Will Activity-Based Compensation Work for You?


You cannot manage results; you can only manage activities. When activities are habitually performed and flawlessly executed, the results take care of themselves!

Sound activity-management requires that you do the following:

  • Develop, document, and implement the processes that are critical to your business strategies,
  • Clearly define and communicate your expectations,
  • Measure what you need to manage,
  • Inspect what you expect, and
  • Reward those who meet your expectations, and deal with those who do not.

Today, I’m going to talk about the last three bullet points.

In the early 1970s the “McMillan Leaderboard” was introduced to, and became quite popular with, the retail automotive industry. Some of you may remember this.

I had one in my dealership, hanging on the back wall of my general sales manager’s office. My intent was to scoreboard performance, inspire competition, and incentivize vehicle salespeople within numerous categories of unit sales and gross. This was back when I was so naïve that I believed that we could manage results! The message now is that my intent for you is unwavering, except that I strongly encourage you to measure, scoreboard, inspect, and incentivize activities, rather than just results.

To demonstrate this methodology, I have developed a sample Vehicle Salesperson Leaderboard template and have attached a PDF version for your review. Should you wish to receive a working Microsoft Excel version of this template, together with instructions for its use, please email your request to me at ghouse@garryhouse.com. This leaderboard template will focus on up to nine separate categories of sales activities, for up to 25 salespeople. Each category can be weighted, based on its respective importance to you. The activity categories on the sample template are:

  1. Percent of Opportunities to do Business (OTDBs) Against Objective
  2. Percent of OTDBs Delivered
  3. Average Price-to-Sale Gap
  4. Percent of OTDBs with “Set” Appointments, that originated from Pro-Active Salesperson-Generated Efforts
  5. Percent of OTDBs with Appointments that “Showed,” from Item #4 above
  6. Number of Vehicles Delivered that were classified as “Over-Age” at time of sale
  7. CSI Score
  8. Percent of Vehicles Delivered that were classified as “Pre-Owned”
  9. To Be Determined

Obviously, any of these activity categories can be easily modified. Get as creative as you wish!

Should you wish to adopt this type of activities-management discipline, I recommend that you:

  • Have an administrative assistant update the Excel template every Monday, Wednesday, and Friday and also at Month-End.
  • Following the update, immediately transfer the results from the Excel template to a highly-visible scoreboard. (By the way, customizable magnetic leaderboards, similar to the old “McMillan System” are available today at https://www.magnatag.com/page/LEA/board/contest-whiteboard.asp).

Should you wish to include activity-based compensation, I recommend that you:

  • Devote between 15.0% and 20.0% of your total sales compensation budget to incentivizing your sales staff, based on leaderboard performance. As with most golf tournaments on the PGA tour, it would be appropriate for you to ensure that all salespersons that finish in the top half of the leaderboard are financially rewarded for their efforts.

If you like the concepts of activities-based management and activities-based compensation, don’t limit yourself to just the Vehicle Sales Department. These concepts work equally well in the BDC, in the F&I Department, and in the three Fixed Operations Departments.

Join the conversation! Let me know what you think!

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Comment by steven chessin on March 23, 2015 at 3:51pm

 Don't BS me.  The Internet is just another way to get people in, nothing more. 

Brian - Thanks for the perspective. I can address it. Hope it doesn't bore you. 

A targeted BDC follow-up campaign of previously failed sales is not an "internet or even computer  thing" as it a human effort of hundreds of calls by a team of people working for many hours in response to a pro-active targeted special announcement. It is an "old-school" chunk of work that could have been done 100 years ago. It would be physically impossible for a salesman, regardless of his talent and diligence, to perform this on his own. And if he tried he would have had to abandon floor coverage. The  "hero"  was management for allowing me to direct the resources I manage for his exclusive benefit rather than as a general effort for the whole sales team.   Did he make the sales because his name was on them even though he did not make the OTDBs. His customers were gift-wrapped and hand-delivered. Maybe a raw rookie could have been able to write them up just as well.    

This is what Steve Stauning calls "An Appointment Culture".    

