Do you believe that history repeats itself?
Before you freak out, I am not walking through town yelling, “Here Ye! Here Ye! The end is near!” I’m not suggesting a massive salesperson purge is about to happen.
However, a sales purge did happen in the 1920s, where organizations “cleaned house” (their term at the time, and still used today). The similarities in the lead-up between then and now are eerily similar. As a matter of fact, I had some trouble sleeping thinking about it, but then again…I’m a nerd of the highest order.
Last night, I was reading a 1920s study that sought to explain the then rise of salesperson turnover, which ended with a great purge of salespeople that took place in 1921-1922. As you can see in the chart, the average percentage of salesperson turnover across the companies represented equaled 77% in 1921, and 85% in 1922. While the number of companies represented appears small, this study represented over 20,000 salespeople and included both voluntary and involuntary turnover.
It went on to explain why. Why was turnover trending upward in the late 1910s? What was going on in the economy and the world? Then, what caused the sudden spike?
The beginnings – 1915 to 1917: The economy was doing quite well. Much of the rest of the world was falling into World War 1. The United States saw this as an opportunity to get and extend our lead as a world power. While they were all fighting, we’ll be here making stuff, selling it, and growing a great economy. Turnover was on the high end, mainly because there were lots of jobs…and lots of options for salespeople.
World War 1 – 1917 & 1918: When it became abundantly clear we would have to join the fight, turnover rose due to (a) salespeople enlisting to join the fight. Companies lost anywhere from 19-37% of their sales team, who left to enter the war effort. But (b) companies were slowing production, choosing to focus manufacturing efforts and guiding resources to prepare to fight the war. Fewer salespeople were needed. (oh, and there was a massive pandemic going on, too…The Spanish Flu)
The Boom – 1918 into early 1920: The war was over. Everyone was building, growing, and spending at extraordinary levels. The demand for salespeople far exceeded the supply. During this two-year period, most companies “took almost anybody into their sales forces”. There was an overabundance of available jobs. Good and bad salespeople were able to continually improve their situation. The competition between companies for those salespeople was fierce…boosting the turnover figure enormously.
The Depression of 1920 & 1921: Then the bubble burst. This was a short, deflationary depression, The country hadn’t quite figured out how to absorb all of the returning military into the civilian workforce, and by mid-1921, when the depression was at its worst, “sales executives discharged practically all their salesmen.”
1922+: Smaller, more efficient sales teams led to more profitability. Profitability became the beacon, versus growth at all costs. So, the purge continued into 1922. “Most sales managers had come to believe that small sales organizations composed of real producers could secure just as much business, and at a smaller expense, than larger organizations which included low-grade men. Hence, the universal determination to clean house.”
Massive purges of salespeople. The pendalum in full swing, moving to where there was very little demand for salespeople coupled with a high supply. So, why the comparison’s to today’s era?
The beginnings – 1915 to 1917 – a lot like 2017 to early 2020?: The late 2010’s were represented by steady economic growth – much like 1915-1917.
World War 1 – 1917 & 1918 – similar to Spring/Summer of 2020?: It wasn’t a war, but it was similar in terms of our country’s focus and economic upheaval. The economy stopped because of the uncertainty around COVID. Two weeks to stop the spread became months. Companies cut costs, cut sales teams, focused spending on the essentials, and turned their entire organization’s focus to runway extension and cash conservation. In wartime during the period 105 years ago, the situation was very similar. Little focus on growth. More focus on maintaining, extending their runway and contributing to society.
The Boom – 1918 into early 1920 – a lot like Fall 2020 through today?: By late 2020, the tide started to shift, right? You could feel tech investment going through the roof as the economy would now rely on technology to keep moving. Every company needed to make massive investments in their tech stacks. Companies came out of the woodwork. The result is what beings to look like a bubble.
For example, does this chart only seem odd to me?
The number of newly minted unicorns by year has a bit of a crazy spike going on, eh? 2021 more than tripled the all-time record. Unicorns, meaning companies that are valued at over $1B USD. More in one year than the previous 4 combined? Add in the number of open sales positions. According to ZipRecruiter, there are over 2 million sales jobs open…NEAR ME in Palatine, Illinois. I’m guessing that’s not quite correct, but in a study published last year, there were over 700,000 open sales roles – excluding real estate, retail and car sales. Real B2B sales roles! There clearly isn’t that much supply…
Turnover is the highest it’s been in my lifetime, too. The US Department of Labor Statistics continues to break previous monthly records in the number of job changers per month. Turnover has always carried with it a huge cost burden on companies. In a 1925 article from the Bureau of Personnel Research:
“Unfortunately we have almost no figures on the subject. Few companies know what it costs to hire a salesman, train him and put him in the firled fully equipped for his work. The costs differ, of course, for different lines of selling, and range all the way from $200 to $2,000. Normally, we are told, there are 400,000 traveling salesmen in the United States. Estimating the turnover this year at only 50% and the cost at only $200 for each person hired, we have a total of $40,000,000 added to sales expense and therefore to the costs of distribution.”
Add to it that when sales job demand is higher than supply, the cost of sales labor goes up. It costs more to compete to get the best salespeople. You’re competing with other companies for talent. You are lowering your standards for typical sales hires. You are investing greatly in enablement. Those costs have to go somewhere to maintain profitability – and, if time-to-hire is long, time-to-revenue stretches out.
So, why the article?
Late 2022+: My concern is there won’t be enough business for companies to all realize their enormous valuations. Cost increases need to go somewhere. If they’re passed along to the customers, customers won’t be able to afford as much, or they will have to cut somewhere else. This begins to create at least a slow leak in the bubble. Worst case, it will pop, and companies will have to constrict, merge, and optimize. We’ll go back to evaluating companies on profitability instead of revenue growth coupled with potential. This has happened over-and-over again. It happened in the tech space from 1996-2003…lead up, bubble, pop, scatter for jobs, land on profitable measures.
We’ve been in an extended period of growth in this country, which tells us that history does NOT always repeat itself. My hope is that it continues to defy history, measures are in place to see this coming and minimize its impact. But I also believe we shouldn’t bury our heads in the sand and pretend that it cannot happen.
What do you think? Comment below – share, or you can even email me directly at email@example.com.
Todd Caponi is the author of the 3x best-book-award-winning and international best-seller, The Transparency Sale and a speaker & workshop leader as Principal of Sales Melon LLC. Todd is also a multi-time C-Level sales leader, a behavioral science and sales history nerd, and has guided two companies to successful exits. His next book, The Transparent Sales Leader, is planned for Spring of 2022.
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