How to minimize the cost and impact of employee turnover

In dealerships of every size and stripe, people come and people go. But when they go, valuable resources, knowledge and insights go as well. Employee turnover represents a huge potential loss in productivity and continuity, and an increase in cost. But these problems can be averted with advance planning and keen management. How can you minimize the disruption caused by departing people in your dealership?

Richard G. Ensman Jr.

January 1, 2002

7 Min Read
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In dealerships of every size and stripe, people come and people go. But when they go, valuable resources, knowledge and insights go as well.

Employee turnover represents a huge potential loss in productivity and continuity, and an increase in cost. But these problems can be averted with advance planning and keen management.

How can you minimize the disruption caused by departing people in your dealership? Use these powerful, but simple tools for starters:

  • Applicant Pools. Maintain an active file of individuals who might be candidates for positions in the organization. Better yet, encourage your best people to suggest candidates.

  • Celebration. Mark comings and goings with a simple party, a lunch, a coffee hour or some other special occasion. Celebrate the arrival of employees, and you'll help them quickly become part of the team. Celebrate their departure, and your employees may leave with good feelings, ready to recommend your place of business to others.

  • Contacts List. It contains information crucial to each employee's job: names, addresses, and URLs of customers and vendors… call reports for salespeople… product preferences… important customer correspondence. Keep each list handy and safe in case of departure.

  • Cross-Training. The rule of thumb: the more critical the skill or function, the better off you'll be if more than one person understands it. Cross-train your people in these skills and they'll function more effectively as a team - and they'll be better prepared for the day when someone leaves.

  • Curricula. If you don't have formal curricula for orienting new people, now may be the time to develop it. A combination of “live” training and self-paced study can bring new people up to speed and save thousands of dollars in lost time and productivity.

  • Essentials File. The essentials file, maintained for each critical employee, should contain a job description, reports completed by the employee, job tips, descriptions of resources the employee uses, and summaries of problems the employee encounters. The file will become a powerful continuity resource whenever an employee leaves.

  • Exit Interviews. They're great for identifying problems employees had while on the job, and for gaining insight into the way things can be done better in the future.

  • FAQ's. In this high-tech age, maintain a file of frequently asked questions on your intranet or your public e-mail folders. Jot a question and answer down whenever you encounter an important issue. One day, you'll be amazed at the size and depth of the file, and grateful that you have it.

  • Interviews. When new people start, let them interview their predecessors. When people reach milestones in the organization, such as annual anniversaries, let them share their knowledge in interviews with their peers. When people reach new pinnacles of achievement, let them share the background on their accomplishments with others.

  • Job Analysis. Every time an employee leaves, you have an opportunity to re-engineer duties and priorities, or even reallocate duties to others.

  • Knowledge Base. This “warehouse” of data contains critical information about the organization: financial performance, sales histories, customer data, work processes, products and services under development. Whether it's computer-based or paper-based, it's an invaluable continuity tool.

  • Orientation Program. A good orientation program packages information and ideas for new employees, and acquaints them with the history and culture of the organization.

  • Participatory Hiring. Allow your people to interview prospective candidates for the job. In addition to pointing out the candidate's strengths and weaknesses, they will feel more committed to working with the new employee once he or she is on board.

  • Process Book. This manual is a how-to-do-it reference guide to the employee's job. It contains information on all manner of tasks: how to retrieve information from the computer, team calendars, technical data… any key information the employee uses to perform the job.

  • Reverse Training. Encourage your supervisors to obtain informal training from their people. Why? It builds their own skills, and helps them prepare to train others.

  • Staff and Team Meetings. Yes, these routine meetings help maintain continuity. They're an opportunity for you and your team to learn about each other's duties. And written minutes of these meetings can become important reference tools.

  • Stories. Great organizations are filled with legends and stories. They speak of the founding, history and values of the organization and, continually repeated to new groups of employees, they transmit vital information about organizational goals and expectations.

