Changing the commission-based model for sales staff could lower high turnover rates that have long plagued dealerships, says the president of the Ontario-based Trillium Automobile Dealers Association (TADA). The association represents more than 1,100 franchised, new car and truck dealers across Ontario.
TADA President Susan Gubasta, who is also CEO of Mississauga Toyota, said her store recently adopted a salary model, where employ-ees are guaranteed a base salary as well as sales commissions. The move helped to give staff peace of mind and resulted in a lower turnover rate, she said, adding that there has been no turnover among a core of 10 salespeople over the last two years.
“They’re still making something, and their commission is on top of that based on getting paid a percentage of what they sell,” she said. “And there are monthly targets on customer satisfaction and how many units they sell. They’re able to make a really good living, but they need that base, just like anybody. They need a bit of a cushion.”
High employee turnover is prevalent among dealerships. A 2012 TADA study found Ontario sales consultants had an annualized turnover rate of 46 per cent. National data was not readily available, though a 2016 study by the National Automobile Dealers Association in the United States found that annual employee turnover could be as high as 39.6 per cent.
Gubasta said much of the high turnover can be attributed to the financial stress that comes with starting a new sales job. For instance, new
hires might undergo numerous training sessions that give them less time to sell vehicles and make a living in those early months. With fewer opportunities to make money early on, sales staff might be more likely to leave.
“Our sales model has been the same for the last 50 years, and when you look at a job today that is strictly commission-based, it’s difficult for somebody to commit to that unless they start selling cars right away,” she said. “If you’re new to the business, there’s a whole training process and so much that goes into it. It takes time to have the confidence in yourself and to understand the process.”
The typical guaranteed wage for sales staff is about $2,000 per month, according to Vancouver-based Canada Drives. They usually make about 25 per cent of the dealership’s gross profit on a vehicle sale, and they typically rely on performance-based bonuses to supplement that income.
Shannon Friesen, vice-president of dealer services at Canada Drives, which helps consumers secure auto financing via an online platform, said higher guaranteed salaries would not only help reduce stress but “attract and retain” talent.
“Having a higher guaranteed salary makes it easier for salespeople to get approved for apartments they are looking to rent, houses they are looking to buy, or even cars they are looking to finance,” she wrote in an email to Automotive News Canada. “Lenders often place more weight into someone’s guaranteed salary than they do on commission.”
Training also is key to retaining employees, said Gubasta, adding that her sales staff are required to do about 20 minutes of online training daily.
“If you just throw people into a position and you don’t spend time with them and invest in them, then what you put in is what you put out. Investing in your people and in training them is so important.”
She also cautioned against micromanaging employees. “I used to micromanage historically, and I found, man, I better get out of their way and my own way,” she said.
“And things have gone so much smoother. You have to allow your people to shine, and that only comes with them being with you for a time, having communication and they know that at the end of the day, we’re going to have their back. When they have that, why would they want to go anywhere else?”