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SUMMER 2008, VOLUME 28, NUMBER 3

This Journal of Personal Sellingand Sales Management articlereprint is made available to membersof the Sales Management Associationby special arrangement with JPSSMand the Pi Sigma Epsilon NationalEducational Foundation.

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Article

The Concept of Salesperson Replacement Value: A Sales Force Turnover Management ToolRené Y. Darmon

Salesperson Burnout: A Test of the Coping-Mediational Model of Social SupportJeffrey E. Lewin and Jeffrey K. Sager

The Infl uence of Job Security on Field Sales Manager Satisfaction: Exploring Frontline TensionsCharles H. Noble

Buyers’ Trust of the Salesperson: An Item-Level Meta-AnalysisJohn Andy Wood, James S. Boles, Wesley Johnston, and Danny Bellenger

RESEARCH NOTES

The Effect of Self-Effi cacy on Salesperson Work Overloadand Pay SatisfactionJay Prakash Mulki, Felicia G. Lassk, and Fernando Jaramillo

Role Ambiguity, Role Confl ict, and Performance: Empirical Evidence of an Inverted-U RelationshipVincent Onyemah

Special Abstract Section: 2008 National Conference in Sales Management

Journal of Personal Selling & Sales Management, vol. XXVIII, no. 3 (summer 2008), pp. 211–232.© 2008 PSE National Educational Foundation. All rights reserved.

ISSN 0885-3134 / 2008 $9.50 + 0.00. DOI 10.2753/PSS0885-3134280301

Sales force turnover is pervasive and affects most sales orga-nizations. Frequently, companies cannot retain more than 50 percent of new salespeople for more than a couple of years (Futrell and Parasuraman 1984; Richardson 1999). A sales executive poll reveals that over 50 percent of them experienced turnover rates of over 15 percent (Keenan 1993). Average sales force turnover rates have been estimated at 27 percent, more than twice the national work force average (Richardson 1999). In spite of the current shifts toward customer orientation and team selling, sales force turnover rates remain high in many industries and companies (Blausfuss, Murray, and Schollars 1992; Creery 1986; Taylor 1993). For instance, voluntary turnover reaches over 15 percent among specialty pharmaceu-tical product salespeople (Davenport and Fisher 2006) and runs as high as 61 percent at new car dealerships (Joetan and Kleiner 2004) and specialty product retailers (Sloan 2005).

In addition, although they can hardly be precisely estimated (Mobley 1982), turnover costs are extremely high. Researchers have identified and estimated the high direct costs of turnover in nonsales (Cawsey and Wedley 1979; Flamholtz 1974; Mirvis and Lawler 1977; Tuggle 1978) and sales organizations (Darmon 1990; Richardson 1999). A chemical product firm saved $10 million in direct costs since 1989 by bringing its 15 percent sales staff turnover rate down to less than 7 percent per year (Kiesche 1997). Similar high cost estimates have been

reported over the years (Learning International 1989; “Survey of Selling Costs” 1987; Weitz 1979; Williamson 1983).

In fact, most managerial decisions have a direct or indirect effect on sales force turnover. To a large extent, turnover reflects sales management’s efficiency (Brashear, Manolis, and Brooks 2005). Because of its strategic importance, the sales force turn-over issue should be addressed long before salespeople decide to quit. In practice, however, it is seldom systematically dealt with. For instance, sales managers often do not know how to reduce turnover and consider it a problem with no solution in sight (Futrell and Parasuraman 1984). Even when they are willing to tackle the problem, few managers have developed precise policies and well-established programs. Most often they lack relevant data about sales force attrition (Williamson 1983). A survey has revealed that more than half the respond-ing sales managers thought that turnover rates were the same as five years before and would remain constant in the future. In fact, the rates had tripled in those five years (Coleman 1989; Learning International 1989). Few organizations know the characteristics of leaving salespeople or the causes of sales force attrition.

This paper argues that a strict and systematic analysis of sales force turnover can provide managers with precise guide-lines for actions and lead to more effective sales management. Many sales force turnover indicators could supplement more traditional managerial performance measures such as sales volume, profits, or market shares. For that purpose, this paper proposes a general framework for effective management of sales force turnover. As already advocated in the sales force literature, salespersons are heterogeneous in their propensity to quit and replacement costs. Consequently, turnover should be controlled at the homogeneous sales force segment level (Darmon 1990). To that effect, the proposed procedure defines the concept of a salesperson’s replacement value (SRV) as a sales force segmentation criterion. SRV is defined as the net stream of costs or gains that a firm would incur for replacing any given salesperson, should this salesperson quit the sales

The ConCepT of SaleSperSon replaCemenT Value: a SaleS forCe TurnoVer managemenT Tool

rené Y. Darmon

In most industries, sales force turnover is high and very costly to an organization. This paper argues that sales force turnover reflects the quality of sales management performance and that a systematic analysis of sales force turnover can provide clear guidance to increased sales management’s practices and effectiveness. For that purpose, a simple and flexible five-step procedure relying on the concept of a salesperson’s “replacement value” is proposed. It requires only some systematic data collection from leavers at the exit interview time. A case study illustrates the procedure.

rené Y. Darmon (Ph.D., The Wharton School, University of Pennsylvania), Emeritus Professor, ESSEC Business School, France, [email protected], and Affiliate Professor, Faculté des Sciences de l’Administration, Laval University, Quebec, Canada, rene-yves [email protected].

The author thanks Professor Benny Rigaux-Bricmont, Laval Uni-versity, for his comments on an earlier draft of this paper, as well as the JPSSM editor and three anonymous reviewers for their insightful comments and suggestions.

212 Journal of Personal Selling & Sales Management

force. Then, operational implications are drawn from turnover analysis for every segment.

a general ConCepTual framework of SaleS forCe TurnoVer

Sales force turnover is defined as the rate at which salespeople leave an organization because of separations such as promo-tions, resignations, retirements, or dismissals (Cron and De-Carlo 2006). Salespeople may leave the sales force voluntarily because they find better job opportunities elsewhere, either as salespersons or in other capacity when they decide to make a career change. They may be dismissed, typically because of poor performance or because a firm downsizes its sales force. They may also leave an active selling job because of promotion to managerial positions within or outside the sales force or for unavoidable reasons such as death, illness, or retirement. Because all departures from a sales force are potential sources of costs, this extended definition of sales force turnover is used in this study.

Sales management’s actions have direct or indirect effects on turnover. Direct effects result, for instance, from a firm’s firing policies and practices. In addition, a firm’s policies have at least three indirect effects on sales force turnover: (1) new salesperson recruiting and selecting policies affect the quality and performance of the sales force, as well as the speed at which salespersons are replaced; (2) the same policies have an impact on the sales force turnover rate through the characteristics of the newly recruited salespersons; and (3) the promotion, initial training, and retraining policies, support, supervision, com-pensation, and territory assignment all have an impact on sales force turnover through their effects on salespersons’ satisfac-tion or dissatisfaction (SS/D). As a result, sales force turnover reflects past or current managerial policies and practices and, to a large extent, sales managers’ performance. As a result, like in any other parts of an organization (Cascio 2000; 2007), sales managers should develop sales force human resource programs that minimize costs and/or maximize benefits.

Sales managers play the dual roles of developing relation-ships with customers and managing relationships with sales-persons. Although the nature of these relationships is different, the same general approach to relationship management ap-plies. Currently, customer relationships are managed through customer relationship management (CRM) techniques. Cus-tomers being heterogeneous in their potentials, needs, and behaviors, CRM involves segmenting a customer base and treating each segment differently. The rationale comes from segmentation theory: managers maximize profits when they take differentiated actions on homogeneous segments (within markets or the sales force) whenever these segments react differently to external forces or to managerial actions. In the same way, salespersons are heterogeneous in their propensity

to leave, in their abilities, and in their cost consequences when they leave, and a similar approach should apply.

