News/Publications

Shrinking Employee Turnover

May 04, 2018

Dealerships have historically experienced some of the highest employee turnover rates of any industry. Some in the industry refer to high turnover among dealerships as the “turnover tax.”

According to the National Automobile Dealers Association (NADA), the average tenure of dealership employees is only 2.4 years. For salespeople, however, this figure drops to a scant 18 months.

High turnover = high costs

High turnover rates can cost dealerships in a number of ways. Of course, there are the hard costs associated with recruiting, hiring and training new employees. Less obvious are the lost sales and revenue that can result from less-experienced salespeople who aren’t as adept at closing deals as their departed predecessors were.

ESI Trends, a dealership consulting firm, has done some calculating. It found that a 10% increase in employee turnover costs dealerships an average of $7,500 in gross profit per employee annually. For a dealership with 70 employees that experiences a 10% increase in turnover, this translates to a loss of more than $500,000 in annual gross profit.

Tips for better retention

Here are a few tips that can help you reduce employee turnover at your dealership:

Empower your employees. Give employees more autonomy and decision-making authority in their jobs. For example, instead of requiring salespeople to ask their managers before closing a deal, set broad price guidelines and then let them finalize the transaction.

Invest in training. Well-trained employees tend to perform their jobs better, achieve more success and have higher levels of job satisfaction. So don’t pinch pennies when it comes to employee training — you can achieve a high return on this investment in the form of lower turnover rates and costs.

Rethink commission-driven pay plans. These types of compensation plans have traditionally been common among dealerships. But many employees — especially Millennials, who represent about half of all new dealership hires, according to NADA — don’t like the high-pressure environment they create.

Therefore, some dealerships are moving away from straight commission comp plans to plans with a base salary plus commission. This can remove some of the pressure many salespeople face and, thus, increase their job satisfaction.

Offer a well-defined career path. Many employees want to know that there’ll be opportunities for advancement if they perform their jobs well. So show them specifically how they can rise through the ranks, including the possible raises they could receive with each promotion.

Give it a try

There’s no reason your dealership must keep paying the turnover tax. See if implementing some of these ideas can help boost employee retention at your store.

© 2018