Wednesday, 23 May 2018

Big or small, size can be a hiring advantage

Morrie’s Automotive Group CEO Karl Schmidt believes his group’s 11-store count gives him an edge in hiring because he can offer a career path to attract and keep talent.

But Brad Gross, who runs a Chevrolet store in a tiny town in northern Michigan, said he also has an edge. He offers a lucrative living with good hours.

“If mega-store X is right next to me and he’s working them to death and paying them a ton of money, I’d still hire and keep way more people than he would,” said Gross, general manager of Schafer Chevrolet in Pinconning, Mich. “I’m confident in that.”

Both are right. Large dealership groups, those with five stores or more, can afford training programs and offer employees avenues for career advancement, making them attractive employers and providing a deep bench of future leaders. But there is a risk: Becoming “too big” can lead to corporate homogeny, turning off some job candidates.

On the other hand, small dealership groups, those with four or fewer rooftops, often hit a wall in their ability to promote people, potentially driving talent away. But small dealers can provide broad experience across all departments, more access to leaders and more intimate mentorship with the dealer.

“Smaller dealers need not be at a disadvantage if they’re leveraging their strengths to market effectively,” said Adam Robinson, CEO of recruitment specialty firm Hireology in Chicago. “It’s the difference between going to work at a start-up versus going to work at General Electric. Some people are big-company people and some are start-up people. Rarely do they fit both.”

When looking at the role size plays in hiring and retention, executive search specialist Suzanne Malo said, “Each could have the advantage.”

Most large dealership groups can recruit the best talent by having a full-time human resources department, something small groups cannot afford.

But large groups don’t have the market cornered on structured training and career paths, said Malo, director of executive search at DHG Search in Greenville, S.C. She said many small dealerships gain an edge by giving employees access to the dealer principal as a personal mentor.

Both large and small groups can offer flexible hours and lucrative pay. But no matter the size, the ultimate key to retention is valuing employees and keeping them engaged in the welfare of the company, she said.

“Are they being involved in decisions even if they’re not a manager? Do they think they’re doing a great job?” said Malo. “Those who don’t feel valued tend to leave because they’re chasing the rainbow.”

Schafer Chevrolet’s Gross agreed. He said many dealerships, large or small, have an “environment problem,” meaning they overwork people. Long hours lead to burnout and discontent among employees who then quit, he said.

Schafer Chevrolet sells 1,900 new and used vehicles a year despite being in a town of 1,000 people located an hour’s drive north of Flint, Mich. Gross employs 50 full-time workers, 19 of whom are in sales. The average tenure in sales is 6.2 years. He credits his retention success to a policy he set five years ago that limits each sales employee’s work week to five days and 45 hours. Previously, many worked six days a week and up to 70 hours, Gross said.

“The biggest benefit of low turnover is performance. We’re in this little, tiny town and we’re way overachieving,” Gross said. “The No. 1 reason is because people like working here, and the No. 1 reason people like working here is they have a great schedule.”

Brad Gross says the small store he runs offers good pay and attractive hours.

Right size

In 2014, the industry’s average dealership turnover rate across all dealership positions was 40 percent, said Ted Kraybill, president of ESI Trends in Tampa, Fla. ESI works with the National Automobile Dealers Association to compile annual dealership workforce data. The average annual turnover rate for sales consultants was 67 percent.

Schmidt, of Morrie’s Automotive Group in suburban Minneapolis, said his average turnover in the last 12 months was about 38 percent across all jobs. In sales, it was about 46 percent.

The group sells nearly 24,000 new and used vehicles a year and employs 890 full-time workers across its 11 dealerships.

Schmidt said the group, owned by Schmidt and Fremont Private Holdings of New York, wants to buy more stores, but he said his gut tells him 30 to 40 rooftops is the right size to provide career opportunities to employees while maintaining a personal feel to the corporate culture.