Sales managers use CRM analysis in order to assess the value of individual customers, identify the best ones (segments) to target, and customize the firm’s products and interactions to each customer. A similar approach can be applied to sales force turnover management. Here, the objective is to assess the value of individual salespersons to the firm, identify the most valuable ones to target, and customize the firm’s manage-ment programs to each target segment in order to maximize benefits or reduce costs. The same relationship management logic holds for customers and salespeople: as is often (but not always) the case, it is more costly to attract new customers away from competitors than build loyalty among current customers. In the same way, it is often more costly to replace a departing salesperson than to develop programs for preventing high sales producers from quitting.

In order to design adequate turnover management pro-grams, managers also need to characterize the various seg-ments by sociodemographic, personality, or other relevant characteristics. The literature recognizes that salespersons with different characteristics display their own behaviors on the job, and have different propensities to quit (Russ and McNeilly 1995; Wotruba, Brodie, and Stanworth 2005). Furthermore, salespersons with different profiles do not reach the same performance levels and are not subject to the same promotion opportunities or firing threats. Experienced and longer-tenured salespersons tend to leave the sales force in larger proportions for health reasons or retirement age. Many research studies have investigated the relationships between turnover and salespersons’ socioeconomic characteristics (see, for instance, Flaherty and Pappas 2002; Mangione 1973). Age has often been found to be one of the best predictors of turnover: older salespersons have a lower propensity to quit than their younger counterparts (Munchinsky and Morrow 1980; Munchinsky and Tuttle 1979; Porter and Steers 1973; Price 1977). Male salespersons may be more likely to quit than their female counterparts (Ladik et al. 2002). Although other personal characteristics have often been included, none has been found to be strongly linked to sales force turnover.

Because the proposed approach relies on the costs or ben-efits incurred by a firm when a salesperson quits the sales force, these costs/benefits are identified in the following section.

SaleS forCe TurnoVer CoSTS/BenefiTS

Turnover involves high direct and opportunity costs, often hidden or felt in the long run, and difficult to estimate. These costs/benefits are heterogeneous (Lucas et al. 1987). They involve direct costs (DC) and opportunity costs or benefit opportunities (OC/BO) that impact the firm’s financial results. Figure 1 shows the different DCs and OC/BOs that a firm

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figure 1 Costs/Benefits associated with Sales force Turnover


incurs when a salesperson quits and leaves a territory vacant (at time t

1) until a new salesperson takes over and is fully

operational (at time t2).

Direct Turnover Costs (DC)

Turnover involves several types of highly visible direct costs. Separation costs include severance pay in the case of firings and separation allowances a salesperson may be entitled to receive. Recruiting and selection costs are incurred for replacing depart-ing salespersons, unless the firm wishes to downsize its sales force. Training costs are incurred for training new salespeople before they can take charge of their territories. These costs also include the time managers and other salespersons spend in the field with new hires for training purpose. Excess person-nel costs are incurred when a new salesperson is hired before the departing salesperson has actually left. In such cases, two salespersons are on the payroll for one single sales territory. These costs include the remuneration and all associated costs of keeping a salesperson before territory assignment. In practice, sales managers have the choice between leaving a territory vacant and experiencing excess sales personnel.

opportunity Costs or Benefit opportunities (oC/Bo)

OC/BOs may result from salespersons’ differential skills. New and departing salespersons may differ in skills and compe-tences, resulting in more or less lasting differential sales (and, consequently, profits). More generally, the two individuals may have different expected career paths/outlooks over their planning horizons.

Differential operating OC/BOs are incurred when the in-coming salesperson requires more (or less) resources than the departing salesperson, especially in terms of salary and other fixed compensation, or need for managerial supervision and time.

Vacant territory OC/BOs include the decreased level of ser-vice in the vacant territory or the time managers must spend in the vacant territory before a replacement is found and trained. They also include some sales losses in the territories of salespersons who are assigned the temporary responsibility for the vacant territory. In practice, these costs are difficult to estimate because they include long-term effects such as loss of goodwill, impaired relationships with customers, and competitive inroads. These costs, however, are incurred only when managers fail to predict and make provisions for the departure of the salesperson. They may, however, become benefit opportunities when the departing salesperson causes more damages than leaving the territory unattended.

Sales territory quality differential OC/BOs result from a leaving salesperson taking away clients remaining loyal to a salesperson rather than to the firm. In such cases, turnover

results in more or less lasting sales territory downgrading, with the associated opportunity costs. Alternatively, it is also possible for newly hired salespersons to bring new customers from previous business relationships, and consequently, to upgrade the territory’s quality. In this case, increased profits may follow.

Social or organizational OC/BOs are even more difficult to quantify. They include disruption of social and commu-nication structures, productivity losses (during replacement, search, and retraining), decreased satisfaction among staying salespersons, and negative public relations from leavers. From the point of view of salespersons who stay, other negative con-sequences include the loss of functionally valued coworkers, increased workload immediately after search for replacement, decreased cohesion, and lower commitment (Mobley 1982). Many of these negative consequences of sales force turnover, however, may become opportunities if the departing sales-person is a low sales producer, not especially appreciated by management and colleagues.

propoSeD proCeDure

The proposed procedure involves the five following steps:

• Step 1. Estimating the replacement value (SRV) of all the present salespersons, in order to define homoge-neous cost/benefit segments and characterizing SRV segments by salespeople’s sociodemographic profiles

• Step 2. Estimating the actual replacement value (costs and benefits) of all the salespeople who have left in the recent past, assigning the leavers to the corresponding SRV segment, and characterizing the leavers in every SRV segment according to

a. the cause of their departure b. their sociodemographic profile.

• Step 3. Estimating every SRV segment turnover rates and analyzing sales force turnover at each segment level in terms of

a. causes of departure b. leavers’ basic characteristics (such as educational

background, stage in the career cycle, personality traits, or other relevant characteristics).

• Step 4. Analyzing leavers’ and present SS/D with vari-ous job dimensions.

• Step 5. Deriving managerial implications for control-ling sales force turnover in every segment through dif-ferentiated programs.

This five-step procedure is briefly described in Figure 2.For illustrative purpose exclusively, the case of a mainte-

nance product sales force of 325 members is used to illustrate

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the method. Salespeople call on retailers and major industrial users of maintenance products. This sales force has experienced an average and almost constant turnover rate of 24.5 percent per year over the past few years. As a result, 239 salespersons left the sales force during the past three years. This company wished to reduce turnover and its associated costs. This firm practices exit interviews of salespeople leaving the sales force voluntarily. Direct supervisors are requested to record such information as the reasons for quitting, which new position the salesperson is moving to or will be looking for, as well as the SS/D with a number of aspects of their last job. Unfortu-nately, these data were not systematically exploited.

Although applied in this specific situation, the proposed method is general and simple enough, applicable to any sales force, and sufficiently flexible to be adapted as specific cir-cumstances require.

Step 1: Segmenting the Sales force according to Salespersons’ “replacement Values”

In the reported application, all of the SRVs have been esti-mated with the formulae provided in the Appendix. Note that these estimation formulae are suggested rather than unique rules. The direct costs (DC) estimates are straightforward and may come from accounting records. The opportunity costs/profits (OC/BO) estimates are hard data, often coupled with managerial judgments, whenever hard data are unavailable. As an example, the parameter estimates used for salespeople that have left the sales force (column 1) and for the current salespersons (column 2) are provided in Table 1. The corre-sponding estimated SRV values are provided in Table 2.

