David Alemian on the Hidden Cost of Employee Turnover

Retention expert David Alemian explains why dealerships need to think beyond compensation when it comes to keeping top-performing employees. As skilled workers become harder to replace, Alemian argues that employees stay when they see a stronger future with their current employer than they would elsewhere.

In this episode of Inside Automotive, Alemian explores the financial and operational costs of turnover and outlines strategies dealers can use to build long-term employee loyalty.

• Why top performers leave even when compensation is competitive
• The hidden cost of turnover and its impact on revenue, morale and productivity
• Why simply increasing pay may not create lasting retention
• Long-term incentives that give employees a financial reason to stay
• How retention strategies can be tailored to top performers
• Why dealerships need to make retention an ongoing business strategy

Alemian also discusses how dealerships can create benefits that strengthen an employee’s future while aligning their long-term interests with the success of the business.

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Transcript

Welcome And Guest Introduction

Announcer 0:06

Welcome to Inside Automotive with Jim Fitzpatrick.

Jim Fitzpatrick 0:11

Retaining top talent has become one of the biggest competitive advantages a business can have. With hiring costs continuing to rise, understanding why great employees stay or leave has never been more important than it is right now. Joining us today to discuss what leaders can do to build stronger, more loyal teams is David Elian, who is the keynote speaker, creator of Elimian Retention System, and author of Talent Retention: How to Attract and Retain Highly Skilled Professionals, which is what we all want. So, David, thank you so much for joining me on the show today.

SPEAKER_00 0:44

And thank you for having me.

People Stay Where Future Is Strongest

Jim Fitzpatrick 0:46

Sure. So you often say that people stay where their future is strongest. What does that mean and why is it such an important mindset for today's business leaders?

SPEAKER_00 0:58

I'm glad you asked. I call this the David Alemian principle. Okay. People stay where their future is strongest. You know, we're wired to think of the future ever since we were little kids. And people said, What do you want to be when you grow up? Really? Then where do you want to go to school? What are you going to study? What are you going to do for a career? What house are you going to buy? Where are you going to live? Who are you going to marry? That's right. All of these things, every big decision is future-based. Yeah. So people, when people leave a company or stay with a company, it's a decision. A decision to either stay or a decision to leave. Now, your best employees or an employer's best employees, they're being approached. They're not necessarily telling you they're being approached, but they are. Why? That's right. Because pretty much almost everybody who wants a job already has one. So the only thing you can do if you have seats to fill, you need bodies, is go find them from somebody else. That's right. So when they get these offers, and the employee could be perfectly happy where they are, but they'll consider it. And it boils down to one decision. If I stay here, what will my future be like? If I go over there, what will my future be like? The stronger future always wins. That's why I say people stay where their future is strongest. That's right. And that's what that means.

Jim Fitzpatrick 2:27

Yeah. And even if the prospect of the future, you know, for that uh that candidate uh is more perception than it is reality because they're not feeling great where they're at, that that will make the move, right?

SPEAKER_00 2:42

It's what they believe, it's their perception. That's right. So I talk I I help employers build stronger futures for their employees so that when that offer comes, yeah, they decide to stay.

The True Cost Of Turnover

Jim Fitzpatrick 2:59

Great point. Great point. Many business owners think of turnover as simply a hiring issue, but you say it's one of the biggest hidden costs an organization faces. What are they missing?

SPEAKER_00 3:10

Turnover is the biggest hidden cost that an employer has. It can cost more than double the salary to replace someone. And to make matters worse, most of that cost is not deductible. Sure, you can cost deduct the cost of an ad to repla to keep somebody or for a headhunter, but how do you deduct lost production? If you've got a superstar salesperson and he walks out the door, how do you deduct lost sales? That's right. How do you deduct employee morale?

Jim Fitzpatrick 3:40

Yeah.

SPEAKER_00 3:41

All of these things contribute to the cost of turnover. And then you bring in a new candidate, and you don't necessarily know whether or not they're gonna work out. So you they might bring them in and you're paying them, and then six months later it's like, uh, not the right person. No. All of a sudden you just blew six months worth of salary on top of everything else. That's true. So, yes, turnover is the biggest hidden cost, and it's gonna get worse. Yeah, it's gonna keep getting worse. Yeah. There's really no end in sight. And here's why it's a matter of the size of the generations. The baby boomer generation, which I'm a member of, was the biggest generation. The subsequent generations, generation the millennials, generation X, Y, and Z were smaller in size. And out of that smaller size, a smaller percentage of people actually have skills. So it becomes a double whammy. So as bad as it is right now, it's gonna get worse.

