Reducing Sales Turnover

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 8×10 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.”

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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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11 Comments on “Reducing Sales Turnover

  1. Dr. Wendell,

    I agree with the fundamentals of your article but do not understand where you got those figures on mental abilities assessments and personality/behavioral assessments. Our personality tool has been proven to predict as much as 52% of the performance variance associated with a given position. By the way, this local validation study was conducted on the Financial Services Sales Manager position. It all depends on the tool under use and how important the construct the assessment measures is to being successful in the position. I do not think mental abilities assessments predict 60 – 70% in every sales role. Also, the use of such a tool for selection purposes with a stringent cut scores can be risky because of the protection offered by the ADA and ADEA. The same goes for using a value or motivation assessment. Who is to say that being motivated to serve is not as good as being motivated by money? Are someone’s values/motivations a BFOQ?

    Best regards,
    Nicole

  2. Job performance can be thought of as a two-sided coin: 1) the abilities to do the job (e.g., hard skills) and 2) the willingness to use these abilities (e.g., motivations). That is, a skilled, yet unmotivated person only does what is necessary to get by; whereas a highly motivated dufus can become a train wreck.

    Motivation scores tend to have lower correlations with performance than mental ability tools because they are easy to fake-good, are based on self-opinions, and do not measure actual abilities.

    An occasional high correlation with a motivational test is usually due to either small sample-size or a job where ‘ability’ is less important than ‘willingness’. For example, the only situation where I can conceivably imagine a motivational validation study would have a correlation of .70, would be a job were everything else was held constant (i.e., a dufus-free zone). Otherwise, that would be a study worthy of the Guinnes Book of Records!

    I agree that every test should be job-appropriate and its scores validated for the position. As far as the EEOC is concerned, my experience has been all they usually want to know is that selection tools are based on job requirements and job necessity, validated and, have minimal adverse impact on protected groups.

  3. I spent 10 years as a top sales performer……

    I am presently self employed as a recruiter..

    I have a passion for the sales profession….However, I was totally uninpressed with the bureaucratic corporate nonsense that takes place at some of these corporations that demotive top sales professionals who in some cases….are paid by commission.

    That being said your article does not talk about why top performers…like me leave the profession…its very simple….we do not want to take financial responsiblity when in fact….other employees do not support our potential clients…..whend deals fall through due to lack of corporate support or incompentence….the sales person suffers financially and yes…….gets fired……….

    It was an exciting experience but a very confrontation experience…..dealing constantly with corporations who fiddle with our pay packages…….making it difficult for us to make a decent 6 figure living……………

    You can come up with various tools to weed out poor performers……….but the greed of the corporate management team will drive out the top sales performers who will seek lucrative employement elsewhere….

    A sales professional is the most difficult job anyone can master. If these high priced multimillion presidents feel they can do my job dealing with difficult corporate clients….they are welcome to it……

  4. This is an interesting comment. Having just joined the biggest online job board company in Asia Pac, taking up a sales role has certainly posed its challenges. Your thoughts have given me some points to ponder, and potential loopholes to look out for.

    In a sales-driven company, the level of bureaucracy plays an important role. The more flexibility you give to your sales staff to deliver the service they promised their customers, the better.

    Having said that, of course the question whether a sales person can be overloaded with actually delivering the sold service will arise. But at times when corporate units could not get their act together, the sales person, being the main person in the transaction, should have the flexibility to take matters in their own hand.

    My two cents worth being a newbie in sales profession.

  5. Sorry Josie…I thought my article covered the dangers of choosing bad managers. Bad managers can undo the positive effort of even the best employees.

  6. Dr.Wendell
    You used the word minimal and EEOC — that concerned me a bit here.. Last time I heard the EEO consider that one doesn’t have to have intent to discriminate, just the appearance, it is best to avoid ANY procedures that could suggest a possibility of contributing to an Adverse Imapct

    Quoted ‘Although mental ability tests are valid predictors of performance in many jobs, use of such tests to make employment decisions often results in adverse impact. For example, research suggests that mental abilities tests adversely impact some racial minority groups and, if speed is also a component of the test, older workers may be adversely impacted. Similarly, use of physical ability tests often results in adverse impact against women and older persons –

    not to mention these tests may cause adverse impact against individuals w/attention Deficit and other medical protected classes..

    If one should decide to use Mental Ability Tests
    Check http://www.hr-guide.com/data/G363.htm for examples on how to minimize adverse impact in your assessment program..

    Also the DOL has a great guide to testing that can be found here http://www.onetcenter.org/dl_files/empTestAsse.pdf — Note – The Guide is designed to provide accurate and important information regarding testing as part of a
    personnel assessment program. It gives general guidelines and must not be viewed as legal advice.

