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Pharma Sales Reps Are Leaving—And Companies Don’t Know Why

It costs about $89,000 to replace a sales rep.

September 16, 2011
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Turnover among sales reps in the pharmaceutical and biotech industries rose from 10 percent in 2002 to 14 percent in 2003, according to a new analysis by the Hay Group.

It costs about $89,000 to replace a sales rep. In addition, Hay Group says that the higher turnover rates can hurt companies when sales territories are left vacant and sales-rep/doctor relationships are severed.

Different answers for different folks
Big Pharma may not realize why people leave. Hay Group Vice President Bob Davenport says that "the real reasons why employees left does not tend to jibe with what HR reports." That’s because "individuals don’t like to burn bridges" by saying negative things about their former companies, he says.

In Hay Group's study, employers say that their exit interviews show that the main reason sales reps quit is because of a better job somewhere else. But Hay’s surveys of sales reps show that the biggest reason is "issues with an immediate manager."

Davenport says the companies that are effective in their retention programs are often doing three things effectively:

  1. The most forward-thinking companies pay close attention to how they develop and assess their sales managers. They make sure not only that managers are trained in retention strategies but are also continually getting feedback from sales reps as to how their managers are doing.
     
  2. Their compensation plans "fairly represent performance." This is easier said than done: Davenport says that many companies plan on paying high performers twice as much incentive as an average employee. But, he says, "when we go through data by company, on average, high performers earn only 50 percent more than average performers." The incentive plans are often very complex and don’t achieve the result that companies intend. Employees hear their company telling them that they have a lucrative incentive plan, but it doesn’t come to pass. Davenport says that employees end up thinking, "They tell me I’m a high performer but I’m certainly not being paid like one."

  3. They have a bead on what issues are important to employees. Smart companies, he says, have figured out how sales representatives can move up the career ladder, either within the sales field or by moving to a different part of their business. And they’re in tune with issues such as work/life balance, particularly because so many sales reps are young women. "What are you doing to allow people to perhaps be part-time reps for a while?" Davenport asks.

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