The good news for the pharmaceutical industry is that for a number of years sales rep turnover and attrition has been declining steadily. Or at least that was true until 2003 when, according to a recent report from the organizational and human resources consulting firm, Hay Group, turnover among pharmaceutical and biotech sales reps spiked to 14%, up from 10% in 2002.
The high cost of turnover is no trivial matter. Hay Group experts estimate the so-called hard cost of replacing a pharmaceutical sales rep at $89,000. As a result, even this seemingly small 4% increase in turnover from 2002 to 2003 ended up costing the industry an estimated $356 million. That’s a big pill to swallow, even for the multibillion-dollar pharmaceutical industry.
Plus, as the researchers point out, there are secondary costs that also affect bottom-line performance. “Vacant sales territories and territories with replacement reps threaten physician relationships and could lead to an erosion of market share,” note the report’s authors.
Unquestionably, the pharmaceutical industry dedicates an inordinate amount of time, energy and effort to hiring and sales force effectiveness. Yet these companies then watch as 7% of those reps literally walk out the door every year, taking all those precious resources with them.
To address the problem, Hay Group suggests pharmaceutical companies begin by trying to uncover the core causes driving turnover. One area ripe for improvement is the exit interview. Pharmaceutical companies note that most outgoing reps cite better opportunity elsewhere as the primary factor behind their departure. Yet based on interviews with reps who recently left pharmaceutical companies, Hay Group researchers discovered the real reason more often was issues with an immediate manager.
It was only among higher-performing reps interviewed by Hay Group that problems with management were not the most commonly mentioned reason for turnover. These top reps more often cited issues with compensation as their reason for leaving.
Next, the Hay Group suggests pharmaceutical companies create programs that are designed with sales reps’ needs in mind. These should be offered in conjunction with customized development programs to assist front-line managers to maximize their own potential.
Finally, Hay Group researchers also recommend reevaluating compensation plans to determine whether they accomplish the critical goal of recognizing the contributions made by top performers.