From the PILYTIX Series “Challenging Conventional Wisdom”: Do more sales reps mean more sales?
“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.”
We regularly hear these quotes when talking with sales leaders in professional and collegiate sports. They are indicative of the dominant mindset in professional and collegiate sports that drives many organizations to hire larger sales teams. Sports leaders know that some reps will overachieve and others will underachieve. So, they hire a large army of new reps, hoping the law of averages will ensure a reliably healthy return on the whole group.
The implied premise of increasing the sales staff is that the additional bodies on the sales floor enable the organization to call on a larger pool of prospects. The idea is this strategy floods the sales floor with prospects it wouldn’t have effectively targeted with fewer staff. So, the thinking is more reps calling on more prospects will result in more closed sales.
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.
Diluted quality of 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…
A “more sales reps mean more sales” strategy can result in lower win rates
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…wins tend not to increase.
A “more sales reps mean more sales” strategy can divert rep focus
Introducing scores of underqualified leads into reps’ pipeline diverts some level of focus away from the best prospects. These “hot prospects” tend to cool off the fastest. Any diversion that reduces focus from the best deals often results in a disappointing loss of deals that should have won.
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.
When teams pursue a higher quantity of low-quality leads, they lose easy sales for the sake of hiring expensive resources.
A “more sales reps mean more sales” strategy can result in high turnover
Without a smaller, higher-quality lead list, all reps – tenured and new – must work harder to achieve the same results.
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 leads to 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. These leaders reject the notion that sports sales organizations must hurry in fresh faces as it shoots out barely tenured reps. They understand that pipelines constantly diluted by new hires wears down more tenured reps from the grind of losing more deals than they should. Furthermore, progressive sales leaders recognize that rule-of-thumb equations – like the 1.5x return on new sales hires – come with lots of costs not 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. They realized that fewer, higher-quality reps, are able to pursue fewer but higher quality prospects.
As such, leaders see fantastic returns 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. Moreover, unlocking hidden insights in pipeline opportunities is empowering for sales managers and reps as they apply focus when and where needed. The net result: higher sales, lower sales costs.