The State of the Market 2020

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The State of the Industrial Sales Market 2020

Sales talent has always been difficult to find and retain, but today it is tougher than ever before.  Sales representatives are the second most in-demand candidates across all job functions reported by The Manpower Group[1].  LinkedIn reports that “Account Executive” is its second most recruited role across all industries, “Sales Development Rep” comes in at the number 3 spot[2].

The sales talent shortage is only going to get worse in the coming years, as the labor market get even tighter, and the growing tech industry recruits all the great salespeople from traditional industries like manufacturing, engineering, and distribution.  However, there are several hiring and retention strategies that companies can implement to withstand the challenging sales hiring conditions in 2020.

At the Hunter Davis Group, we work with industrial companies searching for salespeople, while evaluating industrial sales candidates and what they are looking for in their career and in their next employer.  We have seen sales positions are remaining vacant for longer periods while the cost of sales talent continues to rise.  Sales leaders are lowering their expectations to fill vacancies faster, only to struggle with turnover.  We also see competitors poaching sales talent from each other, which also increases hiring costs.

Before discussing some strategies that industrial companies can use to gain a competitive edge in hiring and retaining top talent, it is important to understand the central issues that are making 2020 a candidate driven market.

The tightest labor market in over 50 years

While Salespeople may be some of the most difficult people to hire right now, it is certainly not easy to hire for any positions.  To put things into perspective, the US officially hit a record low 3.5% unemployment rate in 2019[3], and in 2018 the unemployment rate for white-collar employees (those with a bachelor’s degree or above) was at 2.1%.

Furthermore, the labor force is not growing fast enough to keep up with the demand; the labor supply is expected to grow by just 0.4% per year through 2020 and remain that way for the long term[4]. (In comparison the annual growth was 2.6% in the 1970’s).  Former Chairman of the Federal Reserve Alan Greenspan has even stated that this is the tightest labor market he has ever seen[5].

Additionally, companies need to prepare for retirement in their sales team as well as sales leadership positions as a generation of sales professionals are approaching retirement.  10,000 baby boomers retire each day and it will continue for the next 19 years[6].

The sales hiring forecast is bleak

With these conditions’ sales positions are going to be challenging to fill, but to fully understand the difficulty that employers face in 2020, it is important to note that retention in sales is also difficult.

In 2018 a Bridge Group study of over 400 companies concluded that the average tenure of an B2B Sales Development Rep was just 1.5 years at a company[7].  These companies experienced a 39% turnover rate among their Sales Development Reps.  If that isn’t shocking enough, two-thirds of that turnover was involuntary termination (or mis-hires).

The Bridge Group study found that companies seem to be hiring less experienced Sales Development Reps with the average required experience at just 1.4 years.  This average is down 45% since 2010.  Companies may be lowering their requirements to of scale their teams in response to the challenges of a limited supply of talent, but the data suggests that this causes more turnover and turmoil, which is costly for companies.

Regardless, we have noticed that sales professionals tend to jump companies every few years, and compensation increase is a leading motivator.   The average salary increase for switching jobs is 10% to 20%, which is considerably higher than the average annual base salary increase of 3%[8].  Compensation is a key component in the recruitment and retention of salespeople[9].

How to adjust for industrial sales hiring in 2020

Companies can protect themselves against sales talent shortage with a few strategic changes in their recruiting, hiring, and retention planning.  For manufacturing and industrial companies these strategy shifts are especially important to ensure they are an employer of choice to an entirely new generation of talent as baby boomers retire and tech companies are enticing sales talent with attractive working environments and attractive compensation packages.

Focus on A-players

It may be easy for companies to lower their expectations and requirements to hire quickly to scale its sales team.  But we have seen that the it is more cost-effective in the long run when companies commit to hiring only A-players and adjust their recruiting strategy accordingly.  Another report from The Bridge Group shows that for each additional year of experience a salesperson gains, their earnings increase, and companies that hire sales reps with less experience are more likely to see greater turnover[10].

Recruit passive candidates

In order to focus on recruiting A-players, companies need to shift their recruiting strategy to recruit passive candidates (salespeople who are not actively looking).  Simply posting a job advertisement and hoping for applicants is no longer sufficient.  A-players will not be sending you their resume.  Sales leaders need to assume an active and aggressive approach to go after top talent.

Prospecting and nurturing candidate leads

Recruiting and hiring passive candidates is no different than a typical sales process.  Prospects are moved through the “sales funnel” until they become “buyers”.  The key for companies is to fill a candidate pipeline and nurture passive candidates, because it can take months or even years to persuade a top performer to leave their current employer.  Use the pipeline to acquaint a prospect with the company, build trust in the employer brand, and convey opportunities for growth.  This strategy requires advance planning and effort so that when there is a hiring need, companies have qualified leads that already know, like and trust them.

Reevaluate compensation packages

Attracting top sales talent is most certainly about showing them the money, but it is also about the overall compensation package.  Sales incentives (bonuses and uncapped commission) and workplace perks are great, but multiple studies have shown that top performers are driven by more than numbers on their W2.  Companies should review their online presence to ensure that it is attractive to top performers.  While superstars don’t come cheap, if companies design their employer value proposition correctly, they will find them affordable most of the time.

Stop recruiting from your competitors

When a company is suffering a severe lack of qualified talent in their particular industry, one approach we successfully use when recruiting for our clients is to explore similar industries.  Companies in adjacent unrelated industries may share similar traits of their sales models.  We have found it is much more important that a sales candidate have the skills and abilities needed to succeed in a certain function rather than specific industry experience.  This approach also reduces hiring costs when companies do not have to pay a premium to poach from a competitor that may try to enforce an industry non-compete agreement.

Partner with an industry specialist

If a company is having difficulty with a talent shortage, they can transfer their sales recruiting efforts to a recruiting agency in the industrial sales market. A specialist recruiter can partner with companies when they begin to search for sales talent in adjacent industries, because a specialist recruiter will have a panoramic view of candidates in other companies and verticals.  A specialist recruiter will have experience in the trenches of the industrial market and will product much better results right from the start. 

Have a formal sales succession plan

Companies must be ready to fill their sales leadership and executive positions quickly after a retirement or any other reason.  Many companies have an inadequate plan or don’t have one at all.  Succession plans are more effective when they are formal. The plan should include a roadmap to evaluate current team members for their leadership potential, provide ample training, development, and mentorship when a transition occurs.

The road ahead in 2020

Industrial companies will experience a talent shortage in 2020 like they have never seen with a perfect storm of economic growth and a shrinking supply of labor.  And companies that require sales talent with have an even more difficult time.

High performance salespeople are in extreme demand, and the best candidates are not searching for new jobs.

This is why industrial companies must reevaluate their sales hiring strategy and ask whether they can meet the 2020 hiring challenge of hunting down top talent, instead of waiting and hoping for applicants to show up on their doorstep.  Effective recruiting in 2020 requires companies to attract passive candidates with an exceptional employer value proposition to include competitive compensation, and opportunities for career growth.

Retaining their salespeople also requires companies to reevaluate their employer value proposition to ensure they are empowering them with competitive compensation and investing in training and development.  Having a succession plan to replace key sales leadership and a retention strategy is just as important to a company as a recruiting and hiring strategy, because if companies want to grow their sales in the coming years, they need to keep hold of every salesperson they have.




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