Why is measuring ROI from onboarding sales reps so critical

by | Nov 15, 2022

Nandakumar Chari

NOVEMBER 15, 2022

The measurement of the return of investment (ROI) from a sales rep onboarding program is easier than you think. Discussed here is a lowdown on the calculation of the ROI in question. How fast sales reps begin to sell after the initial onboarding, dictates the ROI of the onboarding program in the field of sales.

The money generated by the new sales reps on the job after initial training, which is over and above the monetary investment that went into their onboarding, defines the calculation of the ROI. To get faster returns, an efficient onboarding program is a must. Experienced sales managers are full of wisdom and they assure that good results come with some basic strategies. These include speedily acquainting new sales hires with managers, peers and company culture; and also equipping them with resources without hassles.

See Also: Speedup Sales Onboarding

Just equipping new sales hires with onboarding material and oral instructions and hoping for the best is downright not okay. An effective onboarding process should be high on strategy. It must give new joinees a head start, pump up their self-confidence, and benefit the organization’s bottom line.

If onboarding is poor in execution, the consequences can be damning. ‘New Hire Momentum: Driving the Onboarding Experience’, a general onboarding study across industries throws more light on this. The study done in partnership by Kronos and the Human Capital Institute shows inefficient onboarding is the norm at most companies:

  • New hires claimed that most of them did not indulge in certain strategic activities during onboarding. The percentage of new sales reps given access to some critical activities are as follows. They include peer mentoring (32%), assessment of future training needs (37%), access to self-paced training resources (42%), and meetings with key stakeholders (47%).
  • About 55% of organizations don’t measure the effectiveness of onboarding programs and that means no definite assessment of ROI of onboarding. 
  • 39% of the companies surveyed do not possess the right technology to minimize administrative error or increase accountability. Whereas, 36% cite insufficient technology as the reason as being not able to automate onboarding processes.
  • More than half of the firms (57%) had managers who lacked the bandwidth to improve the onboarding exercise.

The sales rep onboarding program cost rigmarole

A recent DePaul University report cited a study which says that it takes an average of 6.2 months to replace a sales rep who has left the organization. Acquisition costs of a sales rep average $29,000, product training costs average $36,000, and lost sales in territory average $50,000. A good quality onboarding exercise ensures that sales reps are more loyal to the company, peak in their competencies, and generate revenue faster. Generally speaking, according to Training Magazine’s 2021 Training Industry Report, the average training cost per employee in the U.S. is $1,071. 

The cost of onboarding a sales rep becomes more expensive as in most cases it is a long process. To fully onboard a sales rep, 71% of companies take more than six months. The heartburn is more when after all the training there is still a 34% turnover rate among sales reps. On average sales reps stay with an organization for one and a half years only. Hence, sales managers only get a limited time period to develop full blown efficiencies in onboarding reps.

Why should the ROI of a sales rep onboarding program be measured?

The difficulties encountered in a normal sales rep onboarding program can curtail the generation of high ROI from it. Hence measuring ROI continuously is critical to maintain a tab on it so as to improve it over a period of time. This assessment helps to know how well the sales rep onboarding program is doing and to make changes if necessary.

A healthy ROI of a successful onboarding process can have a positive impact on a company’s bottomline. Measurement of ROI gives a comparative picture of the learning behavior of salespersons pre and post onboarding. Measuring both the quantitative and qualitative data impacting ROI is vital for course correction. The right kind of onboarding minimizes time to productivity. Sooner the sales reps close deals, the better the ROI.

To get a good ROI after the onboarding training, many factors come into play. They include productivity, technology used, company culture, and attrition amongst others. Good returns are a function of the human capital finding a balance between the financial capital and intellectual capital.

What does measuring the ROI of a sales rep onboarding program entail?

There is a basic way to calculate the percentage ROI generated from a sales rep onboarding exercise. It is to divide the gains achieved by the program in monetary terms by the total money spent on the program and multiplied by 100. However, there is no total clarity to allocate investment costs during the estimation of ROI as the investments range across tools, technology, and employees. This lack of clarity to evaluate ROI gets more compounded due to the impact of tangible and intangible key performance indicators or metrics on it.

The tangible metrics are:

  • Conversion rates per sales rep
  • Pipeline generated
  • Average time to productivity (ramp-up time)
  • Training time
  • Knowledge retention
  • Certifications completed
  • Net promoter score (a customer satisfaction benchmark) 

To know more details about the above metrics click here.

Whereas the intangible metrics include:

  • Individual and group motivation
  • Different learning curves per sales rep in terms of time and effort
  • Comfort factor between team members
  • Articulation during pitching 

Hence measurement of ROI should factor in both activities and deliverables. It would be great for sales managers to pull out all this data from a central repository equipped with a single dashboard for analysis in an automated fashion, using technology. Else manual intervention by creating multiple spreadsheets is both error prone and time consuming. Thus, clearly, there is a need for sales enablement and readiness tools.

What are the metrics to measure the ROI of a sales rep onboarding program?

An effective sales rep onboarding program ensures the success and loyalty of sales reps, which in turn generates higher ROI. Metrics that estimate this ROI with reference to the sales enablement tools used are platform adoption, the effectiveness of content, revenue, and sales rep performance data points. These metrics appear on the dashboard of the sales enablement tools system as readiness scorecards. The scorecards help to evaluate each sales rep’s performance. The onboarding metrics are of two types, that is leading and lagging indicators.

See Also: Transform Your Car Salesperson into a Winner using New Age Tech

Leading indicators help in modifying the sales reps’ learning process for better performance in real time. Thus, one can course correct this immediately instead of waiting for months to see if sales reps can close deals.

Leading indicators include:

  • Quiz scores
  • Completion of courses
  • Number of learning sessions and meetings attended
  • Percentage of training resources used
  • Frequency of marketing collateral viewed
  • Time taken to complete daily administrative tasks
  • Knowledge retention measured through role play
  • Role play video analysis
  • Time to first deal
  • Pipeline generated
  • Number of open deals
  • Usage of sales onboarding platform

Lagging indicators have their data crunched after specific events happen at the end of a time period. This relates directly to a sales rep’s primary goal which is generating revenue.

Lagging indicators include:

  • The number of closed deals in a quarter or year
  • Sales cycle lengths
  • Quota targets attained
  • Revenue generated by closed deals
  • Churn rate of sales reps
  • Number of customers retained over a period
  • Buyer experience

Last Word

Sales managers must study the interplay between training programs, skills, and performance of sales reps during onboarding meticulously. What type of skills influence different areas of performance must be analyzed. Thus, where skills are lacking stands exposed. The current performance of sales reps must be benchmarked against industry standards. The curriculum of the onboarding exercise training should be tied to key performance metrics. These metrics can then be used to measure the impact of onboarding on the sales reps’ performance. Thus, the onboarding program powered by a sales enablement platform can be improved if falling short of expectations in terms of ROI. 

A solid sales enablement platform can provide accurate insights into the ROI worth of your sales rep onboarding program, thus aiding in better decision making. Each sales rep’s training progress and key performance indicators can then be tracked by their sales managers from a single point of action, i.e. an onboarding dashboard. The StreamzAI onboarding solution can directly correlate sales performance to knowledge levels. It provides an always-on onboarding experience from day 1 to create a winning sales rep. Want to learn more? Talk to a Streamz Sales Onboarding Expert.

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