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Do bonuses affect quality of work?

Chris Oakham, Sewells consultant, talks about bonuses

"Bonus schemes, especially for productive employees in service and body repairs, have always been contentious. On the one hand, many in the retail motor industry believe passionately that bonus is an essential part of any pay package because it increases productivity. On the other hand, there are those that are equally passionate when they claim that bonus and quality are incompatible. So who is right? Let us start by examining the facts about who gets paid what.

According to the 2004 RMI/Sewells Pay Guide, which was published this month (full report in the next issue of AM), franchised dealers are more likely to pay bonus than independents. In the month when the Pay Guide was researched, over 60 per cent of franchised dealers paid bonus to service and bodyshop productives and this made up nearly 20 per cent of pay packets.

At the same time, only 20-30 per cent of independents paid bonus amounting to just over 10 per cent of pay packets. Also a larger percentage of franchised dealers paid overtime to productives during the research period, and at a better rate above basic than independents. As a result of bonus and overtime, productives in franchised dealerships were paid about 15 per cent more than their independent counterparts – even though basic pay was approximately the same.

The reason why independents do not utilise bonus schemes more widely is probably administrative. Franchised dealers, as larger businesses, can provide the administrative capability to run bonus schemes, and independents cannot.

If the argument that bonus sacrifices quality for productivity is correct, then independents should produce higher quality work than franchised dealers.

As far as we know there is no direct evidence of this, although surveys like Castrol Trend Tracker do record that motorists are more satisfied overall with independents. But then quality is only one component of 'satisfaction', and franchised dealers and independents have remarkably similar amounts of rectification work.

More to the point, we have never seen any evidence from a 'before and after' trial that can be considered conclusive – where quality is monitored closely before and after a bonus scheme is installed or uninstalled. However Sewells has implemented many workshop bonus schemes, and measured a clear-cut improvement in productivity in every case.

We cannot say for sure that bonus has an adverse effect on quality, but we can say that bonus schemes increase productivity. It has also been our experience that bonus, as part of a pay package, attracts more and better applicants when recruiting.

No doubt the debate will rage on with undiminished passion. Our view is that bonus is a must for service workshops and bodyshops. It definitely increases productivity, meets employees' expectations, and there is no robust evidence of a fall in quality."

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