Reducing Sales Turnover

by Williams, Dr. Wendell Monday, October 15, 2007
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Much of my career has been spent managing, training, and hiring salespeople. In almost every organization, it seems that well-meaning sales managers hinder the hiring process, salespeople actively resist training, and high turnover is the norm.

Nowhere have I seen this trend more exaggerated than in financial services. The sales turnover numbers in this industry stagger the imagination. What is even more amazing is that managers I know in the financial services business tend to accept it as routine.

The financial sales problem is, in part, caused by field sales managers. In spite of a consistently abysmal hiring record, they remain blindly convinced of their ability to pick good salespeople and by the sales environment itself: intense cold-calling coupled with plentiful personal rejection.

To understand why this happens, we need to carefully examine the root causes of poor sales performance, which include basic sales-management skills and the onboarding process.

Basic Sales-Management Skills

Recruiting activities often start with a hiring manager who earned his or her position by being one of the most successful producers in the office. As a reward for success, senior management decided it made perfectly good sense to pluck a good salesperson from the field and plant them in an office where they would have limited contact with customers.

Flush with excitement, new sales managers often adopt the same clever performance-management strategy they were taught:

  1. Coach applicants to fake company tests designed to weed-out weak sales candidates

  2. Order new employees to ignore home-office sales training

  3. Coach new salespeople to imitate them
This strategy works so well in financial services that about 50% of the salespeople turn over their first year, 30% the second year, 20% the third year, and 10% thereafter! What world-class golf team would ask aspiring athletes to fake tryouts, ignore professional coaching advice, and imitate Tiger Woods? Sure, that would work.

The solution is to change selection criteria. Time after time, experience shows top salespeople, the usual future management pool, often operate on automatic pilot. They are either highly intuitive people who are sales naturals, or they consciously cut corners to make the numbers.

Unable to break apart the complex nature of selling, when these folks become managers they default to the "watch what I do" coaching style. Frustration can ensue when someone wants to be imitated but cannot explain how, why, or when.

Clarity and effective coaching go hand in hand. The best sales coaches are always fully competent salespeople, but they are seldom the highest producers on the team.

Eliminate the "top-seller" requirement; instead, evaluate the candidate's ability to analyze sales behavior, identify critical elements, determine individual strengths, evaluate weaknesses, and implement effective development programs.

The alternative is to make "sales manager" an honorary title and stop expecting folks to teach cows to sky dive.

The Onboarding Process

We've looked at typical sales-management requirements, so now let's analyze the typical sales selection process in which the applicant meets the manager.

They learn they have a lot in common: upscale friends, associates, and contacts; social and outgoing personalities; ambitious financial goals; similar sports or college backgrounds. Plus, the applicant can sell one heck of an ashtray.

To top it all off, the manager has studied the applicant's 8x10 glossy photograph of past earnings statements. It's love at first sight! Besides, historically unable to successfully clone himself, the manager needs more bodies to make quota.

Corporate (the ultimate party-poopers) now steps into the mix. By this time, the manager is totally committed to hiring the applicant, forgetful of past hiring mistakes.

Corporate, on the other hand, is tired of spending money on lost-cause salespeople and wants to reduce hiring failures. They require all field sales candidates to successfully complete "qualification" tests. The insurance industry, for example, often uses tests developed by their trade association (e.g., LIMRA, LOMA, and so forth). But local managers don't like to be second-guessed and often invest considerable time coaching applicants how to pass.

The solution is to change the system. When people attempt to change the course of a river, they forget Mother Nature spent a long time finding just the right path. So why try to convince sales managers to change?

As mentioned earlier, most sales managers have proven themselves at selling. These skills are entirely different from hiring and coaching.

Why not have corporate do all the screening and only forward fully qualified candidates to local sales managers for "chemistry" checks? If corporate did all the front-end work using a well-designed multi-trait, multi-method screening system, they could be sure each sales candidate could demonstrate:

  1. An ability to learn, analyze, and solve prospect problems

  2. An ability to plan and organize time and territory

  3. A persuasiveness and sales ability

  4. The attitudes, interests, and motivations associated with success
That could be a giant leap toward sales success, as long as corporate followed best hiring practices using bare-knuckle honesty. Recruiting ads would not sugarcoat the position. Applicants quickly see through weasel-words.

