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Recruitment Expense: A Costly Pursuit

In the high-octane world of retail automotive, where every day brings new challenges and opportunities, one persistent issue looms large: employee turnover. It's a concern that not only affects our team dynamics but also carries significant financial implications. Let's rev our engines and explore the first part of this series, "Recruitment Expenses."

Recruitment Expenses: A Costly Pursuit

Hiring the right talent in the automotive industry is akin to finding the perfect piece to complete a complex puzzle. The recruitment process encompasses posting job listings, screening candidates, conducting interviews, and facilitating the onboarding process. It's not just a resource-intensive endeavor; it's also time-consuming. But why are these recruitment expenses so significant?

The Numbers Behind the Challenge

Using the 2022 NADA Workforce Study, we created a spreadsheet covering all aspects of the transition from current labor costs through to lost productivity. Given the averages accounted as wages, we were able to extract costs for each position gathered in the study. For this article, we are focusing on Sales Consultants and B-Techs and using Median Averages as they are lower than National Averages and represent a more accurate number.

For Sales Consultants, the statistics are remarkable with a median average income of $97,670, an increase of 37% over 2021. Further, annual turnover is positioned at 46% of your workforce, with only 71%/40% employed after one and three years respectively, giving an average tenure rate of 2.2 years.

For B-Techs, the statistics are slightly better in retention but still challenging. The median average income is $64,580, an increase of 8% over 2021. Annual turnover is positioned at 28% of your workforce, with only 71%/56% employed after one and three years respectively, giving an average tenure rate of 3.7 years.

The Cost Implications

Let’s now look at how these figures work back into the costs of operation. If we calculate all costs, including costs to cover position, separation and recruitment, training, and days to productivity, we found replacement costs for a Sales Consultant to be $114,774.62 and a B-Tech at $131,368.75. This is enormous and, given the rate of turnover in relation to the size of the operation, this has the potential to be in the MILLIONS every year just for these two positions.

Breaking it down for just the Recruitment portion of these numbers, it averages $18,362.59 for Sales and $10,176.76 for B-Techs. Multiply just these numbers by the individual headcount on your teams and 46/28% respectively to determine the potential cost just in recruitment.

For example: If you employ 10 Sales Consultants and 8 B-Techs, the costs of just recruitment would be $107,263.95 or nearly $10,000 per month, which is nearly invisible to the bottom line as it's not completely shown on the statement.

Unpacking the Process

In discovering the costs, we broke down the process as follows:

1. Posting Job Listings: It starts with crafting an appealing job posting to attract the right candidates. This may involve marketing expenses for online job boards or advertising in local publications. A well-optimized job listing is your first step in the recruitment journey.

2. Screening Candidates: Once the applications start rolling in, you need dedicated personnel to sift through the resumes, cover letters, and applications. The time invested in this process alone can't be underestimated.

3. Conducting Interviews: Face-to-face interviews, phone screens, or video interviews require resources. These interviews help you find the best fit for your dealership, but they also consume time and personnel resources.

4. Facilitating Onboarding: After you've chosen the ideal candidate, the onboarding process begins. This involves training, paperwork, and integrating the new employee into the team. It's an investment in ensuring the new hire becomes a productive and committed member of your dealership. Now, let's factor in the cost of employee turnover. When employees leave prematurely, all the time, effort, and resources invested in their recruitment go to waste.

5. Additional Ancillary Costs: While the above is based on a normalized marketplace, we are far from this at this point. As such, recruitment companies and hiring bonuses are more commonplace than rarities and have been used in the above calculations at a greatly reduced cost in comparison to actuality to offset the engagement rate.

Looking Ahead

So, what's the solution? We'll explore strategies for retaining talent and reducing turnover costs in the coming parts of this series. From investing in employee development to fostering a supportive work environment, there are concrete steps we can take to steer our businesses away from the costly cycle of high turnover.

Stay tuned for the next installment where we'll delve into the second part of the series - "Training Investment" - and discuss how we can make the most of our investment in employee development.

Share your thoughts and experiences with recruitment expenses in the comments below. Together, we can drive change in the retail automotive industry and create a more stable and prosperous future.

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