In the reported application, based on their replacement values, salespeople have been classified into functional

figure 2proposed procedure for effective Sales force Turnover management


turnover (FT) (negative DC + OC/BO) and dysfunctional turnover (DT) segments (positive DC + OC/BO). The dis-tinction between functional and dysfunctional turnover is well documented in the human resource and sales management literatures. It relies on whether the departure of salespeople results in a benefit (functional) or a loss (dysfunctional) for the sales organization (Dalton, Todor, and Krachhardt 1982; Johnston and Futrell 1989). Because sales force attrition is heterogeneous and not uniformly costly to a company, some part of sales force turnover is not always bad when it results in more benefits than costs. This is, for instance, the case when a high-caliber salesperson replaces a poor sales producer.

Note that functional/dysfunctional turnover and salespeo-ple’s performance are related concepts. Dysfunctional turnover affects salespeople the company would like to retain because their performance is satisfactory or outstanding. None would argue against reducing dysfunctional turnover. Functional

turnover is beneficial to a firm because it affects salespeople whose performance level is below this firm’s standards. These salespeople have not (yet) been fired because managers believe they will improve eventually or because they are former high performers that managers tolerate as long as their performance remains at “reasonable” levels. Turnover affecting this type of salesperson is beneficial (Williamson 1983). Compared with dysfunctional turnover, functional turnover raises different managerial issues. Why were such salespersons hired in the first place? Why did they turn out to be low sales producers? Reducing sales force turnover may be profitable, for instance, by improving the quality of the recruiting procedure or that of the sales training programs.

In the reported case study, the SRVs of the dysfunctional turnover salespersons exhibited wide variations. Consequently, this segment has been further split into highly (HDT) and moderately (MDT) dysfunctional subsegments according to

Table 1Replacement Values of a Departed Salesperson and a Present Salesperson in Similar Territories

Salesperson k Who Has Left the Sales Force and Present Salesperson i Who Could Potentially Leave the Has Been Replaced by Salesperson l Sales Force and Be Replaced by Salesperson j

Parameter Estimates

TV = 239 salespeople N = 325 salespeopleSCk = $22,000 SCi = $40,000skl = 10 weeks s = 9 weeksR = $200/week R = $200/weekFC = $200 FC = $200tpkl = 9 weeks tp = 10 weeksT = $6,500/week T = $6,500/weekFT = $500 FT = $500gk = 12 weeks g = 12 weeksEkl = $1,000/week Eij = $1,150/weekxk = 8 weeks and qk = 0.05 XQ = 0.4mk = 0.2 mi = 0.2dSko = $33,655 dSio = $17,300hk = 0.08 GH = 0.96vk = 0.20 V = 1.9akl = 12 weeksdSl = $29,500/week A = $7,430/weekul = 0.10ml = 0.18 M = $5,840/weekTR = 0.245 TR = 0.245r(1/TR) = 3.5 years r(1/TR) = 3.5 yearsYk = 14 salespeople Yi = 8 salespeopledSYkb = $25,410/week dSYkb = $20,660/weekdSYka = $22,220/week Gk = $21,405/weekmYk = 0.175 mYi = 0.21Zk = 1 salesperson Zi = 2 salespeopledSZkb = $25,250/week dSZib = $28,400/weekdSZka = $21,210/week GZ = $6,215/weekmZk = 0.16 mZi = 0.19LOCk = $3,520/week LOCi = $2,960/weekLOCl = $3,180/week LOC = $2,815/week

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the mean costs of all the positive replacement values. The results are provided in the first row of Table 3. As can be seen, the present sales force includes 41 (12.6 percent) salespersons in the FT segment, 190 (58.5 percent) in the MDT, and 94 (28.9 percent) in the HTD segments. In this instance, man-agement may wish to reduce the size of the first segment and decrease the probability of quitting in the third segment.

It may be revealing to compare the sociodemographic or personality profiles of salespersons in the three SRV segments. Although age and gender may have limited managerial usage for legal reasons, they have been used in this illustrative ap-plication because they were salespeople’s characteristic data readily available. The results are shown in Table 3. Compared with the highly dysfunctional turnover segment, the functional turnover segment includes a larger proportion of men (70.7

versus 45.7 percent), of salespersons being younger (51.2 versus 10.6 percent), less tenured (68.3 versus 18.1 percent), but more educated (61.0 versus 20.2 percent).

Step 2: identifying the SrV Segments the actual leavers Come from

The analysis focuses now on salespeople who have actually left the sales force in the recent past. The actual replacement values of such leavers are estimated by means of the formulae provided in the Appendix. Every salesperson that has left dur-ing the past three years has been assigned to the various SRV segments specified at Step 1.

The results for the overall sales force are provided in the last two rows of Table 4. Although a curvilinear relationship

Table 2Replacement Values of a Departed Salesperson and a Present Salesperson in Similar Territories

Salesperson k Who Has Left the Sales Force and Present Salesperson i Who Could Potentially Leave the Has Been Replaced by Salesperson l Sales Force and Be Replaced by Salesperson j

Cost and Benefit Estimates

1. Separation costs: SCk = $22,000 1. Separation costs: SCi = $40,000 2. Recruiting and selection costs: 2. Recruiting and selection costs: RCkl = FC + skl R = $2,200 RC = FC + s R = $2,000 3. Training costs: TCkl = FT + tpkl T = $59,000 3. Training costs: TC = FT + tp T = $65,500 4. Excess personnel costs: 4. Excess personnel costs: ECkl = (gk – skl) Ekl = $2,000 ECij = (g – s) Eij = $3,450 Total direct costs: $85,200 Total direct costs: $110,950

5. Opportunity costs of decreased 5. Opportunity costs of decreased efficiency: DEQk = xk qk mk dSko = $2,692 efficiency: DEQi = XQ mi dSio = $2,379 6. Opportunity costs of decreased 6. Opportunity costs of decreased efficiency: DENk = gk hk mk dSko = $6,462 efficiency: DENi = GH mi dSio = $4,801 7. Vacant territory costs VCk = 7. Vacant territory costs VCi = (sk + tpk – gk) vk mk dSko = $9,423 V mi dSio = $8,218 8. Opportunity costs of lower 8. Opportunity costs of lower efficiency LEAl = akl ul ml dSl = $6,372 efficiency LEAj = A = $4,534 9–10. Differential skill and territory 9–10. Differential skill and territory potential costs/gains; DSCkl + TPCkl = potential costs/gains: DSCij + TPCij = 52 [mk dSko – mk dSl] r(1/TR) = $258,622 52 [mi dSio – M] r(1/TR) = ($275,730) Total opportunity costs (revenues): $283,571 Total opportunity costs (revenues): ($255,798)

11. Social or organizational costs 11. Social or organizational costs (or benefits): SOCk = Yk mYk (or benefits): SOCi = Yi (G – (dSYkb – dSYka) (akl + tpkl +skl) = $242,841 SYi mYi dSYia) (a + tp + s) = ($37,548) 12. Impact on adjacent territories: 12. Impact on adjacent territories: VSTk = Zk mzk (dSZkb – dSZka) VSTi = Zi (mZi dSZib – GZ) (skl + tpkl – gk) = $4,525 (s + tp – g) = ($11,466) 13. Differential operating costs/gains: 13. Differential operating costs/gains: DOCkl = 52 [LOCl – LOCk] r(1/TR) = ($61,880) DOCij = 52 [LOC – LOCi] r(1/TR) = ($2,639) Total opportunity costs (expenses): $185,486 Total opportunity costs (expenses) = ($51,653)

“Replacement value” of departed “Replacement Value” of presentsalesperson k, TTCk = $554,257 salesperson i, TTCij = ($196,501)

TTCkl > 0 implies dysfunctional turnover TTCij < 0 implies undesirable salespersons


is not observed in this application, this study supports the proposition that dysfunctional turnover is much more frequent (211 leavers or 88.3 percent) than functional turnover (28 salespersons or 11.7 percent).

