Hiding in Plain Sight: How Investing in Your People Could Be the Answer for Compressed Margins


As the automotive retail industry continues to focus in on beating the margin compression odds, doing away with operational inefficiencies at the dealership will be an imperative. With more than half of dealership gross profit margin going to payroll, an average cost of $10,000 per new hire and an annual turnover rate as high as 67 percent for sales positions, who you hire and how productive your workforce is plays a significant role in a dealership’s overall success. According to the 2017 Gallup Employee Engagement Report, disengaged employees cost the U.S. somewhere between $450 and $550 billion each year. Breaking that down even further, low-level of engagement has been found to lead to, on average, a 33 percent decrease in operating income and a 11 percent decrease in earnings growth.

By hiring the right people and placing them in the right roles, hiring based on company culture and best practices rather than industry knowledge alone, and investing in ongoing training for employees, dealerships have an unprecedented opportunity to increase productivity and employee engagement that will ultimately help lift profitability despite today’s margin-compressed reality. To weed out operational inefficiencies and boost productivity, dealers should consider these three steps.

Hire the Right People for the Right Roles  

According to the 2017 NADA Data report, at the end of 2017, dealership employment surpassed 1.1 million and is expected to hit an all-time high by the end of 2018. While the dealership headcount may be growing, having more employees does not necessarily equate to increased productivity. Rather, it is about hiring the right people and placing them in the right positions that creates a more effective and efficient workforce ripe for success.

Difficulties hiring and retaining the right people can have wide-reaching operational consequences that not only impact company culture and morale, but also hinder overall profitability. Although technology continues to become a larger part of the car buying and owning experience, dealers are still at the heart of the purchase process. In fact, 42 percent of new car buyers returned to a dealership solely because of a previous positive experience they had with that dealer, according to Autotrader’s 2015 Sourcing Study. As a result, investing in recruiting efforts to pull in the right talent for your dealership is key.

It is also important to advertise all available job opportunities. The common misperception that dealership job opportunities largely consist of sales positions may be deterring individuals who otherwise would be the perfect fit for an open position in the service department, administration, or finance and insurance from applying. Don’t miss out on talent. Take advantage of various marketing outlets, such as recruiting websites, colleges/trade schools, job fairs, social media and local publications to educate and reach the widest net of talent possible.  

  1. Don’t Let Industry Knowledge Run Your Hiring Agenda

There’s no denying that hiring people with industry knowledge can be an asset to your dealership. However, don’t let this prior knowledge alone drive your hiring strategy. When interviewing a potential employee, remember to always ask yourself if the individual is compatible with your dealership’s culture and values. Hiring with company values and goals in mind is critical, as it helps to ensure that your employees will conduct work in ways that reflect your desired customer experience and mission. Bert Hodge, General Manager of a successful single rooftop in southern Indiana, attributes his low turnover rate to his hiring practices. “I don’t hire people with industry experience. I want to hire people based on their attitude and willingness to learn. Then, I can train them to follow the best practices and processes that we’ve built to run our dealership with client-first mentality.”

  1. Invest in Ongoing Training

You can hire the right people and place them in the right roles, but if you aren’t investing in ongoing employee training you may be unknowingly hurting overall dealership productivity. In fact, Cox Automotive surveys found that more than 50 percent of new hires in customer-facing roles aren’t being trained enough to do their jobs effectively. Training at dealerships often amounts to a new employee shadowing a colleague for a week. While a great first step, training needs to be much more robust to ensure employees have the skills, tools and knowledge necessary to do their jobs effectively and efficiently.

In addition to shadowing, dealerships should also invest in mentoring programs and online trainings. These trainings shouldn’t just end after an employee’s first year though. Providing ongoing training opportunities help keep employees engaged and at the top of their game. This is crucial to the success of your dealership, as “high-level of engagement has been found to lead to, on average, a 19 percent increase in operating income and 28 percent increase in earnings growth,” according to the 2017 Gallup Employee Engagement Report.

When you invest in ongoing training for employees and hire the right people for the right roles with your dealership’s culture and values in mind, you will find yourself with a more productive and engaged workforce. Take the time to ensure you are giving your employees the opportunity to grow within their roles and the dealership. This upfront investment in your people will ultimately lead to increased profitably on the back end.