What gets measured gets improved.
When I ask executives what they believe the cost of a bad sales are, most focus on turnover costs. The truth is the real costs of a bad sales hire run far, far higher than just turnover costs.
Many small to mid-sized companies live in "La-La Land" when it comes to hiring salespeople. They hire from the gut until they are forced by competition or frustration to hire quality sales talent on a consistent basis.
The result is reduced revenue growth and mediocrity. Average is for losers.
What gets measured gets improved. It is difficult to make a real change until a catalyst rocks your world. Make what I am about to share with you that catalyst for change.
The definition of a "loser".
I want to be clear. None of God's creations are losers. Every human being has potential. Most just do not belong in sales.
Unfortunately, CEOs, Sales VPs, and HR "professionals" put human beings into sales roles that they are unsuited for. The management who hire human beings who are unfit for the job are the real losers. When you hire someone who does not fit the sales role, sooner-or-later three things happen.
- You sentence a human being to to do something that is somewhat or completely against their nature - who they are. That is just morally wrong.
- You sentence your sales management to a period of time that they will be distracted with little return on their time investment. The manager and the human being who is not going to change are going to become frustrated and the damage is often permanent. This is morally wrong.
- You sentence your company a position that is competitively disadvantaged. Your Customers do not get the best solutions. Your company suffers lost sales opportunities. Your shareholders lose shareholder value. Again, this is morally wrong.
I use harsh language for a reason. Salespeople who are not meant to be in sales are "losers" because management was too proud and too cheap to get their sales hiring right.
This is your opportunity. Stop hiring from the gut. Use a hiring scorecard. Use a multi-science sales personality and aptitude test with a benchmark. Get hiring the best sales talent right because the stakes are extremely high.
Decide to not be the frog.
You know the old adage - if you throw a frog in boiling water it will jump out quickly. But if you put a frog in a pot of cool water and gradually raise the temperature, the gradual warming will make the frog sleepy and it will not jump out.
You are the frog whether you like it or not. You have your business model figured out. Revenues are coming in quarter after quarter - perhaps with even a little growth. You are "fat and happy" - you are making more money than you thought you ever would.
Fat and happy syndrome is a dangerous mindset. When you are fat and happy, you change nothing. Your competitors sneak up on you, they innovate, and they take away your best Customers.
Decide to not be the frog. Unless you aggressively raise the bar for yourself through increased sales goals and real accountability for meeting or not meeting them, you are destined to become obsolete - fat and happy.
Hiring the wrong salesperson for the job is insanely expensive.
Following are the five costs of bad sales hiring decisions.
- Damage to your sales culture.
- Damage to your brand reputation.
- Damage to your own reputation.
- Turnover costs.
- Missed sales opportunities.
Damage to your sales culture.
Pat Bowen's comment about my recent article, "Why Sales Welfare Pisses Off Your Best Salespeople" best describes the damage low performers do to your sales culture:
"Pissing off your best sales people is just the tip of the iceberg. When you reward lackluster sales performance and allow under performers to hog company resources it drags the entirety of the organization down."
When you hire salespeople who lose - your culture loses. The more losing that is allowed to happen under your watch colors your sales culture. No one wants a losing sales culture yet many hire losers who cannot sell. The result is you get precisely what you do not want, a losing sales culture.
Sales losers are like "kryptonite" to alpha sales wolves. High performers - alpha sales wolves hate working with losers. Most outright refuse to do so. When you do hire an alpha sales wolf and bring them into your losing sales culture, the alpha sales wolf usually gets sick and leaves.
Damage to your brand reputation.
When you have losers representing your brand in the marketplace, your brand soon becomes tarnished. Your Prospects and Customers essentially get robbed. Your Prospects and Customers want more than just a product and/or service. They want your ideas. They want to be engaged. They want "iron to sharpen iron". Think Challenger Sale.
Losers cannot sharpen anything. Losers do not engage your Prospects and Customers with anything more than canned sales pitches, canned ideas, and discounts. When you let losers sell for you, the result is commoditization. Commoditization occurs when your product and/or service looks just like your competitors. The worst thing that can happen to your brand reputation is commodization.
Differentiate your offering through the value added by sales wolves.
Damage to your own reputation.
I do not care if you are the CEO, VP of Sales, or Sales Manager you are who you hire. If you are the CEO and you allow your VP of Sales to hire losers - you are a loser. If you are the CEO and you allow your VP of Sales to allow your Sales Manager to hire losers - you, Mr./Ms. CEO are a loser as well as your loser VP of Sales.
When a loser gets on your "bus" - you are responsible.
Increased turnover costs.
There are so many statistics available about what it costs to hire a salesperson. The truth is it depends on a lot of things like the type and complexity of sale, the region of the country, local competition, etc. A good rule of thumb is 25-50 percent of first year's total expected compensation.
Missed sales opportunities.
On paper, "missed sales opportunities" is the cost that absolutely blows many people away. Although if you ask me, the damage to the sales culture, the brand, and your own reputation trump everything else. You cannot put a price on that.
The Sales Opportunity Cost is the lost sales spread between top and bottom performers. This number must be readily known. It must be the number you are always striving to reduce. If you were to ask a typical Sales VP how much a bottom performer really costs in lost sales, most would say, "A lot." That's a shitty answer. They must know this number. They must have their compensation directly tied to reducing The Sales Opportunity Cost.
How to calculate your "Sales Opportunity Cost".
Step One: Identify your current sales performance levels.
- Average production of top 20th percentile.
- Average production of all salespeople.
- Average production of bottom 20th percentile.
Stick with me. Follow the math in the following example.
Please note: The performance spreads are often much wider than this. We have seen top 20 performers produce 10-20 times the performance of the bottom 20.
Step Two: Identify the sales performance spreads.
Use the following simple formula to identify the low hanging fruit in the above table:
Step Three: Incorporate your typical sales margin to calculate your Sales Opportunity Cost.
If you assume a 20 percent margin, that $900,000 would become $180,000 in sales opportunity cost on an annual basis.
In five years, the Sales Opportunity Cost is $900,000!
How much is yours Sales Opportunity Cost?
What is your current sales hiring process costing you?
Is it time to reconsider your sales hiring investments?
I see so many penny-pinchers proudly sharing how they use a cheap recruiter or a cheap personality test or just their website to attract talent. These people believe they are saving money?
You cannot save your way to making money!
Be very cautious when trying to save money when trying to hire the best salespeople.
A losing salesperson destroys your bottom line. Unfortunately, many CEOs and Sales VPs look the other way. Many assume paying low performers to destroy sales is part of the cost of doing business.
Build a sales team to be proud of! You are shaping your legacy!
To hire the best salespeople possible, you must use every available resource, every relevant job board, and the best sales personality and aptitude test on the market. You cannot afford less than the best sales hiring tools to hire the best salespeople.
But first you must decide.