With millennials making up 75% of the workforce by 2025, it’s time for organizations to rethink how they are preparing them for success.
In my previous life, I had the privilege of being an analyst for research and advisory firm, SiriusDecisions, for six years. Over the last few years of my time there, the number one topic my seat-holders wanted advice on was sales onboarding. Today in my new role as chief readiness officer at Brainshark, onboarding continues to be a top-of-mind issue.
It’s understandable. Getting new hires productive faster is a huge need for many organizations. But there looms another problem, “the curse of the sophomore and junior year reps.” This is one of the most critical times in the lifecycle of a salesperson; it’s when they decide if they can make it or not – or whether it’s time to start looking for greener pastures.
Most sales enablement leaders lack a real strategy to deal with this. Yet retaining reps in those critical sophomore and junior years has a huge impact on the ability for a company to hit its current numbers, and, more importantly, future growth targets. Sales enablement leaders have to put as much emphasis on retention as they do on onboarding. Here, we will explore the concept of “lifetime value,” look at why sophomore and junior reps leave, and strategies to prevent that.
Lifetime value and the productivity chasm
Look at the voluntary turnover rates across your sales organization and see where they are highest in reps’ tenures. If turnover rates reach their peak during reps’ second and third years on the job, you probably are suffering from the “sophomore/junior year curse.” We’ve all seen stats on the cost of turnover – the amount invested in hiring and training, lost when a rep bails early in their sales career. Now let’s add to this cost the impact of “lifetime value.”
Lifetime value is the loss of the future revenue that the rep would have produced if they had stayed. In many organizations, reps do not hit their true “full productivity run-rate” (the revenue they should produce per year in the future as a fully functional rep) until after years two or three. They are competent and confident with the solutions they are selling, they understand how to better sell against the competition, they become better at pursuing winnable deals, and they are running a productive pipeline. But just as they are reaching that run rate, they leave.
Let’s imagine that a fully productive, fully ramped rep has a run-rate of $1MM per year after three full years in their territory. In year one, typical production is $250K, year two it’s $500K, year three it’s $750MM, year four it’s $1MM, and so on. Now let’s say that a new hire rep (we will call him/her Rep One) hits their first- year target of $250K. Now let’s assume that in year two, this rep leaves half-way through the year after having produced just $300K of revenue. For a period, revenue production stops. The company now has two problems on its hands; it has lost the potential future revenue that rep could have produced, and now must start all over again with a new rep. A new rep is now hired (Rep Two), and the revenue-cycle begins again, with Rep Two producing $250K in their first year, $500K, etc. Let’s take a look at the loss of life-time value over five years:
What Could Have Been Produced Had Rep One Stayed (Lifetime Value Over Five Years):
Year 1 $250K, Year 2 $500K, Year 3 $750K, Year 4 $1mm, Year 5 $1mm
Total Revenue/Lifetime Value = $3.5 MM
Actual Production with Rep One and Rep Two in Same Time Period:
Year 1 $250K, Year 2 $300K (Rep One leaves), Year 3 (Rep Two Starts) $250K, Year 4 $500K, Year 5 $750K
Total Revenue/Actual = $2.05MM
Loss Lifetime Value = $3.5MM - $2.05MM = $1.45MM
Now imagine that Rep Two also ends up leaving in their second year! You can quickly see how this problem can compound itself. Getting reps through those critical sophomore and junior years – what we call “crossing the productivity chasm” must be a focus not only of the sales enablement team – but the entire sales team. So let’s take a look at some of the reasons sophomore and junior reps leave, and some ways to avoid that.
Move from reactive to proactive learning
In a recent SiriusDecisions study of high-performing sales people, 36% reported that a lack of a learning paths as their key reason for leaving a company. For many sales organizations, it seems that after the initial onboarding, the “formal” learning ends and reps are only met with the occasional “informal” training around product launches, pricing changes and other updates.
