The Cost of Employee Turnover on Dealerships

The Cost of Employee Turnover on Dealerships

Nissan Motor Co. reported 100% percent turnover in its sales staff at its dealerships in 2018, meaning some positions went vacant more than once in a 12-month period. Nissan isn’t alone NADA Dealership Workforce Study found three-year retention remained at 45% for retail automotive - just 35% for sales consultants, compared to 65% for the U.S. non-farm sector overall. Turnover like this has a serious impact on your profitability.

What is your turnover costing you?

Every time one of your employees walk away it is costing you money and time. In a recent study, Glassdoor estimates the average US employer spends $4,000 and 24 days to hire a new employee. These costs include advertising, interviewing, screening, and hiring for the new position. On top of the cost to get an employee in the building, a dealership now has to onboard the new employee. While onboarding costs can vary greatly but according to the Association for Talent Development's 2014 State of the Industry Report, organizations spend an average of $1,888 per employee. This means that for every new employee your dealership hires, you have invested approximately $6,000 just to get them to the point they are now adding value to your organization.

According to Automotive News, the average annual turnover for salespeople in the auto business is 67 percent. Now that we know all the stats, let’s do some quick math to help them determine the true cost of your dealership’s sales staff turnover. In this example, your sales staff is 40 people, based on the industry average you will lose and rehire 27 people each year. At a cost of $6,000 per new hire, your dealership will end up spending $162,000 annually on your sales staff turnover.

What are your annual savings?

If you could drop sales turnover to 33% annually, your dealership would end up saving $84,000.

How to improve employee retention?

Knowing the cost of dealership turnover is one thing but what are dealerships do limit the turnover of their staffs. "Retention starts right from the beginning, from the application process to screening applicants to choosing who to interview," says Dan Pickett, CEO of Nfrastructure with a 97% retention rate among its 300 employees "It starts with identifying what aspects of culture and strategy you want to emphasize, and then seeking those out in your candidates."

Hiring selectively is critical for most organizations. As Dan Pickett mentions, value alignment between a candidate and your organization is critical in maintaining a long-term professional relationship.

Pickett argues that high retention rates are a long-term play with major benefits to your company in terms of productive, engagement and loyalty. "It's an increasing returns model; the longer someone's with your company, the more productive they become over time," he says. "You have to look at this as a long game and take steps to ensure you're doing it right by making sure each employee is completely engaged with and part of the company's ongoing success."

Nimble Compensation is a cloud-based software solution designed specifically for car dealerships to make compensation calculations the easiest part of payroll.