Profit and Opportunity Cost Outcomes of Sales Force Turnover and Recruiting Strategies Upon Various Performance Segments

Abstract

The cost of personal selling being substantial (Boles et al. 2012; Richardson 1999), sales force sizing issues have received a lot of research attention (Lodish et al. 1988). Maintaining a sales force at the desired size over time, however, remains largely unexplored. A sales force often departs from its target size as a result of the two adverse personnel flows: salespeople’s turnover and new salespersons hired and trained. In addition, research suggests that turnover is heterogeneous (Darmon 1990), affecting differentially salespeople, especially at both extremes of the performance continuum (Martin et al. 1981). High performers may find better job opportunities elsewhere or be promoted to managerial positions (dysfunctional turnover) (McNeilly and Russ 1992). At the other extreme, salespeople may be dismissed or discouraged to stay because of poor performance (functional turnover, when replacing salespersons are more qualified). Turnover requires hiring and training new salespeople to replace leavers. Hiring too many salespeople involves high direct selling costs, while hiring too few salespersons results in opportunity costs of foregone sales and profits (Darmon 1990; Zoltners et al. 2001). As a result, managers may be more reluctant to incur direct costs (affecting profitability) than opportunity costs (not showing up in financial statements).