Turnover in Sales

A sales manger with a large Caterpillar dealership once said. “A salesperson rides a company like a horse. When the horse gets tired, he jumps on a new one.” This suggests that salespeople expect to change jobs frequently, always looking for a fresh opportunity. Yet Srully Blotnick, a social psychologist and author of The Corporate Steeplechase: Predictable Crises in a Business Career (Facts on File, $17.95), warns, “Perhaps the biggest myth in American business is the idea that you can be rid of your unhappy job situation by changing jobs.” And Dr. Charles Futrell, associate professor of marketing at Texas A & M, found that high performers leave when promotional opportunities are blocked and low performers leave because of dissatisfaction with pay or the work itself.

What really causes high turnover in sales? Who gets hurt by it? Who profits from it? These aren’t easy questions to answer. Studies on the subject are sketchy at best – the latest significant report was published in 1972 by the Conference Board, a New York based research organization. Industry is reluctant to discuss the problem and even more unwilling to compare notes between competitors. Sales managers and salespeople have different perspective on why so much shuffling occurs in the field of selling.

That’s why PSP talked with a number of people – managers, sellers, and university professors – and also reviewed the existing literature – to determine the causes of and cures for turnover.

Getting Started

“The critical period (of a sales career) is in the second year,” says Barbara Pletcher, president of the National Association of Professional Saleswomen (NAPS). “The first year they get along on energy and excitement. The second year, when a new crop of people comes in, it’s kind of like being the older sibling when the new baby comes home from the hospital.”

The “older sibling” even if hired with utmost care and paid well, may, for reasons not entirely explained to the sales manager, decide to move on to another company and, thus, become a figure in that word nobody likes but headhunters – TURNOVER, alias “Quits” and “Separation.”

Although it’s been measured, manipulated, modeled and bemoaned, scrutinized under the microscope of management and dissected by industry, turnover still remains elusive.

Is 30 percent too much or too little? When is it a healthy sign of weeding out and when is it a cancer out of control?

The Conference Board’s 1972 Report on Turnover for salespeople in over 500 companies found that the “first five years of employment show relatively severe losses in most industries. By the end of the fifth year of employment, typically half of a given year’s new sales recruits have terminated….”

Certainly higher turnover is to be expected in circumstances which encourage it – the first six months of employment, “low entry barrier” jobs and in the first job.

“When it comes time to get a job, people say, ‘Well, worse case, I can sell insurance,'” says Mary Jo Potter, co-founder of Oxicon, a consulting firm in California. “When you have a ‘low entry barrier’ to that job – where a lot of people perceive they can do it – you’re going to have high turnover unless you screen them out because they cannot screen themselves out.”

“There’s almost always more turnover with people in their first or second job,” continues Ms. Potter. “If you leave people to their own devices, they don’t know yet where they belong.”

“A lot of women take their first job in sales in the relatively easy entry industry of copy machine sales, which means high turnover and low pay,” says Barbara Pletcher. “It’s still harder for women to get that first job that is higher quality, therefore they’re likely to change jobs until they reach a niche that matches their level of competency.”

The Management Side

Attitudes about turnover beyond the first job and the early years of employment, as seen by management, fall into three categories.

1. Play the Numbers Game
This is the short-term “it-won’t-go-away-and-it’s-not-so-bad” philosophy more prevalent in the past but still highly visible in today’s corporations. “In the past,” notes Chuck Wright, vice president of State Farm Insurance in Bloomington, Illinois, “there’s always been a willing supply of bodies around and companies had a tradition of throwing so much mud up on the wall and seeing what would stick. There was really no overriding reason for them to change their practice.”

“I wonder if some companies don’t bring these young men and women in and really get all of the productivity they can out of them in two to three years,” says associate professor of marketing at Texas A & M, Dr. Charles Futrell. “If their performance levels off somewhat – which is likely – then they replace them. They’re enthusiastic and green and they work like crazy and sales go up. You put someone else in after a few more years and those sales may continue to go up.”

2. Bib Bucks Will Keep Them
This school of turnover philosophy holds these truths to be self-evident: pay them enough money, they’ll stay.

Indeed, the Conference Board study found that money provided the “most consistent relationships between retention of employees and any other given variable.”

“The highest paying companies,” it reported, “lose new salesmen at a rate about one-half that experienced by the lowest paying companies during the crucial first five years of employment.”

But money was also the most complicated variable – how increases were timed, for example, had little effect on turnover, and the common practice of “the other guy’s” pay as incentive didn’t keep them around.

The Conference Board report explained:
“It has been a long-held belief that in his early or apprentice years, a junior salesman can be kept with the firm if 1) he is kept ‘hungry,’ and 2) he is provided a real earnings potential, e.g. if the average experienced salesman in the territories is making 50 percent or 60 percent more than the trainee…Many firms carry on a virtually continuous communications campaign to hold out the success, and consequent high earnings of experienced salesmen as an example to the junior men…Neither of these tactics seems to be effective…there is no relationship between earnings potential and the desire to remain with the company.”

