Dealership turnover squeezing profits

The struggle among dealerships to attract and retain female employees mirrors a broader problem: the industry's inability to keep new hires.

That inability, shown dramatically in the National Automobile Dealers Association's 2016 Dealership Workforce Study, hurts profits, says an author of the study.

Simply put, employees become most productive -- and dealerships see a return on investment from training those employees -- after three years. But too few dealership staffers stay around that long.

"What is concerning is that we continue to have an industry that suffers from very high turnover and an inability to retain workers," NADA Chief Economist Steven Szakaly told Automotive News. "When you look at the best-in-class dealerships -- those that are highest in terms of revenue and profitability -- they also happen to have the highest employee retention rate."

The profitability gap between the best and the rest has been widening over the last three years, Szakaly said. He declined to release the figure but called it "alarming."

NADA's Workforce Study analyzed 2015 data, tracking key trends on compensation, benefits, retention and demographics of nearly 2,000 U.S. new-vehicle dealerships.

It showed dealers are doing better at hiring millennials, those born in 1981-97. That group, aged 18 to 34 in 2015, represented about 60 percent of all new hires, up 3 percentage points from 2014.

But dealers are lousy at recruiting and hiring women. At the end of last year, 18.6 percent of active employees at dealerships were women, a paltry tenth of a point increase from 2014. Women accounted for only 20 percent of all new hires, nearly flat with 2014, the study said.

That's up from "under 15 percent" of all new dealership hires in 2010, Szakaly said. But Szakaly said the industry must do better.

Jim Appleton, who leads a retail trade group, said he is surprised that dealerships continue to lag in hiring women and blames a negative, if outdated, industry image.

"The image of the industry -- particularly at the entry level -- is the car business has always been the province of the guys," said Appleton, president of the New Jersey Coalition of Automotive Retailers. "At the managerial level, it's a retail business, which is the province of women."

Susan Scarola, a former DCH Auto Group vice chairman, wrote in an email: "It would be enlightening to really understand if the issue is exacerbated by a lack of women applying for the positions. I'd still wager it's an outdated public perception of the industry."

Women represented only 7.8 percent of employees in the nine key positions the study tracked, down from 8 percent in 2014. About 17 percent of service advisers and 16 percent of finance and insurance managers were women in 2015. Women made up less than 10 percent of the seven other job categories -- including only 1 percent of service technicians.

They also quit at a higher rate than men.

Appleton blames compensation plans for some of the gender imbalance.

He said many dealers pay employees a lot but provide shoddy benefits, allowing them to opt to buy better benefits if they want to. "The typical millennial woman might look at the overall [human resources] benefits and want better," Appleton said.

Dealer Enessa Carbone, who recently sold Carbone Auto Group to Lithia Motors Inc., said women represent about 20 percent of Carbone's 640 employees, with most of them in management positions. She has worked hard to make her dealerships' culture female-friendly.

"You have to take care of the culture in the store to make a woman comfortable enough to stay and other team members to treat her well," said Carbone, now a Lithia platform vice president.

Store leaders and male employees have to understand women, and that only happens with a strong human resources department, she said.

"You need HR professionals to resolve this human resource issue," Carbone said. "One of the places where the auto industry has historically lagged is having a strong HR department in a store."

The study showed that for all staffers, dealerships' three-year employee retention rate fell to 45 percent last year, while the rate in the U.S. nonfarm private sector was 67 percent. The dealership figure has declined steadily from 51 percent in 2013, the first year of the study. That continues to hurt productivity and profits, Szakaly said.

Productivity, measured as monthly gross profit per employee, rose just 0.4 percent to $8,446 in 2015, the study said. It rose 3 percent in 2014 vs. 2013.

"Productivity for a dealership employee is really something that occurs because of on-the-job training," Szakaly said. "When you look at someone not wanting to stay for three years, let alone for a six-month training period, that's bad because just when they're doing the best they possibly can for you, they leave."

Szakaly said stores with the lowest employee turnover, and higher profits as a result, do the following:

• Update job descriptions to keep morale high.
• Offer career growth. "This is important for younger workers. Very few want to be in a place where they hear, 'Congratulations! You're a salesperson, and you'll be a salesperson for the next 50 years.'"
• Build a business development center to pass sales leads to salespeople.
• Devise creative compensation.

Also: "Don't adjust your pay plan because you think your sales staff is making too much."

Too often, dealers begrudge their top performers the money they're making, failing to see that the dealership benefits as well. Said Szakaly: "One thing that leads to high turnover is that midyear pay adjustment some dealers feel they need to make."