Are your company’s turnover rates for sales
reps too high?
When I was Vice President of a National Manufactures’ direct
organization my sales rep turnover was also a concern. It was
costing me millions of dollars in expenses, and that wasn’t taking
into account the lost revenue and profit opportunity. I tried all
the usual tactics—testing new hire applicants, increasing sales
training, mentoring sales reps, organizing a ride-along—but to no
great effect.
Then I sat down and really thought about why I was having
turnover, which led me to create the “Circle of Success”. I was
able to reduce my sales rep turnover by over 40% within a year of
implementing this system. With a sales force of over 700 sales
reps, the impact of that 40% in reducing expenses and increasing
profit was phenomenal.
The average turnover for copier sales reps in the US is 60%. The
average tenure for a new hire is between 3 to 6 months, and 30% of
all sales reps have been with their current company less than 1
year. These numbers are not only scary but very costly.
The average cost of a sales reps turnover after 5 months is:
Salary @ $24,000 year $10,000
Fringe Benefits @ 25% $2,500
Car Allowance @$400 mo. $2,000
Recruiting $3,000
Training $2,000
Total Cost $19,500
This isn’t including the lost gross profit that a productive sales
rep would have produced from sales and aftermarket.
In addition to this cost there is the internal time spent by Sales
Managers, General Managers, and the Dealer principle in recruiting
and hiring a new sales rep.
Typically the time spent to hire each
sales rep is:
Recruiting time 1 hour
Preparation for the interview ¾ hour
Interview by 3 managers 1 ½ hours
Post interview review ¾ hour
Total time 4 hours
If it takes an average of six interviews in order to hire one
sales rep, then the total hours spent would be 24 hours of
management time to hire each new sales rep. Assuming your company
has 20 sales reps and a 60% turnover rate, that consumes 288 hours
or 36 days per year of interviewing time. This is in addition to
the cost shown above.
I recognized that with over 700 sales reps I had to reduce my
turnover. I had already hired telemarketers to set up appointments
for the sales reps, required personality testing for recruits, had
applicants ride along with a sales rep before hiring, assigned a
mentor to the newly hired sales rep, increased training for the
new hires as well as for my sales managers, and changed our
compensation programs. The end result of all this was that I spent
more money but had the same results—turnover remained high, while
revenue and profit were reduced.
That’s when I sat down with my management team to figure out why I
was having this turnover and what had to change to reduce it. This
resulted in the creation of the “Circle of Success.”
It begins with understanding who is responsible for making sales
reps successful. It is ultimately the sales managers, general
sales managers (branch managers) and the Vice President of Sales
who contribute the most to a sales rep’s success or failure.
Therefore, these were the individuals we had to work with to
reduce our sales rep turnover.
The “Circle of Success” starts with the Sales Rep Opportunity. Why
are you hiring a sales rep? This may seem like an easy question,
but think again. Have you evaluated the territory/opportunity the
new sales rep is going to handle? Will the new sales rep be a
commercial geography sales rep, a vertical sales rep, a major
account sales rep, a managed print services sales rep, a solutions
sales rep, a specialist, or maybe part of a team concept? Can the
territory support the sales rep type you are hiring? Does the
territory have enough MIF or customers to support the sales rep in
order for them to be successful? What we discovered was the sales
manager did not go through this evaluation, but rather just hired
a replacement sales rep or cut the territory to add a new sales
rep.
Based on the type of sales rep that was determined to be hired, we
created the profile of the person we should be looking for. There
were two profiles: one, a generic profile for all sales reps (i.e.
they must have graduated college, etc.); the other was a more
specific profile based on the type of sales rep to be hired. The
skill set of the candidate must align with the sales rep
opportunity, as the skills necessary for a commercial sales rep
will be different from those of a vertical or major account rep.
Then there is the interview process. Some managers are better
interviewers than others, so we created a policy that all
candidates must be interviewed by three managers, usually the
sales manager, the general sales manager and the branch manager.
We created a standard interview questionnaire based on the type of
sales rep to be hired, which included pre-set questions to
determine behaviors, skill sets, and experience. This insured we
gained the knowledge we needed to make a good hiring decision.
