Employee turnover a major issue in automotive sector

KPMG has conducted a workshop at this year’s Australian Automotive Dealer Association (AADA) Convention in Melbourne, where an advisor in the firm’s Automotive practice stressed the importance of a low employee turnover rate for the fortunes of car manufacturers, equipment suppliers and dealers.

According to KPMG, laying off an employee costs an automotive firm a staggering $65,000. As a result, cutting down the employee turnover by just 10% could save as much as $500,000 for a firm. At a time when the automotive sector is looking to boost its earnings, this appears to be a good place to start.

While these figures have been floated in different forms before, the automotive sector appears to be acting in stark contrast to these findings. Employee turnover in automotives is amongst the highest compared to other sectors, not only in Australia but across the rest of the world as well.

Laura Pestell, who is a Learning Co-Ordinator at KPMG Motor Industry Services said that this discrepancy in behaviour was primarily due to the senior leadership at automotive companies being misinformed. Studies have indicated that General Managers at automotive plants believe the overall turnover rate to be much lower than what it actually is.

According to Pestell, realising the true scenario and acting upon it is a quick and easy fix. “Employee turnover is a huge issue in your business but it is totally avoidable cost. So it is something that can be a big opportunity and you can turn it around against the headwinds going forward,” she told the workshop early last month.

The automotive sector has enough on its plate at present, as it looks to contend with an evolving mobility landscape, where individual auto ownership is falling out of fashion and automotive and electric vehicles are strongly in vogue. Operational and infrastructural costs are rising, and returns are falling rapidly in this scenario.

Pestell reports that the turnover within the auto sector is far too high. A KPMG study has placed the employee turnover rate at car dealerships in excess of 40%. “Some anecdotal instances about some dealerships reported in the media highlight 100 per cent turnover,” said Pestell, driving the point home.

This is not to suggest that employee turnover should be completely arrested. In addition to demanding lower salaries, “replacement employees may bring fresh new ideas, creativity and innovation as well as knowledge of competitors. It stops that group-think from happening and it obviously facilitates elimination of poor performing employees,” said Pestell.