The auto industry has dealt with several changes in recent years, in response to new spending habits of today’s consumers, and the expectations of modern employees. While dealerships have made great strides in connecting with this new generation of consumers, many are still struggle to retain their employees. In fact, the employee turnover rate within the industry is currently at an average of 67 percent, according to the NADA Dealership Workforce Study. This correlates to an industry loss of billions of dollars, annually.
A problem almost a decade in the making
The decline in employee retention has been steady since 2011. The average sales employee lasts a little over two years, according to the NADA. This proves to be a striking difference when compared to nearly four years ago, when the study began. Furthermore, the number of dealerships that have an average retention rate of three or more years has fallen to about 33 percent when looking exclusively at sales positions. Meanwhile, the private sector reported an average of 67 percent retention for the same amount of time. What’s more, dealerships across the board seem to be lacking female hires, with less than 20 percent of the workforce made up of women in a 2018 report.
An additional factor accounting for the loss in dealership employee retention is the changing consumer landscape. Instead of going into a dealership when looking for a new car, customers are spending hours researching online. Less than four hours is spent inside a dealership, speaking with a representative. With significantly fewer trips being made to the dealership, a salesperson has less of an opportunity to interact with and sell to customers.
Retention issues impact sales
The employee retention rates not only cost dealerships a monetary loss in the form of search and training expenses, but ultimately result in lost vehicle sales due to inexperienced sales staff and a lack of continuity with customers.
According to AlignMark Corporation, there are four main categories to quantify the expense associated with employee turnover:
- Separation – unemployment compensation, exit interview costs, etc.
- Replacement – advertising, pre-employment testing, time, and materials
- Training – time and effort required to bring new hires up to speed
- Productivity – lapse in morale and production, as well as low-quality output
How to find the right employees
By mid 2020, millennials were expected to make up 40 percent of all new-vehicle buyers. This generation forms the majority of the workforce, and currently accounts for 60 percent of new dealership hires. It is critical to maintain a focus on retaining this demographic to keep dealership floors stocked with quality salespeople. However, millennials prefer salaried positions with more steady income and advancement opportunities, instead of competitive wages based on vehicle sales. This can prove it difficult for many dealerships to retain their new hires.
Common mistakes dealerships should avoid during the hiring process, according to ESI Trends:
- Hiring out of desperation
- Hiring after just one interview
- Overselling the position’s earning potential
- Not impressing the recruit
Best practices dealerships should consider to boost retention:
- Keeping job descriptions updated with relevant, accurate information
- Implementing a business development center to funnel sales leads to salespeople
- Offering creative compensation in addition to stable base wages
- Providing a career growth and professional development plan
By switching to more base-waged positions that include bonuses, dealers meet customer needs versus negotiating the best price for the dealership. Dealerships that take things a step further and create a career path for their employees will significantly increase employee retention rates. The auto industry has recognized there is a problem in its employee retention and has taken steps to improve retention rates. However, there is still a long way to go in creating the best industry culture and offerings. Dealers should not only attract today’s top talent, but maintain them for the long haul. Until then, employee retention will continue to wage a significant toll on your dealership and the industry as a whole.
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