What is the Role of HR at Car Dealerships

Jennifer L'Estrange
January 23, 2023

The role of HR in the automotive industry and specifically inside of car dealerships has been traditionally overlooked in all but the largest dealer groups. In this article, we provide practical tips on how you can better leverage HR support in your organization.

Why HR is Important for Your Car Dealership

HR plays an important role in both the operations and strategic planning for your dealership. We take a closer look at the employee lifecycle and how it impacts dealership results and profitability.

The Role of HR at Car Dealerships 

In most small to mid-sized dealerships, HR is managed by the dealer principal or the office manager. In some cases, there is someone with dedicated HR responsibilities,  but it is typically limited to HR administration and compliance – the person you call to update the handbook or handle employee complaints. But this is only part of what good HR support can do for your business. 

Recruiting Top Talent 

start with defining and communicating your organization’s core values, to understand the type of candidate who will be successful in your dealership. Well articulated values are an expression of your company culture. There might be several dealerships in your area – all looking to hire salespeople or service techs – but none of them are quite the same as your dealership in terms of how work is done and who excels there. We share core values through our job descriptions, interview process, and recruitment communications to establish our employer brand. 

Posting a job or actively sourcing is the first step, but the selection process is where you determine which candidates have what it takes to be successful. Behavioral interviewing, as well as certain job-related assessments, can help identify best fit candidates. Once you’ve successfully identified your candidates of choice, focus on solid onboarding and integration for long term success, engagement, and retention.

Reducing Turnover Rates 

In 2021, turnover rates in dealerships were the lowest in over a decade at 34%, but that’s still a really high number if it means you’re replacing your workforce every 3 years. Human Resources can be invaluable in diagnosing and proposing solutions to turnover problems, starting with meaningful exit interviews and using the data to inform their recommendations for workforce planning and improving retention. Typically we see spikes in turnover when there is employee disengagement – usually due to some sort of organizational disruption. This could be uncertainty in management capabilities, changing economic conditions, or unclear or poorly executed organizational change.

We will continue to see economic uncertainty this year. We’re likely to see volatility in sales, lower total compensation for salespeople, and a possible increase in turnover. In response, we may see sales advisors jump ship when they see less money at the end of the month this year than they did at the same time last year. Clear, honest communication on compensation plans, allocations, and incentives is often the first hedge against turnover stemming from pay plan frustration.

Revising the Pay Plan

Another way HR can support dealerships is they take a critical look at your pay plan and identify areas where you can tie behaviors more closely to the goals of the business. Automotive retail excels as an industry leader in the application of variable pay across the organization as well as in the complexity of its design. But, complexity generally is not your friend in comp design.

Pay plans are only as good as their ability to influence behavior in a way that achieves the goals of the dealership. If employees don’t understand the program, can’t see a line of sight from what they do every day and how it impacts their comp, then it’s not doing its job. If you’re seeing weird variability in sales month over month that isn’t the result of external factors or poor results from one part of the organization while the other is doing well, then the pay plan might need to be revised. A word of warning on pay plans, however: communication is critical. Incomplete or badly executed communications will result in rapid disengagement and increased turnover as employees ‘lost faith’ in their leadership.

Leadership Development 

We’ve all seen it happen. We take a great salesperson and promote them to sales manager – and it’s a total flop.  In most cases, it’s not their fault. It’s just a different job and most of the time, not one that we adequately prepare people to take on. While we are strong advocates of career development and promotion from inside the dealership, we also believe that new managers need proper development – both on and off the job – to learn the hard and soft skills necessary to be successful in a people and functional management role. In the work that we do with clients, we focus on understanding the manager’s communication styles and preferences and how that plays out with the team.  We provide skills training for active listening, giving and receiving feedback, delegation, and how to develop others. Each program is adjusted to meet the specific needs of the dealership and the manager with whom we’re working, but it is clearly within the purview of your HR function to, credibly and efficiently, support you in developing your managers. 

Improving Employee Engagement

Strong employee engagement is the gold standard in organizational effectiveness. In essence, it is the employees’ collective sense of belonging to the organization in which they work. Study after study has shown that when there is a strong, positive culture, the organization is more productive. In fact, in one 5-year study focused on car dealerships, the data was overwhelmingly supportive: dealerships that lead with a strong culture and values did better in sales and Customer Satisfaction Index (CSI) over time.

When employees move from “actively engaged” in the dealership to “disengaged” or “actively disengaged” morale drops, results suffer, turnover spikes, and costs increase. Benchmarking, managing, and developing action plans around employee engagement is another key area where HR can support the management team.

Is Your Car Dealership in Need of HR Support? 

If you’ve read this far, the answer might be yes. You’re welcome to contact us for an introductory conversation or even better if coming to NADA, we’ll be there too. Come see us on Saturday, January 28, 10:30 – 11:30 AM. For more information and details on registration, visit https://www.nada.org/nada-show

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