There are few topics in any small business that cause as much angst as employee compensation. While employees try to extract as much money as possible from an employer, every business owner seeks to pay employees a fair, competitive wage that also offers a motivating incentive.

More than just pay plans, employers need to develop a compensation strategy, especially when it comes to rewarding the people who
generate income for the dealership.

Do they have control?
Employees can’t be expected to have a significant part of their pay at risk over things they can’t control, said Donya Rose, a partner with Cygnal Group and a specialist in helping companies create effective selling functions. “Salespeople must be paid on what they do
personally to contribute to profitability,” she said.

Rose cautions employers that setting annual goals — and corresponding pay — too high risks demotivating employees. How fired up will an employee be in June if he thinks he has no chance to achieve annual volume numbers that must be reached before a bonus can be earned?
If something outside their control prevents them from making what they thought they would, salespeople are likely to just hang out at the dealership collecting their base pay or draw until next year, when the numbers are reset.

In some cases, a mid-year correction may be appropriate. “It’s rare for this to happen and employers must establish criteria in advance as to why it would be done,” said Rose.

Last year’s gas price crunch is a good example of that type of trigger. If sales drop unexpectedly, dealers will have more sales capacity than they need and layoffs may be necessary. “But, for people you decide are keepers, it’s important to share the pain with them, and for them to