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How Much Does A Poor Sales Performer Cost? We’ll Help You Do the Math!

How Much Does A Poor Sales Performer Cost? We’ll Help You Do the Math!

Once upon a time, bad performers were measured in terms of cost of turnover. Those days are gone. The cost to source, recruit, interview, select and train are definite costs that still exist, but they are miniscule compared to the real pain today’s sales managers feel.  For the sake of building an ROI in this case, we are going to focus on numbers that salespeople understand, revenues. Bad performers cost the company big time – not only because of cost of turnover, but because they don’t generate the revenues expected/needed. In many cases, poor performers take up 80% of the sales manager’s time, but produce little revenue, and are often difficult to manage. The question that begs is, How much does a poor sales performer cost?  Consider the following equation and you will begin to see the impact a poor sales performer (bad hire) has on your organization:

Calculate the revenue averages for the participants in each sales group: Top, Average and Bottom Performers

The purpose is to help clearly define what the difference is (in financial terms) between a bottom, average and top performer in revenues.  The following is a pretty typical scenario:

Top Performers Average = $800,000/sales rep

Average Performers Average = $600,000/sales rep

Bottom Performers Average = $400,000/sales rep

In this scenario, the bottom performers generate just $400,000 in sales, compared to $600,000 in sales for the average performers.  This is a difference of $200,000.  So, the reality is that every time you make a bad hire, it costs the company at least $200,000.

Note: we are not even taking into consideration the difference between bottom and top performers. The reality is that if you can move the needle just a little with every new hire, the impact is substantial. In other words, the numbers being used are conservative in this case, but the point is clear, every hire, when it comes to the sales force, is critical.

Annualized Lost Revenue

If you take this concept and apply it to the sales organization as a whole, over one year, the numbers become large very quickly.

50 New Hires Per Year

25% are Bad Hires = 13

13 Bad Hires x $200,000 each lost revenue = $2,600,000 in potential lost revenue!

The good news is that success in sales can be predicted, and Chally is the best there is. The reality is, if we only help prevent your organization from making 1-2 bad hires this year, or if we can help you better realign your existing team, the results more than easily pay for the cost of partnering with Chally. The better news?  Research shows we are accurate in our predictions on average 75-80% of the time, and that can translate to millions of dollars for our clients on an annual basis!

How to Interview Sales Candidates to Get the Real Picture

Chally realizes that more emphasis is put on the interview than any other selection aspect. Here are key factors that experience has proven to be valuable. We’ve also included a short, practical interview example to assist in interview design.


Planning Interviews

While interviewing may be the most common of selection techniques, it is effective only if it focuses on factors that are truly observable. The format should be structured and applied consistently across all candidates. An interview:

Can:

Offer an avenue to explain unclear background data provide an opportunity to evaluate presentation skills, poise, appearance, and the ability to think on one’s feet furnish an opportunity to check stress tolerance, planning, and some learning ability

Can’t:

  • verify honesty or integrity
  • attempt to separate between real motivation and the present need for a job
  • provide totally objective and valid proof of non-bias for legal purposes (in most cases)

Conducting Interviews

Determine the job-relevant characteristics and skills necessary to do the job successfully, and define the purpose of a specific, upcoming interview. This will depend on where the interview is positioned in the selection process. Earlier interviews typically screen people out while later interviews focus on confirming a positive impression which could lead to an offer.

Prepare the questions to probe the candidate and determine the match between the person and the job. Start the interview by greeting the candidate in a professional manner, establishing rapport, and stating the objective for this specific interview.

Allot time to discuss each key area you need to talk about before you discuss the job requirements and your company. The amount of effort you spend on “selling” the job and the company should be determined by how closely the applicant appears to match your requirements.

Finally, ask the applicant if he or she has any questions and respond accordingly. Finish by telling the candidate the next steps and by reviewing what to expect.


