Hiring the Wrong Salespeople Costs More Than You Think
By Ira Wolfe
The costs of hiring the wrong salesperson stack up. Combinations of time, money, and resources are invested with little or no return on the employer’s investment. Few people would argue otherwise. In fact, according to an Undercover Recruiter article, the average bottom line cost of a bad hire is $840,000 over the course of two and a half years. Hiring the wrong salesperson is even more costly than most positions.
No list of hiring mistakes would be complete without mentioning the immeasurable costs of turnover, missed sales goals, lower revenues, lost opportunities, and poor customer satisfaction. However, there are lesser known costs associated with poor hiring such as these four very expensive, hidden, and non-recoverable costs associated with putting the wrong salesperson on your payroll.
Higher training cost.
Organizations that hire inexperienced salespeople must train every new hire on the art of selling as well as the ins-and-outs of a specific business and industry. In addition, an inexperienced professional might lack the essential business acumen to be effective in their role as a salesperson. This is true for both transactional and consultative sales. While the long-term ROI of training is unequivocally positive, the initial investment is high. Unfortunately, when a new hire is terminated or quits, those tremendous training costs are flushed down the drain. To avoid the loss, many organizations foolishly delay training until a new hire “proves” him or herself. “Why train some Millennial newbie when all they do is rush to my competitor after I invest all my money?,” many managers ask. That, my friends, is a retention and employee engagement problem, especially if the new hire benefits from the training. Training is a worthwhile investment for the right people, but huge hiring costs can never be recouped from a bad hire. A positive ROI on training begins with an effective screening and selection process.
2. Higher cost of customer acquisition.
Acquiring a first time customer costs four to 30 times more than the cost to get them to purchase your product or service a second time. What does this have to do with hiring the right salesperson? Relationships matter. Customers won’t build a relationship with an unknowledgeable, unskilled, or unlikeable salesperson. If a good salesperson leaves your company, it is likely that they will move to a direct competitor and their customers will follow. A salesperson with the right attitude, skill set, and shared values will perform better, sell more, and stay with your company longer.
3. Loss of intellectual property (IP).
The costs associated with the loss of intellectual property (IP) are likely the most troubling and expensive. Surprisingly, these costs are the most ignored. In fact, most managers don’t even consider IP loss costs when calculating the value of a hiring mistake. In addition to product knowledge, a salesperson who leaves takes with them competitive intelligence. Like a quarterback who can anticipate every move of his former team’s defense, a salesperson can outmaneuver his former employer’s sales strategies and tactics. However, I’m not just referring to the salesperson walking away with your proprietary trade secrets either. Intellectual property also includes the customers whose loyalty belongs to the salesperson, not the company. You might be protected by a non-compete agreement, but legal fees and the ill-will caused often do not justify the loss. The loss of IP is intangible too. Every time a salesperson leaves your organization, a little bit of knowledge and expertise leaves with them.
4. Damaged company brand.
Hiring mistakes reflect badly on a company’s image. Customers expect you to put your best foot forward, and hiring the wrong salesperson can cause customers to lose confidence in your products or services. Lots of hiring mistakes mean lots of unhappy customers, and this will leave them questioning how much you and your company really care. It takes time for a customer to “train” a salesperson or teach their new company representative what kind of service and value they expect. Selling is a two-way partnership between customer and salesperson. It takes time to build synergies until the relationship is firing on all cylinders. When one half of a partnership is always in transition or not performing up to par, the partnership suffers. Customers will consider your first mistake an accident. They might suspect the second mistake to be a pattern. But the third hiring mistake makes it clear that you don’t know how to hire and are a bad business person, or worse–you don’t care. At that point why not just call and introduce your customers to your competitor?
Ira S. Wolfe is a nationally recognized thought leader in talent management and an expert in pre-employment assessment testing, workforce trends, and social media. Wolfe is president of Success Performance Solutions (www.succcessperformancesolutions.com), a pre-employment and leadership testing firm he founded in 1996. He is the author of several books, including Recruiting in the Age of Googlization. He can be reached at email@example.com.