- High turnover rate of salespeople
Turnover rate is the measure of the rate at which a company gains or loses its employees. It is a phenomenon that no companies would wish to have. A high turnover rate signifies that the company is having lesser employees as compared to other companies in the same industry. Having high turnover rate has its advantages and disadvantages. The advantage is that with less manpower, the company will be able to handle its human resources more efficiently. But disadvantages are that they will have lesser employees to handle the company’s customers. Recently, the company has had a high turnover rate of salespersons. And with lesser salespeople, the company would not be able to make as much revenue as last time.
Turnover rates can be classified into internal and external, voluntary and involuntary. But whatever the classes, having high turnover rate is harmful to the company’s productivity. When the company’s skilled workers are the ones leaving, it would mean that the company would be left with a higher percentage of novice workers. Novice workers’ productivity, under normal circumstances, could not be compared to that of those skilled employees. When we say in terms of salespeople, the novice ones would not know how to better handle the customers, and productivity falls. The fall of the salespeople’s productivity often leads to worse consumer outcomes.
- Morale
Morale is a feeling or state of mind, a mental or emotional attitude that centers about one’s work. In a source by Nicole Fink (of Roberts Wesleyan College), the author found out a company’s employee morale is the key factor that drives an organization; it can drive the organization forward, or it could also create discontentment among employees. A company with employees with low morale has a direct effect on a company. With a low morale among the sales team, a company would make far lesser than it normally would because of the unwillingness to work. And there could be potential problems that the salespeople will face.
Not addressing to the problem of the salespeople’s low morale can have a serious impact on the company. According to sources from CCH Unscheduled Absence Survey found by Nicole Fink, it states that an average United States company make loses of more than $760,000 per year in terms of just payroll costs. It would cost more when we take into consideration low productivity and effects of poor working morale.
Based on the statistics we’ve seen and from the sources found, we can safely deduce that employees’ low morale will not do any company any good. Fixing the problem of the company’s salespeople’s low morale is important. It not only will prevent such unwanted losses, but also increase the sales and in turn, revenue for the company.
- Potential problems
One logical assumption of a series of potential problems due to low morale among the salespeople the loss in the sales they will make. Low morale is linked to lower work productivity, as mentioned above. Lower productivity would mean lesser sales for the salespeople as their productivity level drops. This is not good for both the company and the individuals involved.
This will lead to another problem: customer dissatisfaction. Customers normally feel more attached to the one salesperson that they can relate to, instead of revolving contacts with different salespeople. That is probably one of the reasons why the company’s customers are feeling disgruntled. The most probable reason being that they feel more attached to the one salesperson of the company.
Another possibility is losing faith in the leadership. When sales run low and morale dropping, the salespeople might start to doubt whether the management is leading them in the right direction. They will start to lose faith in the higher management, in turn lose faith in the company. When a company’s employees lose faith in the company, they will be more unwilling to work for it.
- Action Plans
5.1 Solution 1
To deal with the first problem of potential decreasing sales made by the salespeople, there are a number of ways to resolve the situations. Some of the ways are through team restructuring and through training.
One way is to train the salespeople. Training not only will help improve each individual salesperson’s skills, it will also make them more productive. Morale will rise because when a company sends its employees for trainings, it is a way of telling these employees that they are valuable to the company. That way, they will be more willing to work for the company. And training is the other way around if there is no mentors to guide the novice salespeople along the way.
One effective way is the 8 steps of The Selling Process. Knowing about the Selling Process would make a sale more pleasant and efficient for both the customers and salespeople from the start to the end. The 8 steps start from “prospecting”, which let the salespeople know how to identify potential customers. Then is “pre-approach” and “approach”, where the salespeople know more about and get attention. After “approach”, they’ll have to do “needs identification” where the salespeople find out about the needs of the customers. “Presentation” and “handling objections” are part and parcel of sales. Training in these areas will help improve them. Then “closing the sale” and “follow-up” is where the salespeople confirms customers’ buying decisions and ensure that they have a good experience with the company’s products.
Knowing and improving on The Selling Process will definitely make sales better and with the power of word-of-mouth, sales will increase in due time. With the process, the customers would have a better sales experience with the sales people and would not be discomforted. With lesser unhappy customers, the salespeople’s morale would rise, and they can better serve the customers.
5.2 Solution 2
Besides training, another method is to break down the group of salespeople into smaller groups and have them target at the different groups of customers. With the decrease in the number of salespeople, the company has to manage them more appropriately. Instead of all having the whole team of salespeople concentrating on maintaining relationships with the current group of customers, which will cause the customers to be disgruntled, the company can break down the salespeople into different groups. The company can split them into 3 groups: the inside salespeople, the field representatives, and the account managers.
The group inside salespeople is in charge of selling the company’s products at its own facilities. It can be done through the telephone or through walk-in customers. The second group is the group of field representatives. They represent the company to go out into the streets to make sales. They are positioned at strategic locations where the customers are. The last group is the group of people who will be the account managers. They are the group who has the responsibility of gaining sales from specific accounts. A company has both individual customers and big company clienteles. The previous two groups, the inside salespeople and the field representatives, mainly deal with individual customers who make small purchases. The company cannot ignore the big clienteles as well. This group of account managers will be targeting at companies who will make bulk purchases from them.
With the company’s team of salespeople divided up, they will be able to reach out to more customers. Productivity can be increased in this way, and sales will increase. Furthermore, the customers would not be disgruntled due to the revolving contacts by different salespeople from the company.
