Measuring The Exact Impact of Sales Turnover
Employee turnover is a concern in virtually every industry. Whether your company sells potato chips or computer chips, turnover can quickly grind productivity to a halt — and cost your company a considerable chunk of change. Even the replacement of an employee paid $8/hour can cost the hiring company upwards of $3,500 in recruiting, training and benefits package expenses.
Sales team turnover is a telling metric when it comes to company efficiency. In the SaaS (Software-as-a-Service) market alone, sales team turnover rates have reached 34%. More than one in three sales representatives will end the year with a different employer than they started with.
Ouch.
Without the right sales enablement strategies in place to limit sales team turnover — and address turnover when it happens — your sales team can feel less like a unit and more like a revolving door.
We’re confident we can deliver everything you need to know about sales team turnover — how to find it and how to end it — in four minutes or less.
What is sales turnover?
Let’s take 30 seconds to define our terms.
Employee turnover, or in our specific case, turnover in sales, is the percentage of customer-facing sales employees who resign during a set period of time. Typically, this period of time is one year. When sales employees move on, companies must take time to find, hire, and train new sales representatives to take their place.
If this process sounds like it takes a lot of time, money and effort, you’re right.
The exact cost of sales team turnover varies from company to company. Some sources think that replacing a single employee might cost 213% of an employee’s year-one salary. While we think that figure sounds a little high, they’ve made their point: A company’s sales team can be both their biggest reason for success and failure.
How do you calculate sales employee turnover?
If you’re already panicking about your company’s sales employee turnover rate, don’t panic yet. Wait until you learn how to calculate it — then you have our permission to panic.
Many companies prefer to calculate sales team turnover based on quarterly or annual numbers, though some choose to do it monthly. It’s entirely up to you.
Warning: The following formula contains math. If you’re allergic to math, or you’d prefer to skip straight to methods that can help you reduce the sales turnover rate you’re scared to calculate, those can be found below.
In order to calculate sales employee turnover, you can use this employee turnover formula:
- Calculate the average number of employees for the selected time period by adding the number of employees at the beginning of that time frame to the number of employees at the end. Divide by two. This is your average.
- Then, divide the number of employees who left the company by that average number.
- Finally, multiply the answer from Step 2 by 100 for the turnover percentage.
Sales Turnover Rate = (# of Employees Who Left / Total # of Employees) x 100
If you keep this formula sticky-noted to your desktop for future reference, we won’t blame you, though we hope you won’t have to use it often.
You can breathe now. The math is over.
Consider this your invitation to stop panicking. You’re 90 seconds away from solutions that can help reduce the sales turnover rate you just calculated.
What causes employee turnover?
Many questions in life have simple answers.
Should I wear bright orange to a job interview? Probably not.
What if I’m interviewing for a position as a crossing guard? The answer is still no.
Unfortunately, identifying causes of sales employee turnover isn’t as simple. Truthfully, only you can really identify the root cause of turnover in your company, though we can certainly help.
Several unwelcome trends typically contribute to higher sales team turnover. These can include:
1. Compensation that doesn’t reflect effort, impact or success
Here’s a fact — a sales representative’s salary must reflect his or her efforts. In fact, each member of your sales team deserves a salary that shows recognition and appreciation for their contributions to the company.
There’s nothing wrong with paying young salespeople less than seasoned veterans. However, star sales employees deserve star salaries. Fruit baskets are nice, written compliments foster productivity, and an extra day off certainly feels nice. But compensation in the sales world still drives loyalty.
If your people feel valued, they’re going to stick around. But if they feel like their efforts will be better appreciated elsewhere, they’re going to find those opportunities.
End of argument.
2. Job descriptions that don’t align with daily tasks
Have you ever been promised in an interview that you’d be doing one thing, only to arrive at your new job and find a completely different set of responsibilities? Sometimes, that’s enough to cause a newly hired sales employee to walk back out the same door.
If you apply for a job on the sales team, you probably anticipate an interview for a sales position, where you’ll review sales-related tasks. So then why in the world are so many sales reps suddenly responsible for administrative tasks? Why are they asked to spend nearly 65% of each day researching data?
Your company hired a sales team to sell products, services or whatever else your customer base wants from you. Keep your sales team in the zone and let them do what they do best.
3. Sudden, unexpected changes within the company
Uncommunicated changes in a company can leave the entire staff on edge. Often, employees wonder why changes were made without any advanced notice. They’ll question whether their own jobs are safe. Ultimately, your sales team might begin to consider if it’s worth their peace of mind to find employment with a more transparent company.
Luckily, this sort of thing is easily avoided — do not spring changes upon your employees. Your company is a family, and families need to communicate. Obviously, some things will be out of anyone’s control (looking at you, COVID-19), but when you do have the ability to communicate ahead of time, do it.
So many problems find roots in a lack of communication. Don’t let high sales team turnover be one of them.
4. A lack of support
Sales teams need support from virtually every department in your company. Marketing efforts should support sales team strengths. Product teams should consult sales to determine the new features customers are requesting. Research should identify the metrics that would make sales easier to fulfill.
When sales representatives don’t feel sufficient support from the rest of the company, they’ll instead feel like they’re living on an island. And as soon as they find the strength to build a raft, they’ll leave that island for a more secure home.
5. Poor relationships between sales and supervision
Each staff member at your company, no matter their department, provides unique personality traits, ideas, beliefs and abilities. Sometimes, those ideas clash in ways that can intimate companies. Don’t make your company one of many that’s scared by disagreement.
At the same time, employee conflict must be accommodated before it escalates. Proper conflict resolution means finding strategies that help sales work peacefully, and confidently, alongside all other departments.
Even small bridges between staff and administration can go a long way toward improving sales team turnover.
How can you predict and avoid turnover on your sales team?
If you ever discover a way to entirely eliminate turnover on your sales team, quit your job and just sell the formula. Until then, the best we can do is implement strategies that can help you drastically reduce sales turnover.
Here’s an underrated tip: Challenge your sales employees.
If employees are not being challenged or incentivized in their work, they’re going to find somewhere that will.
We don’t always read The Harvard Business Review, but when we do, it’s often because they’re taking time to discuss turnover:
“In settings with high voluntary turnover, employees often lose faith in the company’s strategic direction (because they see others jumping ship), and they tend to be more aware of outside job opportunities, partly because their networks include former colleagues who recently defected. And when there’s lots of involuntary turnover, employees may lack trust in managers, feel little job security, and move on.”
Well said, nameless Harvard Review author. Well said.
Sometimes, reducing sales turnover rates first means identifying employees who are at a higher risk of leaving your company. See if any members of your sales staff:
- Leave work early, call in sick or practice low productivity;
- Work at the same level for several years, while coworkers or outside hires received promotions;
- Operate despite a lack of regular training, or struggle with new concepts that aren’t properly explained;
- Create their own sales guides, slide decks, or other items that should be created by marketing teams, research teams, or other departments;
- Neglect to participate in workshops that could help improve team culture.
These and other signs can help you quickly identify sales associates who might shortly consider a move.
Once you’ve assessed the data, it’s time to act. It’s time to implement change.
What can you, as a team leader, do to ensure that each sales employee’s job enhances his or her quality of life?