How Firms Value Sales Career Paths?

Hello and welcome to the Fifth Reskill Masterclass in a series for knowledge at HEC. My name is Daniel Brown. I'm a journalist in the HEC Paris Communications Department and your host for today. Today our masterclass features Dominique Rouziès. Welcome to this masterclass, Dominique. Thank you. You are a professor of marketing at HEC and the academic dean at the BMI Executive Institute.

You were recently awarded the American Marketing Association Sales SIG Lifetime Achievement Award, which is highly prestigious. At HEC, you're academic director of the H Executive Program in Sales, which focuses on monitoring and performance of sales teams. Your research, teaching, and consultancy interests focus primarily on improving sales organizations' performance.

Indeed, you recently co-authored a book on Salesforce compensation and published several research papers on Salesforce financial incentives. This summer you published a paper in the Harvard Business Review on topics related to today's masterclass, which is data ethics. Now you'll be sharing with the viewers a masterclass on how firms value career paths.

Over to you, Dominique.

Thank you very much, Daniel. Nice introduction. I'm very happy to be here with you this afternoon. Before I start this presentation, I would like to reassure you. I’m going to give you the results of the question we asked through a survey: how many years should salespeople and sales managers wait before changing companies to maximize their income? This will come in a few minutes.

Today, I will present a research paper published earlier this year in the Journal of the Academy of Marketing Science. This is a project I worked on with my colleagues Ali Reza from Manus University in Ireland, France Kmar from Crest Anai and Sala University in Sweden, and Michael Segala, my colleague at HEC Paris.

The question we were interested in is very simple. Most of us reach a point where we wonder: what is our experience worth? How much is my experience worth? Employees ask this fairly often because, according to recent surveys, employees switch roles every two to four years. In sales, this happens even more often due to high turnover rates in the sales function.

On the employer side, the question is similar. Company leaders have the problem of setting a compensation level for people they're hiring in sales, a very important function. They need to assess the competence of job applicants. The information they rely on is primarily experience, usually found in resumes.

For example, Hertz in the car rental industry posts the highest numbers of ads for the sales function at all salary levels. Hertz requires a minimum number of years of experience in the sales function and a specialization in retail. Companies frame the question in terms of work experience within an industry, on the labor market, in the sales function, and sometimes within certain firms.

Our question was: how do employees value their experience, and do employers value the experience of the employee? When we looked at existing knowledge, we were amazed to discover there was not much on the sales function. We don't know much about how various types of career paths are valued. For this reason, we decided to work on the value of various types of experience.

We focused on three types: firm experience (years within a firm), industry experience (years within a sector), and sales occupation experience (years in the sales occupation). We wanted to assess the value of these types of experience and disentangle their impact on compensation.

We used a data set resulting from annual declarations of employee compensation in France, which allowed us to collect a nationally representative sample of the sales population. We ended up with 19,000 salespeople and 5,000 sales managers, followed over a 20-year period from 1994 to 2015. We have data on yearly compensation, job roles, education, and experience within firms, sectors, and the sales occupation. We modeled the relationship between experience and compensation, accounting for gender, age, and education.

Findings:

For salespeople, mobility mainly occurs within a given industry. Salespeople rarely change industries. Salespeople become sales managers as they are promoted, but the probability to become a sales manager declines with sales experience.

For sales managers, mobility occurs within the industry and mostly within the firm. Promotion to sales management is more frequent for people with non-sales managerial experience, meaning lateral transfers from other functions. Successful sales managers have less firm, industry, and work experience but are better paid and more likely to switch at the year of promotion.

Survey results:

The relationship between experience and compensation is an inverted U-shape. There is a plateau indicating the number of years a salesperson or sales manager should stay in a firm, sector, or occupation to maximize income.

Salespeople: plateau at 2.9 years in a firm.

Sales managers: plateau at 3.4 years in a firm.

Industry experience: 2.9 years for salespeople, 3.2 years for sales managers.

Sales occupation experience: 3 years for salespeople, 6.4 years for sales managers.

These results reflect accumulated skills and knowledge, the challenge of keeping knowledge current, and achievement wariness.

Firms source sales managers mostly from internal functions to reduce risk and ease talent development. Three out of four sales managers come from the same firm, and two out of three from other managerial functions.

Conclusion:

Two distinct career paths exist in France:

Salespeople career: focused on the sales job; less likely to become a sales manager.

Sales management career: often starts in other functions.

Implications for employees: salespeople should choose another function if they want to become sales managers. Salespeople need to manage their boss, who may have less knowledge of the sales function.

Implications for firms: newly promoted sales managers need training and support to perform and stay with the company, especially since the year of promotion has high turnover risk.

Audience Q&A Highlights:

Little research on sales careers: Sales has low trust and reputation despite being 10% of the active population.

Applicability outside France: Mechanisms are similar across Western countries; differences may exist in tax policies affecting compensation.

Career mobility: To move up, employees should gain experience in other functions first.

Evolution since 2015: Talent retention is increasingly important; poor sales managers have a multiplier effect on teams.

Promotion from other functions: Less risky, as company leaders know internal candidates.

External hiring vs internal promotion: Newly promoted sales managers require higher compensation to account for risk.

AI impact: Improves onboarding and productivity by enhancing training.

Retail sector: Study was conducted in manufacturing; applicability to retail is not confirmed.

Thank you, Dominique, for this engaging masterclass. Be sure to tune in for the next session, focused on sustainability and the environment with Igor Shishlov.