- Compensation plans
Compensation plans are incentives that are offered to the employees other than the basic salary or wages. This may include insurance, leaves, retirement programs, and other employee benefits. Compensation plans are one of the things that draw potential employees to work in the company. Different companies have different compensation plans. Different plans attract different groups of employees because the wants and needs of people are different.
A company’s compensation plans must be attractive enough to not just retain, but to also attract, potential employees. More attractive compensation plans from other companies could be one of the reasons to the high turnover rate in the number of salespeople in the company. Because every company offers different compensation plans, and different people have different needs, it could be that these salespeople are attracted by other companies’ compensation plans and therefore decided to go for it. More salespeople leaving the company resulted in the higher turnover rate.
But companies have to plan properly when changing compensation plans. The company has to make a sales compensation plan that works for the company and within the ability of the company, not according to what the industry norm is. The company has to take into consideration its profitability and what motivates the sales people.
One direct way to decrease the climbing turnover rate would be to reform the company’s compensation plans. As mentioned, one reason the salespeople are leaving could be due to more attractive compensation plans elsewhere. It would mean the company’s plans are probably not enough to retain them. Changing the plans would be the most direct way of retaining the employees.
The company can target at changes to the company’s compensation plans. Because compensation plans include a number of benefits like leaves and incentives, the company would have more than just the basic salary of the salespeople to make changes to.
- Compensation plans reforms
7.1 Incentive pay
One of the highly effective ways is to offer incentive pay. Incentive pay is a kind of reward that is given to the salespeople who can achieve results beyond what is set by the company. This kind of reward is normally given to achievers in the short term, like a monthly reward. This would encourage the salespeople to work harder to achieve the goals set by the company. The more attractive the pay, the harder the salespeople would work for it.
If incentive pay is not a suitable method, offering bonuses would be another choice. It is similiar to the incentive pay, but bonuses are given out at a longer period of time as compared to incentive pay, like quarterly or annually. With the longer time period n between, it would mean the company would probably have to offer a better bonus as compared to the incentive pay.
7.2 Holiday trip incentives
Another way innovative way is through unique rewards system. As the name says, the incentive has to be unique. One special way is offer reward trips. The company could put up holiday trips as incentive reward. Holiday trips is not cheap for the company, so it could only be offered to a very small percentage of the sales people. The one with the best performance would normally get it.
From sources found, there are live examples of some companies that offer all-expenses-paid trip to holiday destinations to the top performers and they even get interact with top level executives of the company. This proves to be quite a good way of incentive reward because not only do they get to go on a chance to go on a holiday, they also get to earn recognition from the top executives.
Unique incentive system might not be as expensive as this. Special does not always mean expensive. The company could ask the salespeople to come up with their own ideas of incentives. This way, not only would the salespeople get what they want, the company will also be able to get to know their employees’ needs and wants.
- Conclusion
The sales industry is a very important part of the economy. It is what makes the world economy grow and improve. This fact makes the sales of all the companies very important because it is where all the companies earn their revenue from. The sales industry is ever-growing. Based on statistics found, just the United States economy alone, it had a significant increase of 218% in terms of retail sales in less than a fifth of a century. From there, we can deduce the industry is going strong through the years,
The company’s sales team is considered the frontline of the company. They are the people who connect the company’s customers with the company; they are the company’s representatives who do sales with the customers; they are the ones who make revenue for the company.
But with a high turnover rate of salespeople, it is not a good sign for the company. High turnover rate means they have lesser salespeople. Causes are usually employees’ low morale and environment, and many other reasons. It would lead to lower productivity, and eventually fall in the company’s revenue. Employees’ morale, being one of the main causes, is the driving force of the company. It is a very important factor that the company must look into. Not taking care of it could lead cause the company to unneeded loss.
Low morale is linked to lower productivity, and lower productivity and lower sales, which proves to be a potential problem for the salespeople. Not just that; lower sales would tend to tempt the salespeople into unethical doings, like stealing and misinterpretation.
There are ways to solve the problems; through training and regrouping. Through training, the salespeople will have to grasp the 8 Steps of the Selling Process. These 8 steps would make a sales experience better for both the salespeople and the customers. And through regrouping into inside salespeople, field representatives, and account managers, the company’s team of sales people can better reach out to the customers, both current and potential ones.
But the best direct method to resolve the problem would be to try to lower the high turnover rate of salespeople in the company. Making changes to the company’s compensation plans for its salespeople is the most direct way of lowering the turnover rate.
The company can offer incentive pay or bonuses, or both, to help motivate the salespeople. Another type of incentive is to reward holiday trips. This method also proves to be quite successful from the live example.
All in all, the issue of dealing with the employees’ low morale is very important for all companies out there. It cannot be ignored; there are heavy costs to pay if the company were to ignore the potentially disastrous problem. There are different methods to deal with low morale in different industries. In the sales industry, this would be one of the ways on how to deal with the problem.
9. References- The High Cost of Low Morale -
http://www.roberts.edu/Academics/AcademicDivisions/BusinessManagement/msl/Community/Journal/TheHighCostofLowMorale.htm
- US Census Buereau -
http://www.census.gov/
- US Annual Retail Trade Report -
http://www2.census.gov/retail/releases/current/arts/sales.pdf
- Compensation planning -
http://blogs.payscale.com/compensation/compensation-planning/
- Sales compensation -
http://www.8020salesperformance.com/sales_compensation.html
- Employee Turnover -
http://www.referenceforbusiness.com/encyclopedia/Eco-Ent/Employee-Turnover.html