Sales employee turnover has reached crisis proportions and threatens to get worse before it gets better. According to Forbes, employee turnover in sales averages above 20%, and rises to 34% or higher if you include both voluntary and involuntary turnover.
Signs point to an increase in turnover as Millennials and Gen Z continue to represent larger portions of the workforce. Research from Deloitte shows that 25% say they’ll leave their current job within a year; 44% say they’ll leave within two years. Millennials are more likely than any previous generation to switch jobs quickly due to dissatisfaction or the presence of a better opportunity, and Gen Z may be even more flexible in their approach to job hopping.
We know this is a problem, but just how expensive is all this turnover, anyway? Let’s run the numbers.
Cost of Turnover By the Numbers
According to CEB’s Global Talent Trends, the average vacancy costs $500 per position per day, and the average time to fill a position is 44 days. Multiplied together, these numbers mean that a vacant position, simply by virtue of being vacant, costs $22,000 on average.
These numbers are further influenced by the type of position and, especially, the salary of the position and how much the person is contributing in sales revenue. Considering that B2B sales is one of the most highly compensated fields, your numbers are probably much higher.
Let's consider the cost of filling the position itself. These costs include:
- HR time spent recruiting, vetting, and hiring
- Sales leadership time spent on the same activities
- Commissions to recruitment firms
- Onboarding, which includes hard training costs and sales leadership time
- Lost productivity during ramp-up, which can take as long as 12 or more months
- Lost revenues due if the person does not produce as expected
- Loss of clients when good salespeople take their business with them
- Morale loss due to disruption of team dynamics
Estimating conservatively, recruitment costs, points 1-3 above, amounts to roughly $15,000 for a mid-level sales position.
Total conservatively estimated cost of lost sales talent so far: $37,000
Next, let’s add some additional hard costs:
These costs can vary wildly, of course. Onboarding will involve time invested by managers, outside training companies, and co-workers over the ramp-up period. If we calculate 4 weeks invested by internal resources at $500 a day and $5000 for external training, we can add $85,000.
Total so far: $122,000.
Now, finally, we come to the cost of salary and benefits to the employee until they reach productivity, all of which is lost entirely if they leave before they have returned on your investment in them. Estimating conservatively, again, this may be around $50,000 for a half year.
Final hard cost for an employee who leaves after six months: $172,000.
Oh, but we’re not done! Every time you lose a salesperson, there are soft costs associated that are difficult or impossible to quantify. These include:
What would you estimate to be the value of lost revenue? Goodwill? Employee morale? Customers lost to the competition? Add it in to reach your total.
Many companies fail to address this incredible expense because sales turnover feels inevitable. But it doesn’t have to be.
Why Sales Turnover Is Too High
There are many factors that drive sales turnover. It’s a high-stress environment. It requires great communication and people skills. Some people aren’t cut out for it. These are factors that cause many sales leaders to think they have no control over turnover and just have to live with it.
But the reality is that the company’s recruiting, hiring, onboarding, and, especially, ongoing enablement and culture play a bigger role in retention than anything else. And those are matters over which you have substantial control.
According to this article in Forbes, salespeople quit their jobs most frequently for these four reasons:
- They don’t have coaches and mentors
- They don’t have adequate sales tools
- They don’t know how to use data and analytics to achieve their goals
- They don’t have a playbook
All put together, this points to lack of effective sales enablement as the core problem.
How to Stop the Bleeding
I know first hand how painful salesperson turnover can be. In Upstream, selling complex b2b products, I was losing lots of money to exactly this problem.
That was ultimately what compelled me to build the Membrain product.
Companies that are committed to strategically optimizing their recruiting, onboarding, and enablement systems perform better than those that don’t. It requires an investment of time and resources in restructuring and aligning your processes.
Training for your sales coaches and managers is critical, as is training for your salespeople. It is just as important, or actually more important, to arm them with the tools to ramp up quickly, reinforce their learning, give and receive effective coaching, and achieve their goals.
Membrain provides the structured tools to quickly onboard and enable continued learning on the job, thus maximizing retention and success. It also has the tools to deliver effective sales enablement that keeps your employees engaged and achieving their goals–and therefore happy and less likely to run off to your competitors.
I’d love to show you how. Schedule a demo today.