If the job requires selling, say it. Misrepresenting the job is like a person at a singles bar who promises "happily ever after," when he really means "neurotic seeks parent-figure to endure undisclosed insecurities."

Realistic job previews are another key piece of the honesty mix. A 10- to 15-second video or audio clip of prospects voicing common objections are very effective ways to scare away the faint of heart.

Note: job previews are not the same as ride-alongs or listen-ins. Live experiences are too uncontrolled (and sometimes manipulative). The content of job previews should include carefully controlled situations experienced by salespeople: the good, the bad, and the ugly.

The objective of honesty and full disclosure in the application process is to give applicants the opportunity to opt out. Honesty reduces early turnover.

If the applicant pursues the job, the organization can shift its focus into a combination of courting and evaluating. Courting encourages the candidate to continue the application process. Evaluating ensures that the applicant has the necessary mental horsepower, organization skills, interpersonal skills, and motivations to be successful. We won't go into courting in this article, but evaluating requires several different tools.

Mental ability and organization skills are usually evaluated by administering pencil-and-paper tests. These are quick and highly accurate, but they have to be used with caution. The content should relate directly to job requirements and scores should be backed by studies that show they predict job performance. Mental ability tests usually predict 60% to 70% of job performance.

Predicting interpersonal skills requires simulations. Research studies that show written personality/behavior tests only explain about 4% of performance ratings. A simulation consists of a tightly controlled critical piece of the sales job: building trust and discovering problems. Simulations are not role-plays or training events. Passing a simulation involves more than "selling pencils" to sales managers. They are carefully crafted tests. Like mental ability tests, they can also predict 60% to 70% of job performance.

The final step includes evaluating candidates' attitudes, interests, and motivations. Research shows there are only about 10 personality factors related to job fit and job performance. Tests that only evaluate the "big five" personality traits are usually too simple, and tests that measure 16 or 23 personality traits are often too general. A good motivation test is hard to fake and only includes factors that predict job performance not style or trait.

We have now evaluated some root causes associated with poor sales performance in financial services. Ready to quit? Too much work? Applicants are not going through all that just to get a job here? Really? How's the 50%/30%/20% working? Either screen applicants in the application stage or screen them on the job. Those are the only two options.

What about applicants who failed the application phase, but might have succeeded on the job? A good test evaluates job skills. If an applicant can't demonstrate basic job skills, then it's up to management to decide how much risk they want to take with people who fail.

There Must Be Some Shortcuts?

Hiring decisions are always based on probabilities, which improve with the amount of information available to make a decision.

Organizations can develop smart application forms that are computer-scored to predict performance. The organization collects past data on each current and terminated employee and uses sophisticated computer modeling techniques to develop turnover-probability profiles.

Job previews expose the candidate to critical elements of the job. Previews give applicants an up-close-and-personal experience of the job, a golden opportunity for marginal applicants to turn back before it is too late.

Line managers who are expected to coach subordinates should be selected for their ability to coach. Don't clutter their time with hiring activities.

Move the recruiting/screening function to corporate and make it a full-time activity. Never stop sourcing, screening, and placing, even if it means stockpiling sales talent before it's needed. Stockpiling a few applicants would be considerably less expensive than turnover. Besides, effective sales recruiting always drives sales, and sales drive production.

However, I want to emphasize that corporate's job would be considerably different from today. They would become a quality shop and not a quantity shop. Sourcing applicants would only be a small part of their job. Their main task would be screening, testing, and qualifying using best practices and legally credible hiring tools. Their objective would be to become so thorough that local sales managers would only have to do chemistry checks.

If corporate did its job well, I would not be surprised to see at least a 25% decrease in turnover and a 25% increase in productivity across the board. The science and tools are already here. What's next?

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This article originally appeared on ERE.net:
http://www.ere.net/articles/db/3C36B84F2DB042EAB942621A13321683.asp
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