Managers hang onto underperformers for too long

Underperforming salespeople can be a drag on companies' finances. They bring in too few sales to justify their place on the payroll, and the easy solution to this problem is to let them go. However, a study by Xactly Corporation and the Massachusetts Institute of Technology found that sales managers tend to hold onto low-performing staff members for too long.

Writing for Selling Power, Xactly's CEO Christopher Cabrera notes that when managers are on the margins of meeting quotas, they tend to keep all salespeople on the books. It is easy to understand why – when every dollar counts, it is better to get even a few sales, rather than a guaranteed zero from firing the lowest performer. The study found that during adverse economic periods, the average employee turnover rate dropped to just 5.6 percent.

Adjusting incentive compensation is the simplest method of correcting this behavior. The study also found that when managers were certain they were going to meet their quotas, turnover rates rose to 22.2 percent. Managers' performance bonuses were not impacted by the loss of subpar salespeople, so it was beneficial to let them go and replace them with more qualified candidates. Similarly, when managers were unable to meet their goals, they quickly replaced poor performers in an attempt to lift their numbers.

While alternative compensation solutions may make it possible to eliminate underperforming personnel, companies should avoid making this the primary determinant of whether staff should be let go. The failure of salespeople to secure transactions could be related to a number of other factors aside from individual performance. For instance, economic conditions and company support play an important role. This makes the sales process an essential factor when evaluating the efficiency of a team.

In an interview with BX Businessweek, U.S. Sales vice president Chris Cowan notes that sales reps need to be more effective at operating on their own. The changing business environment places a premium on individuals who are able to take ownership of their positions and approach their duties in a manner that will increase productivity. It is therefore the responsibility of managers and executives to ensure that employees have the capability to close deals and drive revenue, according to Cowan.

One aspect that will help any sales team bolster efficiency is better sales data. Organizations are increasingly focused on Big Data and the insights gleaned from analyzing customer information, which forces managers to ensure that all salespeople are properly collecting and inputting data. Showing the impact the information has on generating quality leads with comprehensive sales process management could encourage employees to handle the data appropriately.