Staff turnover: £34,000 without lost sales.

Every organisation is responsible for attracting, recruiting, developing and retaining their greatest asset – the people; but nowhere is the success or failure of a new hire more keenly felt than in sales – where revenue figures and performance speak for themselves.

Balancing act

It’s a fact of business life that all organisations have a degree of employee turnover. However, when a sales person leaves – new or experienced – it creates a difficult balancing act in terms of managing not just workloads and staff morale, but also how to handle delicate customer relationships. Rather than risk compromising a sales situation with someone who is considered – rightly or wrongly – no longer motivated enough to do a good job, businesses often impose ‘gardening leave’ on employees who have resigned. How do you fill the vacuum quickly before the relationship or a sale is jeopardised?

What are the bottom-line financial implications of such turnover in sales teams? A study by De Paul University (Centre for Sales Leadership) in January 2008 entitled ‘Retention: how to break the costly cycle of turnover’ calculates that the ‘hard cost’ of such staff turnover averages £34,000 without lost sales for each sales person leaving an organisation. Meanwhile, the ‘soft costs’ are reflected in lost management time. It concluded rather damningly that ‘high-turnover firms are less profitable than low turnover firms’.

The study, which polled 300 employers, found that:

• average turnover ranged from 12-18%;
• an astounding 24% of firms report turnover higher than 20%; and 
• rate of turnover is highest in entry-level positions

‘The rate of turnover is highest with entry-level hires, with 38% of new hires leaving firms in the first year, and 31% in the second year of employment. Turnover of longer-tenured sales performers is especially costly, as they are usually your top producers and can most easily move to another firm. It is rarely the low producers on your team that competition seeks to attract,’ the authors said.

So given the high costs of turnover both in terms of revenue, profitability and people, what factors count in an organisation’s ability to retain its sales people? First of all we need to understand why sales people leave in the first place.

Why do salespeople leave?

Most would agree that once a sales person is on board their desire to stay is heavily influenced by their relationship with their manager, typically the sales manager. Yet if you ask sales managers why moderate to higher performers resign, they’ll often suggest that they were tempted by a better remuneration package elsewhere.

Yet, according to the De Paul research: ‘As might have been predicted, compensation is not the primary driver of turnover. The primary causes are engagement-related (personal expectations which are no longer met, lack of career growth, conflict with personal life) or management deficiencies (inadequate resources, poor management, lack of appreciation).’

Constant recruitment resulting from high turnover is clearly unproductive. The study found that ‘best estimates indicate that managers spend nearly 50% of their valuable time on recruiting, retention and rehire issues when they should be spending it helping their top performers excel and elevating the performance of the moderate performers in the sales organisation’.

Sales managers are not generally known for being work shy, so perhaps the research paints a picture of managers working harder, but not smarter.

So what can be done to address these issues?

For starters motivation is an important element, so here’s an easy-to-use comparison table to ensure that both human resources and sales managers are adopting the principles that have the biggest impact on motivation within a sales team.

Motivation checklist

Show them the way – lead by example to generate and inspire a following.
Be flexible – everyone is unique and has individual preferences; your methods won’t suit everyone so be prepared to adapt to suit different styles and personalities.
Match to appropriate sales jobs – consider skills, experience, strengths and weaknesses.
Targets – gain agreement and commitment to challenging-but-achievable goals.
Rewards – link them directly to performance.
Supply feedback regularly and communicate at all levels; 360 degrees if necessary.
Understand the ‘why’.

On the last point, a huge proportion of success in achieving goals is about the why. Most traditional sales management focuses only on the how, and therefore misses a critical motivation factor. Exploring the why can ultimately affect successful achievement of the goal.

Employee engagement

One of the De Paul study’s conclusions was: ‘Turnover is a failure in leadership to engage the salesperson in the task. Not surprisingly the worst managers have the worst turnover.’

So what can you do to engage the sales team? The De Paul study found that ‘the design of on-boarding processes (induction) which focus on continuous feedback, frequent coaching and cultural integration occurring on a simultaneous basis helps reduce turnover in the first critical two years’ but goes on to point out ‘however, this approach demands that current managers receive effective training in coaching skills to produce results’.

Effective sales leadership

So, how do you ensure that high motivation, integration and engagement are an inherent part of the culture on a day-to-day basis? Effective sales leadership, of course!

Good sales leadership is the key to unlocking all the potential that exists in your current resources, managing to stimulate and retain the top performers whilst also unleashing the untapped potential that exists in more moderate performers.

The best performance and employee engagement comes from teams with effective leaders. It is absolutely critical that sales leaders help and do not hinder the efforts of their team and the passion within it if they’re to realise the best results for the organisation.

A good leader in sales will not only deliver on the sales targets, but will also create and maintain a professional and highly motivated team with relatively low employee turnover. Some turnover is healthy, but losing too many regularly, particularly higher performers has implications not only in short-term results, but also in the financial sense as indicated earlier.

But don’t forget that sales leaders like everyone else need support and development in order to perform at their best. So the next time you consider sales skills training for your sales team, perhaps you should also consider developing the skills of the sales leader first – after all they’re the ones who will influence and drive the performance of the whole team – and good learning and development at this level produces a multiplier effect when conducted well.

Accelerate is offering a free copy of its report ‘The 5 Secrets of Successful Sales Leadership’ on request. Please send an email with the subject ‘ModernSelling Special Report’ to gofaster@acceleratecc.co.uk.

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