Sales leaders spend a fair amount of time and effort reviewing issues related to the cost of sale. The issues can vary from travel policies and territory designs to compensation structures and bonuses. An issue that is receiving increased attention is the cost of turnover.
For those who have not recently taken a serious look at the cost of sales turnover, we thought a quick exploration of the topic might be warranted. Let’s take a look at some estimates of the real cost associated with sales turnover and an idea or two that have good track records for reducing sales turnover.
Defining the sales turnover problem. In their most recent newsletter Colletti-Fiss, national leaders in sales compensation, made the following observation about the financial importance of retaining sales talent – “Our research shows that when a sales rep leaves, 20% to 80% of the business is at risk. The cost associated with replacing one sales rep – particularly top performers – is 35% to 200% of annual total cash compensation.” The point being, at the high end, the cost is devastating.
From our own observation in markets such as high-end medical devices the customer, in this case the physician, may “go” with the sales rep if they leave for a competitor. Does it matter? The research from HR Chally reports sales person effectiveness accounts for 39% of a customer’s choice of a vendor – more than price or quality. So, yes it matters.
Bottom line – sales turnover matters to the bottom line. Consequently, it is well worth the time to know more about your sales turnover figure and to estimate the cost for every salesperson who leaves – in terms the dollar value of the existing business at risk, the cost associated with finding, selecting and training a replacement, and the opportunity cost while the new sales rep is getting up to speed which in B2B sales is longer than ever. If you are experiencing a turnover rate near or higher than 20%, the costs are likely to be unacceptably high.
Understanding why. If the number does prove sufficient to warrant action, what are some steps for getting it right? First, it is important to better understand the nature of the sales turnover – who is leaving and why. Second, correct the problem.
In regard to the first step, upgrade the exit interview process. In some cases exit interviews are not even conducted and in many others, nobody pays much attention to the results. You may need to change what you are doing and who is doing it.
A more involved approach for understanding the “why” is conducting a 360 assessment with your front-line sales managers. Front-line sales managers are the pivotal job for sales success – making sure they have as much insight as possible about what is going right and what isn’t can provide a critical data set for understanding the source of the sales turnover problem.
Correcting the problem. Obviously some of the specifics for addressing the sales turnover problem will be driven from the work done to find out who is leaving and why. However one across-the-board intervention with a proven track record is sales training and development. Salespeople expect an investment in their development and it works for reducing sales turnover.
In regard to expectations, a recent leadership study by Bluteau DeVenney & Company reported that the one of the most important expectations of all employees is the opportunity to grow. As expressed by the employees who participated in the study – “we expect personal growth and development – if you don’t help us grow and learn, we’ll go elsewhere.”
Turning to the relationship between sales training and turnover reduction, the recent CSO report of over 2000 companies – The Business Case for Sales Training – reported that one of the reasons for investing in sales skills training was lower turnover rates. The results were particularly compelling in that among those companies where sales teams reported the sales training exceeded expectations the average annual turnover rate was 10% lower than when the sales training was viewed as needing improvement.
Summary. Sales turnover matters! High sales turnover can have a devastating impact on bottom line revenue generation. The good news is – there are established interventions for addressing the problem. More attention to sales training and development is a great first step.
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