Sales talent has always been hard to find and keep, but now it’s tougher than ever. Sales reps are the second most in-demand candidates across all job functions globally, according to The Manpower Group. LinkedIn names “Enterprise Account Executive” as its second-most-recruited role in all industries, and in the tech industry, it has even ousted engineers for the #1 spot, with “SDR” at #3.
This sales talent shortage will only get worse in the coming years, as the US labor market tightens and the growing tech industry gobbles up all the great salespeople from traditional industries like manufacturing. However, there are several effective hiring, retention, and succession planning strategies that companies can adopt to withstand the challenging sales staffing climate in 2020.
At our sales recruiting firm, we work with companies searching for salespeople, while evaluating thousands of candidates and what they’re looking for in an employer. We’ve seen that sales positions are remaining vacant for longer while the cost of sales talent continues to rise; companies are lowering the experience bar to boost their headcount, only to struggle with churn a few months later. We also see competitors poach sales talent from one another, which increases the cost of each hire.
But before discussing the protective measures companies can take, let’s examine the broader issues that are making 2020 a candidate’s market.
The tightest labor market Alan Greenspan has ever seen
Salespeople may be some of the most difficult people to hire right now, but it’s no cakewalk to hire for most positions.
For context, the US unemployment rate officially hit a 50-year low of 3.5% in September 2019, and at the end of 2018, the unemployment rate for white-collar workers—those with a bachelor’s degree or above—
stood at 2.1%. Former Federal Reserve Chairman Alan Greenspan has noted that this is the tightest labor market he’s ever seen.
Unfortunately, the labor force currently isn’t growing quickly enough to keep up with demand; it is predicted to grow by just 0.4% per year through 2020 and level off in the long term. Compare this to the annual growth of 2.6% seen in the 1970s.
Furthermore, a generation of sales professionals is preparing for retirement. Baby Boomers began retiring in 2011, and for the following 19 years, 10,000 Baby Boomers will retire each day. Companies need to prepare for retirement events in their sales force and key sales leadership roles.
The forecast is even harsher for sales hiring
In this context, sales positions are difficult to fill. But to understand the full challenge that employers face, it’s also important to note that retention in sales is difficult as well.
In 2018, the average tenure of an SDR at a B2B company was just 1.5 years, which is half of what it was in 2010, according to a Bridge Group study of 434 B2B companies. These companies saw a 39% attrition rate among their SDRs. One-third of that turnover was voluntary but two-thirds was involuntary (for example, via termination).
This data suggests that junior B2B sales roles experience significant turmoil and team attrition, possibly due to underperformance, which is expensive for companies to manage and backfill. Additionally, the Bridge Group study found that companies seem to be hiring increasingly inexperienced SDRs—the average required experience was just 1.4 years, a 45% fall since 2010. Companies may be lowering their bar in response to the demands of scaling and the restricted supply of talent, but the study suggests that more churn can result.
Regardless, we’ve noted that sales professionals tend to switch jobs every few years, with salary increase being a top driver. Studies show that:
Compensation in general is an important factor in the recruitment and retention of salespeople. We surveyed over 1,000 sales professionals from across North America and found that 38% of respondents felt that their compensation was below their industry average. Such poor perceptions doesn’t support retention, and when we zeroed in on the top performers—salespeople who met or exceeded their quota in recent quarters—we found that 29% were not satisfied with their current compensation and 54% were dissatisfied with their employer overall. Companies need to address these perceptions if they want to retain their best salespeople.
How to prepare for sales hiring in 2020 and beyond
Luckily, companies can buffer against sales talent shortage with a few strategic shifts in their hiring, retention, and succession planning.
These are particularly important for traditional industries like manufacturing and industrial businesses, which need to make their workplaces appealing for a whole new generation of talent as Baby Boomers retire and tech companies create attractive working environments with high compensation.
Craft strategy around top performers
It may be tempting to quickly staff up a sales force by lowering the bar to entry. But we’ve seen that it’s more lucrative in the long term when companies set their sights on A-players and adapt their recruiting and compensation strategies to the requirements of top performers. Unsurprisingly, for each additional year of a salesperson’s experience, their on-target earnings increase (Bridge Group), and companies that hire less-experienced reps are more likely to see higher turnover.
Recruit passive candidates
To craft a strategy around top performers, companies need to recruit passive candidates—salespeople who aren’t actively job-hunting because they are already busy meeting their quotas. Simply posting a job opening and waiting for candidates to apply is no longer enough, because top performers won’t be the ones engaging. Companies need to assume an active role and go after top talent directly.
