[Author: David Spader and John Spader, Spader Business Management, 2013 | Keywords: Human Resources, Hiring]
Most research indicates that between 50 and 80 percent of all hires are not successful (success being defined as, “I would hire this person again.”). The lost productivity, poor service, strain on other employees, training time and other expenses tied to poor hires lead to an estimated cost of turnover that can easily reach two to 12 times the employee’s annual salary, depending on their position.
Consider the fact that the lost revenue from the three weeks it might take to replace a technician could easily be more than $12,000 (3 weeks x 40 hours billable x $100 labor rate = $12,000). And this is before you have accounted for the additional training that might be required, travel expenses, lower Collect-able™ Efficiency and a number of other related costs and lost revenue opportunities. The bottom line is that cost of employee turnover is very high. If you hire the wrong service manager this could be multiplied by the number of techs and easily reach six figures very quickly. (If we assume a 10% lower efficiency x 2200 hours x $100 labor x 5 techs = $110,000 of lost revenue.) Below are a few of the most common errors we see in dealerships regarding the hiring process.
Mistake #1: Not Prioritizing the Hiring Process
Given the above examples it’s easy to see that bad hires are extremely costly for almost any company. Not only are the costs of mis-hires and turnover high, but hiring one wrong person can negatively affect your entire dealership. Every time you hire a new employee your dealership’s culture gets either stronger or weaker. Will that new hire positively or negatively affect the rest of your employees?
As a result, it is critical to make the time necessary to effectively prepare for, conduct and debrief every interview. Spending five minutes before the candidate walks into your office simply won’t cut it. The potential damage to your company’s financial performance, morale and productivity from a bad hire make hiring worth a significant portion of your time. Make sure you prioritize hiring as one of the most important decisions you will make during the year, and give it the time it truly requires. It can directly impact your bottom line by a large percentage! You can make the time investment up front, or later on when dealing with performance problems – and possibly rehiring.
Mistake #2: Using the Wrong Hiring Criteria
The single most common criteria most dealers use is “job-specific knowledge.” While this aspect of a job candidate is often easy to discern, recent research shows that only 11 percent of bad hires fail as a result of this factor. Ultimately, a candidate should “fit” in three areas. First, new hires should have a high degree of fit with your dealership’s culture. Second, they should demonstrate the capabilities required to perform the job at a high level. Third, the new hire should have a strong satisfaction-fit and truly enjoy the type of work they are doing. Dealerships must have a system that takes all three of these areas of “fit” into account.
Mistake #3: Lack of a Hiring Process
The third major mistake that dealers make is the lack of a structured hiring process. Many interviews lack two areas deemed critical in the assessment of any person: reliability and validity. Reliability refers to the ability to replicate results. This means conducting the interview in a way that consistently measures candidates against the same criteria. Validity refers to using the “right” criteria. It is possible to consistently hire using the “wrong” criteria (as shown in mistake #2). Thus, it is important to have both a valid and a reliable process.
Avoiding the three mistakes above is a good place to start improving your hiring practices. Here is a General Manager that implemented the Hiring and Developing Winners® process after years of poor hiring processes and a service department that simply wasn’t working:
“I have hired a service manager, three service writers, two lot porters and seven more techs. It has been two years, and they have all worked out fantastic. Our service manager truly manages the entire department, the service writers are the best I have ever had, and our techs are achieving excellent Collect-able™ Efficiencies and delivering a high quality of work. Our (financial) numbers have almost doubled from our previous peak and my involvement in the (service) department’s day-to-day operations has gone from excessive to non-existent.”
As recognized management thinker Peter Drucker once said, “The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage, since very few organizations are very good at it.” Making sure your dealership has a strong hiring system is a great first step to getting the right people in the right seats on your bus!