Most people would agree that the last couple of years have been pretty tough times. Lots of bad things have happen to companies and to individuals – there are no shortages of telling stories.
The good news is more and more people are starting to see some light at the end of the tunnel. Most nonpartisan economists say that while the economic improvement is slow, things are moving in the right direction and precluding any major international event that story is likely to continue.
This economic picture matters because history tells us that as an economy recovery begins in earnest, sales force turnover increases. In most job categories there are negative consequences to turnover, but in sales the consequences can be particularly costly.
Let’s look at some of the effects of sales force turnover and some ways for addressing the problem … starting with the bottom line – financial impact. Although estimates vary widely, a commonly talked about number relative to the direct momentary impact is 200% of the annual compensation package.
However, what makes sales force turnover particularly significant are the indirect consequences – for example, the impact on customer relations both from financial and non-financial perspectives. At the extreme, in some markets the customer may actually go with the sales person when they move to the next company.
Bottom line – sales force turnover matters. If it is high for a sustained period of time it has a significant impact on revenue generation and the morale of the sales team. So what are some strategies worth considering for addressing the problem?
- Review hiring practices. Often the problem with turnover begins with the selection process. As the economic climate changes, how does that impact your hiring process and criteria? For example, how would that impact the advantages and disadvantages of hiring top guns from other companies versus a grow-your-own strategy?
- 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 – boomers vs. 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. A more telling reason for leaving mentioned in exit interviews is front-line management. Also, considerations related to life style flexibility and non-cash rewards are becoming increasingly important.
- Career development. Does an individual on the sales team perceive a career path with options for their development – for example can a sales rep advance without going into sales management? How effective is your company’s sales training program? Do sales people receive mentoring and coaching from their managers?
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 – getting ahead of a potential trend vs. finding yourself in the position of reacting to it is always a good idea.
