What are the real costs of a salesperson’s turnover at a dealership? They’re a lot higher than you might think.

First let’s look at the sales person who just left. Even an average performer probably sold some cars and possibly developed a relationship with his or her customers that could have been a source of referrals and repeat business. Losing a top performer can be far more costly in terms of lost sales.

Now let’s see what is actually involved step by step.

1. The sales manager writes an advertisement to attract potential sales people. That can take from 20 minutes to find the old one to 1.5 hours to write something new and attract a better candidate pool.

2. The sales manager calls the ad agency or newspaper or on line source to place the ad. Let’s say that takes 30 minutes to an hour or two, depending on whether he or she is looking for new outlets to place ads.

3. The sales manager has to screen the applications to decide who is in the “looks promising” category—that can take 2 to 4 hours depending on the number of applications.

4. The sales manager gets on the phone and initially interviews the applicants prior to asking the best candidates to come on down. Say there are 6 to 10 qualified applicants. That means between 3 to 5 hours on the phone, assuming time to get through to the individual and engage in conversation.

5. Now the applicant enters the dealership and meets with the sales manager for about 30 to 45 minutes. Assuming 5 or 6 people are invited in, that takes another 3 to 4 hours.

6. Next the sales manager wants to get a second opinion from the General Sales Manager, assuming 4 or 5 of these people look pretty good. Another 3 to 4 hours in all.

7. Now conference time, both managers sit down and discuss who to bring in for a second interview—say 1 to 1.5 hours to discuss each candidate’s pros and cons.

8. The sales manager may want to schedule a second interview with the top candidates to confirm the decision. Say there are 3 finalists at one hour each to explain the position in more depth and ask probing questions. That’s another 3 hours.

9. Time to check references. Assume that you check 3 references for each of the top 3 candidates. That’s 9 reference checks at 20 to 30 minutes each. Perhaps the sales manager delegates this job to someone else. It will still take another 3 to 4 hours of time for reference checks if it’s done right.

10. Say that two of the top three candidates’ references check out. Time for a second conference to decide which of the two finalists to choose. Another 30 minutes for both managers.

11. Hiring time! The sales manager will want to call the successful applicant to offer him or her the position. That will take another 30 minutes to 1 hour.

In all, the hiring process will take about 21 hours for the sales manager and 5 hours for the general sales manager to help screen, interview and do reference checks. Depending on your hourly rates, this can cost your dealership anywhere from $3,000 to $5,000. You can do the math using your compensation plan.

But there are more costs involved, both tangible and intangible. Let me ask you some questions:

• Do you offer any starting salary while these “newbies” get up to speed or do you expect them to take off and start selling vehicles immediately? How much does this starting salary cost you?
• Do you provide any training for your new sales associates or do you depend on their prior employers to have taught them all the skills they need to do a great job? If your sales manager provides sales training, how much does that cost you in his or her time?
• What are the hidden costs of not providing training? How many customers will your new hires mishandle before getting it right? How many live prospects will they lose to your competitors? If you “train as you go,” will your new sales associates develop bad habits that are hard to break later? Will they become demoralized due to constant criticism and leave the dealership before ever fulfilling their potential? Will you need to start the cycle all over again?

Now, add up all of the costs of hiring, training, and supporting new staff. Isn’t it clear that there must be a better way!

Stay tuned for part 2.