The cost of poor sales selection

Have you ever done the math on how much sales recruitment costs you, especially when you get it wrong?

If you are like most managers then chances are you haven't. So let's consider the costs, overt and covert, involved in sales recruitment.

If you don't know it already, sales recruitment is one of the toughest assignments around. I know this firsthand, as I was in this role for over 8 years with a leading consultancy and recruitment company. During this time, I interviewed about 8,000 sales people face-to-face in the technical, industrial, medical, and scientific industries. Remember, this is not counting all the resumes I screened manually as my experience was pre the internet and we had to do everything manually - no ‘word search'.

My time in sales recruitment gave me a great grounding and honed the skills to select good sales performers but not everyone has had the chance to practice. It was a fascinating social study on what makes a great sales performer. Upon reflection, it was a catalyst for my research into illuminating and defining the elusive qualities that make for highly successful sales people and the development of IP specifically in the Australian Sales Competency space.

It also led me to map out and demystify the sales recruitment process by putting in place relevant content and a structure people can follow. What this structure and the right selection content do is place control back into the hands of the managers who are responsible for recruiting sales people for their businesses. It also made me plainly aware of the costs involved.

The problem is that, for most managers or business owners, sales recruitment happens sporadically and too many managers still use unstructured recruitment practices that are the least predictive of sales performance. Most are just winging it, relying on gut feel, and never getting enough experience to give them something to fall back on when they need it.

It's recruitment by hope, recruitment by chance.

Taking this ad hoc approach adds to the cost of sales recruitment because even if you get it right you don't know why you got it right, therefore making it difficult to repeat the process.

With everyone being so focused on cost management its also important we do the math on the cost of sales recruitment and the cost of getting it wrong. We do this so that when you look at your sales recruitment you can make sure your actions will give you a better return on investment and that you hire the right sales people.

Any action we do has a cost (monetary, energy, time, etc.) associated with it. Whether that action propels us to profit from it or costs us more than we intended is the issue at hand. Getting sales selection wrong can cost you more than you have probably imagined.

What are the OVERT and COVERT costs associated with these issues?

• Keeping a poor sales performer on too long who is not producing and not having a better performer to replace them (Note to self : you should always be on the look out for top sales performers, keep a list)
• Sales territory vacant for too long
• Poor fit: Not selecting the right type of person for your business culture, strategy and task
• Taking too long to make selection decisions thus losing good potential recruits
• Little or no structure to your sales selection process
• Using the wrong recruiters to get you the right people (sadly too many recruiters do not know what a ‘good' sales person looks like)

All these equal lost revenue, lost profits, lost market share, lost customers relationships, customers business drying up, loss of reputation, internal disharmony, team issues, etc.

Let's now look at it in stark terms:

Case study: A sales person who earns a base of $60,000 per annum plus extras stays with a Company for 3 months and doesn't work out:

Overt Financial Costs
(based on a conservative estimate)

• Advertising and Recruitment Agency costs = $10,000+
• Candidate travel costs (if applicable) = $500
• Induction Training costs = $5,000 (in-house and/or formal/external training)
• Salary and benefit costs = $15,000 plus super, work cover, etc.
• Additional costs (car/car allowance, phone, travel, etc.) = $3,000
• Severance pay (2 weeks notice) = $1,600
• Manager's time to recruit 40hrs @ $60/hr ($100K salary) = $2,400
• Administration costs: $2,000
• Sales lost due to poor performance (2.5 times salary is the average) = $37,500

Estimation of Overt Cost Total for 3 - 4 months = $67,000

Then add:

Covert Financial Costs

• Potential litigation costs = ?
• Lost sales opportunities due to vacant territory = ?
• Manager's coaching time = ?
• Team morale = ?
• Customer loyalty = ?
• Impact on Reputation = ?

While I may have missed some things or overestimated others, the math clearly shows that getting sales recruitment wrong is very costly.

I suggest you do an audit and check out where you have made the most of your actions and where you may need to tighten up.

Remember that its all in the preparation and execution of the right activities and make sure you act wisely and in your best interest.

If you want further information how to how to structure your sales recruitment practices go to Getting Sales Recruitment Right

Remember everybody lives by selling something.