If you’ve never seen the mockumentary “This is Spinal Tap,” put it in your Netflix queue. The plot: Spinal Tap, the world’s loudest band, is followed by documentarian Marty DiBergi (played by Rob Reiner) on a disastrous tour.

My favorite scene shows guitarist Nigel Tufnel, played by Christopher Guest, showing DiBergi some of his equipment. They stop near the band’s amplifiers and share a deadpan exchange about the devices, which can be turned to 11 – conventional amps only go to 10.

Take Your Compensation To 11
A well-thought-out compensation plan may give you the edge your tire dealership needs. However, great compensation practices won’t fix process problems in your dealership; they won’t find and select great people to work for you; and they can’t make sure you’ve selected the right products and priced them appropriately. Yet, they can give your band the push you need to play at 11.

Setting the Stage
Here are some compensation mindsets both management and employees must change if you’re going to be successful. Some dealerships manage by using what I call the Retail Robber Baron Mentality:

“My employees should consider themselves lucky to have a job in this economy.” Or, “I’m not here to make them rich; they’re here to make me rich.”

Providing jobs is important. Most employees understand that as an owner, you’re entitled to a great return on your risk and your investment. Most can even understand your desire to be hard-nosed when it comes to expenses.

At the same time, if you want employees to really maximize their efforts, it needs to be a fair exchange for them. The 2009 Federal Poverty Guidelines for a family of four in the 48 contiguous states is $22,050. Paying just over the poverty level will not get you an unbelievable performer.

Management, however, isn’t the only group prone to occasional illogic when it comes to compensation. Employees, too, can either be clueless or unreasonable when it comes to their compensation. I call this syndrome Contribution Delusion:

“I just sold a customer a brand new set of UHP tires for $850! That means I just made this dealership $850!” Or, “I sold $3,000 dollars today on the parts counter. That’s more than I make in a month! They should pay me more.”

Statements like these reveal someone who hasn’t taken the time to really think about compensation and doesn’t understand an income statement – revenue is not profit. If you have a dealership with a net profitability of 5%, that means out of every dollar taken after costs of goods sold, operating expenses and other income modifications, the dealership realizes a nickel of profit. Yes, that’s right – five cents. Still more sobering is the fact many dealers aren’t operating at even a 5% net profit.

Countervailing Forces
In business and nature, there are forces that have counteracting effects. In this example, we’ll illustrate the countervailing forces between an employee’s skill level and the amount of management direction required.

Lower-skilled employees need more management direction, meaning these workers can’t innovate, problem solve or create. Therefore, managers have to spend more time supervising the employee. Moderate skills require moderate management intervention, while highly-skilled employees require very little management direction, freeing managers to actually move the business forward. They can spend more time managing and less time hand-holding.

Employees might even be receptive to the idea of job sharing lower-skilled responsibilities to either increase their own wages or protect their hours. For example, it’s known that flight attendants have been asked to take the place of subcontracted cleaning crews to protect their positions from layoffs. This is not to say you can’t take a low skilled person and improve their skills; I’m only saying that if your strategy is to hire lower-skilled people in an attempt to keep your compensation expenses low, you could be setting yourself up for a negative business cycle that can be tough (and painful) to break.

It sounds like a great strategy: get a few new people with some interest in selling tires and service, and bring them on as salespeople at the lowest wage possible. Even with an aggressive training plan and close supervision, their success rate will be minimal. Quite often, they aren’t skilled enough to hit their sales targets and their additional incentives. Moreover, you are subjecting your hard-earned customers to their learning curve.

This contributes to low morale and subsequently, even lower sales. The resulting lack of success on all fronts frustrates the employee to the point where he or she often quits. Any time an employee quits, it infects the mindsets of other salespeople and can lead to additional turnover. The problem with turnover is that you don’t get to pick who leaves and who stays – you run the risk of losing a star player.

Once that happens, you might not have enough employees to find and keep customers, so this causes overall poor margin results. This, in turn, directly affects your available dollars for new hires and top gun talent. So, you have to hire more low-skilled employees, and guess what – just like an internal combustion engine, the cycle starts all over again.

Attract Highly Skilled Employees
A paramount tire dealership management challenge is to create a work environment that attracts and retains highly-skilled employees, and great compensation plans can help in this endeavor. Use the salaries, benefits and other perks you offer to attract rock stars who will help you push your sales to 11.

An award-winning author, top-rated trainer and founder of Peak Dealership Performance, Mark Rodgers holds a master’s degree in adult education and the National Speakers Association Certified Speaking Professional designation.