Strategies for reducing employee turnover

Ask a dealer or an employment expert the best way to reduce high employee turnover at car dealerships, and you'll get a litany of solutions.

Few of those will be to boost pay.

That's because most dealers who have low turnover credit it to reasons other than compensation.

"We're definitely not paying people too little, but we may not have the most lucrative pay plans either," said Todd Olson, vice president of Audi brands for Carousel Motor Group in Minneapolis. "Reducing turn-over has less to do with the pay plan than it does with people feeling they have opportunities."

Indeed. Some dealers are even experimenting with paying less money to attract more talent. That's one proposed cure to combat an industrywide problem: The average dealership employee turnover in 2015 remained unchanged from a year earlier, at about 40 percent. For sales consultants, it was 67 percent, according to the National Automobile Dealers Association 2016 Dealership Workforce Study. The average tenure of a dealership employee was 2.4 years; for sales consultants, it was just 18 months. 

And every salesperson or service adviser who leaves within the first year costs a dealership about $16,000 in unemployment, training and recruitment expenses, said Adam Robinson, CEO of Hireology in Chicago. 

Here are some ways to help dealers make better hires and achieve longer employee tenure.

The average turnover for service advisers at Audi Minneapolis and Audi St. Paul was 10 percent for 2016. For sales consultants and managers at those stores, it was 20 percent, said Olson.

But turnover wasn't always that low. Before Olson took charge two years ago, turnover for sales consultants was close to 45 percent, and for service advisers, it was as high as 25 percent, he said.

He credits the improvement to two changes: empowerment and workplace culture.

"Our salespeople are now a hybrid desk manager," Olson said. "They're actually running leases and running payments for the consumers and building relationships with customers instead of saying, "Let me go ask my manager.'"

Olson's management team sets price guidelines, but other than that, salespeople are in charge of the deal.

"So to go somewhere else is actually going backwards in their career development," Olson said.

The policy also frees sales managers to do such jobs as prospecting new customers. Service advisers also are empowered to make decisions such as getting a customer a loaner car.

Olson also worked to create a culture that fosters improvement.

"Having a culture where the employees feel we care as much about their success as they do matters," Olson said. "You have to help people push through where they think they can get to."

Market surveys by the human resources department at Morrie's Automotive Group in Minnetonka, Minn., found that some retail workers refused to consider a car dealership job because of the commission-based pay plan and long hours.

"They'd rather work at the mall for $12 an hour due to a fear of commission pay," said Lisa Thornton, Morrie's human resources director.

So, starting this quarter, Morrie's will pilot a salary-based pay plan and reduced hours in sales at two Mazda stores. Morrie's will pay $20 an hour and offer 36 hours a week, instead of 50 hours. Salespeople also get a bonus based on sales volume.

"It's to attract people we would not normally attract," such as college graduates and women, Thornton said. 

The jobs still offer a good living -- $50,000 to $60,000 a year, if staffers sell 15 vehicles a month -- but will reduce personnel costs and, it is hoped, cut turn-over rates, said Morrie's CEO Karl Schmidt. The average employee turnover rate at Morrie's is 38 percent. For sales consultants, it's 46 percent. 

"Not everyone wants to make $100,000 a year. They want that life-work balance," said Schmidt. "This pilot won't fail long term. We're not going to try this; we're going to do it."

The average tenure for department managers at Niello Co. in Sacramento, Calif., is 10.1 years; for sales consultants, it's 7.4 years, said Nichole Schwanke, Niello's human resources manager.

President Rick Niello credits that long tenure to a noncommission salary he pays to sales staffers at seven of his 12 dealerships. He also gives them two days off a week and limits them to 40 hours. He plans to take that pay structure and scheduling to all his stores at some point and is considering offering more vacation days earlier in an employee's tenure. He said he is eyeing offering health club memberships, too.

"We stress a balance in our employees' lives between their work time and their home time," said Niello.

The noncommission-based pay gives "salespeople the chance to have predictability in their lives," Niello said. It also makes Niello more competitive when hiring young talent who desire steady pay and life perks. 

"We're about 90 miles northeast of Silicon Valley, and when we look at the benefits they offer their people, it's eye-opening at how antiquated we are," Niello said. 

Niello employs 680 people, half of whom are ages 18 to 34. "We know what millennials like and what they don't like," said Niello. "We're looking to offer these folks a balance in their lives." 

At least three of his stores have been named to Automotive News' Best Dealerships To Work For list every year for the past five years. Likewise, the Sacramento Business Journal named Niello Co. one of its Best Places to Work for two years. 

Niello touts those awards at job fairs and online when recruiting new hires. 

"It speaks volumes that we pay attention to employees," Niello said.

