Zach Spangler

What's Driving Commission Process Change in Dealerships?

Evaluation
The Short Answer

Let's get clear on the state of dealership commissions process

Is your process working for you? Or against you? In this article we take a look at the different perspectives from all the different people who experience the process, what got us here, why that is and what's next. Oh yea, and the mutual agreement that spreadsheets are a problem.

Zach Spangler
Zach Spangler

3 min read

May 22, 2024

What's Driving Commission Process Change in Dealerships?
The Details

Let's talk commissions. Are they working for you? On a scale of 1 to 10, how would you rate your commission process? What if, by modernizing your commission process, you could unlock your teams to sell more and give your managers and back-office team days back in the month?

Guess what? You can unlock your team’s potential and improve your commission process

As automotive commission specialists, our years of work with hundreds of dealerships across the country make us uniquely qualified to help you answer these questions. 

Let’s start by understanding how different roles generally view the commission process.  

Role-Based Perspectives

HR, Accounting & Managers

For those of you directly involved in calculating commissions, like department managers or the accounting team, it's closer to the lower end of the scale. You know the pain, frustration, and time that commission calculations take. But what if there was a way to automate commission calculations? What if there was a world where calculating commissions for your entire dealership or group only took minutes instead of hours or days?

Commissioned Employees 

For your commissioned employees, they would also rate your commission process poorly. Despite hoping that commissions would motivate your team, the need for more visibility and transparency around their earnings is a constant source of frustration. Some of you spend the entire month tracking deals and trying to estimate your earnings, only to be surprised at the end of the month.

If this sounds familiar to your dealership, commissions need to be fixed. But what if there was a solution that provided your commission employees with real-time insights into their earnings? How would this impact your commission plans and the happiness of your employees?

Owners & GMs

Now, for those owners and GMs reading this article, you might think your commission process is working pretty well. But I would encourage you to talk to your HR and accounting teams as well as some of your commissioned employees to get their opinions. Dive in and try to understand how much time they're spending, how often errors occur, and how transparent your commission processes are.

The History of the Commission Model

While it's challenging to pinpoint an exact date or origin, the commission-based structure became prevalent as car dealerships emerged as a significant part of the economy in the early 20th century. Initially, commissions were simple and calculated by hand at dealerships. However, with the introduction of Excel in the late 80s, dealerships began using spreadsheets to calculate and track commissions. Since then, despite the increased complexity of commission plans and massive technological advancements, 96% of dealerships still rely on spreadsheets to manage commissions.

What's broken with Commission Spreadsheets?

But the reality is most dealerships have outgrown spreadsheets as the tool to process commissions. The model is broken, and new technology is needed to maximize the impact while minimizing the time to process. Spreadsheets have grown from "this works" to "this is working against us."

So why do we say most dealerships have outgrown spreadsheets? You're probably thinking, "My dealership has done it this way for the last 30 years, and it works. My people get paid, my accounting team closes our month timely, and I don't hear many complaints." But here's the reality based on external research as well as research our team has conducted.

1. Lack of Visibility

Commissions are intended to motivate your team and align their behaviors with your dealership's goals and profitability. But how does this happen when most employees aren't sure how much money they make throughout the month? The lack of clarity around earnings is one of the biggest sources of frustration and turnover in dealerships.

2. Commissions Are Inaccurate

A Gartner national study found that the average annual commission overpayment per dealership is $43,000. Based on actual dealerships we've worked with, our findings are slightly more conservative, with annual overpayments averaging roughly $32,000. This is money coming straight out of your bottom line due to formula errors, mistyped information, and other issues directly related to using spreadsheets.

3. Commissions Take Time

On average, dealerships spend 13+ hours each month compiling and processing commissions—nearly two full workdays! Much of this time is spent manually inputting data from various sources into spreadsheets, then reviewing and inputting it into the payroll system. Managers often come in early on the first of the month to get commission calculations done before their employees arrive, while accounting teams spend late evenings calculating commissions.

Effortless Commissions Around the Corner

Here's the good news: effortless commissions are possible with Nimble Compensation. By automating nearly all of the manual work, Nimble Compensation sits between your DMS and payroll systems, seamlessly connecting the two and replacing commission spreadsheets. By integrating directly with CDK, we pull, calculate, and provide washout sheets to your employees in near real-time. The benefits of implementing Nimble Compensation include reclaiming your time, increasing accuracy, improving visibility, and motivating your team.

Nimble Compensation fit right in your ecosystem

Time

On average, after implementing Nimble Compensation, dealerships see an 80% reduction in commission processing time, reducing the time spent from hours to minutes. Commission calculations no longer hold up month-end close, and managers and accounting teams can focus on other tasks.

Accuracy

By eliminating most manual work and spreadsheets, dealerships see a significant reduction in commission overpayments. This means your employees get paid accurately, leading to increased profitability.

Visibility

Nimble Compensation provides real-time visibility into your commission employees' performance, eliminating surprises at the end of the month. Managers can use this data to facilitate conversations and support struggling employees.

Motivation

Arguably, the most significant value Nimble offers your dealership is that it provides near-real-time commission information to your employees, thereby motivating them to perform at their best.

Why hasn't it changed?

So why are most dealerships still using spreadsheets? We run into three reasons:

  1. Dealerships don't realize there's a better way.
  2. Fear of making a change.
  3. What we call the "magic lamp" misconception.

Dealerships don't realize there's a better way

If you fall into the first category and have read this far, you know there's a better way. So, if that's you, check out or schedule a demo from our website.

Fear of making a change

The second reason is fear of change. We hear objections like "It's too complicated" or "There's no way this could work for me and my dealership; commissions are too complex." We've transformed the commission process for dealerships across the country, and our system is easier than spreadsheets because nearly all the work is automated.

The "magic lamp" misconception

We hope we've already addressed the third reason in this article, the "magic lamp" misconception, but just in case, we will review it. Some believe commissions are calculated quickly, accurately, and with little work from your team. By moving to Nimble Compensation, we can become your genie and get commissions done in minutes.

What are you waiting for?

So what are you waiting for? If you're tired of grappling with outdated commission processes that eat up your time and profits, it's time to make a change. Take the first step towards effortless commissions by visiting our website and scheduling a demo of Nimble Compensation. Transform your dealership's commission process and unlock newfound efficiency, accuracy, and motivation for your team. Don't let outdated methods hold you back any longer—embrace the future of commission management with Nimble Compensation today!

Next Step

If it ain't broke, don't fix it. Well?

Check out Why Your Commission Process is Broken? It's time to take a deeper dive into understanding into the state of your dealership's commission process.

Friends don't let friends do commissions in spreadsheets
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