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Battling Turnover

Instead of being surprised and reacting to turnover, it's a good idea to be prepared and expect it.

Do you experience staff turnover at your dealership? If you do, you’re not alone. I understand that eliminating all turnover is unrealistic — the industrial age of getting a good job for a good company and working there for 45 years until you retire are long gone. We’re now in the information age, and employees today have so many choices and resources at their fingertips, that we’re fortunate to get a year or two of consecutive contributions. The cost of the person who fills the vacant position, lost productivity, lost sales, severance pay, employee benefits, administration costs like COBRA, training costs and more make 150% seem conservative. In fact, if the staff member being replaced is in a management or sales position, it is speculated that the costs are much higher. It should also be noted that the costs for lost sales, time and productivity are real, just as real as paying rent, paying vendors for parts and accessories and OEMs for units.

So is there a solution? Well, instead of being surprised and reacting to turnover, it’s a good idea to be prepared and expect it. McDonald’s expects it, that’s why they’ve got applications on the food trays. Homes Depot expects it, that’s why they have career center kiosks at every store.

Ever heard of the "Five P" rule? The Five Ps are an old military axiom that my father, a retired Lt. Col., likes to remind me of: "Prior Planning Prevents Poor Performance." By having a recruitment and hiring system in place, you can perpetually and proactively be in search of qualified team members that can contribute to improved dealership performance.

Building a winning team is a journey, not a destination. For example, look at professional sports franchises. Many players are recruited and traded in the off-season, but many key trades also happen in mid-season. The Phoenix Suns just traded for Shaquille O’Neal from the Miami Heat mid-season in an effort to fill a void and make a strong run at the championship.

Operating a dealership in some ways is very much like running a sport’s franchise. You’re not looking for just players or warm bodies; you’re looking for the right players — the ones that compliment your existing team and your dealerships game plan.

Eliminating employee turnover may be unrealistic; however, reducing it is realistic. By having a strong recruitment, screening and hiring system that scrutinizes against just hiring warm bodies, staff members feel more fortunate and appreciative to have the opportunity to be a part of the team, thus reducing turnover.

Next, what is your training system for new hires? I travel the entire country meeting and working with dealers, and I amazed by the low number of dealers who actually believe in and invest in training their team. Regardless of how talented an individual is, throwing them onto the sales floor without any formal training and expecting them to maximize sales opportunities is as unrealistic as Lance Armstrong trying to win the Tour De France without training. Let’s look at the five key fundamentals (called SWAPP) required to earn a Dealership University Powersports Sales Certification (PSC):

Chalk Talk

According to a recent powersports industry research study, most departments experience more than 30% turnover. We’re not alone, according to the U.S. Department of Labor, the retail industry averages 34.7% employee turnover. On average, you can figure the cost of turnover is 150% of an employee’s annual salary. So for instance, if our friends down at ReActive Cycles have 15 employees and the average employee salary comes out to $32,000 per year, turnover alone costs them $252,000 per year!

 

 

  • Selling Skills
  • Work Habits
  • Attitude
  • Product Knowledge
  • Phone Skills

If your new hires were thoroughly trained in these five key areas, do you think they would be more confident on the sales floor, sell more units, hold higher gross margins and maybe stick around a little while longer? Imagine if the above-mentioned dealer ReActive Cycles could cut its turnover in half. This would add an extra $126,000 to the bottom line alone!

What if while the staff was on the clock, they were performing at a higher level? Say instead of the average salesperson selling 10 units per month and holding a $500 margin per unit, they were selling 12 units per month and holding a $800 margin? That’s another $72,000 gross profit per sales person per year. Multiply that times three sales people, and you’ve generate another $216,000 per year in gross profit! $216,000 in additional gross profit for a trained sales staff and $126,000 for a reduction in turnover — you’ve added $342,000 to your bottom line because you have a strong recruitment, hiring and training system in place. Yes, training costs money, but the potential return on the investment is more than any special tool you can pay for in the shop, or fancy ad in the local cycle trader.

There are many good resources available for training. Yamaha has a new initiative called YMU (Yamaha Motor University). We just returned from doing live sessions with many other industry professionals and the positive energy and return on investment was great. There are 20-Group providers, and the other columnists in this magazine are great training resources. The point is training in the powersports industry seems to be an exception rather than the norm. Plan out a recruitment system, budget for training and don’t let the success or failure of your dealership be left up to the market, weather or even the economy.

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