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Contributing Author:
Amber Hash
Recruiting Manager
EFG Companies

Struggling with Employee Retention?

It could be due to the nature of the industry. It could be due to a labor shortage. It could be due to your recruitment practices. Or, it could be a combination of all three.

The U.S. unemployment rate continues to sink, hitting a 17-year low in November of last year at 4.1 percent. Job seekers are finding work more easily than any time since the mid-90s. Openings have now topped roughly 6 million for five months in a row, a record streak, according to the Bureau of Labor Statistics. While the second quarter GDP notched an impressive 4.1 percent, labor market analysts cautioned that an increasing labor shortage could impact growth going forward.

In addition, according to the 2017 NADA Dealership Workforce Study, the median workforce tenure in retail automotive is 2.5 years. However, it takes employees in key production positions, like F&I managers, an average of three years to reach full productivity.

Going in to 2018, dealers were already struggling with employee retention. Compound that with a labor shortage, and the typical high-turnover nature of the industry could turn from a nuisance to a serious problem.

In my previous blog, I discussed how hiring practices can impact employee retention – specifically the importance of vetting your candidates. While vetting is extremely important in making sure you’re filling open positions with the right people, it’s equally important to set realistic job expectations early on in the recruiting process. This helps your team make sure they are searching for the right talent, and it helps to set up new recruits for success.

One of the biggest reasons for high-turnover in the automotive industry is unrealistic expectations of job performance. New hires come into the job expecting one thing, and get another. This leads to job dissatisfaction and, inevitably, turnover.

The fix for this is surprisingly easy — provide candidates with a comprehensive job description up front. If you don’t know where to start building a job description, think back to those key performance indicators that you utilize to measure your team’s performance. Build your job description around those. This will help both the hiring manager and candidates know exactly what the open position entails and cultivate transparency going forward.

Abiding by Realistic Expectations

More important than setting expectations is abiding by them. When a new employee is onboarded, their training should roughly match the job description for the position to which they applied, and so should their pay plan. Once that pay plan is set, don’t change it unless you find that it is actually demotivating for your team.

This is where the word realistic becomes important. You don’t want a pay plan that’s too difficult or too easy to achieve, as both can be demotivating. So, how do you navigate the tightrope between easy and difficult pay plans? It all goes back to addressing dealership profitability goals. A good rule of thumb to start your pay plan is to first maintain or increase the number of vehicles financed, and then focus on F&I product penetration. This starts with determining the right products on which to base the pay plan. A good pay plan incorporates dealership goals for product penetration based on the products most likely to sell.

Lastly, if you realize you have an extremely well paid employee, the profit generated from that employee should be equally impressive. Don’t punish productive employees by changing their pay plans to reduce their paychecks. Going down that path leads to unrealistic pay plans and all the ramifications that go with them, such as high turnover, non-compliant behavior, and a cut-throat sales atmosphere.

Setting realistic and motivating job expectations can go a long way toward increasing employee retention. The process starts as soon as you have an open position, and requires vigilance as new team members gain confidence and increase productivity. With more than 40 years helping dealerships increase productivity and profitability, EFG Companies knows how to recruit, train, and provide guidance on pay plans to ensure your dealership’s success. Contact us today to get started.

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