No one wants to fire a new hire, let alone 25% of their workforce in any given year. And yet, that is the reality for sales organizations the world over.
Research from CSO Insights found that despite all of the many hours devoted to hiring, training, cultivating leads, and coaching sales reps, average sales churn is around 25%.
In a 100 person sales team, 25 are leaving. Every year.
That level of sales churn costs companies considerable time and money in exit interviews, severance pay, replacement recruitment fees, as well as screening and interviewing applicants.
Pair those with training costs after new individuals are hired, lost productivity, missed revenue opportunities, and loss of institutional knowledge while the raw recruits get up to speed, and the cost of sales churn, something which has become a normality, is astounding.
“Underestimating the time it takes for a salesperson to be productive as well as the investment needed to equip that salesperson to be effective, can lead to high sales churn,” said Peter Clarke, Talent Partner at Accel. “Salespeople aren’t typically afraid of a challenge, but the good ones will also look to join a company where they know they can be successful.”
Additionally, aside from the financial costs, the aforementioned sales churn rate can take a more insidious toll on the most mercurial of success barometers; team morale. Maintaining motivation amongst staff in any business is a challenge at the best of times, but having the odds of one in four team members being shown the door creates unique pressures.
The flip side is the extraordinary contribution that comes from a strong sales team.
Heavyweight companies like Oracle and Salesforce were all built off of the backs of powerful sales teams. The best salespeople not only make millions in revenue, but they also put their companies on the map. Their importance cannot be overstated, and yet companies across the board struggle to find and retain the right talent.
Peter Kazanjy, co-founder of TalentBin, stated in an article published on the blog of venture capital company, First Round Capital, that, “A lot of people may think that a bad rep will only cost you three months of salary before you fire him. It’s way more than that. It’s the dozens of demos that a good hire in his seat would have been doing, leading to 20-30% conversions. It’s all the deals that a quality sales rep could have been closing that now belong to your closest rivals. You won’t get another shot at them.”
In fact, the commonly accepted cost of one lost salesperson is two times their annual compensation, and the median annual compensation of a sales rep is $75,000. Based on that figure, each lost sales person costs a company $150,000, meaning sales churn of 25% costs a business with a 100 person sales team $3,750,000 annually.
For a 1,000 person sales team, the cost of sales churn is $37,500,000 in training and compensation costs alone. With those figures in mind, the magnitude of the problem starts to become clear.
As Kazanjy said, “sales hiring is, quite simply, mission critical. The ability to attract, hire and onboard successful sales reps and execs is an enormous competitive advantage.”
He concludes by stating, “if you don’t give it the time and attention it needs, you’re sabotaging any chances you have at winning your market.”
So why is it so hard to hire?
For starters, sales has an image problem. In 2015, the Wall Street Journal published an article, ‘Why It’s So Hard to Fill Sales Jobs,’ highlighting the stigma many college graduates had about entering the sales field. This problem has been exacerbated by a hiring market where young graduates and workers have gravitated more towards science and tech roles. Their associated values of team building and workplace harmony promote the mantra that results are almost always easier to obtain through cooperation.
Personal competitiveness can often be painted as a negative attribute, leaving sales with a comparatively unfashionable image. With less perceived opportunities for clear career progression and long-held stereotypes around inauthenticity and ‘sleaziness’, sales may be losing some of the best and the brightest who do not see sales as a serious career option.
The reality is far from the perception. It is a high bar to become a successful salesperson. A 2011 Harvard Business Review article set forth the complex set of language, intellectual and political skills necessary to be exceptional in the field, positing that at best, 20% of sales professionals possess them.
Key facets such as relationship building, persuasiveness, product/industry knowledge, and overall tenacity are all required in abundance. And even with those skills, training and experience are essential.
Apart from ability, companies often hire based on a sales professional’s relationships and knowledge of the buying process. A salesperson is much more likely to be successful if they have deep knowledge about the people and organizations they are selling. Thus the choice often becomes hiring for acumen or for a Rolodex. But more to the point, if either area is lacking then failure is likely, as the combination of both skills and contacts make for truly effective salespeople.
These tradeoffs become apparent for mature companies under intense pressure to deliver results.
Former Andreessen Horowitz Talent Partner, Gia Scinto, explains that sales churn can be, “heavily influenced by the growth phase a company is experiencing.”
“I think in the beginning it’s quite easy to motivate people when a company is experiencing violent growth. Because you can make them feel as though they are part of a cult.”
“Problems occur, however, when a company surpasses the high growth phase and starts to mature, yet hangs on to the early ingredients that originally made it successful. These things often don’t work during the later phases of mature growth.”
We have reached a point where the art of hiring sales talent has never been so necessary, and yet so fraught with difficulty and expensive consequences for error. When asked for his take on the problem, Anaplan’s CRO, Paul Melchiorre commented “The supply is limited. The demand? Unlimited. The challenge that sits before us is a great one.”
