Wednesday, January 16, 2008

How Much is Eddie worth?

A fantastic article worth a read
from: Doug Manly


It is always a challenge to determine what the right amount is to pay management. Too much pay and the comfort zone sets-in, too little pay and the manager takes a hike. There has to be the right mix where the dealership is maximizing profits and the managers are given an opportunity to earn mega-bucks. The monetary worth of a manager to the store is usually determined by departmental profit. The catalyst that determines departmental profit is the pay plan. A properly structured pay plan will bring out the worth of the manager. It’s the bucks that motivate.

I recall three instances where the dealer realized the worth of the managers, two positive and one too late.


The dealer decided it was time to review and revise all managers pay plans. The current pay plans had been if effect for years and were outdated. New pay plans were developed and implemented. The new pay plans provided the managers an opportunity to increase their earnings 25% to 50% without substantially increasing sales. Good pay plans can do that.

When it was time for monthly bonuses and commissions, it was the dealer’s practice to go to the Controller’s office to sign the checks. If there were any questions, the dealer didn’t have to chase down the Controller. After the new pay plans were implemented and it was check signing time, true to form, the dealer went to the Controller’s office to sign bonus and commission checks. As the dealer was about to sign the first check, he dropped his pen on the desk looked the Controller in the eye, pushed his chair away from the desk and said, “That’s a lot of money.” The Controller answered, “Yeah, but look at the bottom line.” The dealer looked at the bottom line, smiled and signed the check. Well, guess what happened when the dealer went to sign the next check. You got it, he dropped his pen pushed his chair away from the desk and said, “That’s a lot of money.” Again, the Controller told the dealer to look at the bottom line.

After the dealer finished signing the checks, he shook his head and went back to his office. The dealer was not accustomed to paying the kind of money the managers were earning from their new pay plans. Nothing more was said until the next month, when it was check signing time. Yep, “That’s a lot of money.” Yep, “Look at the bottom line.” That was the last time the dealer questioned the amount of the bonuses and commissions. One look at the bottom line explained it all. Bottom line profits in a year’s time went from $282,000 to $897,000 annually. And the following year the bottom line was $1,300,000 annually.

The dealer realized what his managers were worth and was more than happy to pay, “A LOT OF MONEY”. The annual profit increases year over year more than justified what the managers earned.


Two dealers were linked by a partnership to one store. Between them there were seven stores and thirteen franchises. The partnership store was a new acquisition and the dealers were looking for “Right Person” to bring the store up to speed. “Right Person” was found and in a short period of time the partnership store was firing on all cylinders. Over the next 18 months the dealers acquired more stores and franchises. After acquisitions there were a total of nine stores and nineteen franchises. Guess who was chosen to oversee the dealerships? You got it, “Right Person.” Now “Right Person” told the dealers that more compensation should be forthcoming because of the additional responsibilities and workload. Well, you know how dealers are. “We’ll talk about it.” Two months later and still nobody was talking. “Right Person” gave notice that he was leaving. Then and only then did the dealers want to talk. Too late, “Right Person” took a hike to a single point store for less money, less grief and less headaches. Talks cheap, it takes money to buy whiskey. Evidently, “single point store” recognized the worth of “Right Person” to his organization. I have often wondered why the worth of a person increases when termination notice is given. If one is worth $5,000 a month at 9:59AM and gives notice, how’s comes the dealer counters at 10:00AM? Why is that?

So Mr./Ms. dealer when was the last time you looked at the humans you employ and reviewed their earnings and worth to your company? My best guess would be NEVER. In my years in dealerships, I have yet to see a dealer call one his humans into his/her office, tell the human he appreciates them, and give them a raise. Usually the human has to ask or beg for a compensation increase. Why is that? One word can sum that up but we will get into that in a future article on pay plans.


The dealer decided that it was time to slow down and start smelling the roses. He had worked hard and had a nice store that was running smoothly. Not having a junior in his clan, it was necessary for the dealer to go outside the gene pool and find someone to run the store. The chosen one was a guy named Eddie. Eddie was in his late sixties, not ready to give it up, and still going strong. Kind of. Eddie wasn’t there for the money. He was there because of his passion for the business. In his day Eddie was one of the best.

Time, however, had taken its toll on Eddie. Time does that. Eddie was old school and had paid his dues. Eddie just kind of hung out and piddled with numbers in his office most of the day. On occasion Eddie and the dealer would sit around and swap lies.

The dealer was paying Eddie $80,000 a year. At times Eddie was more like a security guard. Eddie was there at 6:00AM every morning and stayed until close every night. Sometime during the day you usually could find Eddie in a conversion van taking an afternoon nappy nap for about a half-hour to recharge his battery.

One day while in the dealer’s office, I asked the dealer why he was paying Eddie $80,000 when it was obvious his best days were behind him? The dealer leaned back in his chair, took a puff on his cigar, smiled and said, “Because I know he is there.”

I told the dealer that I didn’t quite understand. The dealer explained that he slept better knowing that someone was watching the store. You see, Eddie was always there. Even on weekends, he would cruise the lot at odd hours, like midnight on Sunday, to make sure everything was all right. Eddie was one of a kind.

Even today I ask myself was $80,000 overkill? Maybe. But not in the dealer’s eyes. So the next time somebody asks why you pay “your” Eddie $80,000, lean back in your chair, light up your cigar, and smile. There aren’t a lot of Eddie’s around anymore.

“We do not see things as they are, we see things as we are.”

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