As manufacturers and dealerships become even more competitive, the cost of losing an experienced employee continues to grow.
It’s probably reasonable to assume that the most productive employees you have at your dealership have the most options for career mobility outside your company as well as inside it. It might also be true — supported by plenty of third party studies — that the 80-20 rule applies to worker productivity in many high-skill jobs: Twenty percent of your front line workforce is carrying eighty percent of the team. Can you imagine what kind of performance a V-8 engine would deliver if only two of the cylinders were working to full capacity! Think of the productivity losses in the typical US company where only 27% of front line staff is fully engaged!
Dealerships with low levels of employee engagement have correspondingly low levels of employee retention. No surprise there. Who would want to work for NoOneCares Motors?
Many of the costs of poor employee retention are subtle, but very real indeed.
Many company owners dismiss poor employee retention as being outside their control. It’s just what happens in the automotive industry, or, people like to move around nowadays, or most scary, I don’t really care because there are plenty of candidates to replace them. The reality is, however, poor employee retention has a high cost to it, and it’s not always obvious why.
I’ve come up with a list of costs that I’ve collected over the years, including a few from a Human Resources professional friend of mine who has worked for a huge corporation in that capacity for decades:
• Cost of replacement: Perhaps the most obvious is the hard cost of advertising, screening, interviewing, selection and training of a new employee to replace the one who has left. It can take tens of hours by a HR professional to simply do their part of the work. In addition, executives, managers and supervisors’ time is spent being distracted while meeting the new candidates.
• Opportunity cost: While your staff is busy on the process of replacement, they are not busy doing other important employee retention and development work. Employee loss begets employee loss as it ties up staff who could have been working on keeping staff engaged and productive.
• Ramp-up time: Even a quick-study, experienced new employee takes time to get fully up to speed, especially sales professionals on product knowledge. For months — perhaps more than a year — after the new employee orientation class has been forgotten, a new front line staff member is still learning “how we do things here”. While that is happening, they are running at a suboptimal productivity level. It simply takes time. Typically, it takes eighteen months for an employee to be fully immersed in a new work culture.
• Security risk: Often overlooked completely, every experienced employee who walks out the door for the last time takes with them valuable knowledge of what goes on in the company they just left. The more critical that knowledge, the more of interest it is to the new employer. Companies internationally seek to recruit employees with first-hand experience within the walls of their competition, and not without reason. And it’s why companies ask certain employees to sign non-disclosure and non-compete clauses in their work contracts. They don’t like secrets to walk out the door, especially to other automotive groups.
• Customer service quality issues: If you’ve ever reached out for service on a vehicle you purchased, you will have noticed quickly how much product and company knowledge your service representative has. It’s usually obvious when the automated service phone system patches you through to that totally green, first-week-on-the-job employee. They take longer to solve a problem, and are less likely to solve it first time round. That, in itself, costs the employer more. It’s a simple matter of experience, and if the level of service becomes a problem, you, the customer, might consider buying elsewhere next time. That is the hidden cost of putting new employees in front of customers.
• Product quality issues: All else being equal, any human being — with practice — gets better at what they do every day. It’s why it is safer to fly in an airliner piloted by an experienced crew than an inexperienced one. It’s why an experienced therapist has a better success rate at rescuing relationships than an inexperienced one has. On the dealership sales floor and in the service drive, experience pays for the same reasons, and it can be seen in higher productivity rates, better CSI scores, and greater service quality across the board.
• Negative employee distraction: A low employee retention rate attracts the wrong kind of attention on the shop floor, and impedes your ability to deal with employee issues in general. As you hemorrhage your most productive employees to the competition, ironically, your disengaged employees become emboldened with the knowledge that even though they are troublesome, they might be all you’ve got. That’s not a position a manager wants to be put in. You want high levels of employee engagement so that those who are disengaged stand out for all the right reasons.
It’s easy to see how low levels of employee retention can sap the energy and profits from an otherwise healthy organization. And at the same time, it’s not rocket science to put things back on track. Employees want to be engaged. You just have to reach out to them with a robust employee communication system. They’ll do the rest.