Quantifying the Impact of Turnover at Your Dealership

By Adam Robinson,
September 8, 2016

Dealerships across the country face unique hiring challenges. On one hand, there’s massive disparity in employee turnover among the various departments-particularly between sales and service divisions.

For instance, data from the National Auto Dealerships Association 2015 dealership workforce study found the average turnover rate across all positions reached 39 percent in 2014. Car sales consultants showed a turnover rate well above national averages, at 72 percent. Worse, female sales consultants demonstrated a 90 percent turnover rate.

So, dealerships have a mixed bag to handle when they look at their hiring and retention outcomes. More importantly, the concrete costs of high turnover rates can have a huge impact on the success and growth of your business.

Here are a few ways to start quantifying the impact of employee churn:

Take a Holistic Approach to Measuring the Cost of Each Employee

Whenever you try to measure the cost of employee turnover at your dealership, it’s important to understand it’s not simply a matter of looking at someone’s annual salary or hourly wages and taking a percentage of that total. In fact, quantifying the impact of turnover can become very complicated depending on an individual’s role in the dealership and their overall impact on not only customer service or sales, but on other staff members as well.

With that said, the Society for Human Resources Management highlighted a report from AlignMark Corporation, which divided turnover costs into four primary categories:

1. Separation – This includes unemployment compensation, exit interview costs and others

2. Replacement – The costs associated here involve advertising, pre-employment testing, as well as time and materials

3. Training – This expense stems from the time and effort required from the individuals who bring new hires up to speed

4. Productivity – Often most challenging to measure, this relates to lapses in morale and production, as well as low-quality output

When you sit down to focus on what is included in each of these categories, it quickly becomes apparent how much it costs your dealership even with the single loss of a single employee.

Hireology’s Approach to Measuring Turnover

When you look at your dealership’s turnover rate and try to calculate costs, you’ll need to get pretty detailed to a firm number. A Hireology infographic looking at the cost of turnover highlighted a number of areas that impact total expenses, providing a rough estimate:

  • Administrative costs: 2 hours – $10 per hour
  • Staff covering for employees: 80 hours – $10 – $35 per hour
  • Overtime costs: 20 hours – $15 – $45 per hour (time-and-a-half)
  • Advertisement: $300
  • Management time spent on reviewing applicants: 15 hours – $35 per hour
  • Pre-employment and drug testing: $50 per test
  • Orientation for new hire and manager: 40 hours – $50 per hour

The costs can reach nearly $6,700-and this doesn’t even cover every single aspect of going through the termination process and recruitment. Extrapolated further, you’re looking at $46,900 in turnover expenses if seven out of 10 sales consultants leave during the year. And that is just for entry level employees, the costs become significantly higher when trying to replace employees in executive positions.

This highlights the importance of having a recruitment strategy, starting with a strong employment brand and continuing on with a seamless onboarding process. 

Employee turnover doesn’t have to be an ongoing issue. Start making better hires by downloading our free guide below!

About the Author

Adam co-founded Hireology with the mission to help growing companies make better hiring decisions through data and better technology. Adam is passionate about entrepreneurship, donating time to a number of organizations that support the entrepreneurial cause. Adam completed his undergraduate study at the University of Illinois at Urbana-Champaign, and received his MBA from DePaul University in Chicago, IL.

Subscribe to our weekly newsletter and learn how to build your best team.