Real Cost of Salesperson

The “Real Cost” Of A Salesperson

What would you think of a front line manufacturing manager failing to address problems that consistently cost millions of dollars in scrap and rework (not to mention customer sat problems because of missed deliveries)?  Or an engineering manager that missed product launches that caused millions in lost revenue?

Most people would say these are real problems and if they happened repeatedly, these managers would be fired!

Yet, within sales, this practice is common, yet people, that is leaders seem not to care about it, instead the squander millions in mis-hires or in failing to retain top talent.  Stated differently, I’ve never seen a manager fired for consistent lack of attention to talent acquisition, development, and retention.

In sales, the raw ingredients are people.  We hire people, we shape them through on-boarding/training, we provide them systems, processes, tools, programs to help them perform.

We invest time and money in those people.  Average on-boarding of a sales person is about 10 months.  For some very complex solutions, buying environments, it’s much more.  After they are on-boarded, there is the time involved in generating pipeline, and the time involved in managing the pipeline opportunities through closure.  It’s not unusual to see sales cycles of 6, 12, 18 months, or longer.

As a result, after they are on-boarded, it can take a year or more to start seeing a consistent flow of business.  And that’s assuming you have the right person, doing the right job, ramping up their performance at the right rate.

If you have the wrong person, they may never ramp to the right level of productivity.

The costs to this are huge.  Most people think only of the direct costs.  The cost of hiring, the salary, some training, on-boarding costs.  Too often, managers think this is pretty small.  $100-200K.  But the real cost is much higher.  It’s the opportunity cost.  Customers don’t stop buying just because you might have an open position or open territory.  They just buy from your competition.  Customer don’t buy from sales people that aren’t competent, so the wrong person, has is actually costing you business.  These costs are in the millions, sometimes 10’s of millions.

Now layer on top of this sales person churn.  The average tenure of a sales person (voluntary/involuntary attrition) is 22 months.  If they’ve spent 10 months on-boarding, in the subsequent 12 months, they are ramping their productivity, and may be getting to be fully productive–but then they leave.   As a result, we’ve probably not recovered our investment in the person, and we have continued opportunity costs of millions.

And this is common practice!!!

I ask again, how many sales managers are fired because of bad talent management?

Instead, I see exactly the opposite behaviors.  Managers thinking of sales people, as “disposable, replaceable, commodities.”  As I speak with too many managers the attitude is, “I’ll try him out for a few months, if he doesn’t work out, I’ll fire him and find someone new…….”

This is irresponsible.  We need to start thinking about firing sales managers and executives who do not put talent acquisition, development, retention as their top priority.  Managers say they need to focus on hitting the numbers, but if they don’t have the right people performing at the highest levels possible, then there is no way they will hit their numbers.

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Note: this article originally appeared December 19, 2018 at the Partners in EXCELLENCE blog

David Brock
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