The Sales Manager’s Most Important Decision

Imagine this situation. You are competing against two other firms for the same piece of business. One firm is the 900-pound guerilla in your market and the other is a competitor of about the same size. You have the best technology, the big company has the most market share and brand recognition and the third competitor has the lowest price. Who gets the business?

The answer is extremely predictable. The company that gets the business is the one with the best salespeople. Good salespeople win more deals regardless of the circumstances. Are you going to win the next time you find yourself in this position?

The best opportunity you have to impact the productivity of your organization is every time you make a hiring decision. Good hiring decisions propel you to success. And, all the managing, coaching, systems, training and technology can NOT help you recover from a hiring mistake.

Over and over again we see examples of companies with inferior products, over-priced products and poor reputations win the business. Why? Because they have the best salespeople. If you can fix only one thing in your company, upgrade your sales force and you have the best chance of succeeding.

Most sales organizations suffer from the 80-20 rule. You get 80% of your revenue from 20% of your salespeople. This applies to hiring as well. For years I have listened to sales managers talk about hiring five and keeping one good person. This is a terrifically costly way to do business. Let’s translate some of the costs so you can see just how much this flawed strategy is costing. Here’s an example:

You hire John to sell in your Seattle office. After a month it doesn’t look good. After 90 days it is really bad. At six months you give up and let John go.

This all too familiar scenario happens time and time again. Unfortunately, you get lulled into believing that all you lost was six months of salary and benefits. Nothing could be further from the truth. In addition to salary and benefits you lost six full months of sales opportunities, management time, administrative costs and training costs.

And these are just the obvious costs. Some of the hidden costs you may not have considered are vacancy costs, replacement costs, customer costs, separation costs and employee morale costs. The final cost is loss of competitive edge. Just think of all the deals you lost because you were outsold. (Visit www.salesrephire.com to use the Real Cost Calculator to determine your real exposure)

Let’s look at a salesperson with a $40,000 base salary and an annual quota of $500,000. Salary and benefits for six months cost $27,000. It cost you $5,000 to recruit the person. You spent $3000 on training classes and materials. And those are just the hard dollar costs.

Your soft costs begin with lost opportunity. If John had been successful, how much revenue would he have generated? You have to add 50% of your annual quota to the total for lost opportunity. (Cost $250,000)

How about your time? Would you have been more productive using your time working with someone who was generating revenue? (Cost 15% of your annual compensation ($17,000) Make sure you add separation and administrative costs. (Cost = $3000)

And the two real intangibles in this equation are employee morale and customer cost. Your good employees resent having a non-performer on the staff. It makes them look bad and they have to work harder as a result. And, there is cost with your customers as well. They have to deal with a sub-par person, which can sour the relationship. (Cost: What is the cost of one lost customer?)

Your cost of one hiring mistake is roughly $305,000 without counting the cost of low employee morale or lost customers. And here is the really sad part, if you do make this hiring mistake, you have to do it all over again doubling all the numbers! How does $610,000 for each hiring mistake sound?

Now you can see why the “hire a bunch and keep a few” staffing strategy is a mistake. The good news is you are on your way to fixing the situation as we speak. The first step in upgrading your sales force is to recognize the problem. Next, you have to put a great recruiting and hiring process in place that gives you the highest probability of hiring top talent.

A great way to get started is to invest in your education. The more you know about recruiting and hiring good sales people, the better chance you have of building a winning sales team. Reading books and attending workshops will help you expand your knowledge base. If you are not expanding your knowledge base, when you compete against someone who is, the outcome is fairly certain.

Once you realize the economic impact on your business, you’re ready to take the steps necessary to get on track. Recruiting and hiring top sales talent has to be your top priority.

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