What Does a New Sales Manager Cost?
What does a new sales manager cost? Unfortunately, there has been little written and less studied on the subject. The cost of hiring a salesperson is fairly well documented—somewhere in the neighborhood of at least three to four times their salary, so if your average salesperson is making $50,000, your minimum cost to hire and train a new salesperson will be $150,000 to $200,000. That’s a significant investment.
A small, very unscientific, informal survey by McCord Training indicates the hard and soft costs of hiring an outside sales manager or promoting a salesperson into management is significantly more expensive than hiring a salesperson. The survey indicated the minimum costs associated with a new manager are in the area of five to seven times salary. So if your manager’s salary is $50,000, your first year expenses for that new manager are in the area of $250,000 to $350,000—minimum.
Where are the dollars spent? Whereas a new salesperson’s investment tends to be in formal and informal product and service training, lost sales opportunities, management’s time invested in the new hire, and the costs associated with hiring the salesperson, the new manager’s costs are heavily related to lost opportunities and wasted resources.
Lost opportunities and wasted resources come in a great many shapes—insufficient coaching and mentoring of the sales team, overlooking new market opportunities, not recognizing and reacting to new initiatives and expansions by competitors, not acting to correct or eliminate destructive behavior by team members, misallocating discretionary training and marketing dollars, as well as a number of other areas.
False Expectations
Few companies hire a new manager or promote a salesperson into management with the intention of simply letting them sink or swim. Most often the company’s management sincerely expects to give the new manager the resources they need to succeed through an informal structure where the new manager’s manager--and possibly others in the company--is available to help the new manager as he or she has questions or as situations arise.
Seldom does this informal structure work. Soon after coming on board or being promoted, the new manager discovers that his or her manager isn’t available when needed; others in the company are too busy to help, as are the other front-line managers the new manager tries to connect with. They quickly discover that despite the best of intentions, they’re left on their own.
Within short order a pattern develops. The new manager determines they can’t wait for help and either makes decisions on their own without sufficient background to make the appropriate decision, or they simply ignore the issue hoping it will resolve itself. Mistakes are made. At first, the new manager is given a gentle slap on the hand and some guidance. As more and more mistakes are made, the gentle slaps become harder; the new manager’s manager becomes less patient. Within a few months, both the new manager and their manager are both frustrated. Within 12 to 18 months, there is a better than 50% chance the new manager will no longer be with the company—either leaving on their own or having been let go.
Informal Training Programs Don’t Work
Although well intended, informal training programs simply don’t work well. An informal program is by definition a catch as catch can program. The new manager is encouraged to seek help as needed, wherever that need arises. Consequently, not knowing when or why they’ll need help, help is usually sought only when it is needed immediately. That immediate need often occurs when the individual who can help address the need is unavailable, requiring the new manager to either wait until someone who can help is available or to address the issue without counsel.
The expectation in an informal program is that the new manager will have the ability and foresight to seek guidance before it is needed or that those who can help address the issue will be available when needed. Both of these are unrealistic expectations as the new manager doesn’t have the experience or background to anticipate many of the situations they will encounter, and those that can give guidance and support cannot neglect their primary duties to be ‘on call’ at a moment’s notice.
Addressing the Issue
Of course, it doesn’t have to be this way. There are alternatives to the well intended but ineffective informal training the company intended to do:
Training Program: A formal training program that each new manager undergoes is an excellent choice for larger companies. Whether constructed and presented by the company’s training department or by an outside vendor such as McCord Training, a formal program should enlist support from a number of departments to address each area of the new manager’s responsibilities. Consequently, the program may bring in individuals from finance, accounting, shipping, manufacturing, human resources, and a number of other departments.
Although most often presented in a structured, multi-day classroom setting, additional one-on-one coaching for an extended period must be an integral part of the program to insure success.
Coaching Program: A one-on-one coaching program for each individual manager is perfect for small to mid-size companies and has certainly been very successfully employed by large companies as well. Typically an outside management coaching company such as McCord Training or any of the other quality coaching companies is hired by the company on a 6 month to year contract to formally coach the new manager. Often the coach will pull in individuals within other parts of the company as needed to address particular areas of responsibility.
Management Based Mentoring Program: An alternative used very successfully by McCord Training has been to set up a formal mentoring program within the company’s management where a senior manager from each department that touches on the new manager’s areas of responsibility engages the new manager for a set period of time to mentor them on how to manage their responsibilities within that area. A senior manager from accounting would work with the new manager on budgeting and cost control, a manager from human resources would work with them on human resource issues, and other managers from other departments would take their turn.
The difference between this and the informal program established by most companies is the formal mentoring program is just that--formal. Both the new manager and the department executive know the mentoring process is important and a set time is scheduled for meetings. It is the department manager’s responsibility to prepare the new manager for the issues they will face, not just to react to the particular questions the new manager may have. Each department manager has a formal agenda to address that is designed to prepare the new manager to fully execute their duties.
Manager Hired Coach: The least desirable but often used method of addressing the issue is for the new manager to hire their own coach. Once they understand that they are in a sink or swim situation, many will take the initiative and hire a coach to help them learn and perfect their management skills. Although their coach will help them become quality managers, a byproduct is often resentment on the part of the new manager that the company ‘left them out in the cold.’
Manager Training is Becoming More Critical
With the introduction of sales metrics, training front-line managers will become increasingly more important. Those costs of five to seven times the manager’s salary will increase as the opportunities to increase sales performance increases due to better understanding the coaching and training needs of individual salespeople, more market opportunities will be exposed through an analysis of better and more accurate sales and market data, and as competitors enlist the sales metrics technology to sharpen their sales teams.
Whether a company chooses an outside vendor, an in-house training department, or a management based mentoring program, investing in the success of front-line managers doesn’t cost, it saves, it increases sales, and it increases profitability.
