There are many negative consequences to high turnover; in sales the consequences can be very costly. What happens when a sales territory is left uncovered for several months? How will the customer’s perception change as there is sales rep “churn” in serving the account? What happens when a sales rep leaves for a competitor, “taking” many of the accounts along – as often happens in some markets, like medical device sales?
Bottom line – sales rep turnover matters. Although the estimates vary widely, a commonly talked about number relative to the direct momentary impact is 200% of the annual compensation package. If sales rep turnover increases and persists for a sustained period of time, it has a significant impact on revenue generation and the morale of the sales team. And, as the economy picks up, sales rep turnover is likely to increase.
So what are some strategies worth considering for addressing the sales rep turnover problem?
- Review hiring practices. Often the problem with turnover begins with the selection process. Are the right sales people being hired for the position? Are you filling the slot in a hurry “before you lose headcount” and it’s not a good fit? And as the economic climate changes, how does that impact your hiring process and criteria?
- Compensation package. How appropriate is the base pay and commission structure? How fair is the sales goal setting process and does it take into account territorial differences? To some degree, the rights answers may vary by the generation – like boomers versus millennials.
- Non-financial rewards and recognition. Although exit interviews often point to financial reasons for leaving, in many cases that is just the easy answer. Considerations related to life style flexibility and non-cash rewards are becoming increasingly important for many people. In sales it much more important than a lot of people think!
- Career development. Do sales reps see career paths with options for their development? How effective is the company’s sales training program? Do sales people receive mentoring and coaching from their sales managers? How responsive was sales management when times were tough?
Whether your sales force turnover over the last several years has been low (under 10%) or high (greater than 20%), it makes fair sense to take a second look as the economy starts to turn around. As the economy picks up, sales reps will be more comfortable moving from one company to another. Plus companies will be searching for competitive hires to add to their sales force. History tells us that as the economy recovery begins in earnest, sales force turnover is likely to increase – so minimizing sales rep turnover will be a key sales leadership challenge this year and beyond.
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©2012 Sales Horizons, LLC
