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Two types of companies have a turnover issue with their sales force.
First, there are those whose turnover rate is too high. Each year, they need to replace 30% to 50% of their workforce.
Then there are those where there is absolutely no turnover. As strange as it may seem, this lack of turnover is just as problematic.
Finding the appropriate turnover rate for your salesforce
When it comes to turnover, the key issue is to find the right balance. According to Jack Welch, an iconic American leader, an adequate rate is 10%.
To find the right balance, the company must get rid of the least performing individuals on the team at regular intervals. We thus use turnover as a lever for growth and motivation.
This rule can create discomfort and seem very counter-intuitive. However, in a state of mind where the goal is to achieve ambitious objectives, this approach makes perfect sense.
How to calculate the team’s turnover rate
In order to calculate its turnover rate, a company must identify how many reps have been replaced among the salesforce within the last two years.
What causes a high turnover rate in a sales force?
- The industry
- The experience of the salespeople
- The management style
- The compensation
- The caliber of the candidate
- The recruitment process
- The integration of new salespeople
- A sales culture that promotes success
The problem is often related to the industry in which the company operates. The automobile, financial services and insurance industries typically have a higher turnover rate.
The experience of the sales person
The representative’s number of years of experience in the marketplace is key. Hiring individuals who have been in the business for less than 5 years is risky. They tend to be a bit unstable at the beginning of their careers, seeking to move up the ladder by jumping from one job to another.
Besides, some people realize after a few months or years that they are not well-suited for the job. However, after five years, they should understand what sales involves and be more comfortable in their role.
The management style
Close management usually retains salespeople longer within a company. Indeed, when the rep benefits from closer supervision, he achieves his goals quicker and performs more consistently. Of course, this ensures that he keeps his place in the team.
The sales manager must find a balance between close management and micro-management. Managing closely means supervising the rep’s actions. Did he make all his calls? Does he get enough meetings with new potential customers?
The management style to apply also depends on what motivates your salespeople. However, one thing is certain: the most successful salespeople like to be managed closely, because they know that this supervision has a significant impact on their sales results.
Sales rep with a salary largely based on commission tend to stay longer with their employers. However, this compensation method is not necessarily the one they prefer.
Management must build a compensation plan that encourages successful, consistent representatives who are able to maintain high levels of performance. Remuneration must vary and offer choices to reps in order to increase their motivation and performance.
The caliber of the candidate
Top salespeople tend to quickly feel the need to move on to other challenges. For this reason, you should always determine the type of rep required for each type of job. It is not necessary to hire an elite sales representative if the nature of the sale does not require it. You risk unnecessary expenses.
The recruitment process
Industries with high turnover rates are recognizable by their recruitment processes. They opt to hire 10 individuals and then keep only those who meet expectations after a trial period.
It’s more efficient to properly screen sales candidates with an effective recruitment process in order to hire the right people from the start.
The integration of new salespeople
A successful integration of new salespeople leads to better initial results and, therefore, higher retention. Otherwise, they fail to achieve their goals and are either laid off or choose to resign.
A sales culture that promotes success
The company must ensure that it provides an environment where the reps can naturally be successful. A strong sales culture based on accountability, coaching, motivation, and performance contributes to the retention of the best salespeople.
Low turnover rate: where is the issue?
Despite what you might think, a turnover rate that is too low, or even non-existent, is not a sign of a healthy sales force. It is often a symptom of a complacent sales management.
To be proactive, the sales manager should practice continuous recruitment. This technique allows you to:
- Avoid complacency among salespeople;
- Increase the team’s level of competence;
- Acquire internal recruitment expertise.
By building a pool of potential candidates, the director ensures that he can maintain an optimal turnover rate, which is about 10% annually.
Of course, expectations will have to be clearly defined and communicated: all reps must know and understand that their sales objectives must be met in order to guarantee their employment.
Analyzing the turnover rate of your sales department provides an overview of your sales force’s health. Whether the rate is too high or too low, the issue is usually recruitment.
For this reason, sales recruitment should follow a sales-specific process that pinpoints the best candidates. This is how the manager ensures that the right salesperson is hired for the right role or, on the other hand, that he can afford to fire those who do not meet the requirements.