Buick-GMC dealer John Moore said his salespeople have worked for him an average of 10 years. He credits that longevity to a laid-back, family-run culture.

"Part of the attraction is they're not going to be scrutinized at every turn as to their performance," said Moore, owner of Moore Buick-GMC in Los Gatos, Calif. "We try to help them achieve their best potential but not create such a high-pressure situation that they're uncomfortable."

But in the past three years, seven of his veteran service technicians left for jobs at the Valley Transportation Authority, which offers top benefits that Moore can't match, he said.

To replace the techs, he had to raise pay to $75,000 a year from $55,000.

"It's very difficult to compete against a company that doesn't have to show a profit," Moore said.

He hopes the hands-on culture he and his son, Bret, the general sales manager, offer will cement loyalty from his new hires.

"My son and I are out interacting with the customers all around," said Moore. "All I can do is tap my guys on the butt every day and thank them for being here."

Lithia Motors, in Medford, Ore., added 8,500 people in 2016 between new hires and dealership acquisitions. It expects to hire about 7,000 employees this year, said Christine Collinet, Lithia's director of talent strategy and acquisition.

Lithia leaders restructured the recruiting process two years ago. Collinet and her team created "talent acquisition teams" to support each of Lithia's 153 dealerships. The teams help to advertise jobs and move candidates through screening and hiring at dealerships more efficiently. There is an appointed team leader to serve every five to eight Lithia stores in each market, Collinet said.

The teams also help store leaders select better candidates using resources such as standardized assessments and stronger interview questions, Collinet said. But the teams do not make the hiring decision, she said.

"We tee it up and try to be good partners," Collinet said. The process "relies heavily on the stores in those markets to create their own culture. It's all up to the people in those stores to take personal ownership and drive the culture in those stores, and the word gets out there in the auto community."

Since Lithia started the recruiting revisions, the 90-day employee retention rate has improved, said Geoff Gill, Lithia's director of human development. But Gill did not have measurement data to share.

Dave Wright Nissan-Subaru in Hiawatha, Iowa, has been named to the Best Dealerships To Work For list annually for five years. Yet owner Dave Wright is "constantly" seeking "better talent."

Typically, Wright's employees stay with him for 15 years or more. He said it's because he lays out a career path when he interviews and hires them. He also trains them for three months before they interact with customers.

"A lot of stores, they're lucky if they do two weeks of training," said Wright. "I invest personally in the training; my son invests personally in the training -- we actually do it."

He created a stringent hiring process in 1998. He pre-screens candidates on the phone and does a "behavior study," drug test and three interviews, one with all department managers.

"If one manager and I feel that person will be successful, but another manager has a reason to believe they won't, we'll probably pass on hiring that person," Wright said.

He said they pass on about half of the job candidates they interview. But he would rather lose them in the hiring process than later, after he's invested in training. He estimates it costs him $30,000 to train a salesperson, not including his personal hours. His training investment in a service adviser is $10,000 to $15,000.

To keep talent, he relies on a noncompetitive culture that promotes a work-life balance.

"We don't split car deals here," Wright said. "You always help your buddy, and your buddy helps you on your day off. You might spend three hours selling a car and not get paid, but that's what we do. Otherwise, you have a situation where people are coming in on their days off or fighting over what is a half-deal and what's not."

There is one dealership department that automatically offers job candidates a defined career path: the parts department, said Gil Weiss, president of Automotive Training Team, a company in Manassas Park, Va., about 30 miles west of Washington, that consults for dealerships and offers job training.

Weiss said most parts staffers start by driving a truck; then, they stock parts; next, they work at the retail parts counter, then the wholesale parts counter; and from there, they might rise to an assistant parts manager and eventually to parts manager.

"It's the one path in the dealership that everyone knows it's there," said Weiss.

He proposes dealers put together similar paths for sales consultants and service advisers to show new hires that the leap from sales consultant to sales manager is possible.

He suggests creating levels for sales consultants to move up as they complete various training. As they improve, they make themselves more eligible for promotion.

"As you get this system working, the people who are coming on board begin to witness others moving to the next level, and they celebrate it," Weiss said. "It would be a whole different mindset from what we have today, and the generation coming up would especially value it because they're the generation of the participation trophy, right?"

Finally, if dealers really want to fix the turnover problem, they should get out of their own way, said Hireology's Robinson.

"We have an inferiority complex," Robinson said. "We're stuck in the industry image of 20 years ago. I would position a job as: "Where else can you work at a family-owned organization that's a bedrock of the community, working with people like yourself on the forefront of a revolution in transportation and connecting with cutting-edge consumer technology?'

"Let's sell the things we can compete on and stop looking at ourselves as an industry where people come if they can't find something else. Those days are over."