Where Did All The Sales Reps Go? OneHow do we put an end to the untenable sales turnover we seem to accept in our industry? You’ve heard for years about the high cost of sales turnover: Your “normal” eight month sales employee costs you $40,000 + as the below chart demonstrates: Eight Month Investment Salary $20,000 Employer taxes $ 2,000 Five months benefits $ 1,500 Sales managr time ($100K/6) $11,111 Sales training $ 3,000 Direct recruiting cost $ 3,000 Total $40,611 The justification I hear is that “we are in the click business” and the sales reps bring in new aftermarket. Really? I believe in letting data guide my decisions so would you mind sending me the data that supports that hypothesis? I’ve embedded my own down and dirty analysis below: Total tal revenue $ 50,000 Average unit selling cost $ 5,000 Units sold 10 Average hardware GP 30% Total equipment GP $ 15,000 Cost over equipment GP ($40,611 - 15,000) $(25,611) Average monthly clicks 5,880 Average per click rate $0.01 Average monthly aftermarket revenue $58.80 Aftermarket GP 40% Average monthly aftermarket GP $23.52 Number of months to cover cost ($25,611/23.52) 1,089 My calculations indicate that you recover your investment in 1,089 months; let’s call it 9 years. Hey, if you’re willing to put $40,000 today in an investment that will return your capital—without any interest—over a nine year period send me an e-mail and I’ll let you know where to send me the check. I’ll give you your principal back in nine years! I’ve witnessed all types of approaches to address this perceived issue (perceived because I’ve never seen anybody actually do the calculation on what turnover costs). Let’s go through the most egregious of them all: Draw against commission. The innovation with draw seems to be in the name. It seems like some consultant (hey, like every other profession, the skill set varies widely) suggested to dealer principals in the industry that they change the name to “guaranteed draw” that pays after a certain level of monthly gross profit is achieved. But draw by any name is an advance against earnings. More to the point, when the sales rep is terminated, draw becomes salary. Are you sending the failed rep an invoice when they leave? So you think draw is minimizing your risk, but it is actually significantly increasing risk. Let’s take a look at why. If you are a business major you probably had at least two semesters of economics. I only had two myself, so I won’t try to explain economic theory too deeply, but let’s just agree that in a highly competitive market people don’t over pay for a product or service or sell themselves short in seeking employment. Therefore, if 100 companies are seeking sales professionals, which to use another economic term are fungible, and 97 of those companies are paying a salary, we can assume that anybody who is analyzing the attributes of a job offer will be attracted to that salary. The inverse of that salary scenario is that the only sales people that would be interested in a draw are those that did not get an offer from a company that offered a salary. To transition to another class we all had in our business studies—statistics—we have adverse selection. If you pay draw, you get to choose from a pool of applicants that cannot find a “real job.” Hence, your risk of failure has increased significantly. We’re not talking about those “old dogs” in your bullpen that have been on draw for the last 15 years. They’ve made it, and although these tenured reps probably aren’t overly excited with draw, they are even less excited with the idea of management changing their compensation plan. But more than likely the tenured reps present another problem for you. They control all of your accounts, putting you in a position where you think you have to hire start-up copier sales reps with zero MIF. These “old dogs” are more than likely—and subconsciously (never had a psych course)—holding your growth plans hostage. Again, you think you are minimizing your risk by keeping all of your accounts with your tenured reps but you are actually decreasing your ability to grow your business. You now have two of the three largest inhibitors to growth: Poor territory design and a compensation plan that attracts the worst candidates. My inbox may fill up after this article is published, but my goal is solely to help companies and people achieve greater success. I learned a long time ago that you need to admit you have a problem before you can think of fixing it. Once you admit you have a problem the next step is not to develop a solution, it is to gather data. Then comes the hard part: Having the fortitude to use the data. If you’ve hired 20, 30, 100 reps over the last five years and 1, 2, or none are still with you, then you clearly have a problem. Now let’s move to what is without a doubt—in every single study of success and failure of sales professionals—the number one determinant of sales professional success: The sales manager. If you are a dealer principal, are you in a position