The Hidden Costs of Ineffective Onboarding

Sales organizations spend good amounts of time and resources finding and hiring the best talent. Yet oftentimes, onboarding new hires is treated as an afterthought. The fact of the matter is, though, that an ineffective onboarding plan puts these valuable investments at risk, leading to higher washout 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:

Rise of Insight Selling  – Insight selling requires business acumen and higher level analytical thinking skills that do not come naturally to many new reps
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
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
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. We have not only raised the bar on the level of mastery that reps must achieve with certain skills, we have added completely new skills to the mix as well.

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 an ROI from onboarding a specific individual rep, underperforming sales 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 to fix, damage to the credibility of your organization in the eyes of your consumers.

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.

CEB Sales Leadership Council members, join us on November 20th for a webinar in which you can learn how to develop a more effective onboarding plan for your organization.