3. Better Selection Methods
Even though the Conference Board report found that selection standards, and large amounts of money spent on third and fourth interviews showed little connection to keeping salespeople around, recent hiring refinements have proven successful. While minimum age at hire, marital status or previous selling experience, as the Conference Board showed, had no bearing on turnover, precision selection may.

“If turnover occurs with a year, it’s almost always a wrong hire,” says Ms. Potter. “If it happens two, three, four years down the line, it may be a management or compensation problem. But if it happens fairly quickly – people get in and they say, ‘I made a mistake, this is not what I thought’ – that’s the part that we should be able to do something about.”

In an industry notorious for turnover, often as high as 80 percent, State Farm Insurance has been particularly concerned.

Chuck Wright believes more people fail not for lack of selling aptitude, but because “they didn’t get the training and support they needed…that kind of turnover is what causes suspicion and the decline of the agent system of marketing insurance. How in the world can a policy holder feel very good about an agent or the company when three times a year he’s greeted by a new face and a new letter of introduction?”

State Farm thinks it has an answer in precontract training. They only hire people who are currently employed and who are willing to study evenings and weekends for up to six months before a mutual agreement is reached.

“We try to get acquainted with the people we bring in as State Farm insurance agents. Even though it’s time-consuming and costly, we make fewer mistakes,” says Wright.

State Farm is, understandably, highly protective of the specifics and will not even reveal how long, other that for “years and years,” the plan has been in operation.

“The longer we go the better results we get and the more convinced we are that taking the time to find the right people to begin with is worth the effort,” Wright emphasized.

The Salesperson’s Side

Salespeople look at the turnover problem differently. Their attitudes are shaped by more personal philosophies.

1. “I am an investor.”
A pharmaceutical salesman, who has been with his present employer for over 12 years, says “Salespeople looking for a job are investors. They are preparing to invest the most important possession they own – themselves.” This highly successful salesman attributes his continued prosperity to selecting the right company to fit his individual needs and personality.

“Look at the top guy first,” he emphasizes. “The head honcho sets the tone of the organization.” In a large organization, this might mean the division head above the sales manager. In a small company, talk to the president.

“Of course,” he continued, “you want to be sure that you get along with the sales manager – the person you deal with on a regular basis. But sales managers come and go. I have survived four management changes in the last six years. Sales managers have to follow the rules from above, just like you do. The more you know about what to expect from the executive level, the more accurately you can evaluate whether or not the company’s ‘style’ suits your own.”

2. “Money is the scorecard”
“I have to make $90,000 a year to make the payment to my ex-wife, to pay for my new airplane and to support my occasional gambling trips to Reno,” explains a California real estate salesman. “If a company can’t offer that income potential in their territory, I can’t afford to waste my time. Money is the scorecard and the reason I perform beyond the norm.”

A retired military man, now a defense contractor, told us about his reasons for putting such a high value on money. “When I retire, I decided that I had 15 to 20 good working years left before I’d be ready to really retire. The kids are grown, my wife is working towards a degree in accounting, and I’ve got a pension coming in. There’s no reason not to sell my services to the highest bidder.”

Many salespeople equate income with self-worth. This isn’t necessarily good or bad, but the degree of importance the paycheck carries often depends on life-style and age. “If you’re free and single,” says a veteran sales rep in the office products industry, “with reduced family ties or commitments, your salary/commission and cash bonuses and awards will become the major considerations in job selection.

“When I first started out in sales,” recalls telephone equipment salesman John Dudley, “I had no one to consider but myself. So when I took my first job, I went with the top-paying company. After I’d gotten some experience under my belt, I moved on to an even better deal. In fact, in my first two years, I changed companies three times.” Did he regret the “money chase”? “Not then, no. But now that I have a wife and a baby on the way, I’ve changed my priorities. Now I look for a high-base salary, a territory where I don’t need to stay more than one night on the road each week and better long-range security.”

3. “Meaning Before Money”
“It took me about six months to find out that the company philosophy was not compatible with my own,” explains jobber about his recent career change. “When the pressure from my manager to use down right dishonest selling techniques increased, I quit. To me, meaning comes before money.”

A 28-year-old single saleswoman who just left a radio advertising sales job to join a large medical products company said, “I decided that hustling and playing small company politics was not worth the higher paycheck. The way I feel about myself in the job has to be taken into account.”

And it’s not just women who worry about their psychic income. “Games of cut-throat, 16-hour days and a fat expense account may be fine for some, but not for me,” Tony Walker says as he shakes his head. “I’m looking down the road, trying to see what my reputation will look like in 10 years,” explains this computer salesman and future entrepreneur. “I’m building a foundation for a business of my own. Recognition in my field – to be known as a knowledgeable, trustworthy salesman – means more to me than chasing the big bucks or earning more money working with a company that doesn’t include the word integrity in its vocabulary.”