Getting The Real Picture, Put the Candidate at Ease

This is often called a “permissive environment.” By helping the person to feel free to talk, you create the opportunity for the applicant to provide more candid responses.

Listen – Don’t Give Away the Show

The key point of a selection interview is to gather information, not to sell. Even naive and inexperienced candidates can follow interview clues projected by a talkative interviewer, allowing them to package their answers. Practice the 80/20 Rule: listen to the applicant 80% of the interview; talk 20%.

Silence – Don’t Be Afraid of It

Talking may be either communication or a defense. Too much of it on your part is an indication of your own discomfort with silence. Likewise, the need for an interviewee to talk too much indicates discomfort with silence, a characteristic that can hinder future success. No one can listen while talking.

Offer Opportunity – Not Just Security Good employees tend to live on their own merits and expect to be rewarded as a result. They prefer more opportunities for growth, not just long-term security. They may be unwilling to commit to guarantees for employment tenure.

Look for People Who Exhibit the Courage of Their Convictions People are better suited to persuade others to buy an idea or product in which they strongly believe. Even the best actor cannot feign a false belief in the product all the time. A lack of conviction leads to cynicism and, eventually, personal problems for the candidate.


A Structured Interview Example

In terms of overall impact on the value of an interview, “asking the right questions” is second only to understanding what you are looking for in the first place.

For an in-depth interview, we at Chally advocate a
“Cone Approach.”

cone_approach

When using this approach, the interviewer starts by asking open-ended questions which focus on a characteristic sought in the candidate.

As you can see in the following diagram, coning questions often start with the broad inquiry, “tell me about.” For example, an opening question could be, “Tell me about yourself. How would you describe yourself in a work situation?” As the candidate answers, listen for areas of interest, and begin focusing downward in the cone. In our example, a more narrow, second-stage question might be, “What have been some of your biggest mistakes?”

This last question would lead you to the bottom of the “cone” with a very specific follow-up question intended to pinpoint what was learned from key mistakes as in, “What did you learn from _____ (one specific mistake)?” In this example, what you are looking for is a person who owns his or her mistakes and can persevere in spite of barriers. Having debriefed what went wrong in order to learn for the future, your candidate has taken responsibility for fixing the situation. It is this final point in the inquiry where you can start forming conclusions about the candidate, drawn from specific answers to your pinpoint questions.

“Chally’s assessment quite often highlights candidate traits and characteristics that can be probed in more detail during subsequent interviews.” Vice President, Sales


A Sales Example:
As we defined earlier, successful performance is supported by a number of critical skills. Using a Cone Approach to evaluate customer relations skill could flow as follows:

General: Describe a long-standing customer relationship you’ve had.

Focus: What tactics have worked well to help maintain the relationship? Look for:

  • a recognition of situations which may become problems in the future
  • a focus on building goodwill
  • pro-activity in asking the customer for ways to improve
  • not allowing previous problems to bias how customers are treated now

Specific: On a scale of 1 to 10 (10 = high) how would you rate your ability to nurture customer relationships and why? Look for:

  • willingness to listen to customer’s challenges and help problem-solve even in unrelated areas
  • helping customer stay abreast of changes that may be of benefit
  • objective and cool-headed approach; not trying to impress for its own sake

What To Avoid

In the United States, it is illegal for employers to disqualify job candidates based on a variety of personal characteristics. For example:

  • Questions dealing with arrests
  • Questions asking about citizenship
  • Questions concerning a spouse, the spouse’s employment or salary, children and child care arrangements, dependents, or pregnancy
  • Overly specific questions not likely to affect job performance, such as health questions
  • Questions dealing with marital status
    Questions about type or condition of military discharge
  • Questions about whether applicants own or rent their own homes

“A pre-employment assessment profile by Chally can radically increase your chances for success when recruiting and hiring … low-priced evaluations, while interesting, simply don’t offer the in-depth analysis provided by Chally.” Business Owner