Bruce Daugherty’s extensive auto industry career has spanned more than forty years. Bruce began in automotive sales and service, moved into executive management, and most recently served 7 years as a Chief Operating Officer in San Diego county. For the last 25 years, he managed in all three major time zones and touched nearly all manufacturers in the business. Currently, he is the owner and president of his own consulting company.
Today he shared his insights about hiring, firing, and potentially rehiring in 2023.
Like many other industries watching the current economic trajectory, the auto industry is asking one question: should we hire or not hire?
The current situation is similar to past challenges. People who watch the news are concerned about an impending recession, stagflation, or whether their landing will be a hard one. As a consultant, I often see auto dealership owners and managers overreacting to the news.
Instead of panicking as if the sky is falling and cutting personnel or suspending hiring, I recommend looking at overall expense control.
How does expense control affect staffing?
Expense control requires making a difficult decision. Do you cut people? Do you cut pay? Or do you a deep dive on vendors?
I strongly believe this, especially when advising people in my consulting business: Don’t touch people one way or the other until you’ve done a deep dive review of vendors and the relationships you have with them — and your expenses that have been blown out of proportion over the last two or three years.
Until you’ve reviewed all the vendors and taken out all the extra expense from those relationships, there’s no need to talk about your people until you’ve eliminated waste first. You may actually be understaffed.
Here’s my simple strategy for owners and managers to tell if you’re understaffed: call every department ten times in the next two weeks. If you’ve got four departments (New, Used, Service, Parts), you’ll make 40 calls. If you also have a Body Shop, make 50 calls. Someone must answer the phone without fail, 100% of the time, in two to three rings max, or you’re understaffed.
America has a labor shortage, but business is still happening in all the stores. However, you don’t know how much business you’re actually missing by being understaffed. And then you’re going to cut people from your staff?! It doesn’t make sense. Don’t knee-jerk react to the news.
So, you think that even in the current economic situation, many dealerships are still understaffed, and they’re looking to cut that further?
That’s exactly it. Many stores assume that they’re overstaffed, so they try to create a profit without doing the call tests. I’m not saying that you can’t and don’t need to review people, but once you’ve called every department ten times and been taken care of appropriately on every call, then you will know whether you’re staffed correctly.
In almost every single store, leaders exacerbate their situation by cutting staff when reacting to the media. As long as you have a productive position in your store, you should always be hiring, even during bad times. You should always be looking for the best people so that you can stay on the attack.
Let me give you an example. Even during the best of times, the auto industry was a high-turnover industry. Post-COVID, you have higher turnover, and employees are more transient than ever before. They’re consolidating their lives. They’re moving into different states. Some people are quitting work altogether. If you’re not looking for and hiring the best people, especially in productive positions, you will be woefully short when trying to meet customer demand.
What do you recommend?
In terms of expense control, cut vendors first, employees last.
If during COVID you’ve been able to get by with a C+ or a B- player, those people are going to fail worse than ever during challenging times. Now is when you need to be looking for the very best people in management positions.
Why have dealerships been able to get away with subpar managers?
Dealerships that got by during the COVID environment wanted to keep the same people because grosses were exceptionally high. Supplies were short, and people were willing to pay high prices. We were getting by with order-taking at the highest possible price, so many owners did not critique the results. The C+ and B- players looked like heroes.
Moving forward, the best people can steer and navigate through the toughest times, and they’ll still make you big money. Look for your top talent now if you think there could be a recession or a hard landing.
What do you advocate for building the most profitable environment?
My approach is valuing people over vendors.
Before putting in hiring freezes or cutting personnel, let’s eliminate vendor redundancy. When I review stores with owners, I see overlaps and redundancies in vendors who are doing the same things. A proliferation of vendors appeared during the COVID period because few people paid attention to expense control. Now all of a sudden, everybody’s worried.
My philosophy is counter to what most people are doing. In our high-turnover industry, I’m going to eliminate waste in all other areas before I begin thinking about cutting people. Instead, I look for the best people when the environment is the most challenging.
For example, I recently reviewed a multi-store operation with eight to ten vendors doing the same things in marketing. Reviewing the vendors and eliminating the overlap saved $500,000 per store annually. Saving that kind of money requires putting your priorities in order.
Keep only your key vendors with no overlap, put productive people in place, and ensure that you’ve hired the best managers. A-players and rainmakers will get you through challenging times.
Although many dealerships are cutting staff, what dealerships are seeking out the incredible talent on the market right now?
A few dealerships are taking a counterintuitive approach instead of the knee-jerk reaction from the media and the news. Those focused on retaining people and adding talent will be set to win because even if there’s a recession, it will not last forever, and the Fed will eventually lower rates back down.
We don’t know if or when that could happen, but afterward, we’ll go right back into a strong economy again. For every ten dealers, only one or two are smart enough to maintain their edge, retain people, and keep attacking the market. They’re adding productive people and better managers to their stores in preparation for competition and growth.
Dealerships doing it right are the same ones with a history of success. They make good decisions, and they have staying ability. What decision-making patterns do you see in these dealerships?
A couple of mega groups and individual dealers that have a tremendous track record. They want to continue winning, and they want to get better. Those are two phrases I’m hearing from people: I want to win, and I want to get better.
They’re not pulling back. They’re still attacking. And that’s an approach that I like. In tough times, you have to be the guy that’s willing to attack. I’ve been through multiple recessions. I’ve seen all kinds of environments. Pretend for a moment that business is off 15%. That means that 85% of the consumers are still in it. You can attack and take share by attracting customers from other dealers when most stores are relaxing, pulling in, and not meeting the demands of their clients.
Leaders who abandon successful marketing strategies, and especially their staffind needs, will fail.
I want to leave you with a quote about the revolving door of staffing: You hire, and then you fire, and then you rehire the ones you fired.
I learned this from a mentor and it stuck with me my entire career. Some people are going to go into a revolving door scenario. Instead of planning on attacking and growing their business, they’re creating a revolving door with their people. Anyone you fire now, chances are you’ll end up rehiring later.
If you would like to connect with Bruce, please reach out to David Adragna at 650-808-7066.
When you’re ready to have the recruitment team at Autopeople in your corner, you can call 1-800-659-9501, visit our website at www.autopeople.com, or email us to discuss what Autopeople can do for you.