The two most nagging problems in retail dealership operations are personnel turnover and increasing expenses. As you may know, in many ways, they are related.
We find the average dealership today experiences 65% turnover in one year! That is staggering! While many dealers quickly assume this represents salespeople and lower paid non-technical employees, they are wrong! Our studies clearly show it is "an across the board" problem. While turnover is greater in these two segments, turnover is excessive by any measurement in every employment segment and in every department.
Why this affects expenses is pretty simple. We all know that when you lose a valued employee in any category, you pay more and generally get less in the replacement. But it goes much deeper than this. Think of the costs of training 65% of your employees each year. Consider the loss of productivity when only 35% of your employees are "seasoned," (that is they have been in your employ one year or more). What effect does all of this have on CSI and bottom line profits? Some other factors (costs) to consider are FICA taxes (employer portion), health insurance costs, greater exposure to employee instigated lawsuits - the list goes on and on.
What are the costs of losing and replacing one employee? In 1997, the total gross generated per employee in our dealer index decreased $548 per month, 8.2% less than the previous year. That is $6,576 per year. In a firm of 100 employees with turnover at 65%, the annual difference, 1997 vs. 1996, was $427,440! The net profit effect is $373 per month per employee, $4,476 per year, and again 65 employees leaving could impact profits nearly $300,000 just in productivity losses, a direct reduction of net profit.
Hopefully, we now have your attention, since in the very well-run dealership a $300,000 drop in profits takes a $9,698,000 increase in dollar sales to recover.
What are the root causes of this problem?
We would identify them as these:
· Lack of a clear-cut organizational structure, or a structure that is not working
· No clear definition of job functions and assignments
· A poor recruiting and hiring process
· Society's (dealership management's) fear of holding every employee accountable for expected performance. (Most employees do not know what is expected of them because they have never been told!)
· A well thought out training curriculum that requires a minimum of 4-5 hours of training every month, and a job specific re-training program for sub-standard performers
Training for all employees should include:
· Orientation to your dealership culture
· Specific job function process training
· Product/brand training
· Self-worth training
· One year training calendar for every employee
An employee who leaves us for any reason is our mistake. We either made a mistake in hiring the individual, did not train them properly, or mismanaged them in the day-to-day activities of the job. In many cases, all three apply.
How do we stop this costly turnover and lack of productivity?
We must first ask ourselves the following questions:
1. Is our organization properly structured to meet today's challenges?
2. Are all processes carefully identified, categorized, coordinated and managed?
3. Who trained our current management staff to manage? To train? To hire effectively?
Let's assume your organizational structure is in place. All processes have been identified and defined. We know with some exactness what each job requires. We have set three accountability standards:
Category 1 - Minimally acceptable
Category 2 - Expected performance level
Category 3 - Superior accomplishment
For the employee in or below category one, we set a re-training curriculum with definite deadlines. After re-training and coaching, this employee must reach category 2 or become a part of the "George Washington Program" (meaning a part of history). You cannot tolerate under-performing employees after you have conscientiously trained, re-trained and managed their work efforts properly. The "warm fuzzies" are great, but must be coupled with accountability. Discipline creates the bonding so necessary to employee productivity and satisfaction.
The major faults in our current systems are our recruiting and hiring techniques. We expect every manager to possess all of the needed characteristics of a Human Resources Director. In some dealerships, the Comptroller is expected to fulfill that role. If you believe in behavioral and motivational profiling, you will understand that you can either have a great recruiter and a lousy manager, or a fantastic Comptroller and an incompetent Human Resources Director, but trying to combine some of these roles can be disastrous. We can show you some excellent case studies!
Human assets today far exceed in importance our financial assets, but most dealers and general managers seem unwilling to accept the fact that they need a professional Human Resources Director well trained in our complex business to take over the charge of building the right dealership team.
Filling this position of Human Resources Director is the first step to cutting your turnover to an acceptable and desirable 15% per year.