 "my success or failure was mine alone"  Not true. The leads - sales - and fails belong to the store. If you fail the store gives them to me to work.When you leave they are orphans and most salesmen leave before "their" customer is ready to buy again so they are inherited by sales support to provide OTDBs to new guys.  

Gary carefully spelled out 9 specific steps. I was pointing-out that the steps regarding OTDBs were more often in the hands of SALES-SUPPORT -- and activity-based compensation rather than sales commission was probablycorrect as the salesman NO LONGER DOES THIS as they did in the 1956 video. A salesman today generally does a few days of follow-up. Without sales support teams this work would not get done.  That includes the follow-up sales support by outside vendor services - such as your own. Selling involves a solid share of back-room support that gets in the way of doing the front-room work. THAT includes a team of people doing internet marketing - BDC - plus every vendor. 

Comment by Brian Bennington on March 23, 2015 at 2:18am

Sorry Garry, but I want to respond to Steven's comments to me.  Steven,  Because of your past comments on various posts, you've convinced me of one thing.  While you and I both love this business, it's for different reasons.  No where have you ever mentioned you like the straight on, one-to-one selling of a vehicle.  Well, I do.  It's the best, most enjoyable part of the business.  Instead, you go on and on about BDCs, working as a team, yadada, yadada, yadada.  When I sold, I was successful, not because of someone or some group of non-sales people doing my prospecting or follow-up, it was because I handled the prospecting, selling and follow-up myself and did it better because no one knew my customers better than me.

I recognized that as my responsibility as a sales rep., and my success or failure at it was mine alone.  That's the only way I'd want it, and I long ago recognized that my management, no matter where I worked, based their respect on the numbers I got and how well my customers liked me.  Not me counting on the support of others. The fact that you continue to insist that things have changed doesn't mean they have.  They haven't.  In fact, because of the growing insecurity of today's customers and the decreasing "performance" of the average rep, a good sales person has more opportunities than ever.  Don't BS me.  The Internet is just another way to get people in, nothing more.  Really, nothing happens until the "rubber meets the road" as in, "We'll take it."  Think what you want, but no sales support position will ever "pack the punch" with management like your name on a board followed by a bunch of marks.  As to "war stories" like your BDC's saving a salesman who'd thought he lost his "MoJo," they're boring.  Who ever tells a war story about themselves where they don't turn out the hero?     

Comment by steven chessin on March 23, 2015 at 1:28am

Thanks Brian -  For me its all about the 2 steps Gary wrote about so well here. Numbers 4 & 5. Yes- there are some sales where salesmen can-and-do generate and process their own opportunities to do business.Years ago that defined what they do. That is no longer true now. "Obviously, any of these activity categories can be easily modified. Get as creative as you wish!"  The actual case I provided showed that a top salesman needed a whole team of business development help sell 7 cars in two days when he did not sell any in 21 days without a tech team's help. THAT changes the definition of what a sale - and a salesman - is today. With all due respect to my good friend's floor sales skills the smartest thing he did was to know what my department could do to get him the OTDBs he needed otherwise he would have to resort to 1956 style marketing by putting flyers under windshield wipers and talking to strangers at the gas station. "These concepts work equally well in the BDC" ---  Yes as it is part of the sales process.In some cases -  like this one - an equal part.    


Comment by Brian Bennington on March 23, 2015 at 12:21am

With your permission Garry, I'd like to congratulate Mr. Steven Chessin for finally putting his picture up!  My Steven, you certainly are a handsome devil!  I also noticed you've updated your DE bio, too, but I'd suggest you "objectively" reread it as it doesn't make as much sense as I'm sure you want it to.  (Thanks for the space Garry!) 

Comment by steven chessin on March 22, 2015 at 7:16pm

As BDC director I was approached by the store's # 1 salesman month-after-month who was 3 weeks into the month without a sale and close to suicidal. He begged for help. He said "He lost his 'Mojo". I got permission to apply our efforts just for him plus $ 250 additional discount was contributed by management to sweeten the offer to customers.I sent an eBlast to every walk, be-back, no show and no-appoint from the past 45 days. He had a 7 sale weekend from leads and appointments generated and managed by BDC.