Jim Fitzpatrick 4:45

It's gonna get worse.

SPEAKER_00 4:45

So, yeah, what do you do? It's not like we can turn on a machine, push a button, pull a lever, and manufacture more people with skills overnight. We can do that.

Jim Fitzpatrick 4:55

Right.

SPEAKER_00 4:56

So we have to do with the talented and skilled people that we have. Yeah. You know, your talented employees are the most valuable asset that a company has. That's right. Now, what employers need to learn is, you know, to protect themselves from loss. For example, they have auto insurance, they have homeowners insurance, they have business liability insurance. They need to put something in place that ensures that their best people will stay.

Jim Fitzpatrick 5:29

Yeah. That's right. It's a very good point. Beyond compensation, that we often look at, and so do you know our associates and employees, what are some of the biggest reasons that high-performing employees decide to leave an organization?

SPEAKER_00 5:45

Their future?

Jim Fitzpatrick 5:47

Their future.

SPEAKER_00 5:47

You know, they're getting offers and they're considering those offers, and as I mentioned before, they're saying, if I go over there, my future's better. Yeah. I'll be able to do more things for my family, more things for my spouse, and so on. And you know, when I talk about future, I'm not just talking about their working years. They'll I'm talking about beyond the working years. You know, there are more people working well into retirement these days than ever before. Okay. That's right. And that's fine if you choose to work well into your retirement. You love what you do, you're having fun, you're healthy, all these things. Sure. But when you're forced to work into your retirement years because you can't afford to retire, that's a whole different conversation. You know, most Americans are not prepared for retirement.

Jim Fitzpatrick 6:43

That's right.

SPEAKER_00 6:43

You know, saving for retirement is the biggest financial challenge that Americans face. Yeah. And we're living longer, which means we have to fund a longer time. And, you know, that's a good thing to live longer. But it's nice to live longer and be comfortable.

Jim Fitzpatrick 7:02

That's right. That's right. For sure. For sure.

Why Talent Shortages Will Worsen

Jim Fitzpatrick 7:05

Um, for business owners out there that may not have the resources of a larger company, an IBM or a Nike or what have you, what are some of the practical steps that leaders can take to improve retention starting today?

SPEAKER_00 7:19

Great question. You know, let's say you've got a company, it's the it's the employee, it's the company owner, small business, maybe he's got three employees. If he loses one person, he just lost a third of his workforce. Yeah, good point. Right. Right? And sometimes, you know, they they want to pay him more money. That's a cost, right? And that's a cost that doesn't go away. But here's what happens it becomes the new normal for that employee. And sometimes the employer is shooting themselves in the foot by paying them more money. Why? That's right. Because

Future Includes Retirement Security

SPEAKER_00 7:52

somebody else will have deeper pockets, need people, be more desperate for help, and lure them away. Because nobody expects anybody to make a lateral move. Right. So they're gonna expect this, so they're gonna take that higher salary that they're getting and leverage it into a higher salary somewhere else. So here's what they can do they can create something that will strengthen that employee's future and make it contingent on them staying with the company. That way, if they leave, they lose that benefit. That becomes huge because people will do more for what they have in hand than something that they might get somewhere else. Because remember, if they leave and go somewhere else, they don't necessarily know if things will work out at that other company or that other organization.

Jim Fitzpatrick 8:44

Sure. So give me give me an example of that.

SPEAKER_00 8:48

An example of doing something that will oh there's a there's a number of things they can do. For example, there can be uh continuity within the corporate within the company. So, in other words, when that person's gonna, when the owner's gonna retire, maybe this person will take over. And that's a pretty that could be a pretty good future.

Jim Fitzpatrick 9:06

That's a big one. Yeah, that's a big thing.

SPEAKER_00 9:07

Yeah, that's a big one.

Jim Fitzpatrick 9:08

Yeah.

SPEAKER_00 9:09

Then there are also, I know I spent 31 years in the retirement planning business. And there are much better things than the 401k for saving for retirement. As a matter of fact, the 401k does nothing about retention. Why? Because it's portable. You can take it somewhere else.

Jim Fitzpatrick 9:24

Yeah, yeah, that's

Retention Strategies Beyond Higher Pay

Jim Fitzpatrick 9:25

not even right.

SPEAKER_00 9:26

Right. I help employers design supplemental employee retirement plans. Okay. That the employer funds 100% cost the employee zero. Okay. In exchange, the employee agrees to stay with the company. Could be for 10 years, could be till retirement, could be anything in between. Yeah. And there's a written agreement between the employee and the employer. Okay. If they leave, if they leave, they forfeit the benefit, and the investment that the employer made in that employee stays with the company. Right. So now it's not a cost, it is literally an investment and a growing and compounding asset on the company's books. So turnover, as we said before, is more than double the salary.

