Sales Productivity In the Digital Era

The increasingly blurred line between B2B and B2C has inevitably changed the nature of sales, with customers demanding a more personalized selling process. Salesforce’s “State of the Connected Customer” report recently found that 58% of consumers and 77% of B2B buyers believe technology has changed their expectation of how companies should interact with them.

As sales mandates and productivity quotas rapidly change, sales teams often fall short of these rising expectations and are unable to meet their job quotas.¹ The easy solution for companies is to replace sales reps. The more effective solution, given the high career turnover rate and cost of hiring a sales employee, is to take measures that increase the productivity of existing sales teams.

Impact of High Turnover Rate On Sales Productivity

The turnover rate for sales representatives has remained much higher than that of other roles.

According to Bridge Group Research, there is a minimum 20% annual turnover for sales talent and an average annual rate of 34.7% per year in the United States; this is almost three times as high as the average turnover rate for all roles, which LinkedIn reports as 13%.² Further research also suggests that one out of ten B2B companies experience sales turnover rates of above 55%.³

This contrast in turnover between sales and other roles can be attributed to the difference in perspective between the representative and company with job performance, as well as an increasing competitive landscape for talent. SiriusDecisions also lists deficient compensation and lack of connection with leadership as top reasons why high-performing representatives leave their organizations.³

General Costs of Hiring a Sales Representative

This high sales turnover rate means that firms are continuously spending money to hire and replace those representatives who leave. On average, US firms spend around $15 billion a year training salespeople and $800 billion on incentives, only for attrition and other factors to reduce the return on those investments.⁴

The key to improving employee retention is first understanding the cost of employee turnover.

There are a few general estimations of the upfront costs behind hiring a new sales employee. A report by DePaul University states that it takes an average of $97,690 to replace a salesperson, while SiriusDecisions reports that the average turnover cost of a B2B sales representative can range above $200,000.^{5, 6}

However, the true cost of hiring an employee in 2020 is much more complex with additional hidden costs. Employers must consider the full cost breakdown of recruiting, onboarding, and training employees until they both reach full productivity levels and cover intermediate loss in overall company efficiency.

Hidden Costs in Sales Turnover

Hidden turnover costs come from the time and productivity lost in two places: recruiting, and training and onboarding new representatives.

Recruiting

Businesses are constantly searching the market to fill vacant positions with top sales talent. Recruitment during this period often draws time out from human resources and sales leadership and impacts their respective productivity. After considering commission for external recruitment firms, McKinsey estimates that some organizations spend roughly $15,000 in internal productivity to select a mid-level sales position.⁷

Companies also suffer costs from supporting a vacant position during recruitment. The average vacancy costs $500 per position per day, meaning that a vacant position itself costs at least $22,000 for the average recruitment period (44 days).⁷ This number often increases to anywhere between $25,000 to $50,000 when lost productivity and customer dissatisfaction are also considered.⁸