“We see from groups that become too large, some people feel they lose their autonomy and independence,” said Schmidt. “They have to homogenize. I’ve heard it from numerous people we’ve interviewed: They have all the accountability, but no authority.”

At Del Grande Dealer Group in San Jose, Calif., having 13 dealerships is a size that serves it well, said President Shaun Del Grande. The group sells 32,000 new and used cars annually and has 1,000 full-time employees.

Del Grande’s average annual employee turnover rate across all positions is 20 to 25 percent. In sales, it’s 35 to 40 percent, he said.

Del Grande said his group’s larger size provides the financial muscle to hire a full-time training director, a full-time recruiter, have an internship program and offer leadership academy courses to keep talent and foster future company leaders.

“Opportunity is probably the biggest competitive advantage dealership groups have over non-groups,” Del Grande said. “Yet we’re still private and feel small, so you kind of get the best of both worlds.”

Publicly owned dealership groups tout the perks of their size, too.

Penske Automotive Group Inc., the nation’s second-largest dealership group, has a 21 percent average annual turnover rate across all jobs, Chairman Roger Penske told Automotive News.

In new and used retail vehicle sales, it runs 30 to 50 percent, he said.

Penske said retention is “a real problem” for many dealers, but said his company’s size — it has 263 stores — has helped mitigate turnover because Penske can relocate talent to various stores for any reason.

“It happens every day with us — people moving across the country for personal reasons,” Penske said.

Penske also can afford a customized management training program that NADA supports. Penske puts 25 to 30 people through it annually, he said.

Similarly, Lithia Motors Inc. CEO Bryan DeBoer said Lithia’s size helped it land one of the biggest buy-sell deals of last year when it bought the nine-store Carbone Auto Group.

“We really believe that many groups like the Carbone organization have a lot of people who are stifled by career development because they weren’t ready to invest further capital in the dealerships,” DeBoer told Automotive News. “So the influx of capital to help their people grow is the same promise that [Lithia Founder] Sid DeBoer gave to us as managers 20 years ago.”

DeBoer said Lithia’s entrepreneurial model makes it feel small to employees because each of its 153 stores has autonomy from the corporate office in Medford, Ore.

Lots of hats

But the one-on-one mentorship offered by a dealer principal at a small shop has the advantage of letting leaders easily identify an employee with potential. Also, the employee can see how he or she contributes to the company’s bottom line, said Hireology’s Robinson.

Finally, an employee will get to “wear lots of hats” at a smaller group, which provides a breadth of experience, he said.

“Small operators have to stop worrying about if they’ll have a career path to offer to keep people,” Robinson said. “They can’t compete with large operators on that level. But they can say, “We’ll give you so much more learning and access,’ to set them up for success in whatever they choose for their career.”

Also, small dealership groups should tout a “family feel” when marketing careers, experts said.

“There are a lot of people who don’t want to be a number,” said ESI’s Kraybill. “They believe they’ll get more attention and prefer working for a family-owned smaller business.”

Finally, never underestimate the power of an open-door policy.

Toyota South Atlanta in Morrow, Ga., sells 3,000 new and used vehicles a year. Its average employee turnover rate across all jobs dropped to 34 percent in 2016 from 88 percent a year earlier. General Manager Rich Mahon credits part of that improvement to what he calls his “bullshit policy.”

That means any of his 128 full-time employees can approach him at any time with a complaint about a dealership policy. If Mahon cannot justify a reason for it, he said, “It’s probably bullshit and should be changed. That’s a big difference between being a private-cap store versus a corporate store.”

Sizing up

Here are the benefits of store size when it comes to hiring and retention.
5 or more stores

  • Provides structured training programs
  • Offers career paths
  • Has full-time HR department to recruit
  • Relocates employees if needed

4 or fewer stores

  • Dealer does hands-on training
  • Offers broad cross-store experience
  • Offers access to top leadership
  • Can be more flexible with hours

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