If you tune into many media outlets, you’ll inevitably hear about “The Great Resignation.” This term describes the mass exodus of employees leaving their current job. According to the US Department of Labor, June had over 10 million jobs created and nearly 4 million professionals quit their job. It’s fair to say that the labor market is tight. And, there are many reasons why this environment is likely to persist.
For sales leaders, the Great Resignation is not so great. Moreover, this might be their biggest obstacle to meeting their goals. Unfortunately, many sales leaders recognize this risk but haven’t calculated the magnitude of its impact. Let’s explore the explicit and hidden costs of sellers leaving.
Explicit Costs of Sales Turnover
Based on Gartner’s research, the average cost of a departing employee is nearly $19k. While this isn’t specific to sales, it should provide a quick order of magnitude on the direct impact on your organization. Hypothetically, if you have a sales force of 100 sellers with an 18% turnover, that’s a $335k consequence.
For sales organizations, the math gets much trickier when you factor in hidden costs.
Hidden Costs of Sales Turnover
Hidden costs are those dollars at risk before you even recognize you have an issue. Specifically, there are three sources of hidden costs:
- Disengaged sellers – i.e., sellers wanting to leave or looking at other organizations. Note, even if your sellers aren’t actively looking, recruiters are working to get their attention.
- Under-served buyers in the open territory – i.e., the revenue risk associated with buyers and prospects in unassigned territories or books of businesses. Certainly, sales leaders will leverage other sellers and managers to support open territories, but those individuals are likely at full capacity with their current work. Managers, in particular, are likely to be well over-capacity as they add hiring activities to their already full plate.
- Onboarding sellers – i.e., sellers who have been hired but are still learning how to execute in their new organization. Gartner’s research shows that the time to onboard sellers has been steadily growing. Interestingly, the most common response to the time to full seller productivity was 7-12 months.
These hidden and opportunistic costs are difficult to monetize in dollars as it varies by an individual’s performance, role and business model. Instead, it may be easier to approximate the costs in terms of months – let’s call it Turnover-Related Risk in Seller Productivity Months. To calculate this metric, consider:
- The average turnover
- The estimated productivity lost due to disengaged sellers
- The number of months it takes to backfill
- The onboarding of sellers
Calculation Illustration: Turnover-Related Risk in Seller Productivity Months
For this calculation, let’s assume 100 sellers and a turnover of 18% (which is somewhat typical, but admittedly varies by role and industry). Here are other assumptions:
- Pre-turnover distraction = 2 months per seller
- Pre-turnover productivity loss = 25%
- Time-to-backfill = 2 months
- Seller onboarding = 8 months with the following productivity build:
- 0% productive for 3 months
- 50% productive for 3 months
- 75% productive for 2 months
Based on these assumptions, the turnover-related risk in seller productivity months is 7 ½ months per turnover. That’s to say that every seller leaving costs the sales leader 7.5 months of productivity. When compared in the aggregate, 7.5 months across 18% turnover equals 135 months. This is 11% of the total months. Therefore, in this case, the sales leader has an 11% risk due to voluntary turnover. That’s significant.
Sales leaders must not be a victim to this circumstance. Seller turnover is bound to happen but it can be mitigated, especially for strong performers. Most leaders already see this as an immediate risk. No one should be surprised by what’s coming. Sales leaders must not be defensive and reactive. They must turn offensive and proactive. For more information on how to do that, see Attracting and retaining top sales talent.