As an industry, we’re acutely aware of the high turnover that dealerships face amongst their sales staff. While JD Power states that 67% of new sales hires left their dealership within 6 months, ESI Trends estimates that number to be closer to 80%! While this is a shocking statistic, an even more shocking figure is ESI Trends predicts this lack of retention can cost an average-size dealership up to half a million dollars a year. That translates to billions of dollars we are losing as an industry. We need to do better for ourselves and for the future of the dealership structure. It’s time we shape up as an industry when it comes to retention before it’s too late.
Reasons for Turnover
Turnover can be attributed to several causes, but regardless of what these reasons may be, the end result hits the bottom line. Dealerships not only need to spend countless time and resources to recruit and train new employees, but the customer is negatively impacted through the lack of continuity and consistency of your staff and the experience they provide. Today, I want to discuss two of the most common factors for turnover of competent and experienced employees.
Reason 1: Pay Structure
As we look across the industry, we have found one major motivation for people leaving is the pay structure in their dealership. Dealers by and large are still paying their staff a commission-based salary, and for many entering the industry, it’s a tough pill to swallow. While they may initially be enticed by the earning potential, this can quickly sour as they realize the hours and skill they need to reach their financial goals. Additionally, this commission structure doesn’t allow forgiveness in the beginning of a person’s tenure to allow them to get up to speed with the new culture, processes, product knowledge, and training. In turn, the employee loses confidence and the dealership loses another person.
Reason 2: Lack of Direction or Career Path
Another reason people are leaving dealerships stems from a lack of direction and a defined career path they can envision. This is largely attributed to poor dealership management and unclear expectations and goals for employees. The truth is many managers don’t know how to manage. Frequently, dealership managers were once the best sales people and one day were tapped on the shoulder and pulled into management. The reality is the skill set needed to coach/manage and the skill set needed to sell are completely different.
Think of it this way, some of the best coaches in history never even played the sport they coach. Let’s take Bill Belichick for example. Like him or not, he will go down as one of the best coaches in NFL history with 5 Super Bowl victories. How many years of NFL playing experience does he have? Zero. He was a lacrosse player.
On the flip side, look at Wayne Gretzky. Widely considered the greatest Hockey player who ever lived, he is also arguably one of the worst coaches in NHL history, ending his coaching career with a losing record and never finishing above 4th place in his division.
Being a great player and being a great coach are completely different skills. The same is true in the business world.
We can continue the list of why people are falling out of the car business - long hours that aren’t conducive to a family, reputation of being a car salesperson, or the impression that the business is a “good ol’ boys club.” Any way you slice it, there are steps that can be taken to make it better.
How Do We Move the Needle?
The first step to gain control of the exodus of salespeople from the dealership is to hire the right people. To do this, you need to position your dealership appropriately to entice candidates to apply and then have the right processes in place for hiring. What does that mean? Ensure you have a clear job description, situational interview questions to determine cultural fit, and of course standard background checks. Often times, companies will even do behavioral assessments to pinpoint areas of strengths and weaknesses to make sure the job is the right fit.
Once you have the right people working in your dealership, you will need to retain them. We have found that one of the first lines of defense to slow turnover is to invest in your people. Investing in your people means providing them with the tools and resources they need to be successful in their role. It’s our organizational obligation to train our employees because, after all, they are our most important asset. So how can we do a better job of it? Make training a priority.
How to Overcome Common Hurdles
We have heard excuses across the board about why dealerships don’t train their staff. Some claim that it’s not in the budget, or if they need to make cuts, training is the first line item to go. How can this be an area that we are skimping? You cannot afford not to train your people. Your dealership likely spends thousands of dollars on advertising, right? However, is your staff able to properly handle leads that come into the dealership and convert them to customers? Probably not if you have failed to train them to do so. Training is a huge area of opportunity and one that will produce immediate results with the right effort. Not making training a priority at your dealership is essentially leaving money on the table, or even worse, is actively losing you money.
Other times we hear managers complain that their staff won’t complete the training. This is a big red flag, as it really begs the question, who is managing who? This is not a choice for your salespeople, this should be part of the culture. In our experience, all it takes is 15 minutes a day to impact your bottom line. Whenever you make it a priority to teach people to do their jobs well and coach them to do it the right way, you get higher performance, better results, and happier employees.
Think back to when you started one of your first jobs, the one you thought would be the start to your career. Did you know what to do from the get-go? Of course not. You had to navigate new responsibilities, learn from the more experienced workers, and understand the company culture. There’s always a learning curve, and the same goes for your new hires.
Practice, Practice, Practice
Finally, make sure you encourage your staff to practice and set the expectation that they will practice on a regular basis. Actually simulating client situations is key to take your training to the next level. I’m sure you would rather have your staff practice on each other rather than trying out their skills on a live customer. Think about what it takes to be a great athlete: You need to know the rules of the game and have a basic understanding of the sport, but you don’t become successful by learning the theory behind it. You need to practice. You won’t become a great golfer by watching golf on television, you need to get out there and tee off to master the skill. The same goes when perfecting talking points about an aging vehicle, working on overcoming an objection, or negotiating the best rate to close a deal. Practice makes perfect.
Hold Your People Accountable
Once you’ve got your training plan in place, it’s up to you as managers to hold your people accountable. Make sure your people are utilizing the training effectively by listening to your call monitoring, confirming appointments are set in advance, and that your staff is effectively capturing referrals.
Make training a part of your culture so everyone knows it isn’t a suggestion, but rather something that happens every day at your store. By training your employees, you’re sending them the message that you care about their development, you will be setting them up for success, and they will be happier. People stay longer when they’re having fun and making money, and isn’t that what we’re all striving for?
Learn more from Shelley Ram-Saban and Alan Ram's Proactive Training Solutions, and check out our executive level courses in the NCM Institute.