On a national level vehicle sales continue to rise; however, BDO have noted that dealership profits appear to have peaked in 2015/2016. Dealers are feeling the impact of margin pressures, regulatory changes and an increasing cost environment. Couple this with the need to adapt to the changing buying behaviours of consumers and ‘digitalise’ the dealership and it’s a challenging industry to make a satisfactory return on investment.
From a workforce perspective BDO is seeing a rising employment market across many roles, driven by mining and metals, construction, and pockets of manufacturing and other industry demand across Australia and beyond. Within Australia there has been an unusual convergence of skills demand in several industries at once, increasing the degree of difficulty in the search for and retention of talent across several labour markets. The mining sector’s inability to pace itself, with announcements of major coinciding projects, will, in our view, lead to further pressure to engage and retain capability going forward.
At Dealer level, maximising key performance indicator (KPI) money paid by the Original Equipment Manufacturers (OEM) has become critical to achieving profitable returns. The achievement of this money is increasingly linked to ensuring the customer service delivery model meets the demands of the OEMs and in fact consumer expectations. With this in mind, a focus on people within the dealership has never been more important. Whilst most Dealers assume this purely relates to optimising the remuneration structures there is, in fact, so much more to ensuring success. The focus also needs to consider the organisational culture of the business and ultimately how you retain talent through employee engagement.
What is employee engagement?
Workplace engagement is more than having happy employees and goes beyond job satisfaction. An engaged employee has an emotional commitment to the dealership and its goals and gives a greater amount of discretionary effort to their work. Many studies suggest there are transformative effects of high workplace engagement. Implementing certain strategies that ensure that your staff feel connected, involved and engaged is one of the keys to optimising productivity and ensuring that the workforce is collectively working towards the dealership’s goals.
Employee engagement has become a top priority for businesses that want to grow and survive in this competitive environment, and the automotive industry should be no different. Accepting the traditional high staff turnover rates within the dealership has to be a thing of the past and dealerships need to prioritise employee engagement especially for talented individuals who could become future leaders of the organisation. Dealerships that don’t focus on engagement run the risk of high staff turnover which has a financial impact, both directly and indirectly. Examples include:
Cost of turnover – Direct costs:
- Loss of employee productivity following resignation
- Exit administration costs
- Lost productivity resulting from vacant position
- Overtime payments or temporary staffing costs
- Recruitment and selection costs (e.g. advertising, shortlisting, interviewing, reference checks)
- New hire administration costs (e.g. IT and payroll set-up)
- Onboarding costs
- Training costs (formal and on-the-job, including trainer time)
- Disruption to peers and manager (diverts skills from revenue generating activities)
Cost of turnover – Indirect costs:
- Negative impact on staff morale
- Disruption to team (reforming)
- Negative impact on customers
- Damage to the dealerships external reputation
- Lost intellectual property and institutional knowledge
- Short-term stress on remaining staff who absorb workload
- Cost of ‘ramp-up’ time (inconsistency, reduced efficiency, reduced quality)
How do you measure employee engagement?
Question: How do you know if you have an engaged workforce? Answer: Measure it.
The best example I have seen on measuring employee engagement is given by Gallup, a global management consulting division. They have suggested that there are12 core elements that highlight how engaged an employee is, and link this back to workgroup performance. These 12 questions are:
- Do you know what is expected of you at work?
- Do you have the materials and equipment to do your work right?
- At work, do you have the opportunity to do what you do best every day?
- In the last seven days, have you received recognition or praise for doing good work?
- Does your supervisor, or someone at work, seem to care about you as a person?
- Is there someone at work who encourages your development?
- At work, do your opinions seem to count?
- Does the mission/purpose of your company make you feel your job is important?
- Are your associates (fellow employees) committed to doing quality work?
- Do you have a best friend at work?
- In the last six months, has someone at work talked to you about your progress?
- In the last year, have you had opportunities to learn and grow?
Employee engagement needs to be assessed so that action plans can be created to help improve engagement. BDO’s observation is that Dealer groups have been slower to recognise the link between employee engagement and productivity and can improve in this area, but with profits under threat maybe now is the time to refocus on the dealership’s largest cost – its people.
In conclusion, those who invest in sustainable employment practices, training and development, building capability and an employment brand beyond paying at market, may be better placed for what will be a wild ride. Factors like work/life balance, corporate purpose, internal leadership and operations, friendship at work and opportunity to progress and develop as an individual in a functional team will all play a part with each demography of the employee population.
If you feel this article has been useful and you would like to discuss further, please feel free to get in touch.
Matthew Cutt
Partner,
BDO Automotive