Wages seem to be the most common concern among tire dealers who meet to discuss business issues in several Twenty Groups organized by Dealer Strategic Planning Inc. (DSP).
How to prepare pay packages? What is the correct incentive plan for managers? Should technicians be paid a flat or hourly rate? There are no common answers to these and other questions, but dealers “want to get it right,” said Pat Brown, vice president of marketing for DSP.
The company has organized three Twenty Groups for tire dealerships and has two more planned. The groups alternate meeting at each other's businesses to discuss issues, tour the host dealership and review and critique each other's financials, marketing programs and business practices in a confidential setting.
“Pay is the biggest thing because it's the biggest expense,” said Matt Curry, president of Curry's Auto Service in Sterling, Va. He said his Twenty Group discusses pay package issues at every meeting.
“It's a constant battle,” said Dale Donovan, vice president of Donovan's Auto & Tire Center in Cincinnati, who also participates in a Twenty Group. “We constantly revisit (the issue) on a regular basis.”
Ms. Brown said the groups submit topics to her for upcoming discussions and noted that other major concerns among the 60 dealers are employee motivation, workers' compensation and training.
The dealers are mixed on whether they pay an hourly rate or a flat wage for their technicians. “For managers, more and more tire dealers are going with pay packages with bonuses based on net profit,” Ms. Brown said. Managers are more motivated to help the dealership make more money if their pay is tied to a profit goal, she added.
Mr. Curry said he had to cut his employees' pay 5 percent last year because he determined they were being paid too much, and he changed the pay package to include incentives to meet profit goals.
“It helps hold the guys more accountable,” he said. Managers can make as much as $100,000 in bonuses if they help meet the company's profit goals. Techs, who are paid a flat rate, could earn as much as $200 a week in bonuses if they meet performance goals.
Near the end of 2008, his dealership's net profits had dived to about 4 percent of sales as the economy sunk into recession. That's when Mr. Curry learned about the Twenty Group and, through suggestions at its meetings, made some changes to his business, which included cutting the payroll by 5 percent.
“Tough decisions have to be made. Those decisions were helped formed by the Twenty Group.” He said discussing issues with a group of his peers “confirms or verifies what we have to do.”
The Twenty Group “is better than any consulting and I've had consultants,” Mr. Curry said.
Part of the success he's had with the group is that the program holds him accountable, he said, since the group members agree to accomplish four or five things for their businesses before the next gathering. Meetings are held a few times a year.
Over the past year, Curry's Auto Service has increased its bottom line 220 percent and sales have been growing the past two years due to customers holding on to older vehicles and needing repairs. He said Curry's sets itself apart by focusing on performing complicated services, such as diagnostics and programming, and specializing in European vehicles.
The dealership also has changed the way it views its financials based on input from Twenty Group meetings. He said the company controls its payroll expenses by keeping it under 40 percent of gross profit. Curry's also offers its 70 employees at its five retail stores paid vacation and sick days, matching 401k contributions and health and dental insurance.
Meanwhile, Donovan's Auto pays an hourly rate and gives technicians bonuses based on the amount of hours they bill per month. The dealership also offers employees health benefits, a retirement plan and Christmas bonuses.
Despite the recession, sales have increased the last couple of years and the trend is on track to continue this year, Mr. Donovan told Tire Business. The dealership has been in business 50 years and has developed a good reputation in its market. A lot of that is due to his employees, he added.
Mr. Donovan is proud that the dealership—which has one retail store and an oil change shop—has a low turnover among its staff of about 20. Some employees have stayed with the company for more than 30 years. “They don't leave because we give them a fair shake. Our employees are part of us being successful,” he said.
Based on suggestions from his Twenty Group, his dealership implemented regular employee meetings to discuss concerns or other issues.
Overall, dealers need to look at numerous factors regarding their pay scale, such as competitive rates in the local area, according to DSP. “Sometime the environment is the better carrot,” Ms. Brown said, adding, “We suggest checking rates in your market and put in what is right for your business.”
Twenty Group dealers also have discussed ways to motivate their staffs, especially employees who have been with the business for a long time but are not engaged in the corporate goals and are reluctant to change their ways.
“They do not want to do anything new. Those people influence others…. It can create a lethargic organization and it will not move forward,” Ms. Brown said. Weeding out unproductive long-time employees is a difficult decision, and Twenty Group dealers often share suggestions on the best way to handle that situation.
“There is peer encouragement. Twenty business owners have done it and they can provide ideas and suggestions on how to do it,” she said.
Other concerns dealers discuss often are how to reduce workers' compensation claims and develop safety programs as well as finding affordable training programs.
“The biggest subject going forward is healthcare,” Ms. Brown said, referring to the federal government's recently enacted healthcare reform legislation and the confusion surrounding what changes and costs it will implement.
Mr. Donovan paid 100-percent health insurance premiums for Donovan's Auto employees and their families until about two years ago, when the dealership switched to a health savings account. He acknowledged he is concerned about what the new federal healthcare plan will involve and how much it will cost businesses.
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