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Hiring Ineffective Salespeople Costs Real Estate Industry Millions

Written by: Peter Gilbert

Article Overview: If ever there was an industry that lives or dies by the performance of it’s salespeople, it is real estate. But real estate sales, like insurance sales, suffers from a cripplingly high failure rate when hiring new salespeople, and the reason is that these industries employ highly ineffective processes for identifying and hiring fresh sales talent. In most real estate companies the 80/20 rule (or something akin to it) applies. For example in one major national agency 15% of agents deliver 78% of revenues. What this means is that hiring effective agents is a purely random event - No more effective than tossing a coin.

Hiring Ineffective Salespeople Costs Real Estate Industry Millions

If ever there was an industry that lives or dies by the performance of it’s salespeople, it is real estate. But real estate sales, like insurance sales, suffers from a cripplingly high failure rate when hiring new salespeople, and the reason is that these industries employ highly ineffective processes for identifying and hiring fresh sales talent.

Some Things You Probably Didn’t Know About Salespeople

1. As a talent-based vs. a learned skill, exceptional sales effectiveness is often inversely correlated with academic interest. Sales people typically do not shine academically. It is not that they are stupid, they simply have other priorities – like building social networks – and they typically have relatively little brain space allocated for theory.
2. Psychological theory cannot predict sales success. Psychometric and personality profiling tests are of little or no value in predicting whether an individual can sell or not.
3. Sales excellence can be coached but not trained. You can’t train a person for a job they cannot do and some people will never learn to sell as long as they live. So hiring and training estate agents who lack the necessary talent is a monumental waste of time and money.
4. Selling is a contact sport and classroom based sales training is of limited value. Real learning happens in the field and most great sales superstars have had mentors or coaches, and one of the most critical roles of sales management is coaching in the field.
5. Top performing salespeople cannot sell in all markets. A hugely successful account manger in the packaging industry would probably be a disaster in new business development in real estate. Another fact of note is that most great salespeople make very poor sales managers. Less than 15% of great salespeople in real estate make good managers-----scary thought!

Why Hiring Processes Fail

The typical interview-based hiring process is marginally more effective than flipping a coin (51%)

Typical Selection Processes

Hiring success rates aren’t much better than a coin toss*

Selection Method % Over “Chance”

Typical Interview 1% increase
Personality Tests 1% increase
Experience 5% increase
Scorable Interview 7% increase

*International Personnel Management Association, Feb. 1999

However with new predictive actuarially-based assessment technology provided by HR Chally of Dayton Ohio, a structured scorable interview and proper reference checks, a hiring accuracy of >90% is possible.

In recent discussions with real estate executives, they were asked to define the characteristics they associated with successful agents. These were:

• Assertive
• Hard working/High energy levels
• Outgoing personality
• Good interpersonal skills
• Good attention to detail

When a validation study was conducted, these attributes were found in equal measure in the super performers and the abject failures. In other words they were “nice to haves” but not predictors of success. Further correlation studies revealed that the real success drivers were:

• Lead development
• Problem solving
• Qualifying leads
• Commits time and effort to ensure success
• Closing skills
• Opportunistic

Another phenomenon encountered in real estate sales, is new entrants to the business who start off brilliantly but leave after a year or less. This drives managers of realty companies nuts, but the answer is not difficult to find. Quite simply, there is a mismatch between the individual salesperson’s natural selling style and what is required in real estate. For example, account managers----the classic “relationship” salespeople----really thrive when they look after a small portfolio of customers or accounts with whom they build deep, and often lasting business and personal relationships. However, put them into a deal driven industry with a fairly short and intense sales cycle, they seldom last. They have the selling skills to do the job, but they simply don’t like it and move on.

The barriers to entry in real estate are low and, regrettably, many new entrants to the industry have little or no chance of surviving in a tough business. The resulting attrition rate is high and horrendously expensive, notably the costs of lost opportunity. Increasing hiring accuracy can have a dramatic impact on the profitability of any real estate company.

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Article Tags: academic interest, account manger, brain space, contact sport, critical roles, failure rate, fresh sales, good managers, insurance sales, learned skill, monumental waste, necessary talent, new business development, personality profiling tests, psychological theory, real estate sales, sales effectiveness, selection processes, typical interview, typical selection



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