Create a candidate pipeline
The best approach for directly seeking top talent is to design and fill a candidate pipeline. This is similar to a customer funnel—prospects are found and nurtured as they move through the funnel, eventually becoming buyers. It’s the same for hiring. Companies must fill a pipeline and give candidates a long runway, because it can take months or years to woo a top performer away from their current job.
The candidate funnel should include an initial sourcing or “prospect identification” stage, then have regular touchpoints of online or in-person communications, to familiarize a candidate with the company, convey the employer brand, and build a trusting relationship over time. Notice again how this is different from the old paradigm of posting a job and waiting for responses. Instead, it takes advance work and planning so that when a position becomes available, good candidates have already been primed.
Improve compensation packages
It is imperative that compensation is slightly above industry standards to successfully attract top-performing candidates. Companies should use compensation studies to benchmark their base salary and OTE (2019 Sales Compensation Report). It’s also about the broader package, such as sales incentives (like bonuses and no-cap commission) and workplace perks. Employer branding is part of the non-monetary benefits and companies should review their online presence to see if it appeals to top performers—does it reflect a positive work environment, a culture of success, and showcase opportunities for long-term career growth?
Consider recruiting from adjacent industries
If a company is experiencing a severe shortage of qualified talent in their own industry, one tactic we successfully use in our recruiting work is to explore similar industries. Companies in unrelated industries may share aspects of their business models. So we have found it is less important that a sales candidate has industry-specific experience, and much more important that they have the specific skills and aptitudes needed to succeed in a certain function. These skills tend to generalize, and they are more valuable than if a hire were to enter a new job with a Rolodex of contacts from the same industry.
Make use of recruitment process outsourcing (RPO)
If a company is struggling with a talent shortage, they can transfer their sales recruiting efforts to RPOs. This is different than hiring traditional recruiters, because RPOs specifically take ownership of the design of the entire recruiting process, tracking metrics and taking responsibility for the results. These services can include unique candidate sourcing methodologies, such as sourcing through social media, and introducing quantitative applicant screening through aptitude tests. This can assist companies when they begin to search for sales talent in adjacent industries, because good RPOs will have a birds-eye view of candidates in many firms and verticals.
Gear up more training for an existing sales force
We see many companies that are overdue on providing sales training. Such training should be ongoing as a company grows and adapts to new challenges. We also see opportunities to introduce leadership training programs, coaching, and mentorship. Investing in an existing sales force not only uplevels their skills, it also helps with retention by demonstrating the potential for career growth with their current employer—reducing the need to move jobs for that growth.
Make a rigorous sales succession plan
Companies need to consider their sales leadership as well. Are they ready to fill executive positions quickly after a retirement or other succession event? Many of the companies we work with have an inadequate plan and plenty don’t have one at all. Succession plans are most effective when they are formal. They should use frameworks to evaluate current employees for their management potential, then provide adequate training, development, and mentorship when a transition takes place.
A critical part of a succession plan is the tracking of key metrics, such as:
- The number of executive-level sales positions that will need to be filled by succession candidates
- The number of candidates identified for succession
- The number of candidates being actively developed for succession
- The number of executive-level positions that have been successfully filled
- The percentage of positions that were filled with internal promotions over external candidates
- The percentage of promotions that came from the high-potential succession pool
Monitoring these metrics helps companies understand the scope of their succession needs and recognize whether they are prepared.
Looking ahead to 2020
In 2020, North American companies will likely experience a talent shortage, simply due to economic growth and a slowing supply of labor. But it will be all the more difficult if those companies require sales talent.
Experienced salespeople are in high demand, and the best candidates are not typically looking for new jobs.
This is why businesses must revisit their sales hiring strategies and ask whether they fit the 2020 hiring paradigm: companies now need to go after top talent directly, instead of waiting for applicants to come to them. They need to nurture passive candidates over months or even years, building trust in their employer brand, as well as offering competitive compensation and demonstrating opportunities for career growth.
They must also empower their current sales staff. Are they investing in training, development, and competitive compensation? Do they have a formal succession plan in place to backfill sales leadership? These retention activities are just as important as hiring strategies, because if companies want to fuel their growth with sales in the next decade, they need to hang on to every salesperson they’ve got.
Latest posts by Ryan Moore (see all)
- COVID-19 Sales Force Impact Study - April 17, 2020
- The State of Sales Staffing in 2020: Hiring, Training, and Retention - January 22, 2020
- Sales PIPs (Performance Improvement Plan) for Underperformers - August 2, 2019