Hire Right (Or Else)
Hiring Well
The Importance of Hiring Well
The single biggest controllable indicator of a successful (CSI) and profitable dealership is a good team. It’s a “people business,” ergo having good people means having a good business. Many dealerships hire off the cuff and expect good results, which if they continue such actions, one might consider this the definition of insanity.
According to the June 2007 McKinsey study written in conjunction with NADA on top-performing auto dealerships, the difference between average performing dealerships (e.g. Net Profit before Taxes was 2%) and high performing dealership (e.g. Net Profit before Taxes was 6.6%) was based on six basic characteristics of the dealership, broken out into two categories:
Static Factors (Things You Might Control in the Long Run)
1. Region & Demographics
2. Brand (domestic or foreign) - [Author's note: Duh]
3. Size, structure of dealership
Internal Dealership Practices (Things You Can Control Today for 2.3% more net profits)
4. Talent Management (Turnover)5. Customer Loyalty (service & CRM)
6. Dealership Performance Planning (Your OEM’s consulting resources)
Many dealers and managers consider hiring an art form or that there is no real science to hiring and a lot of intuition goes into making good hires. This perspective may have been useful in the past, but with increasing liabilities associated with a poor hiring process and the tremendous cost of hiring the wrong person for a job, a best practice approach to hiring is needed.
Overview of Hiring Best Practices
Don’t get me wrong, new hire management is a process that still requires judgment. But by adding structure and best practices to sound judgment dealerships can avoid the many and varied hiring pitfalls. Judgment is made up of experience and intuition. Add some structure to the mix and good things will start to happen. That said here are a few points toward building a good hiring process that incorporates these managerial traits:
1. Don’t hire because you need to. If you are in a position where you need an employee RIGHT NOW, you’re in trouble and much more likely to hire the wrong person.
2. Take your time. Get as many references or interviews to uncover unknowns and wash away doubts about an applicant. As long as you don’t lose the applicant’s interest, take your time.
3. Use the technology available to you. Use assessment tools during the pre-hire process. There are also online applicant tracking systems that automate the logistics of resumes and applications. These save time and can screen pre-hire applicants so you don’t waste management time dealing with picayune details.
a. You may also want to consider an Applicant Tracking System with integrated background screening. The turnaround time is not much better than existing manual processes, but, and this is a big BUT, all of the release forms and other legally binding documentation can be turned into electronic documentation.
i. Q: What is the difference between a happy dealer and a sad dealer? A: Documentation
ii. Without proper documentation, dealers can get into trouble NOT hiring someone; I know, crazy.
4. Ask tough “fit” questions. If you want a person who can handle tough interactions, construct an interview that tests that. Expect they have the qualities that you seek, and test their mastery. If you can’t expect that much, then warn them ahead of time and see how well they adapt. It is better that they quit during the interview process, rather than after 30/60/90 days and hit your unemployment stats.
5. Learn the tricks. If you can find out something about their general aptitude in a certain quality through a “pseudo” IQ test, you may be onto something. This saves time and is specific (generally) to the needs of your dealership’s culture.
Now let’s get into the nitty gritty of hiring.
Pre-hire Process in the Employment Lifecycle
A new hires employment lifecycle is composed of two primary parts, the pre-hire process and post-hire process. For purposes of this article we will be focusing on the pre-hire process.
A structured pre-hire process is a recent phenomenon that emerged from the ashes of legal controversy in other industry verticals that have spread slowly into the automotive space. From biased job descriptions, to recent legislation and legal precedent, to the continuing belief, particularly in dealerships, that hiring is more an art than a discipline, many dealerships have learned there are a right way and a wrong way to attract, assess and interview someone before you hire them.
A good hiring process begins the moment you reach out to the labor market for someone to work for you. You want to do three things, attract the “right” person, avoid verbiage that can cause legal action and take the time necessary for review of that person’s background and responses. To do this requires discipline and structure. If you structure your hiring process accordingly, you will reduce turnover and increase the overall level of knowledge and experience at your dealership and by extension, increase CSI.
The basic structure of an effective and compliant pre-hire process includes the following:
- Non-biased verbiage for open position ads (either in electronic format on a website or hard copy at the dealership or reviewed and provided to the local newspaper)
- Non-biased job descriptions (either in electronic format on a website or hard copy at the dealership)
- Non-biased preliminary screening questions (either in electronic format on a website or hard copy at the dealership for hiring managers)
- OPTIONAL: A Non-biased personality assessment to ascertain the person’s “fit” with the job requirements and a dealership’s culture. Many dealers swear by them.
i. Art Neiman & Associates is one of the oldest assessment providers I know and work exclusively in the automotive space
ii. OPTIONAL: An Applicant Tracking System that electronically captures applications and resumes for review and management; Screening questions are especially popular when using this type of software
- Non-biased interview questions (provided to the hiring managers, either in electronic format or hard copy, with policies and guidelines to avoid bias.)
- Multi-manager interviews
- OPTIONAL: Selection committee for critical positions (super-majority vote at least, if not unanimous)
- Background Screening: Don’t leave the office without it! Screenings can quickly raise the red flags necessary for getting rid of a bad apple BEFORE you hire them. Once hired your risks of legal action increase (probably) exponentially because a lot of lawyers are sending their kids to Ivy League colleges on the backs of managers who hire poorly and fire just as well.
- There are plenty of providers, do a google and you will see what I mean.
i. I like Kroll’s service best. Their pricing is competitive; they provide automation tools and don’t make you buy an applicant tracking system.
- The offer process and salary/commission negotiation (if any)
- Document, Document, Document their compensation. This portion of the hiring process can lead to immediate liabilities and legal risk if not done properly. Did I mention you should document their compensation?
The structure of a good hiring process I outline above assumes managers will take the time necessary to truly evaluate the job candidate pool available to them and apply the screenings necessary to reduce the applicant pool down to people that “fit” that dealership’s culture and way of doing business. Otherwise dealerships will continue to experience the overhead associated with turnover (HUGE, NADA says it’s in the BILLIONS), the liabilities associated with bad apples or ignorant apples (SCARY and COSTLY) and the direct costs of wrongful termination litigation (DEALER MANAGEMENT CAN’T SLEEP AT NIGHT).
Cost of the “Bad Hire”
The cost of bad hire is not just the time HR took to find them and the hiring manager took to bind them, but rather it impacts nearly every element of a dealership’s operations. A bad hire is to dealership profitability what a neutron bomb is to a small city; it leaves the buildings standing, but nobody is around to shut off the lights.