The next part of the “Circle of Success” is the compensation plan.
The compensation plan must align with the company strategy, and
while there is a base compensation, a variable component would
keep it competitive, while factoring in sales rep opportunity and
the candidate’s experience level. The sales manager’s compensation
was also geared toward the success of the sales rep.
After everyone agrees on the right candidate for the opportunity
and the person is hired, the most important day for the new hire
is the first day. The new hire is excited; they are starting a job
with a great opportunity to learn and are contributing to their
companies and their families. Unfortunately, their managers don’t
share this same excitement. Many times the sales manager left the
new hire in the lobby to read some materials, while they went on
an appointment instead of beginning the orientation. Other times
the manager did not have all the tools ready for the new hire to
begin work. Unbelievably, this is all too common. To prevent this
we created a checklist of everything that had to be ready for a
new hire sales rep on day one.
This included such things as a phone, laptop, computer access,
desk, chair, business cards, company documentation, organization
chart and hiring paperwork. We also created a 10 day orientation
which included a detailed day-by-day, hour-by-hour schedule for
the first 10 days of the new sales rep’s career. It involved
meetings with key individuals such as older sales reps and
manufactures sales rep if available, as well as training in tool
utilization, company sales and marketing material, and products
and programs. There would also be review meetings after each
session with the manager and employee, with homework assigned if
necessary. The goal was to keep them involved at all times. After
the 10 day program we conducted the first management review with
the employee, wherein we evaluated whether or not this was a good
hiring decision. By then it was evident if the employee had the
attributes necessary to be successful.
Continuous training is critical for the success and retention of
every sales rep, and this training process must be managed.
Therefore we created a multi level training program including time
frames and reviews, in which the manager constantly reinforced the
training programs and made sure the program was adhered to. The
program involved manufactures training, web-based training,
hands-on training, and self-paced training, with the necessary
hardware and software in the show room to support the training
program. Reviews and evaluations were conducted by the manager
with the sales rep after each course, in addition to the sales
manager’s scheduled weekly group training meetings.
Activity management and account reviews are and will always be one
of the most important drivers in the success of any sales rep.
Sales managers should use a sales force automation tool such as
SalesForce.com to ensure sufficient activity levels, as well as
software such as remote monitoring software and SFA software as
part of their account reviews to shift the focus to
solution-selling versus box-selling. Team account reviews should
be more of the norm, and in many cases the next-level manager
should sit in on account reviews to guarantee they are done
properly.
Lastly, there are the success factors and programs of the “Circle
of Success.” All sales reps should be aware of internal marketing
and sales programs, and sales managers should make sure these
programs are used appropriately. Internal programs should be
geared toward strategic plans and to help the newly hired sales
rep “ring the bell” as early as possible. “Ringing the bell” gives
them confidence and makes them money, which will stop them from
looking into other careers. Simple programs for new hires need to
be in place and driven by the sales manager to make sure the new
sales rep has success within the first couple of months.
These were the key components we needed to manage if we were going
to reduce our sales rep turnover. Once we established these points
we assessed ourselves using a scale of 1-10 to see how we fared.
While we did fairly well in some areas, we needed to significantly
improve upon most of them. Although changing was a challenge, the
results speak for themselves. After one year we were able to
reduce our sales rep turnover by 40% and increase our overall
productivity by more than 20%, both contributing to a significant
increase in profits.
If your company is experiencing higher sales rep turnover than you
would like, I suggest you adapt the “Circle of Success”. The
results will surprise you. If you have any questions on any of the
areas of the “Circle of Success”, please feel free to contact me
at any time at (727)403-3936.
Fred Berger - is President of Document Technology Solutions
Consulting, a consulting firm dedicated to "Partnering with
Dealers to Reach the Next Level". Prior to starting DTS
Consulting, Fred was the Vice President of Ricoh Business Systems,
Ricoh's direct organization. He was also Vice President of
Operations for Danka and President of Copytex Corporation, Sharp's
4th largest Dealership in the early 1990's. Fred has over 35 years
of industry experience and can be contacted at
fberger@documenttechnologysolutions.com
