At the outset, I’ll apologize. This post is likely to rub some executives the wrong way. The premise is that many organizations are under performing their potential—possibly by huge amounts.
The immediate reaction from many might be, “We’ve been beating our numbers year after year! How can you say we are under performing our potential?”
First, let’s look at the “number.” The number is always somewhat arbitrary. Ideally, it’s arrived at by both a bottoms up and tops down assessment of what we might achieve for a given investment in sales and marketing resources.
It’s always an iterative process, sometimes the number is fairly developed, sometimes it’s arbitrary.
Too often, we think our goal is to “make the number.” In reality our goal is to maximize our profitable growth and share(for a given investment) in our markets. As a consequence, our number is likely to be something we pass on the way to maximizing our growth.
Stated a little less obliquely, we don’t tell our people to stop selling the moment we hit our number. We don’t say, “Stash that away until next quarter or next year (though some of our comp plans provoke that behavior).” We say, “Congratulations, great job! Let’s see how much more we can sell!”
With that as background, we can often see companies that are consistently overachieving their goals, that are growing wildly, that are the darlings of Wall Street and their investors/shareholders, and say, “These organizations, as well as they are doing, are underachieving their potential! They could be doing a lot more than they currently are, or they are overspending on sales and marketing.”
A key metric I assess in looking at organizational performance and whether they can achieve more–regardless of what their plan or actual performance indicates, is Attrition, voluntary and involuntary.
The data on attrition in sales is stunningly bad, even with many of the “best performing” companies in the world. Let’s look at some data points:
- Research shows sales turnover at roughly 35% per year. Other reports show 50% of sales organizations turning over every 2 years and the entire sales and management team turning over every 3 years.
- Average sales tenure in the top 10 technology companies is 1.76 years.* Remember, these are top performers, the darlings of Wall Street/NASDAQ.
- Studies show across a wider number of companies, average tenure of sales people and sales managers has been plummeting, to about 16.5 months. (1.38 years)
- Average onboarding time is 5.3 months for all sales, and at least 10 months for complex B2Bsales.
- Average sales cycles are roughly 6 month,s and in complex B2B can be well over 12 months.
As you start reflecting on these numbers, you start thinking, “Something doesn’t make sense here!”
If it takes 5-10 months to onboard someone, and we have sales cycles of 6 months or longer, in the best case, sales people are just getting productive (and paying off our investment in developing them), and then the leave, starting the same cycle all over again. In the worst case, they never get fully productive, in fact even if they are performing as well as possible, we will never recover our investment in them.
At the same time, we look at opportunity costs. Customers aren’t waiting to buy, they are buying from someone, just not us. So the opportunity costs per sales person per year is Multi-millions!
The mistake too many make in looking at sales turnover, is to focus on the costs of hiring and onboarding a sales person. These may be on the $100-200K range. But the real costs are the opportunity costs, the business that we could have had but missed (not even lost) because we didn’t have a sales person in place or that sales person wasn’t ramped up and fully competitive.
With management it’s perhaps more tragic. It takes managers time to ramp up, as well. During that time, they aren’t being as effective as possible in hiring, coaching, and developing their people. It takes them time to understand the performance of their people, then time to coach them to maximize their performance.
Even worse, if they have to make changes in the strategies, priorities, and focus. Any of those change initiatives take time–both to figure out what to do, and to put the programs in place, then see the results. So we see a revolving door of managers, constant new change initiatives, and none sustained long enough to know whether they might have had an impact or not.
Is it any surprise with these levels of attrition/turnover that we see such poor performance in sales organizations? Is it any surprise that we see a widening gap with customer perception of sales and sales ability to create value.
Talent is possibly the single most important issue impacting sales performance. Our ability to find, hire, onboard, coach, develop, and retain the right people is the biggest lever we have in driving performance.
Our investments in training, programs, systems/tools, content will never be fully realized if we have a continued revolving door, at all levels, with our people.
Unfortunately, talent seems to get the least attention from management. We hire what we can get, or those with whom we have chemistry. We exploit them as long as we can, even if they don’t produce results. 30% of the turnover we see is voluntary. That means our very best people are leaving to go somewhere else.
We have to create workplaces where the right people want to work, want to stay, want to contribute, and want to/can grow. Attrition, retention, employee sat, and average tenure needs to be key metrics against which managers, at all levels, are measured.
Some of you might say, “But Dave, we’re making our numbers, it isn’t that big a deal! We’ve figured it out.”
My response is, “You are under performing your potential! You could and should be doing so much more if you can stop the revolving door in your sales organization!” (Alternatively, one could say they are spending too much for what they are getting.)
Which brings us to the darlings of high technology. By virtually any measure, they are doing fantastic! Market caps are skyrocketing, they are growing an stunning rates, they constantly grab headlines with their great products, “cool factor.”
But look at average tenure, 1.76 years. They face the same issues as anyone else. It takes time to find, hire, onboard and get someone to full productivity. The sales performance issues are no different for them. Many of them, have very long, complex sales cycles.
Despite how well they are doing, one could claim they could be doing so much more. When you assess the opportunity costs tied to the short tenures, they could be driving higher levels of performance!
You may want to short your stocks, if the institutional investors ever started assessing the talent strategies of even these top performers, there might be an interesting market adjustment.
Bottom line, we in sales and sales management tend to be distracted by bright shiny objects, the latest tools, the newest sales techniques, the sexy sales methodologies. We will never be able to exploit any of these fully, we will never be able to achieve our full potential until we start understanding and addressing the talent challenge.
*Some caution should be exercised in looking at the average tenure of sales people in the top 10 technology companies. The data I have is aggregate data, many of these organization have very large retail/consumer sales teams, so much of the tenure data may be influenced by the higher turnover one sees in those types of organizations.
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