Good Hiring Makes Good Cents

By Scott Fuhr

Since a single mistake in hiring can potentially cost you $616,000, here’s how to hire the most productive salespeople from the start.

Because most sales candidates are well versed in selling themselves to just about anyone, cutting through the performance art of the hiring interview presents a thorny challenge for sales managers. When it comes to selecting the highest producers to fill open sales positions, a sales leader must be able to cut through some of the smoke and mirrors of the candidate interview process.

Traditionally, great interviews often lead to extended offers based more on gut feeling than on knowing candidates’ prior behaviors that drove their true past performance. If sales managers fail to determine those behaviors before hiring, they risk hiring the wrong salespeople, which could lead to an immediate negative impact on sales and revenue.

In reality, it is not easy to screen for candidates who are missing such additional skills and behaviors as being process driven, assertive, empathic, communicative, methodical, and disciplined – all required for long-term sales success. Even if specifics about a candidate’s ability to achieve sales targets in past positions is provided by the candidate in the interview, those specifics require, at minimum, corroboration by former managers.

The Impact of Hiring

Every hiring decision is important and worthy of careful consideration. Here are some of the significant and long-lasting implications of hiring a salesperson.

Salespeople have a direct tie to revenue performance. Hiring the wrong person means missed quotas with immediate, negative bottom-line results.

High sales turnover leads to diminished impressions. The sales rep is often one of a select group of professionals who serve as the organization’s face. High sales turnover can lead clients to assume that other areas of the firm, such as customer support, might be unstable.

Poor hiring decisions have a long shelf life. Consider that it can take a few months to fully train a new salesperson, with several more months needed to recognize substandard performance, particularly in industries with long selling cycles. By the time any performance issues are documented and corrective action is taken, a year could have passed.

There are several tools that help companies assess the total cost of making a poor hiring decision, from capturing all the costs associated with processing a separation, to hiring and training a replacement, to losing productivity and business. For a sales position, the most thorough calculators also point to the costs associated with the following:

  • net profit on lost sales;
  • time sales support spent being distracted by the situation;
  • customers alienated by the failed salesperson;
  • prospects alienated by the failed salesperson;
  • lost referrals from customers and prospects, who are now alienated;
  • wasted expenses for travel, cars, laptops, and phones.

The Hay Group, a management consulting firm, takes a conservative approach by estimating that the cost of replacing employees ranges from 50 to 150 percent of the position’s salary. Considering a median salary of $88,000 for a technology sales representative in Philadelphia, for example, that approach would equate to a replacement cost ranging from $44,000 to $132,000; however, this expense is just one part of the total picture for sales positions.

Peak Sales Recruiting, a leading executive search firm for sales positions, calculates the cost associated with hiring a bad salesperson as nearly seven times the annual salary for the position. This scenario assumes that the person achieved 50 percent of his or her quota in the first year on the job and had a base salary of $100,000 and took into consideration the cost of hiring, compensation and benefits, travel and expenses, training, overhead, severance at time of departure, wasted leads, lost customers, and lost margins. For the technology sales representative mentioned above, the cost of the bad sales hire would be a whopping $616,000. What company can afford such a mistake – or more than one?

In addition, results from a recent poll taken from the best-practices Webinar “The New Science of Hiring Top Sales Talent,” hosted by Selling Power, showed that 77 percent of sales leaders measured sales turnover costs by including the salesperson’s salary, the cost of lost sales while the position is vacant, and related general costs calculated by the human resources department. So no matter who’s doing the calculating, the cost of the wrong sales hire is high on the negative side of the equation, while the benefits of the right hire are always high on the positive side.

A New Way to Find Sales Talent

There is a new approach to hiring that allows sales directors to capture the real story about candidates’ behaviors and past performance directly from those who have worked closest with them – their references. Observations about a person’s abilities and performance over time are available from the candidate’s managers, peers, subordinates, and customers. Yet meaningful feedback has become increasingly difficult to obtain from these references. In many cases, they are hard to reach by telephone, and conversations often reveal little more than prior employment dates. In fact, research from the Society for Human Resource Management shows that 96 percent of human resource professionals do check employment references, yet fewer than 25 percent of those checks are able to produce information beyond simple employment verification.

The good news is that the game is changing, and sales directors can leverage this change to their advantage with a new opportunity to uncover pivotal information about sales candidates before they are even interviewed. With newfound anonymity using Web-driven technology, sales leaders can take five minutes to gather feedback from a candidate’s references through a survey that is delivered to the reference over an electronic platform. This platform preserves the confidentiality of the references and releases all parties from liability threats.

As a result, references will report on your sales applicants’ behaviors and skills in candid detail. More than 85 percent of references respond to a reference request when asked to do so through a confidential electronic survey. This method can enhance your partnership with the human resources department, or it can stand alone as part of your office’s sales recruiting process.

Adoption of these behavioral surveys is growing rapidly, and best practices for reference checking include using scientifically validated surveys that inquire about attributes and behaviors that correlate specifically with success in a sales role.

In fact, one such system from SkillSurvey has gathered multisource reference feedback from thousands of people (managers, peers, direct reports) for the position of sales manager alone. The feedback from these thousands of references (based on an average of 4.7 references per candidate) reveal that many sales candidates are prepared to contribute to your sales team’s success in the long term. Leveraging this reference feedback to hire a winning sales manager or sales representative for your team is now a best practice.

Ideally, these surveys should ask a reference to rate a candidate on these attributes:

  • ability to consistently meet or exceed sales goals;
  • persistence when faced with objections or other setbacks;
  • competencies in managing relationships after a sale;
  • determination in locating qualified sales opportunities;
  • ability to leverage technology for productivity, as with a CRM system.

When the surveys are administered prior to the final interview, the results can guide the interview itself, allowing the sales director to press further into certain areas. And the results can be easily reviewed across multiple candidates through a composite view. Sales directors can compare candidates on a variety of skills and behaviors to select the best candidate – before making an offer.

Reference feedback removes much of the guesswork from the hiring decision, providing lower turnover and higher revenue for the sales team. For instance, Fortune 500 firm Quest Diagnostics found that a reference-checking system utilizing these surveys resulted in a 90 percent retention rate for sales representatives during their first year on the job. This retention rate is likely correlated directly with Quest’s ability to gain insight into the quality of its sales candidates by leveraging feedback from references before hiring.

With this new tool, the hiring interview is no longer a shot in the dark but a matter of what’s really on the record.

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