  • Transition Budget. Occasionally, employers will set aside funds to cover the cost of employee transitions - so many dollars per employee, for instance. These funds help cover the cost of temporary employees, recruitment, training and other transition costs.

  • Weekly Appraisals. These informal “appraisals” give managers the opportunity to get to know their new employees, and give them quick feedback on how they're doing.

Pick a few of these simple tools and try them out. You may find that they make a difference in your ability to retain valuable employees - and ultimately help you maintain stability and strength in your business.

What does staff turnover really cost?.

Consider the case of Joe Jones, who earns $35,000 a year. He provides customer support and other customer-related services. Joe decides to leave his position with 30-days notice. He may well sock his employer with these costs:

  • Separation costs (exit interviews, benefit paperwork, and payroll processing). ($500 - $1,000).

  • A temporary worker for an additional 30 days while the search for a replacement goes on. ($3,000 - $4,000).

  • Strained relations with several key customers. ($1,000 - $10,000).

  • The cost of running advertisements for new positions ($2,000 - $3,000).

  • Other recruitment costs, such as screening, reference checks, resume processing ($1,000 - $1,500).

  • New employee costs, such as business cards, telephone hookups, and payroll processing ($500 - $1,000).

    Additionally, the employer loses:

  • The benefit of a training program it provided to Joe just several months before.

  • Valuable knowledge the employee has picked up over the years. The longer the employee's service, the more the employer loses.

  • The stress other employees feel when they attempt to pick up the departing employee's workload.

  • The loss of team camaraderie, common whenever an employee leaves.

  • Staff time involved in providing basic organizational orientation and training.

  • Valuable supervisory time in interviewing prospective new employees, and orienting the individual hired to the job.

  • Lower levels of productivity of new employees.

Of course, there's always a chance that the new employee will be able to bring more to the organization than his or her predecessor. So turnover is not always a bad thing. But given a choice, you're better off taking steps to control turnover, keeping your good people, and retaining the business stability they represent.

Focusing on building customer relationships staves off slumping market

Car dealerships can stave off a slumping economy by focusing on customer relationships, which result in increased referral-based sales, says OCT Group President Grant Dunning.

“During expense-sensitive times, dealers can be proactive with prospective and current customers,” says Dunning, whose company has processed more than three million consumer satisfaction-related surveys for car dealers since 1986. “It's surprisingly simple because most dealers intend to be customer-focused anyway.”

The OCT Group recently collected 6,020 surveys from car buyers nationwide. Sixty-one percent of the respondents wanted additional information about extended-service policies they passed up at the time of delivery.

“We also received 1,050 names of potential customers who were interested in buying a vehicle,” Mr. Dunning says. “Referrals and new extended warranties were two of nine questions in the survey designed to help dealerships sales and marketing.”

How to shop for cars at the airports and malls

Shopping for cars at airports, malls or on Wall Street. That's what Saab Cars USA hopes will happen as it begins employing a novel marketing approach.

The Swedish automaker will begin placing in strategic locations “Saab Unlimited” brand centers that will act as information stops for people interested in Saab.

Each center will be manned by one or two customer service employees on hand to answer questions about the Saab product, direct customers to dealerships, and collect customer information that will be provided to the dealership located in that customer's geographic location.

Also in the brand centers will be kiosks with 42-inch screens that use a 3-D digital technology developed by Opticore. Using the kiosks, customers can configure the Saab vehicles and view them with available colors and trim packages. The images are of photographic quality and can be rotated 360 degrees and viewed from any angle.

Several brand centers are already in place in Europe, and while Saab officials admit it's difficult to quantify actual sales numbers, they say the centers have generated a lot of interest as well as provided several “hot” leads to dealerships.

The centers are part of a global program designed by the Swedish automaker to bolster a weak brand image. The first center in the United States was placed at a Wall Street location in December. Other centers are slated for early 2002 in the Atlanta Hartsfield Airport and the JFK Airport in New York.

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