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H Gregory Gershman

H Gregory Gershman Managing Partner

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The National Auto Dealers Association recently put out its latest statistic on sales turnover, and it is scary!  72% turnover in the sales department of the average dealership.  Figures are similar in other sales industries such as insurance, furniture, jewelry, and financial products.

With an average total replacement cost of $30,000, and a sales floor of 11, an employer can expect to spend $250,000 per year on turnover.  That means dealers spend more on employee replacement than the average dealer makes from their new car department yearly.

The good news is you can raise you retention percentage easily.  The majority of turnover is caused by over-hiring.  Bringing on large numbers of staff at one time without the means to feed them clients, or spend the time to nurture them.

Cure sales turnover, just hire less!

Some people in the HR space tell their clients to hire as many as possible, that each salesperson will bring incremental business.  There are giant holes in this theory.  First when dealers hire 7 to 10 salespeople in one "class" they generally do not retain any more than 1 person long enough to sell anything.  When a dealer hires a large number of new salespeople at once, veteran sales reps leave.  It is very common to see dealers use a staffing company to bring on a large number of reps, and in 60 days actually have the same or less salespeople than when they started hiring.  All the employer does is swap out experienced salespeople for new untrained staff.

Here is how to know the right amount of sales hires:

  1. Only hire the number of sales representatives your management can fully train.  View training as a 30 to 60 day program.  Each sales rep needs 1 hour of individual time, and 1 hour of group training daily during that time.  It is impossible to hire 10 sales reps with 3 managers working.  That is an 11 hour per day commitment, and your management needs to have time to attend to the rest of the staff so your store can sell.  Hire around 1 new person per manager available to work with them.
  2. Match your staff size to the number of working leads and list of prior clients.  The average sales rep can manage servicing and marketing to 500 leads and active prior clients.  So if my store as a clean data bank of 5,000 prior clients and 1,000 working leads from all sources (showroom, internet, phone) then I can feed 11 sales reps.  They each will have people to contact, and traffic to sell.  Aggressive would be carrying 12 or 13 sales representatives.  Having a staff of 11 working on these numbers and then hiring 8 is guaranteeing I will turnover all the reps I hire.  

Hiring is like eating chocolate cake;  always seems like getting more is better until you eat too much.

H Gregory Gershman - Managing Partner - Recruitment HQ

Mark Dubis
Greg, thanks for interesting article and it makes sense. The only issue is in the car business none of this applies. With 72% turnover clearly, it's not a problem with the players, but a major issue with the coaches. We have an entrenched system and a poor track record of taking care of employees in the dealership. Having a "recruiter" on speed dial to bring more bodies into the store is the status-quo and cost of doing business. If a dealership is profitable many feel there is no reason to change. After working in this industry for a few decades, I have seen some incredibly talented people in dealerships. The problem is they don't stay around long. My rule of thumb and advice to auto sales professionals: Ask how long the sales managers have been in the store. If one or more has been there less than a year, then do not work for that store. If they can't keep managers, how the heck will they keep salespeople?
H Gregory Gershman
Thanks for commenting Mark. This is a complex problem. More bodies is not fixing it. Controlled and patient hiring is necessary both in entry level sales and management. Depending on the size of the store there should be new management expected yearly. Otherwise the dealership gets too stale. If the store has 6 managers that have been there 10 years or more it may not be a good thing. A healthy balance of long term managers that provide stability in culture and new management that integrates fresh ideas is the best case for a sales rep.

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