As a Subject Matter Expert (SME) in Dealership Compensation Planning and Implementation, I am frequently asked, “What should I pay for (this position)?” And my answer is always the same…”it depends!”

“On what?”…the group executive (or dealer principal, or general manager, or department manager) normally asks. To make my point that “there’s no easy answer” to that, I routinely ask at least five questions, not in any particular order of importance:

• How is the department organized?
• Does the department operate with a systemic structure?
• What are your expectations for this position (or person)?
• What do similar positions pay within your competitive geographic area?
• Is the department’s gross profit level adequate to support “best practice” compensation guidelines?

Once I get answers to the first four questions, the conversation tends to get stalled by the natural question, “What are the ‘best practice’ compensation guidelines to which you refer?”

“Guidelines are the easy part,” I reply. “If you want to review my guidelines for the three major franchise groups, go to http://garryhouse.com/prod04.htm. But be cautious! The really important guidelines are shown in the ‘Total’ row, and the guidelines for the sub-categories for each department (and in one of which the position in question is included) are far, far less critical.”

And also recognize another essential component of compensation planning…”Guidelines” only suggest what to pay…not how to pay! That’s why you might want to engage an SME!