Segmental Analysis of Turnover Causes

In the reported case, the breakdown of the past three years’ turnover according to departure causes is given in the last two columns of Table 4. Almost three out of four departures are voluntary and 16.3 percent (dismissals and promotions) are under direct managerial control. Identifying the immediate causes of sales force turnover is useful, but it fails to point to

the parts of turnover that are the most costly and appropriate for immediate managerial actions.

As Table 4 shows, there are few differences in departure causes between the HDT and MDT segments. In contrast, as anticipated, 50 percent of functional turnover is caused by fir-ings. Leaving voluntarily for nonsales positions (likely to reflect decisions to give up a sales career) are relatively more frequent causes of departure in the functional turnover segment.

Segmental Sociodemographic Turnover Analysis

Analyses of leaving salespersons’ characteristics are carried at the aggregate and segmental sales force levels (Table 5). In this

Table 3Analysis of Sales Force Replacement Value Segments According to Salespeople’s Characteristics

Replacement Value Segments

Highly Moderately Dysfunctional Dysfunctional Functional

Salespeople’s Turnover (HDT) Turnover (MDT) Turnover (FT) Total

Characteristics N Percent N Percent N Percent N Percent

Total 94 100.0 190 100.0 41 100.0 325 100.0 (percent) (28.9) (58.5) (12.6) (100.0)Age Less than 30 (A1) 10 10.6 45 23.7 21 51.2 76 23.4 (percent) (13.2) (59.2) (27.6) (100.0) 30–40 (A2) 33 35.1 56 29.5 6 14.6 95 29.2 (percent) (34.7) (59.0) (6.3) (100.0) 40–50 (A3) 27 28.7 64 33.7 5 12.2 96 29.5 (percent) (28.1) (66.7) (5.2) (100.0) Over 50 (A4) 24 25.6 25 13.1 9 22.0 58 17.9 (percent) (41.4) (43.1) (15.5) (100.0)Tenure Less than 1 year (T1) 17 18.1 22 11.6 28 68.3 67 20.6 (percent) (25.4) (32.8) (41.8) (100.0) 1–5 years (T2) 20 21.3 97 51.1 2 4.9 119 36.6 (percent) (16.8) (81.5) (1.7) (100.0) 5–10 years (T3) 15 16.0 30 15.7 4 9.7 49 15.1 (percent) (30.6) (61.2) (8.2) (100.0) 10–20 years (T4) 13 13.8 22 11.6 2 4.9 37 11.4 (percent) (35.1) (59.5) (5.4) (100.0) Over 20 years (T5) 29 30.8 19 10.0 5 12.2 53 16.3 (percent) (54.7) (35.9) (9.4) (100.0)Education High school (E1) 24 25.5 65 34.2 6 14.6 95 29.2 (percent) (25.3) (68.4) (6.3) (100.0) College (E2) 51 54.3 91 47.9 10 24.4 152 46.8 (percent) (33.5) (59.9) (6.6) (100.0) University (E3) 19 20.2 34 17.9 25 61.0 78 24.0 (percent) (24.4) (43.6) (32.0) (100.0)Gender Men (Ma) 43 45.7 121 63.7 29 70.7 193 59.4 (percent) (22.3) (62.7) (15.0) (100.0) Women (Fe) 51 54.3 69 36.3 12 29.3 132 40.6 (percent) (38.6) (52.3) (9.1) (100.0)

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application, for the whole sales force, turnover essentially af-fects younger salespersons before they reach their forties (78.2 percent), with less than five years tenure (57.3 percent), an average education level (56.5 percent), and mostly women (82.0 percent).

This analysis, however, provides only one facet of the picture. It needs to be supplemented by similar analyses at the SRV segment level. Consequently, the leavers from the various segments are characterized by the sociodemographic characteristics that have been used for the whole sales force (i.e., age, tenure on the job, education and gender). The sociodemographic profiles of the leaving salespersons are somewhat different across segments. Table 5 reveals that dysfunctional turnover seriously affects the 30–40 age group (60.1 percent) of men (91.0 percent), with some one to five

years of experience with the firm, and some college education. In contrast, functional turnover mainly affects very young (56.3 percent) women (64.3 percent) during their first year of employment (35.7 percent) at both extremes of the edu-cational spectrum.

The data in Tables 3 and 5 provide a detailed account of various dimensions of turnover. In order to provide a clear vi-sual representation to management, they can be supplemented by a correspondence analysis diagram (Carrol, Green, and Schaffer 1986; Hoffman and Franke 1986). This technique is especially suited to provide a spatial representation of the relative positions (i.e., the strength of relationships) of the columns and rows of contingency tables, like those of Tables 3 and 5. In other words, the technique allows the simultaneous casting of the different stimuli (i.e., the rows and columns of

Table 4Analysis of the Causes of Departure for Every Dysfunctional/Functional Turnover Group

Replacement Value of Leavers

Highly Moderately

Salespeople’s Dysfunctional Dysfunctional Dysfunctional Functional

Causes of Turnover (HDT) Turnover (MDT) Turnover (FT) Total

Departure N Percent N Percent N Percent N Percent

Unavoidable Leaves 12 9.0 8 10.3 3 10.7 23 9.6 (percent) (52.2) (34.8) (13.0) (100.0)Retirements (Ret) 10 7.5 2 2.6 1 3.6 13 5.4 (percent) (76.9) (15.4) (7.7) (100.0)Deaths/Illnesses (D-I) 2 1.5 6 7.7 2 7.1 10 4.2 (percent) (20.0) (60.0) (20.0) (100.0)

Promotions 14 10.5 5 6.4 0 0 19 7.9 (percent) (73.7) (26.3) (0) (100.0)Within Sales Force (Pw) 10 7.5 2 2.6 0 0 12 5.0 (percent) (83.3) (16.7) (0) (100.0)Outside Sales Force (Po) 4 3.0 3 3.8 0 0 7 2.9 (percent) (57.1) (42.9) (0) (100.0)

Dismissals 2 1.5 4 5.1 14 50.0 20 8.4 (percent) (10.0) (20.0) (70.0) (100.0)Low Performance (Dlp) 0 0 4 5.1 14 50.0 18 7.6 (percent) (0) (22.2) (77.8) (100.0)Other Reasons (Do) 2 1.5 0 0 0 0 2 0.8 (percent) (100.0) (0) (0) (100.0)

Voluntary Leaves 105 78.9 61 78.2 11 39.3 177 74.1 (percent) (59.3) (34.5) (6.2) (100.0)For Other Sales Position (Vls) 97 72.9 56 71.8 1 3.6 154 64.5 (percent) (63.0) (36.4) (0.6) (100.0)For Nonsales Positions (Vln) 8 6.0 5 6.4 10 35.7 23 9.6 (percent) (34.8) (21.7) (43.5) (100.0)

Total 133 100.0 78 100.0 28 100.0 239 100.0 (percent) (55.7) (32.6) (11.7) (100.0)


a contingency table) as points into a common reduced space. The closer the points on a diagram, the stronger is the relation-ship between the corresponding stimuli, and conversely. The results are given in Figure 3 and provide a diagram that can be easily visualized and interpreted by management.

