Strategic Headcount Management for Group and Independent Automotive Dealership

Written by: Marc-André Phaneuf

Thanks to our experience with numerous clients, we have identified a recurring issue in the financial statements of car dealerships: inaccurate staffing figures on the last page. Many dealers rely on external tools to manage their staffing but fail to update this information in their financial statements regularly. Many only update it once a year, leading to significant analytical gaps that hinder financial optimization and strategic decision-making.

Tracking and managing staffing is not just about counting heads but optimizing your most valuable resource – your employees. By ensuring that those within your human resources department are providing accurate monthly headcount in your organization and completing your monthly Dealer Financial Statements, you effectively open the door to a range of KPIs that can manage your resources more efficiently, increase your CSI (Customer Satisfaction Index) exponentially, and in the end drive your profitability more dramatical-ultimately.

Key Metrics for Effective Staffing Management

As a CFO or controller, ensuring efficient staffing management and sound financial control of your dealership involves tracking key metrics. These performance indicators (KPIs) guide strategic decisions and support your business's growth.

Essential financial indicators:

• Revenue per employee (RPE) = Total revenue / Total staff
• Gross profit per employee (GPE) = Gross profit / Total staff
• Labor cost ratio = Total labor cost / Total revenue

Why Monthly Headcount Tracking Matters

A dealership’s operations are cyclical by nature, with seasonal fluctuations that impact each department differently throughout the year. Monthly staffing tracking provides essential data that directly influences operational efficiency and financial performance.

In the sales department, demand is particularly high between March and May, with a second peak in October. Conversely, the winter months, especially January and February, experience a significant decline in foot traffic. To assess the financial performance of this department, it’s crucial to track certain strategic KPIs:

Sales Department KPIs:

• Units sold per sales advisor = Total units sold / Total sales advisors
• Gross profit per sales advisor = Total gross profit from sales / Total sales advisors
• F&I revenue per transaction = Total F&I product revenue / Total transactions

Optimizing the After-Sales Service Department

The after-sales service department experiences high activity periods, particularly during tire changes: in the fall for winter tire installations (October - December 1) and in the spring for summer tire replacements (March 15 - May 15).

A key KPI for measuring staffing efficiency is the number of customer labor hours billed per repair order (CP Hours: RO Count).

?? Why is this KPI essential? This indicator allows you to assess the productivity of the service department. A mere increase of 0.3 billed hours per repair order can lead to a significant rise in revenue and profitability.

Rigorous tracking of this metric enables management and advisors to optimize each sales opportunity while highlighting the quality and expertise of the after-sales service to customers.

Service Department KPIs:

• Labor hours per technician = Total billed labor hours / Total technicians
• Effective hourly rate = Billed labor revenue / Total labor hours sold
• Gross profit from fixed operations per employee = Total gross profit from fixed operations / Total fixed operations employees

Customer Pay Labour Hours per Repair Order (CP Hours : RO Count)

What It Is: The average labour hours sold per customer-pay repair order.

Why It Matters: This metric serves as a monthly "health check" on service department productivity per written RO and highlights opportunities to increase revenue and gross profit in the service department. Consider the impact: an extra 0.3 hours per RO per month multiplied by your service volume creates exponential results.

Labour hours sold represent one of the largest single revenue sources in your dealership, especially with such high margins. Accurately tracking this KPI allows management and advisors to optimize every sales opportunity while demonstrating the value proposition of your facility to customers.

Optimizing the Parts Department

The parts department experiences increased demand for winter tires and related parts between September and November, followed by a rise in sales of suspension, brake, and tire parts in the spring (March 15 - May 15).

Parts Department KPIs:

• Parts sales per counter employee = Total parts sales revenue / Total counter employees
• Stock turnover per staff member = Cost of goods sold (COGS) / Average stock managed by employee

Given these seasonal variations, proactive staffing management ensures optimal efficiency and avoids costs related to understaffing or overstaffing.

The Impact of Proper Staffing on Service Excellence

Maintaining the optimal number of service advisors and technicians directly impacts your CSI and profitability. A properly balanced and professionally staffed service department can:

o?? Maintain volume without compromising quality

o?? Allow advisors and technicians to dedicate the necessary time to increase dollars per RO

o?? Prevent the pitfalls of understaffing, which can lead to rushed front desk interactions and ineffective vehicle inspections

Strategic Focus Areas for Headcount Tracking

Ensuring Balanced Staffing: Identify where additional personnel are needed to maintain high service and sales standards.

Skill Gaps: Professionally trained to ensure each aspect of your business has the necessary expertise to fulfill your goals.

Staff Utilization: Track employee productivity and turnover to optimize staffing levels across the dealership, reducing costs while maintaining operational efficiency.

For a dealership, staffing is as strategic as any other investment. With adequate staffing aligned with critical KPIs, dealerships can enhance profitability, improve customer satisfaction, and ensure resilience in a competitive market.

Multi-Location Workforce Optimization for Dealership Groups

Dealership groups have a unique advantage in managing headcount efficiently by creating a flexible, mobile workforce that can be leveraged across multiple locations.

?Strategic Workforce Mobility

• Develop a centralized talent pool across dealership locations
• Create cross-training programs that allow employees to: Fill gaps in understaffed locations Gain broader experience Increase job satisfaction through varied responsibilities

?Hybrid Staffing Models

1. Floating Specialists Technicians who can move between service departments Sales representatives with expertise in multiple brands Parts specialists who understand inventory across locations
2. Centralized Support Roles Shared HR resources Centralized marketing teams Unified finance and accounting support Centralized training and development programs

Ultimately, investing in workforce management analytics empowers dealerships to make informed staffing decisions, reduce inefficiencies, and sustain long-term profitability. By treating staffing as a strategic investment rather than a cost, dealerships can future-proof their operations, strengthen customer relationships, and maintain a competitive edge in an evolving market.