Steve Stauning wrote, "Dealerships do themselves a disservice when they focus all of their attention on salesperson results and nothing on the activities that drive those results"Items 4 and 5 on that list were NOT done by the salesman -and were the critical components of the sales.  The  OTDBs. 

Once-upon-a-time, auto sales was 1-on-1 cradle-to-grave. My team earned $ 7 per kept appointment + $ 25 per sale for a grand total of $32 for each sale added to their minimum wage, no-benefits, salary.  

Does management see any flaws with this  ?  It looks like splits to me. 

Comment by Brian Bennington on March 22, 2015 at 7:19am

Mr. House, my friend, could you possibly make auto sales compensation any more complicated?  No wonder dealers can't hold on to sales reps with "pay plans" like this.  The simplest and quickest way to having the best, most self-motivated and determined reps is to set-up a tiered graduated-by-performance (units, gross & CSI) commission structure that pays better than other dealerships in your market, than work on getting the word out to the reps in your area.  After all, "Money talks and BS walks."  With your area's most productive reps on board, you'll certainly save money on unnecessary consulting and outsider sales training.

As to not being able to "manage results," I think it's easy, but somewhat harsh, to do.  Just make it known during hiring the dealership regularly dismisses its worst performers as dealership policy and you will be managing results.  Having experienced top producers, who learned how to sell at other dealerships, makes solid economic sense as it simplifies the hiring and training process.  Of course, even the best performers can have off months, but the dealer can look at those situations on an individual basis, and than decide if dismissal is necessary.


Comment by David Ruggles on March 22, 2015 at 2:20am

I know dealers who have been on the Pritchard board for decades.  I always thought it under rewards the best performers and over rewards the worst.  BUT those dealers still using it have less turnover than other dealerships I've know.  It wouldn't be for me. 

So where did you encounter Ernie and Terry?  I've seen a LOT of training manuals that look suspiciously like the one they developed in the late 1970s. 

Comment by Garry House on March 21, 2015 at 5:16pm


Thinking of Tex really ages me! And, yes, I'm very familiar with the Pritchard Board sales compensation plan. I removed it from several client dealerships. The problem with that plan was that 100% of the compensation was based on "the Board", and a salesperson could never figure out his earnings until the month was closed.

Comment by David Ruggles on March 21, 2015 at 1:22pm

OTDBs!  Shades of Ernie "Tex" Prichard."

Speaking of Prichards, ever hear of a Pritchard Board, different spelling, different family. 

An Ernie Prichard parable: "How many base hits a week does it take to go from being a .250 hitter to a .300 hitter.  The difference could be the Hall of Fame versus a pedestrian career, unless 500 homers went with the .250 average.  ANSWER:  1 base hit per week.  And how to get that extra base hit per week?  ANSWER: "Attention to details.  Stubborn adherence to and execution of details.  If one does this, the results take care of themselves."

But none of this works if a dealers continue to turn over sales people at the rate they have for DECADES.  If one has turnover it is ALWAYS management's fault.  Either a bad hire was made, or poor management applied after the hire.  It amazes to me how this dirty little secret of the industry is ignored and we talk all around the problem. 

Are there any ex Control, Inc. trainer/consultants still "out there?"

Comment by Mike Warwick on March 21, 2015 at 12:02pm

Great post Garry!  It is amazing how many dealerships haven't realized that they are measuring the wrong activities. I manage our groups BDC's and each night I do a report on calls, emails, texts, contacts, responses and appointments.  I send this report to our entire group.  In the four years I have been doing this repoort, not one store has looked at this report and thought, "Geez, we should be doing this to measure our salespeople's activities every day." Or maybe they've had the thought but never followed through! Finally, in January, I gave in and started doing the daily activity report for the entire group. My hope is that eventually, it will start to sink in and the managers will begin to realize that they need to create what Steve Stauning calls an "Appointment Culture."  Anyone who is not paying attention to Steve's website is missing a great resource.  Sales are the result of "sales activities" and those activities need to be monitored daily.

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