How a dealer saved over $89,000


The price of instability in a dealer's workforce is high, although probably not as high as the 50 to 150 percent indicated above. There are obviously wasted direct costs like wages and benefits, but don't forget about the indirect costs like recruiting and interviewing, training, lost sales, and lost repeat sales. Some dealers use sales recruiters and trainers. The costs of those services are extra but can easily measured. Turnover will also have a negative impact on CSI, but we will not attempt to put a value on that. So let's take a stab at calculating the cost of hiring a sales person who quits after ninety date of the job (see right). These numbers are a little conservative but the are within the usual estimate of $10,000 to $15,000 per bad hire in the dealerships environment. The Virginia Chevrolet dealer (who wishes to remain anonymous) we mentioned above acknowledged his problem and resolved to do something about it. One issue to be faced was the policy of flooding the sales floor.	Twenty salespeople for a 150-unit / month store meant nobody could make any money. They now run with fifteen salespeople. Improved selection techniques have also helped. The dealership enlisted a human resources consulting firm that specializes in the retail automotive industry. Training in interviewing skills, along with the use of psychological surveys to identify desirable personality characteristics, has dramatically improved the consistency and quality of the sales staff. Lastly, the dealer committed to providing a guaranteed income to salespeople for their first six months on the job. After that, it's full commission. The results have been gratifying. There is still turnover, but the dealer says most of the relates to people who are asked to leave due to poor performance. Attention can now be devoted to retaining those employees who show potential but choose to leave on their own. Our dealer calculates that he has reduced this group by about eight hires per year. And 8 X $11,150 = $89,200.	First the direct costs: Compensation @ $1,000 $3,000 Benefits @ 27% of compensation 800 Now the indirect expenses: Interviewing - 5 hours for 1 Hire 100 Advertising 150 Resume Review/ Phone Screen - 5 hours 100 Training - 5 hours/week for three months 1,000 Lost Sales - 1/month @ $1,000 gross 3,000 Lost repeat sales 1/month 3,000 Total $11,150

The price of instability in a dealer's workforce is high, although probably not as high as the 50 to 150 percent indicated above. There are obviously wasted direct costs like wages and benefits, but don't forget about the indirect costs like recruiting and interviewing, training, lost sales, and lost repeat sales. Some dealers use sales recruiters and trainers. The costs of those services are extra but can easily measured. Turnover will also have a negative impact on CSI, but we will not attempt to put a value on that. So let's take a stab at calculating the cost of hiring a sales person who quits after ninety date of the job (see right).

These numbers are a little conservative but the are within the usual estimate of $10,000 to $15,000 per bad hire in the dealerships environment.

The Virginia Chevrolet dealer (who wishes to remain anonymous) we mentioned above acknowledged his problem and resolved to do something about it. One issue to be faced was the policy of flooding the sales floor.

Twenty salespeople for a 150-unit / month store meant nobody could make any money. They now run with fifteen salespeople.

Improved selection techniques have also helped. The dealership enlisted a human resources consulting firm that specializes in the retail automotive industry. Training in interviewing skills, along with the use of psychological surveys to identify desirable personality characteristics, has dramatically improved the consistency and quality of the sales staff.

Lastly, the dealer committed to providing a guaranteed income to salespeople for their first six months on the job. After that, it's full commission. The results have been gratifying. There is still turnover, but the dealer says most of the relates to people who are asked to leave due to poor performance. Attention can now be devoted to retaining those employees who show potential but choose to leave on their own. Our dealer calculates that he has reduced this group by about eight hires per year. And 8 X $11,150 = $89,200.

First the direct costs:

Compensation @ $1,000 $3,000

Benefits @ 27%

of compensation 800

Now the indirect expenses:

Interviewing - 5 hours

for 1 Hire 100

Advertising 150

Resume Review/

Phone Screen - 5 hours 100

Training - 5 hours/week

for three months 1,000

Lost Sales - 1/month

@ $1,000 gross 3,000

Lost repeat sales

1/month 3,000

Total $11,150