Many sales enablement leaders I’ve worked with would argue that they have built continuous learning paths, but reps, focused on selling (as they should be), don’t take advantage of them (learning is important but not urgent for those Covey fans out there). What sales enablement leaders need to do (with the support of the CSO) is move from a reactive learning approach (where reps participate on their own) to a “proactive” learning approach, where reps are engaged to learn automatically, and continuous learning is expected and measured.
Based on where a rep is against the required competencies, learning is continuously pushed to them, ideally in micro-learning (3-4 minute) sessions, and via the devices and systems they use every day, such as mobile devices or the CRM. There should also be the expectation that there will be regular assessments to ensure reps are mastering the competencies along the way. This proactive approach can only work if leaders and managers are committed to it and foster an environment of improvement. Without that support, reps will likely be allowed to ignore the learning, and you will find yourself back in reactive mode.
A culture of coaching
There has been so much written already about the topic of getting managers to coach more and better, so I won’t take up too much space discussing it.
The fact remains, coaching continues to be a significant problem in most organizations, and the lack of it contributes greatly to the sophomore/junior curse. If this is a problem in your organization, either finally resolve to fix it and create a coaching culture, or live with the consequences of not having one.
One piece of advice (I could not resist): some companies are actually looking to solve this by creating dedicated coaching positions, specifically to focus on reps in early tenure, rather than trying to turn managers into coaches. They are justifying the costs of these coaches by using rep lifetime value, increased rep productivity, and the cost savings from reduced rep turnover.
Peer-to-peer learning: connective intelligence
It can be lonely out there in the field. Especially if your reps are working from remote offices, and they only get together with the entire sales team at the annual kickoff. Establishing a peer-to-peer program to connect these newer reps with their peers is essential. There’s nothing like learning from the best, and it gives your new hires the ability to do just that. It also gives them the opportunity to join the discussion, sharing their key learnings as they ramp (always good to get fresh perspectives) and ask specific questions of reps that have been there and done that. Lastly, it gives them the chance to stay to connected with their “classmates,” the folks that were part of their new hire class, sharing successes (and failures), stories and advice.
Quota setting: let’s get real
Here’s the scenario: Salesperson A has been with the company for 11 months and Salesperson B has been with the company 21 months. It’s a new fiscal year and both get the exact same quota – and it’s the full run-rate quota that all reps have. This is probably not an atypical scenario – after all, we need to distribute quota based on what the plan is. But the reality is, many companies set up both reps for failure by over-assigning quota and giving them a number that will be difficult to reach. The results are predictable. Even if the reps are producing the historical run-rate, they will get discouraged halfway through the year, realizing they will not hit their number nor make the money they were expecting. As a result, they will check out and spend more time looking on LinkedIn looking for prospective employers instead of prospective buyers. Sales and sales ops should be looking at all factors, including historical data of rep production by tenure, to set realistic quotas for early tenure salespeople.
New hire recognition
We all love to be recognized – and salespeople are no different. Look for ways to provide recognition to your early tenure reps, who often are overshadowed by their more senior peers (e.g. the salesperson of the year is rarely a first-year rep). I’m not advocating a “everyone gets a trophy” approach, but some real meaningful recognition, such as Rookie of the Year, Sophomore of the Year, Energizer Bunny (opening the greatest number of new accounts), First Million Club, and so on.
Provide a career path
Another key reason reps leave organizations early is a lack of a career path. Often times, it’s not long after they start that they begin to wonder “what’s next?” and if there is not a clear path, they start to think “where else?” as in where else do I need to go in order to move up the ladder. Early on in their tenure, provide them early with a pathway for growth and career advancement. Tap those who have manager potential (and have demonstrated a high-level of competency and productivity) and use them as mentors for the new reps coming in under them. Offer a clear learning and assessment path that reps can follow to “up-skill” for other sales positions, such as moving from a territory rep to a strategic account manager.
Sales enablement leaders are always looking for ways to demonstrate their value to their sales leaders and executives. Focusing on and improving the retention rate of your sophomore and junior reps is a great way to demonstrate that value. In other words, turn that “curse” into a “blessing.”
For more tips on how to retain your sales reps, check out our eBook: The Blueprint for Better Sales Onboarding.