Part 1 of the piLYTIX Sports series “Challenging Conventional Wisdom”
“You don’t lose money when you add new sales reps.”
“Any additional funding needs to go to sales headcount.”
“We know that when we hire a new sales class, we achieve a 1.5x return on our investment in the first year. It’s pretty easy math.”
These are just a few of the quotes that we regularly hear when we talk to sales leaders in professional and collegiate sports. These quotes are indicative of the mindset that dominates professional and collegiate sports and has driven many organizations to hire larger and larger sales teams. Sports leaders know that some reps will overachieve and others will underachieve, but if they hire a large enough army of new reps, the law of averages will ensure a reliably healthy return on the whole group.
The implied premise with the strategy of hiring such large sales teams is that the additional bodies on the sales floor enable the organization to call on a larger pool of prospects. The sales floor is flooded with prospects that it wouldn’t have been able to effectively target. Consequently, the organization ultimately closes sales from the pool that otherwise would have never even been called upon.
That’s the concept; it’s a quantity play – pure and simple.
However, there are consequences that cascade from this quantity-driven hiring strategy. The consequences are never expected, rarely understood, but always wickedly expensive:
Quality dilution to the prospect pools and pipelines
The quantity-driven strategy requires the organization to flood the sales team with longer lead lists of lesser-qualified prospects. Unless an organization only feeds the worst prospects to a new crop of hires until the next class is hired (not advisable!), the overall quality of each rep’s pipeline is diluted. The abundance of garbage leads is shared among the entire sales team. Further, good opps that would have been given to tenured, proven reps are shared with newbies – some of whom aren’t yet ready for prime time. The diluted prospect pool leads to…
Lower Win Rate
Win rates typically decrease as sales headcount exceeds the optimal number of reps for a given sales organization. This might not be an intended impact of an aggressive hiring plan, but it isn’t an accident. It’s basic math:
WIN RATE = WINS / TOTAL PIPELINE OPPORTUNITIES
The over-hired sales organization increases the denominator by adding lots of bad prospects to the opportunity pipeline. If wins also increased, we wouldn’t see the drop in the win rate. But…
Fewer wins and lower revenue
Wins tend not to increase. By introducing scores of underqualified leads into reps’ pipeline, some level of focus is naturally diverted away from the best prospects. Reduced focus on the best deals causes many deals that should have won to lose in disappointing fashion as the hottest prospects tend to cool off the fastest.
In addition to losses incurred by distracted tenured reps, new reps tend to be the worst closers in any organization – and they now have lots of opportunities in their pipelines.
In the simplest possible terms, teams are losing easy sales for the sake of hiring expensive resources to pursue a higher quantity of low-quality leads.
All reps – tenured and new – need to work harder to achieve the same results that that could have been achieved with a smaller, higher-quality lead list.
Working harder to produce reduced output naturally leads to decreased job satisfaction. This problem isn’t confined to sports or sales; this is a universal H.R. challenge. Decreased job satisfaction is a leading cause of employee turnover – and sales employees in sports turn over at a pace rarely seen in other industries.
This becomes a vicious, non-stop and expensive cycle of hiring, training, and replacing reps. This cycle produces less than maximum sales volume with unjustifiably high expenses.
So how can teams break the cycle?
The most forward-thinking leaders question the conventional wisdom of hiring excessively large teams. They reject the notion that sports sales organizations naturally require a constantly revolving door that hurries in fresh faces as it shoots out barely tenured reps – worn down from the grind of losing more deals than they need to as their pipelines are constantly diluted by new hires. These leaders recognize that rule-of-thumb equations – like the 1.5x return on new sales hires – come with lots of costs that weren’t previously included in the calculus. Even still, they are recognizing that a 1.5x return looks a lot less appealing compared to investments that sustainably yield a much higher return.
These leaders are prioritizing quality over quantity in all aspects of their sales organizations:
Fewer, but higher-quality reps, pursuing fewer but higher quality prospects.
They are seeing fantastic returns that can be achieved from leveraging their data to empower their smaller teams. They are using their sales and marketing data to understand the difference between ordinary leads and quality leads. Likewise, they are unlocking hidden insights to empower sales managers and reps to unlock hidden insights in their pipeline opportunities so that they can apply focus when and where it is needed. The net result: higher sales, lower sales costs.