Sales Force Turnover Carries High Price

June 20, 2001 ( ? According to a new survey, the average turnover rate for sales positions is up to 18% from 14% in 2000. Worse, that turnover does not come cheap, with the average replacement cost per salesperson running slightly more than $60,000.

The Hewitt Associates study titled “Hot Topics in Sales Management and Sales Compensation”, surveyed 224 large employers on sales force issues.

Big Issues

When asked to name the biggest management issues to be faced in the next three years, issues relating to recruiting and retaining a dynamic sales force topped this list, in fact:

  • almost three quarters of the poll cited retaining high-performing salespeople
  • while 64% of survey participants noted the importance of recruiting key talent, and
  • only 47% said that their current turnover rates were at acceptable level, compared to the 57% in last years survey.

Quota System

On questions regarding compensation, over three-quarters of survey participants reported having a quota-based component in their sales incentive plans, which nine out of 10 believe are effective.

While 56% of those surveyed adjust their quotas during the year due to changes in customer base, cited by 39%, or changes in the business cycle which impact the company or its customers, noted by 33%, in setting quotas:

  • almost 70% use territory potential,
  • some 65% make use of sales management projections, down from 80% in the 2000 survey and
  • three out of five refer to historical data, compared with 71% last year

Keeping Options Open

Research from Hewitt also shows that at 13% of companies surveyed, eligibility for stock option grants varies between the sales team other staff members. Of the 44% of company sales employees eligible for stock option grants:

  • More than nine out of 10 are sales managers,
  • Some 67% are national/key account managers, and
  • Only 40% are sales representatives.