This diagram provides the typical profiles of the leaving salespersons corresponding to the three SRV segments (linked as a triangle). HDT salespersons are more likely to leave because of retirement, promotion within the sales force, or for taking a sales position elsewhere. They are typically either younger (30–40) or older (over 50), and they have been with the firm for more than one year. In addition, they are predomi-nantly men with a college education. MDT salespersons also

tend to do so when they have found a new sales position in another organization. They are either younger, less than age 30, or middle-aged (40–50). They frequently leave within their first year with the firm, and are more likely to hold either a secondary or a university degree. Finally, FT salespersons are more frequently women who either have been fired or have resigned voluntarily and shifted to nonsales positions.

Step 3: Turnover analysis of every SrV Segment

In order to supplement this analysis, annual turnover rates for all the sales force subsegments (SRV and sociodemographic subsegments) are estimated (from Tables 4 and 5). They are

Table 5Analysis of Salespeople’s Characteristics for Every Dysfunctional/Functional Turnover Groups

Replacement Value of Leavers


Salespeople’s Turnover (HDT) Turnover (MDT) Turnover (FT) Total

Characteristics N Percent N Percent N Percent N Percent

Total 133 100.0 78 100.0 28 100.0 239 100.0 (percent) (55.7) (32.6) (11.7) (100.0)Age Less than 30 (A1) 28 21.1 29 37.2 15 53.6 72 30.1 (percent) (38.9) (40.3) (20.8) (100.0) 30–40 (A2) 80 60.1 28 35.9 7 25.0 115 48.1 (percent) (69.6) (24.3) (6.1) (100.0) 40–50 (A3) 17 12.8 16 20.5 4 14.3 37 15.5 (percent) (46.0) (43.2) (10.8) (100.0) Over 50 (A4) 8 6.0 5 6.4 2 7.1 15 6.3 (percent) (53.4) (33.3) (13.3) (100.0)Tenure Less than 1 year (T1) 0 0 19 24.4 10 35.7 29 12.1 (percent) (0) (65.5) (34.5) (100.0) 1–5 years (T2) 65 48.9 31 39.7 12 42.9 108 45.2 (percent) (60.2) (28.7) (11.1) (100.0) 5–10 years (T3) 33 24.8 17 21.8 3 10.7 53 22.2 (percent) (62.3) (32.0) (5.7) (100.0) 10–20 years (T4) 25 18.8 7 9.0 3 10.7 35 14.6 (percent) (71.4) (20.0) (8.6) (100.0) Over 20 years (T5) 10 7.5 4 5.1 0 0 14 5.9 (percent) (71.4) (28.6) (0) (100.0)Education High school (E1) 21 15.8 40 51.3 11 39.3 72 30.1 (percent) (29.2) (55.6) (15.2) (100.0) College (E2) 97 72.9 26 33.3 12 42.9 135 56.5 (percent) (71.8) (19.3) (8.9) (100.0) University (E3) 15 11.3 12 15.4 5 17.8 32 13.4 (percent) (46.9) (37.5) (15.6) (100.0)Gender Men (Ma) 121 91.0 65 83.3 10 35.7 196 82.0 (percent) (61.7) (33.2) (5.1) (100.0) Women (Fe) 12 9.0 13 16.7 18 64.3 43 18.0 (percent) (27.9) (30.2) (41.9) (100.0)

Summer 2008 221

provided in Table 6. These results point to subsegments with the highest (and lowest) turnover rates that constitute priorities for managerial actions. These estimates must be qualified by the size of the subsegments (indicated between parentheses in Table 6).

An analysis of this data shows that the average sales force turnover rate of 24.5 percent hides important facts. Turnover is far from being uniform across sales force segments. In the HDT segment (accounting for 55.7 percent of total turnover), the actual turnover rate is 47.2 percent, compared to a low 13.1 percent for the MDT segment, and to 29.2 percent for the FT segment. Even the 47.2 percent turnover rate in the HDT segment is not uniform. It is even higher among younger (93.3 percent) men (93.8 percent) with a college degree (63.4 percent) having spent between one and 20 years in the sales force. In contrast, HDT saleswomen have a very low turnover rate. MDT seems to be more of a problem for salespeople during their first year on the job. Although the relatively small sizes of the subsegments commend caution with their interpretation, functional turnover seems to af-

fect mostly women (50.0 percent), which contrasts with the HDT segment.

Figure 4 provides the correspondence analysis joint space of the characteristics of leavers versus those of the segment they come from. A larger distance between a segment and its corresponding turnover (the arrows in the diagram) signals that leavers tend to have profiles different from those of their original segments, and conversely. The triangle that joins the three turnover profiles is smaller than the triangle joining the three segments. This suggests that the leavers’ profiles tend to be closer among themselves than the typical profiles of the three segments, and conversely. Finally, a major overlap of the two triangles would suggest that leavers tend to share somewhat similar characteristics to those of salespeople who stay, irrespective of their original segment. Figure 4 shows that the two triangles do not overlap and that the turnover triangle encompasses a somewhat smaller space in the diagram. Consequently, leavers tend to share somewhat similar charac-teristics, but different from those of their original segments and from current salespeople’s profiles. Further analysis shows

figure 3 relationships Between replacement Value Segments, Causes of Departure, and

Salespeople’s Sociodemographic Characteristics

Notes: SRV segments profiles: HDT= highly dysfunctional turnover; MDT = moderately dysfunctional turnover; FT = functional turnover. Age groups: A1 = < 30; A2 = 30–40; A3 = 40–50; A4 = > 50. Tenure groups: T1 = < 1 year; T2 = 1–5 years; T3 = 5–10 years; T4 = 10–20 years; T5 = > 20 years. Education: E1 = high school; E2 = college; E3 = university. Gender: M = men; W = women. Causes of departure: Pw = promotion within; Vls = volun-tary leaves (sales); Po = promotion outside; Dpl = dismissals (low performance); Do = dismissals (other); Vln = voluntary leaves (nonsales).


that leavers are younger men (less than 30 years old, with a college education, or with one to 20 years of tenure with the company).

Step 4: Voluntary leavers’ Dissatisfaction analysis

Sales force turnover and morale are often interrelated prob-lems, and salespeople’s job satisfaction is often linked to sales force turnover (Jones et al. 1996; Roberts and Chonko 1996). Dissatisfied salespersons may be less motivated (and, conse-quently, be lower performers). They often express an intention to quit and find a more satisfying position elsewhere. Job

satisfaction has several components. For instance, sales force turnover tends to be negatively related to salespeople’s satisfac-tion with pay, work, supervisors, and promotions. The most important job satisfiers for salespersons are the firm’s policies concerning promotions, dismissals, supervision, compensation (Albers 1981), quota setting, and control procedures.

Many studies have investigated the links between turnover and intrinsic and extrinsic job satisfaction (Lucas et al. 1987). No positive relationship seems to have ever been found. For intrinsic job satisfaction, 25 out of 28 studies report a negative relationship, and only three report a nonsignificant relationship. As for extrinsic job satisfaction, the empirical

Table 6Turnover Rate Analysis of the Different Desirability Segments According to Salespeople’s Characteristics

Replacement Value Segment


Turnover (HDT) Turnover (MDT) Turnover (FT) Total

Salespeople’s Turnover Rate Turnover Rate Turnover Rate Turnover RateCharacteristics (segment size) (segment size) (segment size) (segment size)

