NADA Workforce Study Review With NADA’s Chief Economist, Steven Szakly

In a follow-up to a story we brought on October 27, DrivingSales News interviewed Steven Szakaly, the chief economist for NADA, to review the Workforce Study that was recently published by NADA. We asked Steven to shed light into what dealers should be celebrating and what areas need improvement in arguably the most important asset of your dealership – your people.

“The dealer workforce study is an annual exercise we do in order to determine the major trends within the dealership workforce body,” Szakly explained. “We’re trying to determine the salary trends, the turnover trends, how dealerships can attract those workers and of course what those workers are doing and how they’re performing overall to allow every dealership to have a standardized benchmark by which to measure their own performance.”

One of the key components of the study was the finding that productivity in the retail auto industry is up. The numbers tell the productivity tale.

Speaking of industry productivity Szakly said, “We are an industry that has done phenomenally well in terms of getting people to work better and thus be much more productive. We are basically putting though almost 100 million transactions. So if we include new vehicle sales used vehicle sales, parts, it’s almost a hundred million transactions though 16,000, a little over 16,000 dealerships, which is a phenomenal increase in productivity with just over a million people and that comes though in the study as well when we can show that even though wages are rising in this industry, even though people are being paid more, we are seeing that payoff in terms of productivity improvement, so people are selling more per person, they’re doing more service work per person and that’s fantastic. It’s something the industry should be very proud of.”

In a follow-up as to why retail auto was more productive in 2014, Szakly noted positive changes by dealers.

“Its a lot of dealerships have begun technical improvements of course,” Szakly said. There are better connections between all the various staffs and various departments. It used to be a very siloed environment. You would certainly have the sales staff that wouldn’t interact much with the service staff, with the parts department. I think that has really been broken down significantly. Then of course you have technical improvements. A lot of these financial improvements took place before the financial crisis but as with any business, when you’re doing reasonably well you don’t feel the pressure to fully implement those changes. We’re seeing the benefits and fruits of the technical progress that was made earlier in the decade really coming to bear.”

The part of the NADA study that we reported on the most in our previous story was industry turnover. As Szakly explained, jobs in retail auto provide a unique growth opportunity.

Szakly said, “I’d like to see this industry reduce its turnover rate. I’d like to see it increase the attractiveness of this industry because these are very good paying jobs. These are jobs, when people think retail they think I’m going to make ten dollars an hour at Wal-Mart or five dollars per hour at McDonalds or something like that. These jobs pay $55,000 per year on average, they come with benefits and these are excellent, excellent jobs and they also offer a career path. You can easily start as a sales associate or a low level tech and work your way up to a licensed mechanic or sales manager or general manager. This is one of the few places where you can start, walk in the door, and start at a low-level job and in twenty years own part of the dealership.”

Szakly noted about 50% of those who leave a position at a dealership will leave the industry entirely, while the other 50% stick around, potentially to find the best product.

“It’s about half and half, “Szakly said. “Half stay within our industry and half move on. The ones that stay in our industry are interesting because in many cases they’re moving brands and they know which brands they want to move to because those are the hot brands. You do have a lot of people that are like, ‘Ok I’m a sales guy at an OEM that isn’t doing real well because it doesn’t have a good product. I’m going to walk across the street to the OEM that has really good product. So, you do have that effect in this industry where people will follow the trend and the hot brand because look, they know they’re sales people. They’ve talked to other sales people, they know who’s doing well and so they will move around and that’s something I’m not sure you can solve no matter what. If you don’t have the hottest product at this moment, there’s going to be some natural attrition that’s going to occur. It doesn’t have to be as high as it is of course.”

Szakly also noted retail auto is difficult to compare to other retail positions as the pay and opportunity is so much better. However, he noted retail auto jobs can still carry a stigma for the general public.

Szakly explained, “I think this is a two-way street. You certainly have to have movement on the part of general management and on the part of owners to recognize this is a different industry and I think you do. I think many have already started this process and they recognize these changes. And you have to educate the public about what these job opportunities really are like and what these jobs mean for their future as well because I think we do have a technical skills shortage for sure. We do have a difficulty in attracting people into these roles because there is a stereotype about them and there has to be some education on both sides.”

In speaking of finding the right employees, some of the characteristics of a successful sales consultant include stamina to handle hard work and the ability to be ok with some rejection. Sales positions also carry a large turnover and gender gap at 65% for men and 90% for women. The key to keeping good employees is investing in your people.

On the subject of finding the right people, Szakly said, “Investing in your people, giving them long-term career opportunities. Some of its going to happen no matter what. You’re going to have some turnover. No matter what you do someone’s going to be like he’s got the greatest product. I’m going to go there because it’s the easiest job I can have.”

While some may jump ship, certainly an investment in people is critical if dealers want to keep good employees and recruit new talent.

When compared to the rest of the private sector, dealerships actually have a turnover rate lower than average. Nonetheless, turnover does happen in retail auto and one reason for that turnover is the complex sales model in retail automotive compared to other retail businesses. The other reason is due to dealership recruiting and training practices. Investing and understanding human capital could be one way to beat the competition in your market. If dealerships monitor their employee turnover, have a well thought out recruiting and on boarding process followed by a training program that will allow qualified employees to meet customer expectations could this problem merely be an opportunity?