The POISON Known as “Commission”… and The Cure! Part 1
The POISON known as “commission”.. and the cure!!
We have all been part of this story for many decades. The manipulation of salespeople under the guise of commission. Well, its time is past, AND there are much better answers for everyone involved.
Let’s look at some data that should open up your thinking if you will let it!
A few data points to set the stage:
The Bridge Report across 350 B2B firms with a median revenue of $24M shows the following data.
- In today’s world, in B2B sales teams, the average turnover rate per year in the US is 34.7% (nearly 35% of the salespeople leave the company each year!)
- Involuntary turnover is 2/3 of that (22.9%)
- Missing quota is 2/3 of that (15.1%)
- Within 2 years 50% of the sales team turns over.
- The entire sales and management team turns over every 3 years.
- One in ten companies have a turn over rate above 50%.
- The BEST companies have a VOLUNTARY turnover of 19%.
- The payment industry has a turnover rate of 40%.
This is just crazy! And we wonder why. Well, I will get there, but let’s look at some more data. This time around let’s look at how long your sales folks hang around your companies. (per www data resources)
- Average tenure for salespeople and managers is 15-22 months.
- 27% are gone in the first 12 months
- Sales tenure at the 10 biggest tech companies
- Facebook: 2.02 yrs
- Google: 1.9 yrs
- Oracle: 1.89 yrs
- Apple: 1.85 yrs
- Amazon: 1.84 yrs
- Twitter: 1.83 yrs
- Microsoft: 181 yrs
- Airbnb: 1.64 yrs
- Snap Inc: 1.62 yrs
- Uber: 1.23 yrs
The average time for a salesperson to ramp to productivity is 5.3 months, in complex sales environments, it is 10 months. And sales cycles often exceed 6 months.
So while there is a struggle to well educate the sales team, and it takes 10 months to bring them up “to speed”, on average we only get about 8 months of “productivity” from them and they are gone. And over a 3 year period, you have had to retrain your entire sales and management team completely. It’s actually worse than that in the real world, as this is not a fenced-in activity that starts and finishes, but rather this turnover is always and you must be onboarding and baseline training your team ALWAYS, without a break if you are hoping to at least survive. To thrive you need longevity in the team… it’s CRITICAL!.
So why do you lose your entire team in 3 years? Don’t buy that data… then check yourself, as you should. I know for certain that the local large team of an electronics network equipment provides lost its entire team inside of that 3 years. That same company had (pre-Covid-19) more than 10,000 salespeople. Do the math and the cost of that turnover rate, recruiting, hiring, onboarding, and training is HUGE!
AND it is not necessary, it’s just sadly accepted as normal.
Why? Why is it ok for this terrible outcome to be accepted as normal?
Because it is accepted by almost everyone in the corporate chain from the top down that “salespeople are coin-operated”!
And that is absolutely NOT true. More on what IS true later.
A benchmark study by SeriusDecisions on the reasons that salespeople left the company that they were working for (turnover) shows the 3 top reasons.
- Deficient compensation systems (too complex, biased, and unfair)
- Lack of connection with the leadership, or incompetence of the leadership.
- Concerns for the company’s ability to meet the market needs.
Other specific reasons are:
- Unpredictable compensation changes
- Products that have little market demand and differentiation
- Toxic sales culture
- Unrealistic quota assignment regardless of market conditions (oh yeah, how are you dealing with this in pandemic mode?)
- Inadequate coaching and training
- Poor valuation, appreciation, and reward system
WOW that all hurts doesn’t it!
Sadly there is a phrase that we use regularly that describes this… Every system is perfectly designed to deliver the results that it gets!.
So your system is causing this turnover and retention problem. That sucks!
Here I love to quote my good friend Dave Brock… “Talent will be the single most important issue facing sales execs in the coming 5-10 years. We HAVE to invest in acquiring the right talent, investing in their development, and retaining them.”
So if we want to change the outcomes we must change the system.
To keep this blog from rambling on any more than I have I will publish “the rest of the story” in the next two blog posts. One will cover the nature of the manipulative system that we have created over the years, and the second I will share with you the CURE that you have to neutralize the POISON known as commission.