Leveraging High Turnover
Dr. Dave Barnett
I suppose the question I hear more than any other as a training and development consultant is, "How does your wife put up with you?" The second most frequent question from sales organizations trying to improve productivity has got to be "How can we do a better job of managing turnover? Turnover costs are killing us."
Some sales outfits have a turnover rate of 300% or more. That means they must hire three people a year to fill each sales position. This not only squanders precious time and resources, but high turnover drains morale and makes it even harder for companies to recruit quality candidates. Word gets around when industries and companies are struggling.
Although reliable figures are hard to come by (most companies zealously guard this sensitive information and make it a policy to lie about actual turnover rates), the average turnover rate in the typical U.S. sales organization is around 80%. Slightly higher for commission only, somewhat lower for salaried salespeople.
What can you do to manage turnover? First, recognize turnover is inevitable. No one is hired permanently. Everyone leaves sooner or later. People want and need better opportunities. Spouses get transferred. People retire. Some die. A few win the lottery. Not all turnover is bad. I've received some resignation letters that caused joyous celebration around the office. You can't eliminate turnover entirely. Savvy businesspeople learn to leverage turnover.
Second, use turnover proactively. Plan for it. Make the inevitable work for you instead of against you. Learn to take advantage of people's natural quest for greener pastures to fertilize your own. Don't recruit talented people for a "job." Provide promising new hires with a career path that includes regular promotions, incentives, and referrals. I know one sales manager who tells her salespeople to let her know when they're getting tired of the routine and ready for a new challenge.
I tell my people the day they're hired: "No job is forever, but stay with us a year or two, do a good job, and when you're ready to move on, if I can't give you what you need, I'll refer you to people I know in the industry who can."
That's an example of using turnover proactively. It's usually too late for anything proactive to happen by the time the salesperson gives you his or her notice.
The third key to leveraging turnover in your sales organization is eliminate unnecessary turnover by hiring right in the first place. Most counter and non-productive turnover can be traced directly to negligent hiring, inadequate training, and just plain dumb management practice.
In times of economic prosperity jobs are plentiful. It's a job-hunters market. You can't expect to attract and keep good people if your selection strategy is to essentially:
1. Run a fantastic "Unlimited Income" ad in the Help Wanted section;
2. Give your new recruit a presentation book, an order form, and the phone book;
3. Push them out onto the streets with a pat on the back and a hearty "Go get ëem, tiger."
Examine your selection criteria. One bankcard sales guru told me the only test he gives new hires is the mirror test. "What's that?" I asked. "I tell them to blow on a mirror. If it fogs over, I tell him, ëYou're hired.'"
The problem is anyone can go through a revolving door. The more you invest in the selection process of candidates up-front, the more likely you will be to reduce high turnover.
Our company provides research-driven selection tests (a bit more sophisticated than the "mirror test") and sales training materials. We've been able to help some companies reduce turnover by nearly half by providing them with the right tools. Those tools include sales selection tests that assess whether a candidate possesses the critical skills, personality, and attitudes necessary to succeed at a job.
Another important tool for leveraging high turnover is training. If a salesperson doesn't know exactly what to do and how to do it most effectively, frustration increases, productivity suffers, and you can be certain the company will never get back its investment in hiring that individual. Untrained salespeople leave at the earliest opportunity.
It's difficult for companies with huge revolving doors in their sales department to see any way out of the turnover problems. Convinced that the answer is managing costs, they hesitate to invest in the tools they desperately need.
"Why should I pay $100 for your $#&^% test," one sales recruiter asked me. "I'm just adding to my costs. I need to cut my hiring costs, not add to them."
This manager suffers from a common malady among sales recruiters: flop myopia. It's a blind spot about the cost of a bad hire. When I asked this particular flop myopic to calculate the cost of a hiring mistake for his company, he had underestimated the damage by a mere $82,000 per turnover! It's just good business if a $100 test can help you avoid a $82,000 mistake. (I'll tell you more in our next article about how you can calculate the cost of a bad hire and overcome your own flop myopia.)
Turnover is a complex problem. It can have many causes in sales organizations. You can't ignore it. It won't go away. You must manage turnover proactively or it will certainly mangle you and the productivity of your organization. Someone once defined insanity as doing the same old thing and expecting different results. Examining your sales selection strategy may be the first step in stopping the insanity of high turnover.
Dr. Dave K. Barnett is a speaker, trainer, and co-author of Earning What You're Worth? The Psychology of Sales Call Reluctance. He holds a Doctorate in Organizational Management and is the President of PsychoMetrics International, Inc. PsychoMetrics specializes in convenient, cost-effective leadership development and personal coaching through individualized, interactive training. For more information call 888-PMI-0003 or access http://www.braintrain.com.
