McLEAN, Va. -

Though car dealership employees, on average, earn more than the average weekly earnings of U.S. private sector employees, retention remains a large problem for dealerships across the country.

According to NADA’s 2013 Dealership Workforce Study Industry Report, franchised dealership employees, on average, earn 27 percent more than the average weekly earnings of all U.S. private sector employees — but turnover rates remain elevated.

According to the report, the overall turnover rate for dealership employees is 35 percent.

And it gets worse for sales personnel, in particular.

According to a CNW Retail Automotive Summary released in late May, turnover rates for salespeople at new-car dealerships came in at 111 percent last year.

This compares to a high of 124 percent in 2011, brought on by the 2008 economic downturn, according to CNW.

CNW president Art Spinella noted that historically, new-car dealership sales personnel turnover has been above 100 percent for decades

The 2013 Dealership Workforce Study Industry Report from NADA was produced in partnership with DeltaTrends, a provider of workforce metrics for the auto industry. The report is based on 2012 hard data culled from 290,000 car and truck payroll records, and includes both national and regional data. More than 2,240 dealerships enrolled in the 2013 Dealership Workforce Study.

To get a little more insight into employee retention trends and what dealers can do to turn the tides, Auto Remarketing turned to Ted Kraybill, who conducted and analyzed the study.

Kraybill, president of ESI Trends, shared some opinions based on industry research and experience, regarding the factors that are pushing sales personnel out the dealership doors.

To get the full picture on where the historical trend of high turnover in the show room originated, we went back to the source.

Explaining why sales people don’t stick around, Kraybill said, “I think the history of high turnover in sales positions ties back to sales people being originally classified as a ‘variable’ expense from an accounting perspective due to 100 percent commission-based pay plans.”

“As long as this variable mindset is in place, managers are less likely to see turnover as a serious issue,” he added.

And while the dealership culture changed, with most stores no longer viewing sales people as “expendable,” this trend has yet to fully leave the lot, Kraybill pointed out.

The turnover rate for female sales consultants is even more of an issue, with rates sitting at 76 percent, according to the NADA report.  

As for the reasoning being this trend — the culprit could very well again be tied to industry history.

“While the industry is slowly changing, the showroom is still not a very female-friendly environment.  This applies to female customers, as well as employees,” Kraybill asserted. “The good-old-boy, macho culture still dominates in many dealerships, so it’s not an easy place for women to fit in.  When you add in the work-life balance issues, it’s just not an attractive career choice for many women.”

The NADA study also shared that 40 percent of sales people are terminated within 90 days of hire.

Kraybill shared the 90-day revolving door is due to two factors: poor “fit” hiring decisions and commission-based pay plans. 

“Sales managers who invest more time during the interview process and use some type of personality assessment to identify candidates who fit the successful salesperson profile, tend to have lower turnover in that first 90-day period,” said Kraybill. “Also, dealerships who allow new salespeople to ‘ease into’ commission pay plans with longer periods of guaranteed base pay, tend to have less short-term turnover.

“If a commission-based salesperson isn’t earning enough to pay their bills while they work up the learning curve, they will chose to leave.”

Time Off Versus Pay Incentives

Though overtime and pay incentives will work for some, the study tied high turnover rates in part to long hours.

“The total number of hours and weekend that employees are scheduled to work has a significant impact on retention,” NADA said in the report.

Sales consultants working 50 to 60 hours per week earn 4 percent more a year than their counterparts working 40 to 45 hours. But there's a caveat.

When employees work over 45 hours, turnover increase and retention decreases, implying a change to the incentive system may be due.

“A lot of salesperson turnover is directly correlated to the number of hours that they are required to work.  There are still a significant number of dealerships who require sales employees to work 50 to 60 hours,” Kraybill said. “While there are a lot of other industries where employees have to work weekends, they usually get time off during the week and usually get one or two weekends off each month.  That’s often not the case in dealerships.”

He also pointed out this is a very big issue with most Generation Y employees, who put a higher value on time-off compared to extra pay.

This could be a big issue in the future, as dealers hired members of Gen Y 41 percent of the time in 2012.

NADA cautioned that to keep them, “we need to address dealership culture, work house, salary and incentive programs, as the turnover rate in 2012 for this age group was 54 percent.”

Cutting Down on Turnover

It is common knowledge that employee turnover can greatly reduce monthly gross profit.

As such, Kraybill contends employee retention should be one of dealerships’ top concerns.

“For decades, customer loyalty research has shown a direct connection between customer retention and employee retention.  As dealer margins continue to shrink, employee retention and productivity represent significant profit improvement strategies,” said Kraybill.  “Many dealers and dealer groups understand this, and now, many automakers are implementing programs to help their dealers engage and retain retail employees. 

“Employee retention is becoming a global retail KPI (key performance indicator) for several automakers, such as Ford and VW.”

The report’s author provided a few suggestions as to how dealerships can ensure sales personnel stick around a bit longer:

  • Be more flexible when it comes to work schedules and time off. 
  • Do a better job of matching showroom staffing to showroom traffic.
  • Do a better job of creating career paths for employees who want to grow and thrive.

Improving and investing in staff training also has the potential to lead to better employee retention rates.

“Dealerships who invest in new employees through training programs have higher long-term retention.  As dealerships hire more employees who lack sales experience, they need to help them develop the skills needed to be successful,” Kraybill said.

And at the end of the day, much of it comes down to pay structure. For some, commission-based pay structure is difficult to maintain, especially when just starting out.

“They (dealers) also need to provide higher base salaries until they (sales personnel) are able to support themselves in a commission-based pay structure,” Kraybill said.