Key talent attrition stands at 12.3 percent in 2016 in India. A significant increase from the 7.3 percent recorded in 2015. Organizations always pay a significant cost when replacing an employee. According to a research by Society for Human Resource Management, the cost of finding and training a replacement of an employee can range between six and nine months of her salary. The Center for America Progress is more liberal in its prediction – it suggests the cost of attrition of an employee in a highly trained position is 213 percent of her salary. Ask a business owner, and he will tell you that he would not like that highly trained person to be a salesperson. The impact of losing salespeople is felt rather directly to the business – it leads to an impact on the topline, the wheel has to be reinvented to build rapport with the salesperson’s clients, and some clients end up going away to the organization the sales rep joins. All of this is highly undesirable for any business.
A recent academic research – 'Why Do Salespeople Quit? An Empirical Examination of Own and Peer Effects on Salesperson Turnover Behavior' does an empirical examination of the reasons (both self-inflicted and the ones caused by the environment) behind turnover of people in sales. The authors, Sarang Sunder, V. Kumar, Ashley Goreczny, and Todd Maurer, say that this research has 'implications for sales force management' because it helps manager:
- identify a salesperson’s turnover risk
- diagnose the drivers of turnover behavior, and
- build strategies to prevent salesperson turnover.
Not all attrition is bad
In this article, we underscore the key findings of the research.
Let’s separately look at own and peer effect on salespeople behavior.
In this category, the researchers measured the past performance of each sales person by calculating the revenue they generated, their frequency of achieving monthly targets, and customer satisfaction numbers.
The researchers had hypothesized that high performers (in terms of revenue generation and client satisfaction) would be least likely to leave the organization, and that proved to be true. A combination of factors such as a better incentive pay, a feeling of security and a sense of control over their outcomes increased their chances of staying when compared to mid and low performing employees. But for the performance metric of quota attainment, the research found out that low performing employees are also likely to stay (akin to high performers). It is the mid performers who are at a risk of leaving the organization.
Not all attrition is bad; sometimes losing out on low performers (who have been invested in enough, trained enough, and given enough chances to right the ship) is good for a business; but losing out on mid-performers is detrimental. It is the mid performers who, when invested in and entrusted upon, migrate to the category of high performers.
The peer effects are what create the maximum ripples in the turnover in a sales team, the researchers found out. According to the research, people are less motivated and incentivized to work in environments where there are little or no variations in performance. In such cases, people leave looking for challenging roles in other places. This then has a negative effect on the sales team, as it creates insecurity among those who are left behind. The research suggests that peer effects in turnover can be contagious.
Peer effects in turnover can be contagious.
This calls for the organization – especially line managers and HR professionals to pay careful attention to peer effects. Managers must always be on a lookout of signs that employees are leaving, and HR can assist in documenting and telling the managers the signs of pre-quitting employees.
Another research, 'If You’ve Got Leavin’ on Your Mind: The Identification and Validation of Pre-Quitting Behaviors' by Timothy M. Gardner, Chad H. Van Iddekinge and Peter W. Hom lists 13 such signs which may be of significant help to managers.
13 Reasons Why… employees quit
- Their work productivity has decreased more than usual.
- They have acted less like a team player than usual.
- They have been doing the minimum amount of work more frequently than usual.
- They have been less interested in pleasing their manager than usual.
- They have been less willing to commit to long-term timelines than usual.
- They have exhibited a negative change in attitude.
- They have exhibited less effort and work motivation than usual.
- They have exhibited less focus on job-related matters than usual.
- They have expressed dissatisfaction with their current job more frequently than usual.
- They have expressed dissatisfaction with their supervisor more frequently than usual.
- They have left early from work more frequently than usual.
- They have lost enthusiasm for the mission of the organization.
- They have shown less interest in working with customers than usual.
Organizations need to use a combination of human gut and technology to predetermine the sales people who are about to leave and make honest efforts to minimize the peer effects and retain them; only then will they be able to save the immense cost to the business and minimise the subsequent ripple peer effects on the ones who stay in the organization.