The Expert’s Side

1. High Performers vs. Low Performers
High performers leave for different reasons than low performers, says Dr. Charles Futrell, 43, associate professor of marketing at Texas A & M. After studying turnover at a major pharmaceutical company, he found that higher performers leave when promotional opportunities are blocked and low performers leave because of dissatisfaction with pay or the work itself.

“The problem that companies have to watch out for,” says Dr. Futrell, who himself has eight years of sales and management experience, “is that they do exit interviews and find out why everybody’s leaving. If you do that, you’re not going to have an impact on the people you want to – the high performers.”

It may be helpful, says Dr. Futrell, to look at turnover as a kind of Darwinian present to business which helps weed out the low performers.

“The thing we’re trying to emphasize is that turnover is not necessarily bad. You have to step back and segment that sales force into performance groups. Then, if you’re losing your high performers, that is bad. But if your average and low performers are leaving, that could be good for you.”

2. Salespeople Need Attention
Dr. Dan Newton, who holds the post of John Tyler professor of business administration at the University of Virginia, explains: “People are motivated by much more than money alone. There’s a practice on the part of a number of sales executives (to think) that their best salespeople don’t need much attention in the field. These people begin to feel unwanted and unloved and the grass begins to look greener on the other side.”

Bob Green, a California industrial psychologist, agrees, “Companies keep saying they’re interested in people, and yet too often they act otherwise. Time and time again we find the In Search of Excellence kinds of companies have low turnover – for a reason.”

When Dr. Newton studied the turnover of 1,021 U.S. companies, he found among other things, that “stagnating rates in the growth of salespeople, where promotional opportunities get reduced, exacerbate the tendency for them to look around.”

His recommendations: “First level supervisors should spend more time in the field with their salespeople in general and their best salespeople in particular. Make sure pay scales are competitive. I don’t think you reduce turnover by overpaying but you can certainly exacerbate it by underpaying. Know what you’re doing and keep your salespeople fully informed.”

3. Assess the Situation

Srully Blotnick recently told Success magazine that when people changed jobs, they often were not prepared for substantial loss of contacts and the sudden switch to amateur status.

Although most salespeople can easily transfer professional seeking skills from one job to another, Blotnick’s warning applies to every turnover candidate: “Perhaps the biggest myth in American business is the idea that you can be rid of your unhappy job situation by changing jobs. It was a shock to find that the majority of people who had switched jobs or had switched careers had, in fact, taken a monumental step back.”

People just want to “free themselves from whatever it is they’re embedded in,” concludes Blotnick, “and don’t take time to assess the situation.”

Professor Newton offers similar advice to management: “Turnover gets to be very costly, not only the hiring, but the open territories, general disruption, and a bad image as fast as the customers are concerned.”

Turnover Management
Whether you’re on the sales or management side of the selling fence, there are some do’s and don’ts for making turnover a healthy growth process rather than a win/lose situation. The two common denominators are INFORMATION and COMMUNICATION.

1. Compare Expectations during the job interview. This benefits the company and the salesperson. Both sides know what to expect so problems are solved instead of created. Don’t keep future expectations a secret. Be frank and open, do that and a productive relationship can begin right from the start.

2. Check the Potential for sales success. The salesperson’s responsibility is to find a match between personal goals and company goals. The hiring company needs to develop effective screening procedures to identify the characteristics of the “ideal candidate” and screen out unsuitable candidates (See side bar “Can a computer cure turnover?”).

3. Use Performance Reviews. Talk with your employer/employees so that you don’t repeat your mistakes. Selling is a profession and an art. There is no one right way to do the job. If you are having problems agreeing on strategies, salary/commission, benefits, distance or frequency of travel, etc., discuss the situation. Changing jobs is not the only solution available.

4. Work on the Relationship. As a manager, you may have pressure from above to meet certain quotas, weed out a certain number of employees, or maintain a minimum performance level. Never look at the numbers without looking at the people behind them. As a salesperson, recognize that a good working relationship with your manager is good for the company and therefore good for you. Don’t see your own needs to the exclusion of your manager’s expectations. Work actively on your employer/employee relationship. Think of it as a marriage – each partner has to believe that he or she gives 60 percent and receives 40 percent for there to be steady growth.

5. Solve Frustrations. Don’t fire someone or quit because you have a problem that seems insurmountable. You will probably take the difficulty with you to the next job or hire someone with the same problem. The stresses of moving or hiring and training may significantly outweigh the benefits of a quick solution. Work towards resolving disagreements, either one-on-one or with the help of a qualified mediator.

6. Use Exit Interviews. Don’t throw up your hands and say “oh well” when a turnover is unavoidable. Find out what went wrong and how the problem might be avoided with existing and new employees. Management benefits by restructuring policies to better suit their sales force, and the outgoing employee may be helpful enough to gain respect from the employer and a better referral for a future position.

For many years, turnover in selling has been an accepted fact of life. But with an increase in communication between management and salespeople, the odds for a long-term company career instead of a short-term job will increase and make the sales profession more attractive and more rewarding to everyone involved.