Churn and Burn

For those of you who did not attend the Driving Sales Executive Summit, one of the topics that generated the most discussion was related to turnover. Of course, we all know that our industry has some of the highest turnover (almost 66% annually), but do you know how that effects your bottom line? I’ll show you.

According to Harvard Business Review, “In skilled and semi-skilled jobs, the fully loaded cost of replacing a worker who leaves (excluding lost productivity) is typically 1.5 to 2.5 times the worker’s annual salary.” Perhaps you already knew this, but have you examined the cost when multiplied by a 66% annual turnover rate? Considering that according to NADA statistics new-car dealers, on average, employed 64 people per dealership, that would mean at a 66% turnover rate you would have around 42 people moving in and out of your dealership in the course of 1 year. That’s insane. Especially when you know that NADA shows the average weekly earnings of new-car dealership employees to be $1058.

So how does this affect your bottom line? If the cost of replacing a worker is 1.5 to 2.5 times the annual salary, which we know to be $55,016 on average, then replacing roughly 42 people every year is costing between $3.5 million and $5.8 million for your dealership.

Good news! There is a simple solution to bring that cost down substantially. The article that generated buzz at DSES challenged the common assumption that labor rates equal labor costs. The Harvard Business Review article said plainly that “managing labor costs isn’t a crazy idea, of course. But stingy pay and benefits don’t necessarily translate into lower costs in the long run.”

Here’s the thing though, it isn’t just pay. It is also benefits and company culture. So don’t just spiff more often, or give a few raises and think your turnover will disappear. People also want to know that you care enough to work with them on retirement by offering plans and contributing to them. They want to know you care about their health and family life.

However, the greatest thing you can do to decrease your turnover is to create a powerful and inviting company culture. Offering great pay plans and benefits are great FACTS, but your team wants to FEEL that you care about them. The good pay and benefits are only part of the picture. People will still leave if there is no driving culture at your company that shows you care about their success. It’s as simple as that. Give your time; invest in their success by training and implementing processes that will ensure an optimal environment for success. By improving the culture of your dealership it will improve the ability for the entire sales team to succeed, not just one or two. A managed sales floor is the simplest form equalizing opportunity and allowing for not only a better customer experience, but also true accountability. In the end, your dealership will be exponentially more successful and enjoyable for your employees and your customers.