A Frightening Look At The “Cost Of A Sales Person”
I worry, sometimes, that we take the process of hiring, onboarding, coaching, developing and managing the performance of sales people too casually. Too often, managers tend to treat sales people as commodities.
There’s an attitude of quickly hiring the best that’s available, if that person doesn’t work out, we can fire them and hire someone new. Likewise, as business goes through it’s natural ups and downs, sales organizations are expanded and contracted to fit our budgets.
It’s not just a sales management issue, too many sales people move from job to job, never staying in a job long enough to be long enough to produce results.
Recently, I heard a great speaker at CEB’s conference. He outlined some frightening statistics, here are some that scared me to death:
- The average tenure of a sales person from the time they start a job to the time they leave is less than 2 years (Sales Readiness Group).
- The average tenure of a sales manager is 19 months.
- 47% of companies say it takes 10 or more months for new sales people to become fully productive (67% are 7 or more months)(CSO Insights).
- 58% of reps make quota (CSO Insights).
Taken together they present a frightening view of selling and the cost of sales. Basically, we have to make our money from a sales person in a little more than a year. That is, to get a return on our investment in hiring and onboarding someone-who takes 7-10 months to be full productive, but who will probably leave within the next 14 months; we have them produce at least 2 years worth of business in those 14 months!
But it gets even worse. That sales person is probably on their second manager, who takes some time to ramp and become effective as a manager.
But think further. Many people selling complex B2B solutions have sales cycles longer than 18 months. So coming into a job, they may “inherit” great deals started by the previous sales person–but we’re new so our likelihood of winning is low. The deals that we qualify early on in our tenure on a job is probably very low–because we are new and don’t know the right deals to qualify. As we get to the 10 plus month mark, we start recognizing what a quality opportunity is, the quality of the deals we chase go up, then 14 months later……..
It’s no wonder overall quota performance is so bad. It’s no wonder we constantly struggle with the cost of selling and getting a return from our investments in selling.
And then there are the customers. We talk about the importance of relationships, of establishing the trust and confidence. Yet, it can look like a constantly revolving door to our customers. For a buying cycle that may be longer than 12 months, a “trusted” sales person is seldom involved for more than one buying cycle. Customers have to constantly invest in “training,” and developing relationships with new sales people and sales managers.
It’s no wonder, customers search for ways to minimize sales involvement in their buying process. If they are constantly “training,” new sales people, if the sales person isn’t as knowledgeable as she should be, if there is no relationship, the sales person can be a disruption and slow the customer down.
So at a high level, the economics behind a sales person and organization are challenging, when we look at the data on time to productivity, average time spent in a job, churn at a sales and managerial level, and declining performance results.
There is always a danger in dealing with high level data and averages across large numbers of people. But I the data should cause us to rethink the people side of our profession. We can’t be casual about this, it’s simply costing us to much in money and opportunity.
We have to be purposeful about recruiting, the costs of a bad hire can be millions. We have to be purposeful about onboarding, we need to get people to full productivity as quickly as we can. We have to be purposeful about performance management, coaching and development. We have to look to retaining sales people–providing great work environments, meaningful career development. Churning people as business goes through ups and downs, or as we look at different strategies du jour is expensive and wrong for both the business and people. It’s a demonstration of bad leadership/management.
This isn’t just a management issue, sales people own a large part of this. Jumping from job to job may seem the thing to do, but you are cheating yourselves and your companies. If you want to be a high performing business professional, you need to hang around long enough to learn and to prove that you can accomplish something. I’m amazed when I see resumes of people with 10 jobs in as many years. It causes me to question their real capabilities and experience, particularly, since it’s unlikely whatever success they attained was primarily due to their efforts. While you wonder about “loyalty,” the real concern is can they produce? Have they hung around long enough to fairly claim the results of their work, not someone who preceded them? People may be able to fool hiring managers for a few jobs, but ultimately, hopping jobs will catch up with everyone.
Both managers and sales people seem to have a very short-term attitude to longevity and experience in a role. It’s a costly practice, both from an organizational and individual point of view. The impact to organizations is $millions. The impact to individuals can amount to $100’s of thousands to millions because they haven’t developed the deep experience they need from staying in a role long enough.
It’s time to understand the true business and personal costs to the short-term perspectives we take.
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