Hiring and retaining the right employees can be a challenge in a dealership, yet it's an essential element to increasing a dealership’s profitability.
According to the National Automobile Dealers Association (NADA) 2013 Industry Report "Dealership Workforce Study," the national average turnover rate for auto dealerships is almost 35 percent. Compli, a workforce management company with automotive industry specialization, has compiled statistics indicating the three-year average turnover rate for dealerships from 2011 through 2013 ranges from 14 percent (dealerships with fewer than 50 employees) to 39 percent (dealer groups with 1001–1500 employees).
Employee turnover is costly. According to the Employment Policy Foundation, a Washington research group, the cost of employee turnover is estimated at twenty-five percent of the lost employees' annual salaries. And with the national average hourly wage of dealership employees being $19.86 per hour (according to the Bureau of Labor Statistics data for February 2014), losing an employee would set back a dealership more than $10,000 per employee lost during a year. Most key jobs in dealerships, such as sales staff, finance and insurance managers, service advisors, and technicians are paid more than the national average, so the cost of losing one of those key employees would be even greater.
The cost of employee turnover can be seen in higher costs for recruiting and training new employees. Employee turnover costs are also contained in reduced profitability due to loss of productivity and the negative effect employee turnover has on customer retention. Company knowledge is lost, there's a disruption of the continuity of customer service, and often losing an employee has negative effect on employee morale.
Why are dealerships losing employees? Two major reasons are working employees all four weekends in a month and the number of hours required to work in a week. Employees are interested in work-life balance, often preferring additional time off over financial incentives.
What is the key to retaining your employees?
- Employees prefer to be engaged and have a say in how to improve the dealership. Discuss challenges with your employees, looking to them for solutions, and come up with a creative way to give them a voice in process improvement.
- Factor the employee retention rate into the pay calculation for the General Manager.
- For employees who are not performing up to their potential, consider mentoring those employees or reassigning them to more appropriate positions.
- Provide necessary training. Invest in a standardized new-hire sales training program and regularly update it.
Along with retaining employees, dealerships should also hire employees to account for growth. According to the Bureau of Labor Statistics, Industry Employment Growth for February 2014 remains at four percent and has been at that level since 2011.
What's important in recruiting new employees? According to the 2013 NADA Dealership Workforce Study, dealerships are being challenged to hire employees who more accurately reflect their customer base—more young people and more women; create staffing models that reduce total hours employees are required to work; and focus on team-based sales incentives instead of individual-based incentives.
Due to the impact on profitability and customer service, a dealership must place priority on its policies and procedures related to employee recruiting and retention.
For more information on this topic, or to learn how Baker Tilly dealership specialists can help, contact our team.