Age Less than 30 (A1) 93.3 21.5 23.8 31.6 (10) (45) (21) (76) 30–40 (A2) 13.8 16.7 38.9 40.4 (33) (56) (6) (95) 40–50 (A3) 21.0 8.3 26.7 12.8 (27) (64) (5) (96) Over 50 (A4) 11.1 6.7 7.4 8.6 (24) (25) (9) (58)Tenure Less than 1 year (T1) 0 28.8 11.9 14.4 (17) (22) (28) (67) 1–5 years (T2) 108.3 10.7 200.0 30.3 (20) (97) (2) (119) 5–10 years (T3) 73.3 18.9 25.0 36.1 (15) (30) (4) (49) 10–20 years (T4) 64.1 10.6 50.0 31.5 (13) (22) (2) (37) Over 20 years (T5) 11.5 7.0 0 8.8 (29) (19) (5) (53)Education High school (E1) 29.2 20.5 61.1 25.3 (24) (65) (6) (95) College (E2) 63.4 9.5 40.0 29.6 (51) (91) (10) (152) University (E3) 26.3 11.8 6.7 13.7 (19) (34) (25) (78)Gender Men (Ma) 93.8 17.9 11.5 33.9 (43) (121) (29) (193) Women (Fe) 7.8 6.3 50.0 10.9 (51) (69) (12) (132)Total 47.2 13.1 29.2 24.5 (94) (190) (41) (325)

Summer 2008 223

evidence is less conclusive. Only 11 out of 23 studies report a negative relationship, and 12 studies report nonsignificant relationships. On the other hand, research tends to support the existence of negative relationships between turnover and the various components of job satisfaction. For instance, sales force turnover seems to increase when salespeople are dissatisfied with pay, work, supervisors, and promotions (Hom and Hulin 1981; Hom, Katerberg, and Hulin 1979; Johnston et al. 1988; Miller, Katerberg, and Hulin 1979; Newman 1974; Waters, Roach, and Waters 1976). Negative relationships between turnover and satisfaction with work are the strongest ones (Motowidlo 1983). In addition, role stress (i.e., role conflict, ambiguity, and overload) has been found related to turnover (Dubinsky, Dougherty, and Wunder 1990).

In the reported application, the 177 voluntary leavers were recorded as either satisfied or dissatisfied with various aspects of the position they were quitting. These aspects cover three basic job dimensions—satisfaction/dissatisfaction with their personal job performance and outcomes, the job itself, and the organization (Babakus et al. 1996). These data have been tabulated for the three turnover segments (see Table 7). Ideally, the satisfaction/dissatisfaction of leavers should be compared

with that of present salespeople. Because management did not wish to survey the present salespersons about job satisfaction/dissatisfaction, these data were not available in this case study. Consequently, the analysis had to be limited to leavers’ sat-isfaction levels. Like previously, correspondence analysis has been used to portray the data. The resulting configuration is given in Figure 5.

Perusal of Figure 5 reveals that on average, leavers from the FT segment were more dissatisfied with their personal performance, the lack of recognition on the job and outside the organization, but not with their compensation or pro-motions. They were highly dissatisfied with the difficulty of the job and with the perceived ambiguity of their roles. This suggests that a large number of functional quitters may have disliked their job, but not necessarily the firm. In the same way, salespeople from the HDT segment were more dissatisfied than the average with their organization, especially with the company’s policies and procedures, the lack of promotion and advancement opportunities, and with the general sales force atmosphere. In addition, they reported strong dissatisfaction with their remuneration, their actual promotions, and their intrinsic rewards. Finally, the leavers from the MDT segment

figure 4Sociodemographic profiles of leavers and present Salespersons in every Desirability Segment

Notes: SRV segments profiles: HDT= highly dysfunctional turnover; MDT = moderately dysfunctional turnover; FT = functional turnover. Actual turnover profiles: AHDT = profile of actual leavers from the HDT segment; AMDT = profile of actual leavers from the MDT segment; AFT = profile of actual leavers from the FT segment. Age groups: A1 = < 30; A2 = 30–40; A3 = 40–50; A4 = > 50. Tenure groups: T1 = < 1 year; T2 = 1–5 years; T3 = 5–10 years; T4 = 10–20 years; T5 = > 20 years. Education: E1 = high school; E2 = college; E3 = university. Gender: M = men; W = women.


Tabl

e 7

Ana

lysi

s o

f Jo

b D

issa

tisf

acti

on

of S

ales

pers

ons

Hav

ing

Lef

t Vo

lunt

arily

in E

very

Dys

func

tio

nal/F

unct

iona

l Gro

up

R

epla

cem

ent V

alue

of L

eave

rs

Hig

hly

Mo

dera

tely

Sal

espe

opl

e’s

Dis

sati

sfac

tio

n D

ysfu

ncti

ona

l D

ysfu

ncti

ona

l F

unct

iona

l

wit

h V

ario

us J

ob

Turn

over

(H

DT

) Tu

rnov

er (

MD

T)

Turn

over

(F

T)

Tota

l

Dim

ensi

ons

N

= 1

05

Perc

ent

N =

61

Perc

ent

N =

11

Perc

ent

N =

177

Pe

rcen

t

Ove

rall

Dis

satis

fact

ion

with

Per

sona

l Jo

b Pe

rfor

man

ce/O

utco

mes

(PE

RF)

12

11

.4

29

47.5

8

72.7

49

27

.7

Perf

orm

ance

(sa

les,

quot

a

ac

hiev

emen

t) (

P1)

2 1.

9 25

41

.0

9 81

.8

36

20.3

C

ompe

nsat

ion

(P2)

10

1 96

.2

55

90.2

8

72.7

16

4 92

.7

Act

ual p

rom

otio

ns a

nd

adva

ncem

ent

(P3)

90

85

.7

50

82.0

2

18.2

14

2 80

.2

Rec

ogni

tion

on t

he jo

b an

d

ou

tsid

e th

e or

gani

zatio

n (P

4)

9 8.

6 30

49

.2

10

90.9

49

27

.7

Intr

insi

c re

war

ds (

feel

ings

of

self-

fulfi

llmen

t) (

P5)

92

87.6

50

82

.0

11

100.

0 15

3 86

.4D

issa

tisfa

ctio

n w

ith t

he Jo

b (JO

B)

6 5.

7 54

88

.5

10

90.9

70

39

.5

Diffi

culty

of a

ssig

ned

sale

s

ob

ject

ives

(re

quir

ed e

ffort

s) (

J1)

13

12.4

44

72

.1

9 81

.8

66

37.3

D

ifficu

lty o

f the

sel

ling

task

s

(u

ncer

tain

ty .

. .)

(J2)

8 7.

6 39

63

.9

9 81

.8

56

17.9

D

ifficu

lty o

f cus

tom

er in

tera

ctio

ns/

terr

itory

man

agem

ent

(J3)

4 3.

8 29

47

.5

10

90.9

43

24

.3

Ade

quac

y of

sup

ervi

sion

(J4

) 65

61

.9

50

82.0

9

81.8

12

4 70

.1

Perc

eive

d ro

le c

onfli

cts

(J5)

8 7.

6 41

67

.2

11

100.

0 60

33

.9

Perc

eive

d ro

le a

mbi

guity

(J6

) 5

4.8

15

24.6

11

10

0.0

31

17.5

Dis

satis

fact

ion

with

the

O

rgan

izat

ion

(OR

G)

88

83.8

55

90

.2

10

90.9

15

3 86

.4

Inte

ract

ions

with

oth

er

sale

sper

sons

/em

ploy

ees

(O1)

30

28

.7

30

49.2

2

18.2

62

35

.0

Supp

ort

prov

ided

by

the

orga

niza

tion

(pro

duct

qua

lity,

adve

rtis

ing,

call

cent

ers,

etc.

) (O

2)

41

39.0

54

88

.5

10

90.9

10

5 59

.3

Prom

otio

n an

d ad

vanc

emen

t

op

port

uniti

es (

O3)

10

5 10

0.0

59

96.7

2

18.2

16

6 93

.8

Com

pany

pol

icie

s an

d

pr

oced

ures

(O

4)

89

84.8

45

73

.8

9 81

.8

143

80.8

Summer 2008 225

tended to be less satisfied with the job, especially the high sales objectives, the difficulty of the selling tasks, and their perceived role conflicts. In addition, many were concerned with their firm’s lack of support.

