Respect and Competitive Pay for Dealership Workforce Improves Profitability

Treating employees with respect and offering competitive compensation has a significantly positive impact on dealership profitability. When employees feel valued, they are more engaged, more productive, and genuinely committed to delivering exceptional service. This is especially true in the car business, where customer experience and long-term relationships drive revenue.

Fair pay and a supportive work environment attracts talent. It also reduces turnover, minimizes recruitment costs, and fosters a culture of accountability and innovation. Ultimately, investing in employees leads to higher customer satisfaction, increased sales, and a stronger dealership reputation—factors that directly contribute to sustained profitability.

So why are we still witnessing toxic work environments, employees being exploited, underpaid, and/or team member contributions disregarded?

After years in the car business, I’ve seen my fair share of mistreatment toward employees – often for no justifiable reason. When you’ve been in the industry as long as I have and tend to think strategically, patterns become impossible to ignore.

And if you think things have improved over time, think again. Just this week, I witnessed the same old behavior still thriving.

When clients work with me, they get someone fiercely loyal to the dealership itself and it was no different when I managed dealerships. Today, while the dealer may hire my services, I remain laser-focused on the store’s overall well-being. My credo is built on providing insights, support, and strategic guidance to protect every aspect of the business: assets, liabilities, income, operations, employees, and customers.

I have to admit, it’s tough to watch someone in authority exhibit toxic behavior. It’s even harder to see a profitable dealership or group fail to enforce a culture of respect and fair compensation. Not only do the employees suffer, but the long-term sustainability of the entire organization is at risk.

The impact of a “non-people-first” approach on dealership profitability

1. Dealerships have an overall employee turnover rate of 46% annually, which is about double the national average for most industries. (Cox Automotive dealership staffing study)

   • Sales Consultant position most significantly contributes to the dealership turnover average at 67% annually. With an average cost of $10,000 per new hire, a dealership that hires say 100 salespeople in a year can lose $670,000 annually.

   • Service Writer position is the second highest annual turnover at 45%.

   • Turnover rates for women under 24 years of age are also significantly higher than the overall average for both dealerships and national averages.

   • These statistics compound the workforce difficulties facing dealers, who are struggling to keep the people they have.

2. The median tenure for dealership employees is just over 3 years.

3. The top reasons for employee dissatisfaction in dealerships are poor work culture/treatment, amount of pay, and management.

4. Only 54% of employees hired for customer-facing positions in dealerships said they received enough training to do their jobs effectively.

5. Work-life balance issues: 38% of surveyed employees cited poor work-life balance as a factor for considering or finding another job.

What about the effect of employee retaliation on dealership profitability?

Employees who feel disrespected or unfairly compensated by management may engage in various forms of retaliation, which can negatively impact the workplace and the company’s profitability.

Some common ways employees retaliate include:

1. Decreased productivity: Employees may intentionally slow down their work pace or reduce their output quality.

2. Increased absenteeism: Workers may take more sick days or find reasons to be absent from work more frequently.

3. Negative attitude: Employees might display a poor attitude towards their work, colleagues, and customers, affecting the overall work environment.

4. Sabotage: In extreme cases, some employees might deliberately sabotage projects or company property.

5. Spreading negativity: Disgruntled employees may share their grievances with coworkers, potentially creating a toxic work environment.

6. Withholding information: Employees may refuse to share important information or knowledge with colleagues or management.

7. Minimal effort: Workers might only do the bare minimum required, avoiding any extra effort or initiative.

8. High turnover: Employees may seek new job opportunities and leave the company, leading to increased turnover rates.

9. Negative reviews: Dissatisfied employees might leave negative reviews on job sites or social media, potentially damaging the company’s reputation.

10. Union organizing: In some cases, employees might attempt to unionize to address their grievances collectively.

It’s important to note that while these behaviors can lead to further, more harmful workplace issues. To prevent such retaliatory behavior, it’s critical to address the root causes of employee dissatisfaction.

Thriving dealers* adopt a “people-first” approach

• 65% of dealers ask more of their employees now than in the past.
• 67% of franchised dealers say motivating/retaining quality employees is a challenge.
• Top driver of employee engagement is a supportive work environment.

*Thriving dealers – those that reached higher levels of dealership profitability and efficiency.

The dealership accounting office is often overlooked

A while back I wrote that throughout my retail career, I’ve witnessed a common misconception: labeling the dealership accounting office as a ‘cost center.’ This oversimplified view of categorizing departments as either revenue-generating or cost centers fails to capture the true complexity of a dealership’s operations.

There are two primary strategies at work when a dealership makes money:

1. Generate revenue through sales.
2. Keep expenses aligned with revenue by conducting regular analyses, remaining in compliance with the myriad of regulations, and implementing cost-saving measures.

A successful store relies on the synergy of both these strategies.

• If you’re generating great revenue but expenses are out of control, that’s not a recipe for success.
• The same is true if dealership expenses are in line but revenue is deficient.
• Balancing the two ways a store makes money is at the core of dealership operations.

I mention the accounting department because this is where I’m currently seeing some of the negative behavior I mentioned earlier being directed. Dealership accounting is a highly-specialized skill that does not grow on trees.  There is no place to go to learn dealership accounting – in fact, college accounting courses are almost a detriment. This means that dealers must rely on their staff’s experience – the staff that handles all the money – to record, report and protect the organization’s finances and profits.

This seems like a place where you’d want to make sure employees feel respected and are compensated fairly. But sadly, I’m seeing the opposite in some cases.

How does a “people-first” approach impact dealership profitability?

• Increased employee engagement: When employees feel valued and respected, they are more likely to be engaged in their work. Highly engaged teams show 21% greater profitability.

• Improved customer experience: Happy employees contribute to a better customer experience, leading to higher customer satisfaction levels and increased loyalty. I speak from experience that this positive atmosphere makes a significant difference in customer interactions.

• Enhanced productivity: Dealerships that prioritize employee satisfaction and create a positive work environment can boost sales per employee by 25% or more.

• Reduced turnover: Respectful treatment of employees leads to lower turnover rates. With an average cost of $10,000 per new hire, reducing turnover can save dealerships significant amounts annually.

• Innovation and adaptability: A positive work environment encourages employees to think creatively and contribute new ideas, helping dealerships adapt to changing market trends and customer preferences.

• Improved work-life balance: Offering flexible scheduling options and prioritizing work-life balance for top performers fosters job satisfaction and increase organizational loyalty while enhancing productivity.

• Higher job satisfaction: Employees who feel respected and valued report higher job satisfaction, which directly correlates with improved performance and productivity.

• Increased efficiency: When employees feel supported and have the necessary skills, they can work more efficiently, improving service quality and reducing repair times.

The evidence is clear

Treating employees with respect and offering competitive compensation has a significantly positive impact on dealership profitability.

By fostering a culture of respect and positive work environment, dealerships can create a ripple effect that extends to customers, business outcomes, and the overall reputation of the dealership, ultimately driving success and profitability.

Like this post? Subscribe to the Kruse Control Newsletter. Get more cutting-edge insights, exclusive content, and a dash of humor delivered weekly to your inbox!

Yes, subscribe me!