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!