Step 5: implications for Devising adequate Turnover management programs

This analysis provides clear managerial indications as to which actions may be taken for improving this sales force effectiveness

through turnover management. In this case, managers may give special attention to the HDT and FT segments.

Reducing Highly Dysfunctional Turnover

Because of the costs involved, management should seriously try to reduce the extremely high turnover rate in the HDT segment. In this application, voluntary leaves constitute almost 79 percent of highly and moderately dysfunctional turnover. In order to reduce the high dysfunctional turnover rate of

figure 5relationships Between Turnover groups and SS/D with Various Job Dimensions

Notes: Satisfaction with the job (JOB) = J1 to J6. Satisfaction with performance (PERF) = P1 to P5. Satisfaction with the organization (ORG) = 01 to 04. SRV segments: HDT= highly dysfunctional turnover; MDT = moderately dysfunctional turnover; FT = functional turnover.


47.2 percent in this segment, management can pursue two (nonexclusive) objectives: (1) reducing the number of leavers in this category, or (2) increasing the number of current sales-persons who could fall into this segment. In order to achieve the former goal, management may attempt to retain higher performers, mainly younger men in the 30–40 age brackets, with at least some tenure, and a college education. These salespersons have a higher propensity to leave. Because they are dissatisfied with their current compensation and actual advancement, managers may consider increasing rewards for higher performance. In addition, in order to keep these salespersons satisfied, management should provide them with better organizational support and improve its procedures and policies. In addition, management can identify nominally all of the salespersons in this segment and pay special attention in order to retain them.

Concerning the 10.6 percent highly dysfunctional turn-over caused by promotions, that part of turnover cannot be completely avoided (Guest and Meric 1989). Promoting good sales performers to managerial levels has definite motivating consequences for the sales force. Before promoting a high sales performer, however, managers should weigh explicitly the anticipated benefits to the whole organization (including the positive signals that promotion sends to other people in the organization, lower selection costs for managers, or possibly lower turnover rates among managers) against the costs it will cause to the sales force.

In order to meet the latter objective, and increase the size of the HDT segment, managers should hire and train indi-viduals who have a promising profile for becoming high sales performers, with a lower propensity to leave. Leaving legal constraints aside for the sake of the example, women over age 30 with higher educational levels may be prime targets for new recruits.

Managing Functional Turnover

Like above, two managerial policies can be used for dealing with the FT segment: (1) increasing the number of leavers in this segment by firing or inducing them to leave voluntarily, or (2) reducing the number of individuals in the sales force who will fall into that category. In this case, management’s decision amounts to determining the boundary between “acceptable” and “unacceptable” performance. The proposed procedure allows a manager to estimate this boundary (i.e., when the replacement cost/benefit of a salesperson is null). Alternatively, managers may try to move undesirable salespersons (mainly young college graduates who tend to leave during their first year on the job) toward the DT segments. Given that these salespersons are typically more dissatisfied with their personal performances, management may provide them with adequate

special training and coaching. Their lack of recognition on the job and outside the organization as well as their perceived difficulty of the job could be addressed by increasing their abilities and self-confidence. Part of their training program should consist of decreasing their perceived role ambiguity. Alternatively, management could reduce potential functional turnover by preferably hiring salespeople displaying profiles that are most likely to fall into the DT segments (e.g., uni-versity graduate women in their thirties).

ConCluSion

Research on sales force turnover has shown that all salespersons are not equally costly when they quit the sales force. Sales force turnover is a heterogeneous phenomenon that is impossible to manage effectively without understanding its mechanisms as well as its resulting costs (and benefits). Because turnover must be managed long before it could occur, the proposed procedure anticipates the costs/benefits that would result if turnover were to occur. To that effect, the method assesses every salesperson’s replacement value and segments the whole sales force according to this criterion. This allows analyses of sales force turnover for various homogeneous sales force seg-ments in order to arrive at actionable recommendations that are aimed not only at reducing dysfunctional turnover, but at improving sales force management’s overall efficiency.

This procedure requires relatively little data (essentially accounting data supplemented by managerial judgments and exit interview reports from leaving salespersons). The application reported in this paper does not intend to provide substantive results that could be generalized (many more applications would be needed), but to illustrate how a given firm can benefit from application of such a procedure. The procedure is flexible and can be adapted to specific firms’ situ-ations. For instance, a firm may find it appropriate to allocate turnover and present salespeople to more segments in order to ensure better within-segment homogeneity. This analysis should have also been supplemented by a satisfaction survey of the present salespersons. These would constitute worthwhile adaptations of this proposed general procedure of sales force turnover analysis.

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appenDix possible estimates for the replacement Values of present and leaving Salespersons

The formulae provided below are only examples of how the various cost and opportunity gains of present and quitting sales-persons could be estimated. The principle is to estimate the actual costs and gains for salespeople who have actually left the sales force and had to be replaced by a given new recruit. For present salespersons, the costs and gains that would be incurred if these salespersons left the sales force are estimated from the firm’s historical turnover data.

a. estimates of Direct Turnover Costs

Let:

N = current size of the sales forcei = index representing a current sales force member (i ε 1, N)j = index representing the salesperson replacing a current sales force member, should this salesperson leave the sales force. It

could represent the average of the salespersons who have been recently recruited over a certain period of time. It could represent a higher level than this average, as decided by management, if managers have a definite policy for improving the competence level of the new recruits in the future

Summer 2008 229

TV = number of salespersons who have left the sales force over a given past period of timek = index representing a salesperson who has left the sales force in the recent past (k ε 1, TV)l = index representing the salesperson who has actually replaced salesperson k (l ε 1, TV)

1. Separation Costs

Separation costs for salesperson i or k (in dollars): SCi,

2. Recruiting and Selection Costs

s = average length of the firm’s selection and recruiting procedures (in weeks)s

kl = actual time it took for recruiting and selecting l when k left (in weeks)

R = variable cost rate of the recruiting and selection procedure (in dollars/week)FC = fixed costs associated with any selection and recruiting procedure (in dollars)

Recruiting and selection costs of any salesperson j for replacing any present salesperson i: RC= FC + s R, for all i, jRecruiting and selection costs for replacing leaving salesperson k by l: RC

kl = FC + s

kl R, for all k, l

3. Training Costs

tp = average length of the training procedure for a newly hired salesperson (in weeks)tp

kl = length of the training procedure it took to salesperson l replacing k (in weeks)

T = variable cost rate of the training procedure (in dollars/week)FT = fixed costs associated with training programs (in dollars)

Training costs of salesperson j (replacing any salesperson i): TC = FT + tp T, for all i, jTraining costs of salesperson l (who replaced salesperson k): TC

kl = FT + tp

kl T, for all k, l

4. Excess Personnel Costs

The timing of a leaving salesperson being replaced by a new recruit is provided in Figure A1.

