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You know what a bad hire can do to the morale at your dealership, but are you familiar with the financial impact of hiring the wrong person?
On average, a single roof dealership has 68 employees. About half of those will leave each year, meaning that you will be hiring and training 30 replacement employees on average.
That sounds daunting enough, but combine that with the average cost to hire, train, and manage dealership employees of $15,000 (excluding your payroll costs) according to JM&A, and you’re looking at $450,000 per year spent on hiring and training employees.
30 employees x $15,000 = $450,000 spent on hiring and training
That’s nearly a half a million dollars taken away from a single dealership’s bottom line just to source and train new hires.
In today’s economy, you can’t afford that cost as a dealer. But what can you do about it?
How dealers can manage hiring costs
At the crux of this issue is how dealers can manage their costs associated with hiring. With so much emphasis put on fixed operations to sustain revenue streams, one of the variables you can control as a dealership is your hiring expenditures. We’ve come up with four ways you can source the talent you need to keep operations running smoothly and your bottom line in the black.
Focus on recruitment channels that drive ROI
The first step to managing your dealership’s hiring cost is to focus on recruitment channels that drive ROI. Arguably, one of the most cost-effective ways to recruit talent in the automotive industry is to establish and foster relationships with the local high schools and technical or vocational schools.
Your dealership could partner with local high schools to provide scholarships to graduating seniors pursuing technician degrees, allowing you to budget annually for a set amount of funds to be used for these students to further their education. You could choose to work with local technical or vocational schools to guarantee employment after graduating a relevant program. These strategies allow dealers to maintain fixed costs for scholarships and spend less money overall on recruitment channels that don’t guarantee the quality of talent needed.
Create your own database of talent to tap into
Instead of spreading your dealership’s hiring budget across multiple recruitment channels, it would benefit your budget to create your own database of talent to tap into. While this might sound more labor intensive than traditional recruiting methods, this simply isn’t the case.
With the right applicant tracking system, you’ll be able to create your own talent pool of previous applicants, former employees, and referred candidates. Just because someone wasn’t hired for the role that they originally applied for does not mean that they would be a bad fit at your dealership; it likely means that there was another candidate with just a little more of what you were looking for at the time. Former applicants are a great source of talent to incorporate into your hiring strategy, as they’re already familiar with your dealership and you already have a taste of what they could bring to the table as an employee. Likewise, former employees who left for other businesses may be looking for a way to come back once they realize that your dealership was a better fit for them. And finally, you can passively grow your talent pool with an employee referral program that taps into the existing networks of friends and former colleagues your employees already have.
Develop talent from within
Another way to manage your hiring and training costs is to assist your employees in developing professionally. When you consider the investment that you make into the people at your dealership, this seems like a no-brainer. According to the 2023 NADA Workforce Study, the following is the average monetary investment that dealerships make per employee:
- Average salary: $73,261
- Average recruiting and onboarding costs: $5,000
- Average annual training costs: $1,200
- Average additional benefits: $21,978.30
- Total annual cost per employee: $101,439
In our 2023 State of Automotive Hiring Report, the leading reason (40%) respondents would choose a lower paying job within their desired salary range was the availability of career growth opportunities. By focusing on providing your dealership staff with the ability to professionally grow, you’re increasing the likelihood that your employees will continue to stay with you. You could start this process by recruiting for apprentice technicians who will work and learn the trade hands-on in your service bays before taking the ASE certification. You should be able to show every employee at your dealership what the next step in their automotive career would look like, ideally through career pathways. By investing in your people’s careers, you’re earning their loyalty — and providing yourself with a pool of talent to tap into for your harder to fill roles.
Consider flexible scheduling for workers who hustle
Right after the pandemic, it seemed like you could only attract and hire talent if you were offering remote work, but engines can’t be fixed behind a screen. Not only that, but the rise of the gig economy only made it harder for brick and mortar businesses like dealerships to compete.
In order to save costs and keep your fixed operations generating revenue, consider offering flexible scheduling. In that same study from earlier, 35% of respondents indicated that they would take the lower paying role within their desired salary range if it offered them the schedule flexibility they desired. Now, you need to stick to some sort of timeline in order to keep your bay running smoothly — but that doesn’t prevent you from leaning into the gig economy to some degree. You can appeal to these types of workers by offering part-time shifts or even letting them dictate when they want to pick shifts up instead of a traditional shift. The employees you would hire for these roles might have a regular full-time job elsewhere, but have the skills and knowledge you need to perform certain tasks at your dealership to increase your revenue stream.
Takeaways
Bad hires do more than damage employee morale — it negatively affects your bottom line to the tune of $15,000 per wrong hire. In order to negate these costs, dealers should focus on recruitment strategies that drive ROI, establish their own passive pipelines of talent, consider ways to develop the talents of their existing employees, and think outside of the box to generate revenue. Schedule a 1:1 demo today to learn how you can hire better talent faster while saving money with Hireology.