A brighter future, empowered by data
As a discipline, sales lags behind marketing, HR, and other enterprise functions that have been boosted by advances in tech and software solutions. Up to now, sales professionals have been expected to do everything from lead generation to the closing of deals without much advance in the tools enabling them to succeed. Sales software has come some way in recent years, but there remains a gap for platforms that provide a greater understanding of the different stages buyers are at in their purchase cycles.
But a new dawn in data-centric AI products and methodology will revolutionize the way sales is conducted today, empowering salespeople to conduct a far more targeted, relevant job with less reliance on old networks and ‘gut instinct’. And better quality sales practice is the ultimate way to shed the stuffy image associated with the job, as well the sales churn that comes with it too.
Bryan Cox, Chief Revenue Officer at Zendesk, has a clear view of the future of sales. He argues that “predictive analytics – the use of data, machine learning, data mining and statistics to analyze current and historical facts to, in essence, predict the future – will be game changing for sales.”
“It will dramatically impact the sales process by more accurately predicting the best leads, and how and when to reach prospects the most effectively,” adds Bryan. “If used appropriately, predictive analytics could transform sales organizations making them more efficient, productive, and profitable.”
Cox is one example of a new line thinking amongst modern CROs, who have recognized the opportunity with AI. Put another way, data has the potential to do for sales what networking services like LinkedIn have achieved for the recruiting industry.
To be a good recruiter 15 years ago it was essential to build relationships with everyone, from candidates to heads of HR. That level of interpersonal knowledge allowed the best recruiters to connect the right people to the jobs on offer, and those without it were left making educated guesswork.
Today, however, LinkedIn has taken out much of the leg-work necessary to fulfill many roles, even at times removing the need for recruiters at all for some non-complex hires. Simultaneously, the network has elevated the practice of exceptional recruiters, who use their perseverance, persuasion and information sharing for complex, top-level placements, getting heavyweight candidates to take up new positions more consistently. Figures released as part of the company’s 2016 hiring statistics revealed that top-level recruiters (based on successful fulfillment) are 60% more engaged with LinkedIn recruiting tools than the average. LinkedIn has, in short, become essential to recruitment.
Figures released as part of the company’s 2016 hiring statistics revealed that top-level recruiters (based on successful fulfillment) are 60% more engaged with LinkedIn recruiting tools than the average. LinkedIn has, in short, become essential to recruitment.
By supporting and incorporating the right tools, sales faces a similar future in the way it operates and supports its best people. AI driven networks like Intelligence.com, that provide insights for sales professionals into buyers and their organizations, will give every sales team access to the kind of information formerly siloed and invisible to all but a few.
Empowered by this level of insight, salespeople will not have to engage in some of the behaviors that have marred the profession’s reputation, such as hounding uninterested buyers or blindly navigating through prospects.
For hiring managers, this will mean dodging the bullet of hiring a mediocre sales professional for their network, since the network is available to all. With a map of the buying process and scientific indicators of success, the art of selling will be the sole differentiator.
If sales follow the path of recruiting, it follows that networks like LinkedIn and Intelligence.com will exponentially increase the value of extraordinary sales professionals, at much higher compensation rates.
Put another way, as sales are increasingly seen as the differentiator between businesses failing and skyrocketing, companies will be prepared to pay much more for this key function than today.
With greater recognition and prestige by association, the stigma attached to sales will soon become a fading memory. To compete in this new landscape, professionals will need a mix of strong skills and a willingness to embrace technologies that play to human strengths, enabling great sales professionals to focus their talents on the right buyers.
Tiffani Bova is Global Customer Growth and Innovation Evangelist at Salesforce. She is also among the ever more vocal group heralding this untapped potential for the sales industry.
“There is one area which is ripe for companies to exploit, and that is big data and analytics. The ability to capture so much rich customer information from multiple sources, use analytics and intelligence to provide improved levels of service to prospects and customers, ultimately results in smarter selling and a highly differentiated customer experience.”
Jay Barrows, Chief Sales Officer for GE Digital, agrees. “This revolution will force sales professionals to increase their focus on aligning emerging ‘capabilities and architectures’ – on-premise, at the edge, and in the cloud – to their customer’s most important business outcomes rather than selling product.”
Barrows adds that this new breed of data processing tools will quickly become standard fare for modern sales teams, and the most ambitious would do well to hone in on this skill as soon as possible. “The pace of innovation will be remarkable and the sales professionals grounded in the outcomes, capabilities and architecture approach will thrive over a product, feature and benefit approach.”
How about hiring managers? As Francesca Romano, Vice President of Talent and Operations for Collective[i] puts it, “The race is on. In addition to recruiting for technology, I spend a good portion of my time building relationships with the world’s best sales talent. I know that the great ones are engineers of revenue; the only thing that matters as much as producing great products.”
It’s this new AI-led and network driven, more scientific approach to sales that will not only achieve far better results but also broaden the appeal of the job to the best candidates.
Technology’s wider adoption has seen the typical top tech engineer’s image shift from geeky nerd to coding rockstar in just a few years. Once the true value that effective salespeople provide is made more identifiable, the same could be true for our industry.