Let:

g = length of legal resignation notice (in weeks)g

k = length of actual resignation notice for salesperson k (in weeks)

Eij = cost rate incurred during the time leaving salesperson i and the new recruit j overlap (in dollars/week)

Ekl = cost rate incurred during the time salespersons k and l have overlapped (salaries, support expenses, etc.) (in

dollars/week)

Length of any salesperson i’s territory vacancy: tp + s – g > 0 or 0 otherwiseLength of territory salesperson k’s vacancy: tp

kl + s

kl – g

k > 0 or 0 otherwise

Length of overlap between salespersons i and j: g –s > 0 or 0 otherwiseLength of actual overlap between salespersons k and l: g

k –s

kl > 0 or 0 otherwise

Excess personnel costs if salesperson i is to be replaced by salesperson j: ECij = (g – s) E

ij

Excess personnel costs incurred when salesperson k has been replaced by salesperson l: ECkl = (g

k – s

kl) E

kl

B. estimates of opportunity Costs/gains (revenue Variations)

5. Opportunity Costs of Decreased Efficiency After Intention to Quit

tk = time (before resignation time) when sales started going off trend in territory k (date)

xk = time period between t

k and resignation time (in weeks)

qk = percentage sales decrease (if any) between the x

k weeks before and after intention to quit (decimal form)

XQ = average values of xkq

k across all k leavers (Sx

kq

k/TV)


dSio, dS

ko = weekly sales rate in territories of i and k before time t

k (in dollars/week)

mi, m

k = gross profit margin rates in territories of i and k (decimal form)

Decreased efficiency costs after intention to quit of salesperson i: DEQi = XQ m

i dS

io

Decreased efficiency costs after intention to quit of salesperson k: DEQk = xk qk mk dSko

6. Opportunity Costs of Decreased Efficiency During the Notice Period

hk = percentage decrease (if any) of the dS

ko sales rate during the g

k notice period (decimal form)

GH = average values of gkh

k across all k leavers (Sg

kh

k/TV)

Decreased efficiency of salesperson i during the notice period: DENi = GH m

i dS

io

Decreased efficiency of salesperson k during the notice period: DENk = g

k h

k m

k dS

ko

figure a1Turnover Dynamics

Summer 2008 231

7. Vacant Territory Costs

vk = percentage of decrease (or increase) of the dSko sales rate in territory k during the vacancy period (decimal form)

V = average (sk + tp

k – g

k) v

k values across all k leavers (S(s

k + tp

k – g

k) v

k/TV)

Length of the vacancy period in territory I (in weeks): s + tp – g > 0, 0 otherwiseLength of the vacancy period in territory k (in weeks): sk + tpk – gk > 0, 0 otherwiseVacant territory costs predicted for salesperson i: VC

i = V m

i dS

io

Vacant territory costs experienced when salesperson k left: VCk = (s

k + tp

k – g

k) v

k m

k dS

ko

8. Opportunity Costs of Lower Efficiency During Adaptation Period

akl = length of time before salesperson l assigned to territory k is fully operational (in weeks)

dSl = sales rate generated by newly hired salespeople i, once adaptation period is over (in dollars/week)

ul = percentage of sales decrease (in any) during the first a

kl weeks of assignment to sales territory compared with the dS

l sales

rate (decimal form)m

l = yearly gross profit rate generated by the newly hired salesperson l (decimal form)

A = average value of LEA across all k salespersons (S(akl u

l m

l dS

l)/TV)

Opportunity cost of adaptation period of salesperson j: LEAj = A, for all j

Opportunity cost of adaptation period of salesperson l: LEAl = a

kl u

l m

l dS

l

9. Differential Skill Costs/Gains and 10. Sales Territory Potential Differential Costs/Gains

TR = sales force current turnover rate (decimal form)M = average profits generated by new salespersons l once adaptation period is over (Sm

k dS

l/TR) (in dollars)

Relevant expected tenure horizon of a newly hired salesperson (in years): 1/TRDiscount factor over the 1/TR planning horizon for present value estimates (in years): r(1/TR)Differential skill and territory potential differential costs when replacing salesperson i by j: DSC

ij + TPC

ij = 52 [m

i dS

io – M] r(1/TR)

Differential skill and territory potential differential costs when replacing salesperson k by l: DSC

kl + TPC

kl = 52 [m

k dS

ko – m

l dS

l] r(1/TR)

C. opportunity Costs/gains (Cost Variations)

11. Social and/or Organizational Costs (or Benefits)

Time over which disruption is felt in territory Yk (between the beginning of the notice period and the end of the adaptation

period) (in weeks): akl + tp

kl + s

kl

Yk = number of salespersons with whom salesperson k had regular work contacts

Yi = number of salespersons with whom salesperson i has regular work contacts

dSYkb

= average sales rate of the Yk salespersons before the notice period (in dollars/week)

dSYib

= average sales rate of the Yi salespersons before the notice period (in dollars/week)

dSYka

= average sales rate of the Yk salespersons after the notice period (until the end of the adaptation period) (in

dollars/week)m

Yk = gross profit margin on sales of salesperson Y

k (decimal form)

mYi = gross profit margin on sales of salesperson Y

i (decimal form)

Gy = average sales gross profit rate in territories of salespeople with whom the k salespersons have had work relationships

before leaving (STV

(mYk

dSYkb

)/TV)

Organizational cost of salesperson i leaving: SOCi = Y

i (S

Yi m

Yi dS

Yib – G

y) (a + tp + s)

Organizational cost of salesperson k leaving: SOCk = Y

k m

Yk (dS

Ykb – dS

Yka) (a

kl + tp

kl +s

kl)


12. Impact on Adjacent Territory(ies)

Time over which disruption is felt in territory Zk (during the territory vacancy period) (in weeks): s

kl + tp

kl – g

k

Zk = number of salespersons in adjacent territories to k given some responsibility to take care of k during the vacancy

periodZ

i = number of salespersons in adjacent territories to i that most likely would be given the responsibility to take care of i

during the vacancy period dS

Zkb = average sales rate of the Z

k salespersons before the vacancy period (in dollars/week)

dSZka

= average sales rate of the Zk salespersons during the vacancy period (in dollars/week)

mZk

= average gross profit margin on sales of the Zk salespersons (decimal form)

mZi

= gross profit margin on sales of salesperson Zi (decimal form)

dSZib

= average sales rate of the Zk salespersons before the vacancy period (in dollars/week)

GZ = average sales gross profit rate in territories of salespeople given the responsibility to take care of sales territory k during

its vacancy period (STV

(mZk

dSZkb

)/TV)

Cost impact of vacancy of territory i on adjacent territories: VSTi = Z

i (m

Zi dS

Zib – G

Z) (s + tp – g)

Cost impact of vacancy of territory k on adjacent territories: VSTk =Z

k m

zk (dS

Zkb – dS

Zka) (s

kl + tp

kl – g

k)

13. Differential operating costs/gains

LOCi = weekly operating costs associated with salesperson i (in dollars/week)

LOCk = weekly operating costs associated with salesperson k (in dollars/week)

LOCl = weekly operating costs associated with salesperson l (in dollars/week)

LOC = average weekly costs associated with the l replacing salespersons (S LOCl /TV) (fixed remuneration, support, supervi-

sion, etc.) (in dollars/week)

DOCij = 52 [LOC – LOC

i] r(1/TR)

DOCkl = 52 [LOCl – LOC

k] r(1/TR)

“Replacement value” of present salesperson i by a new salesperson j

TTCij = SCi + RCj + TCj + ECij + DEQi + DENi + VCi + LEAj + DSCij + TPCij + SOCi + VSTir + DOCi

“Replacement value” of salesperson k leaving the sales force and replaced by salesperson l

TTCkl = SCk + RCl + TCl + ECkl + DEQk + DENk + VCk + LEAl + DSCkl + TPCkl + SOCl + VSTlr + DOCk

TTCij, TTCkl > 0 implies desirable salespeople and dysfunctional turnoverTTCij, TTCkl < 0 implies undesirable salespersons and functional turnover

Note: Different formulae are used for salespeople who have actually left the sales force and those who could possibly quit. In the former case, actual cost data are available to the firm (leaving salespersons were actually replaced, with known costs and benefits), while in the latter case, salesperson have not been actually replaced and consequently, the firm must rely on expected cost/benefit estimates.

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JouJou a ofrnal of Personal Selling Sales Management · Salespeople may leave the sales force voluntarily ... any other parts of an organization ... separation allowances a salesperson