  7. I am not aware of any law that forces organizations to hire un-qualified people.

    When a company fails the 4/5 adverse impact test, they should be able to show documentation that their test methods are based on job requirements and business necessity; and, they are pursuing equally effective tests that have less impact.

    This is the reason why a professionally conducted (and documented) job analysis is suggested. And, why formal validation studies are necessary.

    Interviews, personality types, motivation tests, application forms, and so forth, are all ‘tests’ and subject to the same requirements.

    This is one case where the government’s guidelines and best business practices are the same thing.

  8. Dr. Arnold,
    thanks so much for your response. Actually, my comments were for the not so aware that there are indeed Mental tests that can create such an adverse impact that they would be considered having an disparate impact right out of the door..

    For example the MMPI – which have been put to the test in our Courts.. and they have ruled that the test is not often the best test to use for employment purposes due to ADA and other factors

    Now, there is a rumor going around that MMPI-2 can be used, if certain guidelines are followed. I would love to hear more about that..

    Anyways, I think Dr.Wendell’s answer to mine was right on the money.. In applying a test it really is a grand idea to make sure you have professionals create, prepare and administer the test; and a professional job analysis has been conducted.

    I also read somewhere that there should be a conditional letter of employment before administering a test.. is that indeed true?

  9. Hi:
    Just because a hiring tool ‘may’ have a disparate impact on the basis of protected subgroup status, doesn’t mean its use in the hiring process should be precluded. If that were the case, employers couldn’t use such commonly used criteria which typically exhibit adverse impact (e.g., criminal background checks, various forms of experience, education requirements, certification requirements, credit reports, physical requirements, visual acuity, intelligence tests) to evaluate job applicants. And yes, depending on the type of questions, even interviews could exhibit disparate impact. Under state and federal civil rights statutes, a balancing of interests is conducted to ascertain whether use of a hiring tool is lawful. Specifically, when a hiring tool exhibits disparate impact, then it can only be used if it is job-related and consistent with business necessity.

    With respect to disability issues, here again various hiring tools (not only intelligence tests) have the potential of impacting job applicants on the basis of their protected disability. Thus, hiring tools need to be job-related and consistent with business necessity, and employers need to invite applicants to seek reasonable accommodation in the hiring process.

    I trust this information is helpful.

  10. Hi:

    Just to clarify, my comments were simply to reinforce that it is not only mental ability tests, which would be considered to have disparate impact right out the door. Also, I certainly agree that Dr. Williams’ comment was on point and that it was equally applicable to other forms of hiring tools (e.g., interviews).

    As for the MMPI, which is a clinical tool to assess emotional stability, its use has been challenged from the perspective of disparate impact, invasion of privacy and the Americans with Disabilities Act (‘ADA’). And just like any other hiring tool, courts have recognized it is often not the best tool depending on the job. Specifically, the MMPI has generally not been found to exhibit disparate impact on the basis of Title VII subgroup protections, it is recognized that the MMPI should only be administered when screening for safety-sensitive positions and the MMPI should be only administered after a conditional offer of employment has been tendered–under the ADA medical examinations can only be administered after a conditional offer of employment has been tendered. Additionally, since the MMPI is designed to identify and screen applicants on the basis of psychologically-based disabilities, under the ADA it needs to be used for jobs where it is job-related and consistent with business necessity.

    As for the MMPI-1 and MMPI-2, the latter was created to get rid of some items that were overly invasive or antiquated in the older version. Notwithstanding, the MMPI-2 still contains very invasive items which should be posed only to individuals applying for safety-sensitive positions. In reality, there is not much of a legal distinction between the two instruments.

    As for the conditional offer of employment, that requirement applies to all hiring tools that are medical in nature (blood pressure tests, physical examinations, interviews that ask questions about disabilities, clinical psychological tests). While each hiring tool and its use should be individually evaluated, generally most pre-employment tests are not considered medical in nature. As a result, according to the Equal Employment Opportunity Commission (‘EEOC’) and relevant case law, they need to be administered prior to a conditional offer of employment being tendered.

    I trust these further comments are helpful.

  11. Dr Arnold,
    thanks so much for your response. Grateful for your time and your information —

    There is something I would appreciate if you would also discuss some other issues as well regarding testing ie

    A – Make sure that screening programs do not discriminate, are consistent with business necessity and are job related, non discriminatory, and can be modified to accommodate people with disabilities ?
    B- Rehabilitation Act ? Protects Former Addicts and Drug and Alcohol dependent employees whose dependency does not interfere with job performance or threaten security — ***Federal and State Constitutions also require the Removal of Identifie4d drug users from classified information, national security, health and safety or which require a high degree of trust

    Many don’t realize also that a simple thing as accomodation can be costly as in a recent situation where allowing a visually impaired individual the opportunity of being able to hear the test would have not cost the company 8 million dollars..

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