Jim Fitzpatrick 10:11

Sure.

SPEAKER_00 10:11

So they already, and the average U.S. worker changes jobs every 4.1 years.

Jim Fitzpatrick 10:16

Okay.

SPEAKER_00 10:16

Wow. Which means, which means they already have a turnover cost.

Jim Fitzpatrick 10:24

That's right.

SPEAKER_00 10:24

So I show them how to take a portion of that cost and turn it into a growing and compounding asset that ties that employee to the company. And here's the cool part there's no limit to how big we can make this.

Jim Fitzpatrick 10:39

Yeah.

SPEAKER_00 10:39

Which means that employee could end up with a lifetime income that is greater than their working year's income. You know, for somebody who's a little bit concerned about retirement, that's a tough thing to say no to. That's right. And if you already have it, it's nearly impossible for them to walk away from. Not only will they not quit, their spouse won't let them quit. They'll say, hang in there, honey, that's our future right there.

Jim Fitzpatrick 11:03

Yep. No question.

Supplemental Retirement Plans That Stick

Jim Fitzpatrick 11:06

You know, I've some of the things. I've spoken to some business owners that say, well, what we do is we set up a year-end bonus structure, and they've got to be working for us, you know, at that time when that's going to be paid out in December or the following January. But I've also spoken to those same owners that they say, yeah, and then there's a mass exodus, you know, in February because the people have stayed, they've got their bonus, they knew they had to stay through that period of time, and you're almost rewarding them to leave, right? So that's not long-term enough.

SPEAKER_00 11:37

No, you're absolutely correct. What I focus on is long-term retention. You know, why? Because the company's there for the long term. Yeah. So don't you want your best people? And the way I structure it, it's not like a 401k or a pension or one of those things that you give it to one, you got to give it to everybody. Right. Just give it to your superstars. Let me show share one thing for your viewers. How do you build a world-class company? Now I'll give you a quick little tale. Tale of two hospitals.

Building A Company Of Superstars

SPEAKER_00 12:06

It's both same size, same number of employees, same city, same everything. One difference. One is a world-class organization. People come from all over the world to go to that hospital. The other one, you skin your knee. You don't want to go anywhere near that place. What's the difference? It's the people who work there. That's right. So what any employee can do, employer can do, is they give this to their superstars, the people they absolutely don't want to lose. The others, I don't say fire them, but they'll leave and fall by the wayside because they would anyway. Sure. Then you use this tool to draw in the best of the best so that everything else being equal, competitive, pay, benefits, all those other things, and this thing on top, they will win the battle for top talent every single time, and then they'll keep that talent. Time-wise, you know, if they did this in about four or five years, they'd have a company that has nothing but superstars.

Jim Fitzpatrick 13:05

Yeah.

SPEAKER_00 13:06

And that's how you can build a world-class company. Because they lose so much when good people leave. Oh, it's huge. Consumers have choices. Yeah, no question about it.

Jim Fitzpatrick 13:17

Consumers have, you know, they want to go to the place with Generation Z and millennials. There's not a whole lot of loyalty going on there for the companies that they're working for. Not like when you and I were growing up, and your father or you know might be staying at a company for 20, 30, 40 years to get that gold watch and to get that retirement account and uh or that that uh you know pension, that no longer exists out there. Now people are very open to making changes in their career at the drop of a hat, right?

SPEAKER_00 13:48

Even the you're absolutely correct. Even the pension, they they've killed it. Why? Because after four or five years, mostly in general, four years, you're fully vested. Now you can go anywhere you want, take a pension, go to another organization, get another pension, or get a start of 401k. That's right. There's nothing holding you to the organization. Yeah. This, my system, keeps them there.

Book Recommendation And Closing

Jim Fitzpatrick 14:13

Yeah. David Elimian, keynote speaker, creator of the Elimian Retention System and author of Talent Retention: How to Attract and Retain Highly Skilled Professionals. We're showing a copy of the book right here, right underneath the video that you're watching. You can get your copy of the book, which we highly recommend that you do. So thank you, David, so much for joining us on the show today. Very much appreciate it. Love to do a follow-up with you, because this is an ongoing uh or a topic, I should say, that has got a lot of legs to it, a lot of concern that uh employers have in keeping good people for sure.

SPEAKER_00 14:45

Thank you so much for having me. It is my pleasure.

Announcer 14:48

Great, thanks. Thanks for watching Inside Automotive with Jim Fitzpatrick.