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Sales: The Hidden Costs of Bad Onboarding

Handshake SilhouetteSales organizations spend significant amounts of time and resources finding and hiring the best talent (for CEB Sales members), and yet often treat the onboarding of new hires as an afterthought. Unfortunately, an ineffective onboarding plan puts these valuable investments at risk, leading to higher drop-out rates and extending the amount of time needed to reach full productivity.

On top of this, evolutionary changes in the role of the salesperson are increasing the complexity of the sales function and altering the skills needed to succeed:

  1. Rise of insight selling: Insight selling requires business acumen and higher level analytical thinking skills that do not come naturally to many new reps.
  2. Growth in internal complexity: Reps have to coordinate with a larger number of internal stakeholders and get input from actors across multiple functions within their own organization as they pursue more complex sales.
  3. Proliferation of products and channels: Most reps today are expected to sell across several product lines and are often involved in more than one go-to-market strategy.
  4. Increase in customer complexity and service expectations: The buying organization is more complex as well, and reps have to deal with diverse decision-makers and influencers to drive a consensus sale.

These four factors have dramatically changed the skill set that new reps need to master. Sales organizations have not only raised the bar on the level of mastery that reps must achieve with certain skills, they have added completely new skills to the mix as well.

Less Time, Higher Cost

The time required to onboard new sales hires has increased 32% in the last 10 years. This means that if you could count on a rep to start paying you back in 9 months, it now takes a full extra quarter for that to happen. This leads to lost or delayed revenue for your organization as the point in time when reps become capable of delivering the numbers expected from them is pushed further away. However, this extended onboarding period has costs beyond mere lost revenue.

Most organizations recognize that the upfront costs of recruiting and onboarding a new hire are high, and take into account recruitment costs, initial training, base salary, and the opportunity costs of an open territory into planning.

However, what most organizations don’t plan for are the incremental costs incurred when some recruits require additional time to reach full productivity, which CEB estimates can be more than $60,000 a month. This would seem acceptable if it were known that you were going to get these sunk costs back down the road. But, for nearly 40% of your new hires, you have no way of knowing whether you’re going to get paid back for spending extra resources on their onboarding, or if they’ll ever reach full productivity or leave before they do.

Beyond the absence of a return on investment from onboarding an individual rep, underperforming reps have a harder-to-quantify effect on the sales organization as a whole. These reps drag down their entire team as their managers and peers spend their own time and energy carrying them along. Furthermore, a rep that alienates customers or misdiagnoses needs and destroys relationships can cause irreparable (or at least very expensive) damage to the credibility of your organization in the eyes of customers.

While new reps are expected to master a larger set of skills in order to be fully productive, the direct and indirect costs associated with underperformance increase the pressure to get reps to full productivity quicker. In this situation, companies simply cannot afford to have an ineffective onboarding plan.

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