where you “tolerate” your sales manager because you’ve never seen a star in your 20 years in business? If you are a sales rep, do you view a good sales manager as one that stays out of your way? Give this a second of thought before you move onto the next sentence: What is the key skill of a great sales manager? Okay, no reading ahead for the answer—have you actually given it some thought? Stop, think. Now you are ready for the answer: The ability to develop people. That’s the only answer. If you don’t agree and there is no changing your mind, move onto the next article in this magazine because there is a high probability I will aggravate your frustration. Who is the best coach in professional baseball? What is his on base percentage? How about the best professional football coach? What is his completion rate? What, are you telling me the coach doesn’t hit or pass? How about Rick Pitino who took four different teams to the NCAA Tournament and who has populated the coaching ranks with former players and assistants? What is it that all of these coaches do to make them successful? You think they are able to identify an individual’s strengths and weaknesses and then help them maximize the strengths while minimizing the weaknesses? In addition to being able to work with individuals these winning coaches probably have some type of system. They innovate; they execute extremely well; nobody runs the “West Coast Offense” exactly like they do. Vince Lombardi ran a simple play—the sweep—but his team executed it to perfection and simply won. What is your system? Do you innovate or do you think what worked in 1990 will work today? Do you think you can win Super Bowls today with the sweep as your primary play? You can bet your net worth that Lombardi would have a different system today—a winning system. I cannot believe how much money dealers spend training their sales reps only to place them in the care of an untrained sales manager and in an environment without a “system,” or management process. Do you go to a doctor that “free forms” his diagnosis? How about a lawyer that wasn’t trained in legal process and precedence? Did you ever walk through a company that expanded their facilities and didn’t use an architect? That door that opens into another door….. Before I spend two cents training any of my sales professionals—and I would spend money to train them—I would make absolutely certain I had a manager specifically trained in a system that fosters employee development. I’d run as fast as I could from any “management training” that focuses on sales skills or activity. I’d search out a management-training program that would teach my sales leader how to develop territories that foster success, that put in place specific processes on how to identify my sales professionals’ strengths and weaknesses, and how to use the strengths while addressing the weaknesses. I’d want a program that showed my manager how to actually deliver the monthly forecast and taught him what to focus on to ensure he could deliver the annual business plan. I’d want a system for where we are in the industry product life cycle and using current technology, and not some old worn out program that focuses on recruiting and activity. If you develop and retain your employees, why would you need to focus so intently on recruiting? So to answer the question posed in the title of this article, where did all the sales reps go? Hopefully they found a career that gave them a better chance to succeed than the imaging industry. They more than likely weren’t the best candidates for the job to begin with. Then we set them up to fail by putting them under a manager whose strength was “closing deals,” yet all the rookie did was cold call some geography without any base of accounts. The manager’s strength—deal structure—was useless because the rep didn’t have any deals to work. Do you want to end the cycle of untenable sales rep turnover? Start by getting your sales leadership trained in a repeatable and scalable system! You’ll then have a platform on which to develop a tenured sales team. Tom Callinan is the founding principal of Strategy Development, a management consulting firm for the technology and outsourcing space specializing in business planning, sales effectiveness, advanced sales training, and operational and service improvement (www.strategydevelopment.com). SD developed and instructs the BTA Sales Management Workshop. From 1998 – 2005, Callinan was an executive with IKON Office Solutions, most recently vice president and general manager of IKON’s largest business unit with revenue of $1.4 billion. Prior to IKON, Callinan was the founder and CEO of Copifax, Inc, a copier dealership that was recognized with numerous awards including inclusion on the INC 500 list of fastest growing private US companies. Copifax was acquired by IKON in 1997. Callinan graduated with high honors from The Wharton School, University of Pennsylvania. Tom can be reached at callinan@strategydevelopment.com or 610.527.3317