managed within a monthly or biannual performance review. Delineating them allows the manager to hone in on the key actions that drive profits while still being held accountable for other important, albeit less critical, tasks.
Strong company culture
Create a strong cultural envelope. If you have an excellent compensation program but are lacking in other elements that peak-performing companies master to create long-lasting success, your well-formed pay model will only produce small profit gains and turnover reductions. Other areas, such as recognition, communication, training, accountability and ongoing measurement, must also be fed to influence varying motivational triggers that exist among different staff members.
While most owners and managers recognize the need to reinforce all these elements, the difficulty lies in doing so consistently in the context of running a busy, volatile (due to weather) work environment. The good news is savvy managers can influence multiple elements simultaneously by focusing on actions with quantum impacts, such as coaching. Coaching not only provides training, it enhances recognition, communication, accountability, measurement and even compensation. Now that is a good use of a manager’s time!
When a well-crafted compensation program is inserted into a larger cultural envelope of support, magic can happen. Pay can rise while labor percentages decrease as revenue grows and old performance ceilings are broken. Turnover can diminish at the same time recruiting effectiveness strengthens as companies once stigmatized by the industry at large gradually become employers of choice.
Service and sales can elevate together instead of at the expense of one another. The beautiful thing about driving performance from within is the considerable margin gains possible, due to the expansive economies of scale which exist in the carwash industry. Small lifts in performance not only have mega-impacts on the bottom line but also on an operator’s ease of managing his or her business. It can even blunt competition that can’t keep up with the leading company’s level of employee passion and innovation.
The distance between points A and B above is not some vast, uncrossable chasm. It is only six inches — the six inches across one’s mind, which houses the ability to visualize higher levels of success not yet achieved and the willingness to take the first step, defining what you want.
Chris Brown is founder of Myrrh Consulting, a performance management firm that has helped business owners and managers in over 100 carwashes improve profits by developing their existing personnel and profit building strategy. For questions, a complimentary consultation or speaking requests, contact him at [email protected] or 1-844-MORE-REV.