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The Center for Sales Strategy Blog

112,500 Reasons Why Turnover is Bad

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$112,500 is in flames every single time that you lose a salesperson and have to hire a new one! 

Yes, over $112K! 

How do you figure that dollar amount? Easy. The average cost of turnover for an employee is 1.5 times annual compensation. So, if your salesperson is earning $75,000 per year when they leave, it will cost your organization $112,500.  

So, what if your top salesperson is making $150,000 per year? Then the cost of losing that sales rep and replacing them will cost your business $225,000! So, what is your turnover ratio? 10%, 25%, 50% per year? Then start adding up the cost of your turnover. 

How does that affect your EBITA? Cash Flow? Net Profit? 

A recent study from Bersin by Deloitte estimates the cost of turnover from 1.5 - 2.0 an employee's annual compensation. And a report from Maia Josebachvili, VP of People at Greenhouse, argued that retaining a salesperson for three years instead of two, along with better onboarding and management practices, yields a difference of $1.3 million in net value to the company over a three year period. 

$1.3 Million?!?! 

Yes, turnover is a big deal for your organization. A really big deal. 

So, how do you "fix" turnover? Well, it's simple, but not easy. It's a process that can take months and in some cases even years to slow your rate of turnover in your sales organization, but here are 5 ways that you can reduce turnover:

1. Fill Your Talent Bank

Wait? You said this was about reducing turnover, but your first point is about hiring replacements?  Yes, it is. Your turnover rate is high. You are going to have positions that you will need to fill (and probably soon). Which is why you need to fill your talent bank with the right type of candidates.  People that can step into these open positions and hit the ground running. You can't hire great people unless you have great candidates ready! A full talent bank is the very first step in reducing turnover...in the long-run.

2. Interview the Right Way

We've all done it. We have a big hole in our lineup, so we go after a big hitter from another organization to fill it. They've got the experience and have the connections. The problem is they may not have the talents needed for the position that you need. Experience does not necessarily equal talent. You need to look for someone that has the inherent talents to be a superstar. We recommend a validated talent assessment. (Shameless plug, The Center for Sales Strategy has one…you might want to check it out.) A predictive talent assessment offers the most effective talent instrument available to accurately identify an individual’s innate strengths and guide you to coach them in a way to maximize those strengths. By hiring based on predicting success based on talent, you will hire the right person for the right job who will be successful. More success equals less turnover!

3. Focus on Strengths 

Once you assess someone's talents and strengths, you must focus on how to get the most out of them. Most managers try to help a salesperson get better at their weaknesses, but that is actually quite ineffective. At best, you can see someone improve up to 10% in a weak area, while focusing on a strength you can see a 10-fold increase. Yes, 10-fold increase when we focus on their strengths vs. their weakness. 

4. Build Up, Don't Tear Down

It's easy to focus on what people are doing wrong. It's our nature. It's what a "Boss" is supposed to do, right? Wrong. Focusing ONLY on the problems demoralizes your team, hurts performance and ultimately can lead to good people leaving your organization. Instead, help to build up your staff through positive reinforcement. Tell them what they are doing right every chance that you get. And when they are doing something wrong, don't ignore it. Rather, be truthful, straightforward and to the point. They will appreciate it and learn from it because you've been encouraging them along the way.

5. Train Your People

My favorite "joke" about training is:

CFO asks his CEO, “What happens if we invest in developing our people, and then they leave the company?”

CEO answers, “What happens if we don’t, and they stay?”

Well trained salespeople are more successful, earn more, and are happier. Salespeople who are making good money and are happy don't leave. Lower turnover makes a world of difference in your organization.

Retention is a MAJOR issue for organizations today, and most managers don't even know it. Now, you do, take these five simple, yet important steps in reducing your turnover and increasing your net revenue.

The Talent Bank Worksheet 

Topics: hiring salespeople sales management Talent