Calculating the cost to your dealership of high employee turnover

Employee turnover costs are a burden, costing the average dealership more than $1.5 million a year in replacement costs alone.

That doesn’t count the dollars associated with leads (or customers) burned by inexperienced employees.

And the biggest hit comes with your sales team.

More than one-third of the total, or about $500,000, is what it costs the average dealership with 25 employees to replace nine sales consultants in a year, according to compli, a workforce compliance automation company that specializes in automotive dealerships.

062017 IL Calculating the cost to your dealership of high employee turnover

In fact, U.S. Bureau of Labor Statistics data show that turnover among automotive sales consultants annually is about 67 percent – and as high as 72 percent among non-luxury sales consultants.

That’s about 1.5 times the 46 percent total turnover the Bureau reports for the private sector.

(Turnover among luxury vehicle sales consultants is just slightly higher than the national average, while overall car dealership employee turnover was more than 6 percent lower than average at 39.6 percent.)

What these numbers also mean is that the average dealership must sell about 473 additional cars a year to cover that cost of sales team turnover alone, and nearly 1,300 to cover all turnover, compli says.

You can calculate your turnover costs, based on the number of employees and number of sales people in your dealership, approximate turnover rate and average salary, using compli’s calculator. Of course, the numbers probably will go up if your dealership is larger than average, down if it’s smaller.

So what’s a dealership to do to reduce turnover, the associated costs, and impact on the bottom line?

The answer to that seems to boil down the following practices:

  • Interviewing job candidates
  • The onboarding process
  • Communication
  • Ongoing training

It should be no surprise that your dealership’s approach to hiring can have a big effect on the results, both in terms of meeting sales goals and reducing turnover.

So, avoiding these five mistakes identified in Dealer Solutions Magazine can make the difference:

  • Hiring too quickly to fill a need
  • Believing what is on a candidate’s resume is true
  • Hiring someone because you like them
  • Not properly vetting a candidate
  • Overselling the job opportunity

We’ll have more on avoiding the five mistakes and about onboarding, communication and training in a series of blog posts, “Hiring for Keeps,” on the Inside Lane blog.

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