So what comes before compensation? Here are our thoughts:

 

The first step is to develop a realistic sales and gross profit forecast, based on your market penetration expectations, together with an expense structure that is well-matched to the gross profit structure. The compensation budget is part of expense planning, and “best practice guidelines” are available to assist you.

 

Next, you should ensure that your organizational structure and staffing plan matches your sales plan, together with the activity management training and discipline necessary to accomplish the sales plan.

 

Thirdly, you must have a well-developed and documented set of operating processes for each department. This step also requires that these processes are consistently and effectively trained, habitually performed, and flawlessly executed.

 

The fourth step is to clearly define and communicate your expectations to each dealership employee by developing and documenting job descriptions and performance objectives for each position. You then must ensure that each employee has an unambiguous understanding of, and is committed to, the department objectives. Equally important is to ensure that each employee has an unambiguous understanding of, and commitment to, his/her individual performance expectations.

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After these four steps have been completed, you’re probably ready to begin ensuring that your compensation plans fully support your job descriptions and performance objectives.

 

Are there more steps to Performance Management? Certainly, and at least three of them need mentioning:

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• You must have a disciplined system of measuring the activities that need to be managed, inspecting what you expect, and score-keeping and score-boarding. If activities are effectively managed, the results will take care of themselves.

• You must establish, by position, the frequency and process for conducting One-on-One meetings. Each dealership employee deserves to have, and needs, a One-on-One meeting with his supervisor on a regularly scheduled basis (no less frequently than once each month).

• You must have sound, consistent leadership in order to succeed with Performance Management. It’s not easy! As business development guru Chet Holmes said in his book, "The Ultimate Sales Machine," great leaders must have “pigheaded discipline and determination.”