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Incentives and Consequences in Automotive Repair Operations

Like all people – automotive repair personnel will respond to incentives and avoid consequences. Often compensation is incentive based with corresponding consequences for negative outcomes resulting from striving for goals. It’s always important that costs be considered when offering incentive based compensation as increased expenses can defeat the purpose of achieving higher sales volume. Following are examples of using incentives and consequences in employee compensation:

  1. Performance Goals – An often used practice in automotive repair is to award compensation to employees based on achieving set performance goals. Care must be taken when using this method of incentivizing employees that costs are included in the evaluation. For example when a service advisor is rewarded for achieving a sales dollar goal – parameters should be set on related costs primarily related to offering incentives to customers such as free items or discounts on future repairs. If sales goals are achieved but unrelated costs are increased beyond set levels – the shop can be faced with a loss.
  2. Quality Standards – Rewarding technicians for achieving a specified level of efficiency or completed flag hours in a pay period can be an effective way to increase throughput. However care must be taken that volume isn’t achieved at the expense of quality. Quality problems can not only increase costs in terms of comeback work – they can also result in lost business. So when incentives are used to encourage higher volume – consequences for quality problems must also be employed.
  3. Customer Retention and Attrition – customer retention is a measure of the repeat business sold within a given time period – usually a year. Offering front line personnel incentives for achieving goals based on customer retention rates can be very effective. In addition to bringing in steady business – customer satisfaction can be a powerful marketing tool. By the same token – levying consequences for higher than desired customer attrition (loss) rates can also be effective. If employee compensation is based on customer retention and attrition rates then personnel must be have what they need to accomplish their goals. And as in other performance based compensation methods – possible costs related to employees achieving goals must be considered.

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