I have worked with many sales organizations that continue to employ the bottom 10% of performers even though they are well below the breakeven production for the role. Think about the consequences of inaction here. You are paying people more than they are producing for your company? Unless you are running a charity, this isn’t a good strategy. You do need to be aware of exceptions when calculating the bottom 10%. Examples: New hires that are still in the process of ramping to full productivity, anyone that was out on leave for a portion of the year, etc.
Analysis of cost savings (200 sales reps)
Why would you eliminate the bottom 10%?
- Upgrade Talent
- Effect on Morale
- Opportunity Cost of Resources
Reinvest: in the illustration above you lose 2.7% in revenue if you cut the bottom 10%. Do you really lose that 2.7%, or would some of it be generated based solely on inertia? Can you generate more than the 2.7% by reinvesting the extra $1.7 M in training, resources, demand generation, etc. for the top 90%? Typically the answer is YES.
Upgrade Talent: every Manager makes hiring mistakes. Great Managers recognize when they make a hiring mistake and take action quickly. If the bottom 10% represents hiring mistakes, than invariably investing the money you have saved by eliminating them into implementing a system to ensure hiring is World Class will produce significantly improved results. Better talent is always available.
Effect on Morale: some may argue that eliminating the bottom 10% will lead to morale issues. The top 90% will not feel secure in their roles and feel as if they should always be looking over their shoulder. I disagree. Think about the last time you worked on a team and one of the members dragged the team down. The team would perform better without the “bad apple”. Also, you are doing the sales rep in the bottom 10% a favor by allowing them to move on to a new career where they can be successful. They either lack the competencies to be successful in the role or have made a conscious decision to be lazy. The top 90% realizes this and will be happy remove the negative influence.
Opportunity Cost: how much time does Sales Management, support staff, and other departments within your organization waste dealing with the bottom 10%? What if this time was used to focus on coaching, supporting “A” player and improving the customer experience?
- The revenue generated per dollar of sales expense will increase
- You will have more time and money to invest in the sales team members that are putting forth the effort necessary to be successful
- You remove negative influences from the sales team
If you want to make your sales force more efficient and more productive, look at cutting the bottom 10% and reinvesting in the top 90% of the sales force. Why invest significant resources in those that are not willing to invest in you? If you have given them adequate coaching, training, resources and support they are making the choice to be in the bottom 10% and people don’t change that much. Spend your valuable time and resources on people that want to be great.