The Power of Employee Retention—Impact on Your Bottom Line
In July we told the story about the Chief Financial Officer who thought he could save a bunch of money by firing all of his costly experienced sales reps and replacing them with rookies. As the result of his prescription for “success,” Wilkening & Company developed its Sales-Experience Curve that describes the quantitative benefits to all stakeholders of experience and tenure in the sales force—or in other like-skilled employee groups. (See our July E-Notes)
As I noted in July, the Sales-Experience Curve is a powerful way to analyze and look at intuitive day-to-day business decisions regarding your sales force. To help put relative numbers on this decision-making process, Wilkening & Company built a comprehensive financial model for sales-force value creation. It captures the effectiveness, profit contribution and costs associated with five years in the life of field sales representatives—from the time of hiring until their fifth anniversary on the job. Think of the sales rep starting at the bottom of the curve (at date of hire) and progressing upward along the curve until year five.
Our analysis indicates that the value to the company of a sales rep who progresses up the experience curve for 5 years will be roughly $159,000 on the date of hire. The company will break even on its investment in that sales rep in 16 months. This represents 5-years of sales activity and an average rate of progression. Clearly, their value increases as time goes on.
While that is an interesting conclusion in itself, comparing those findings to alternative rates of sales-rep progression over time is really compelling. For example—
- A sales rep who progresses more rapidly up the experience curve and reaches premium levels quicker (120% of average) is worth $228,000 on the date of hire and the company breaks even in 12 months.
- A sales rep that progresses less rapidly up the experience curve and reaches premium levels more slowly (80% of average) is worth $116,000 on the date of hire and the company breaks even in 21 months.
- A sales rep who progresses much less rapidly up the experience curve and never reaches premium levels (60% of average) is worth $60,000 on the date of hire and the company breaks even in 32 months.
What does this say to the sales-force decision maker?
- It pays to invest in tools to assure that a sales rep will improve their sales effectiveness as quickly and completely as possible. These tools can be sales-skills training, CRM technology and the like.
- A bad-hiring decision is the gift that keeps on “taking.”
- The company has the ability (and available cash) to pay good performers much more than their poor-performing cousins.
- It pays to keep an eye on new reps to assure that they are not wandering around in the field and consequently not moving up their experience curve—as expected. This could be worth six figures over 5 years!
What else do you read in the data?
Lesson: Make the Sales-Experience Curve part of your sales manager’s lexicon. Teach the concept, reinforce its value and run the numbers.
Wilkening & Company would be glad to adapt its sales-effectiveness value-creation model to your company. Please call or write if you would like to chat about it.