article | May 12, 2017
Why a Low Sales Turnover Rate Could Mean Trouble
The turnover rate for top sales organizations is never zero. The ‘B’ players are picked up by uninformed competitors who want talent from your sales organization. The efforts of a sales management team to drive accountability will result is a healthy turnover rate. Add to that competitors luring your star reps and managers. Sales leaders reach out to their HR partners to understand turnover. However, for some companies, the turnover rate is actually too low. This post tells you how low is too low for turnover. It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors. Leverage the How to Make Your Number in 2018 to access a revenue growth methodology to hit your number quarter after quarter, and year after year.
Let’s take a look at some statistics from SBI’s data. Top performing companies across all industries have turnover rate of about 11.6%. This is for direct field sales reps. Inside sales is worse at about 15%. Both these numbers, however, are very subjective. They change based on industry and other performance factors. Also, these statistics cannot reliably distinguish between voluntary and involuntary turnover.
Is Your Rate Too Low?
Using these statistics, if you are well south of 10%, it may mean trouble. Some turnover is healthy – and hopefully it does not include your A players. You will need to calculate what your turnover rate is. Single digits may be a sign of underlying problems. If possible, see what the turnover rates among A, B and C players are. If A players have a higher rate, there are sales performance condition issues.
Reasons Why Turnover May Be Too Low
Here are some top reasons why low turnover could be a problem in disguise. The Turnover Trouble Tool also has symptoms to watch for. Additionally, it gives some advice on how to correct the “problem in disguise”. You may never even see these issues unless there are sales performance problems.
1. Base salaries are too high. High base salaries mean Reps might live without the variable component. And, they hang around because the competition may not have as high pay. Check for the payout of incentive pay to see if it is lower than expected. To correct, change the base to variable mix to put more in variable pay.
2. There are too many low-performing reps. If the common denominator is low performance,there’s no need for low performers to go. There’s no room for A players – who wouldn’t want to work here anyway. Check for performance over the past few years. Also check to see if A player turnover is higher than the others.
3. Your offerings are selling themselves. Sounds like a good problem to have. But it can be costly in terms of Sales costs. Sales Reps don’t have to do much to get paid – they just take the free sales orders coming in. This may also be a sign that your products/offerings are commodities. Maybe you don’t need a field sales rep. Move the sales burden to a lesser-cost resource (inside sales) or even automate it.
For more symptoms and reasons, download the Turnover Trouble Tool.
What To Do Next
HR Leaders, you need to perform these actions to help Sales. The turnover in sales might be too low – this means there’s an underlying problem. Help get it fixed.
1. Calculate your turnover rates. If it is near the top performing rate of 11.6%, don’t stop yet. You may still have some issues. If it’s in the single digits, definitely continue with the next steps.
2. Download the Turnover Trouble Tool.
3. Check the symptoms to see if your turnover is too low.
4. Identify what the root problems are using the tool.
5. Use the suggested actions in the tool to correct the problem.
6. Start planning on having a better mix of sales talent.
Remember, some turnover is healthy in a sales organization. Ensure you can see the signs that low turnover may actually be a problem.
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© 2018 Sales Benchmark Index (SBI), B.V.
A Business Strategy Consulting Company
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