Losing a top performer costs more than most dealers realize, often more than double an employee’s salary. Turnover is something most dealerships will eventually face, but having a framework to keep great people on your team should be part of your overall strategy for long-term growth.
Joining us on today’s episode of Inside Automotive is Retention Expert David Alemian, creator of the Alemian Retention System™ and author of Talent Retention: How to Attract and Retain Highly Skilled Professionals. Alemian says the driver behind who stays and who leaves isn’t just pay, but whether they see a stronger future inside the dealership or outside of it.
People stay where their future is strongest
According to Alemian, people start weighing their future in childhood. What do they want to be when they grow up? Where do they want to go to school? Who will they marry? Alemian said staying with a dealership or leaving one works the same way.
"The stronger future always wins. That's why I say people stay where their future is strongest."
Top performers rarely job hunt openly, but that doesn’t mean no one is approaching them. Almost anyone with in-demand skills already has a job, Alemian said. He believes that dealers looking to fill open seats have to recruit from somewhere. Even content team members will weigh a competing offer against what they already have. The decision, he says, falls down to a simple comparison. If a team member stays, what does their future look like? If they leave, what does it look like instead? Alemian said the stronger future wins every time, and that holds true even when the strength is more perceived than real.
The real cost of losing a top performer
Alemian noted that turnover costs dealerships more than double an employee’s salary, and much of that expense can’t be written off. He illustrated this through the scenario of a superstar salesperson who walks out the door, taking substantial revenue with them. On top of direct financial losses, losing a key team member frequently degrades overall team morale. While none of these factors appear explicitly on a balance sheet, together they silently drain the dealership’s bottom line.
"Turnover is the biggest hidden cost that an employer has. It can cost more than double the salary to replace someone."
New hires, he said, add another layer of risk. For example, a dealer might bring someone in, pay them for months, then realize it’s a wrong fit. However, the salary’s gone before the position is even filled correctly. Unfortunately, the problem will only get worse, Alemian said. While baby boomers make up the largest generation in the workforce, Millennials, Gen X and Gen Z are smaller generations, and a smaller share of each one has in-demand skills. Dealers can’t manufacture more skilled workers on demand, so they have to protect the ones they already have.
Additionally, Alemian believes that the smaller the dealership, the bigger the impact turnover can have. A dealership with three team members loses a third of its workforce if just one person walks out, which makes retention an even bigger priority for smaller teams.
However, raising pay to keep someone can backfire, Alemian said. The new salary becomes the team member’s baseline, not a reason to stay. Yet, a rival dealership with deeper pockets can still lure them away with an even higher offer. Therefore, Alemian recommends offering incentives beyond salary increases. He suggests building benefits that strengthen a team member’s future and tie them directly to staying with the dealership. If the team member leaves, they lose that benefit.
Creating incentives to stay
According to Alemian, a 401(k) does little for retention. It’s fully portable, so team members can take it anywhere. While it’s a nice benefit, Alemian reaffirms that it offers no reason to actually stay. But, to increase team retention, he suggests retirement plans that work differently, such as dealers funding the plan at no cost to team members. In exchange, team members agree to stay for a set period, sometimes 10 years, sometimes until retirement, under a written agreement.
Structured well, it can add up to more lifetime income than the team member earned while working. Alemian said that’s a hard offer to walk away from, and a team member’s own family often becomes an advocate for staying once it’s in place. He said, “If they leave, they forfeit the benefit, and the investment that the employer made in that employee stays with the company. It is literally an investment and a growing and compounding asset on the company’s books.”
Moreover, short-term bonuses don’t solve retention the same way. Alemian said that a year-end bonus can keep someone through December, but it can also trigger an exit once the payout clears in January. So, Alemian’s approach targets long-term retention instead. He recommends reserving the benefit for top performers rather than the entire team.
Reserving a strong benefit for top performers helps a dealership win the competition for talent, even when pay and other benefits are similar across competing dealerships. Alemian said a dealership that commits to this approach for four or five years can end up staffed almost entirely with top performers.
Retention is an ongoing strategy
Although Alemian believes that retention isn’t a one-time fix, he addressed that it’s an ongoing strategy that has to compete with every offer a top performer might get elsewhere. Dealerships that build a stronger future into the job itself, rather than reacting after a team member already has one foot out the door, put themselves in a better position to keep the people driving their growth.
