Sales Team Turnover and What Management Should Do about It?
While the sales reps are the key players for the growth of a business, retaining them is a big challenge. According to a survey conducted by Harvard Business Review the annual turnover rate of sales representatives in the US is 27%, twice the turnover rate in all labor groups.
The study further revealed that the average sales person turnover rate in many industries is less than two years. This is a major problem for companies considering that in the US they spend $15 billion annually on training and $800 billion on incentives. Which means the churn of the sales team drastically reduces the return on these investments. Along with affecting sales in process and potential sales, thereby costing individual companies millions of dollars each year in lost sales.
Reasons for High Turnover in Sales Team
So, what is the reason for this high turnover rate? While it is true that the biggest factor effecting turnover rates is directly linked to poor management (50% according to Forbes & 75% according to Inc.com), there are other factors as well.
Part of the issue is that sales people are extremely motivated by nature and most strive to advance in their careers. They are also very in tune with what your competition is paying, track their open positions, and know how to use their experience in the hiring process. Hence, your best salespeople can easily switch from entry and mid-level positions to another company when they get the opportunity. To help you keep your best people let’s have a look at some of the main reasons that cause salespeople to leave a company.
Lack of Personalized Training
Providing little or no formal training and pushing sales reps directly into the market never builds a strong team. Rather, this sink-or-swim approach may allow stress and chaos to settle in, thereby increasing errors and inefficiency. Thus, it will eventually lead to the employee being fired or they may decide to move to another company with better training programs.
Unattainable Targets/ High Expectations
Another reason that triggers sales reps to switch is unattainable expectations. While a good salesperson must be able to meet certain sales target, you cannot expect them to bring thousands of new customers each month.
Yes, there is no harm in challenging the abilities of your employees, but setting unachievable goals can be overwhelming for the employee. Thus, the stress and burden of not meeting expectations removes the opportunity for the employee to celebrate success and will cause the best performers to leave.
Hostile Working Environment
While strong leadership is crucial to the success of any team, using fear as a means to getting better performance does not work. Threatening the employees or telling them repeatedly that they will be fired if sales do not increase is not a good tactic. Rather, this will de-motivate even the best of the employees, thereby encouraging them to leave for a better working environment. Creating a downward spiral where managers are left with only poor performance employees who can’t find another workplace.
Also, the best salesforce does not grow in stale and dull environments. The monotony kills their motivation and to stave off the boredom, they migrate to better environments.
Poor Sales Compensation
Most salesforces thrive for appreciation and recognition. While monetary compensations are crucial, lack of encouragement for their performance results in frustration. This can be due to low commission rates or when their compensation plan does not match with the strategic plan. An example of this is when a company realizes that they have a customer service issue and change strategies midway through the year with out addressing their compensation plan. Leading to confusion in the salesforce as to which goal should be their focus.
Role of Management to Reduce the Sales Team Turnover
There is no denying that compensation issues greatly contribute to employee attrition. However, in many cases, there is not much that a sales manager can do in this regard. Managers don’t have the authority to adjust the pay scales due to budgeting not being in their hands.
While sales managers have limited to no control over compensation, they can help retain their salesforce in the following ways.
Set a Positive Team Level Culture
If the company has a poor culture, managers can act as a shield between that culture and their team. For example, if the company has a “just do what I say” culture when it comes to change, managers should take the initiative to find the underlying reasons for the change and explain why the company needs to change to their team. Their team will still understand the overall company culture but respect the manager for ensuring that their team’s culture is different. This is a great way to show the team that the manager cares about them and demonstrate managerial skills. Remember, just because the company has a poor culture does not mean the team must also have the same culture.
Create Team Level Personalized Training
Keeping up-to-date on product knowledge and sales techniques is important to survive in every industry. Therefore, it is important to provide thorough training for the sales team. If the company doesn’t provide product and sales training, or it didn’t stick with the team, managers should set up their own training. Strong managers should always be up to date with all products and the best sales techniques. Therefor the manager should be able to train and mentor their team even if there is no formalized training program. Again, it will make the manager stand out against other managers and the team will value the difference and stay with longer.
Create a Healthy Workplace Environment
Salespeople are enthusiastic and love challenges. The nature of their job requires them to be inquisitive to generate potential lead. A study by Radfor reported that sales professionals find their jobs frustrating when a firm’s pipeline “dries up, becomes stale, or faces increased competition.” To keep this from happening show the team how to find their own leads, network, and build referrals this way they do not need to rely solely on the firm’s pipeline.
Also be a positive leader and ensure the team that there is always a way to solve difficult situations. It rubs off and the team will grow to also have a positive mindset. Positivity is needed due to even the best teams at some point having to do with difficulties, i.e. losing a big client or missing a quarter’s sales target. But if there is a positive workplace environment, they will remain motivated and push through the challenges.
Create Individual Sales Target Plans
While the targets are normally set by Senior Management and may be out of the managers control. What is in their control is how they and their team react to the plans. Spend time with each of the team members and create actionable plans to meet their targets.
Also, it is important to motivate both the low performers and strong performers, as the best employees also need encouragement. So, when spending time coaching and training the lower sales performers, don’t overlook the others.
Doing so could lead the strong performers to feel unappreciated or isolated and it may lead them to find a new and appreciative setup. Hence, managers should be focusing on plans for all the employees and show them appreciation as much as possible.
Retaining the sales team is a challenge for many sales organizations. The turnover leads to a loss of ROI on training and past commissions paid, sales in process, and potential sales. While there are many factors that contribute to high turnover rates, sales managers have the ability to prevent the churn in their individual sales team.
By creating a positive team culture, individual training programs, sales plans, and promoting a healthy environment managers can build a strong sales team that contributes to the company's growth long-term. Ensuring that they are not one of the sales managers that lose 50% to 75% of their sales team due to poor management.
Let the Experts Help
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