The stakes are very high when it comes to hiring salespeople, says Consultant Joseph DiMisa. It isn’t just a matter of salary and training—it can mean an average of $2 million in lost sales.
And it’s not just dollars, adds DiMisa, who is senior vice president and the head of the Sales Force Effectiveness Practice at Sibson Consulting. Your salespeople are the company’s ambassadors, the conduit to the customer, usually the first impression, and maybe the only impression. You don’t want the wrong people in those roles, DiMisa says.
Typical cost to hire a new salesperson is about $15,000 in hiring costs, plus $20,000 in training, plus an average first-year salary and incentives at $75,000. Then, take the average quota for a high-tech sales rep—$1.5 to $3 million with an average of $2.3 million.
Face it, making a mistake in hiring will cost the company over the course of a year about $2.1 million.
A great hire can make a critical difference both in terms of revenues and the morale of a sales force, says DiMisa.
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What Is Forecast Over the Next Year?
How much do your companies plan to increase or decrease sales head count over the next year? Overall, companies plan to increase sales force head count by an average of 4%. Approximately 15% of companies plan to increase head count by over 15%.
And, who are your competitors looking for? Your top people and especially, your employees who may be looking to move to more growth-oriented industries.
Why Is It Hard?
Why is it so hard to hire the right people? DiMisa asks. Why can’t everyone do it?
People don’t know where to start, he says. Hiring is often done by the salespeople with limited HR support.
Those salespeople are successful because they act on gut; they “shoot, fire, aim” and hire someone before they have thought through what the person will do and how the person will integrate into the system. There’s no strategy, and often they hire someone they know.
Companies Play a Trick
One trick that DiMisa is seeing is companies who set salary benchmarking targets at 60% to 75% of market—“We’re going to pay at 75%”—to attract people paid at market. But these companies are also setting quotas at 75% of the market—a little bit of a trick, DiMisa says.
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Mistakes Organizations Make
DiMisa points to the following mistakes that hinder good hiring:
- Indistinct value proposition to attract candidates. The organization doesn’t know what is important to the people it’s trying to hire.
- Insufficient use of technology and integrated processes to execute the hiring program.
- New demands that aren’t planned for. For example, mega-hiring for big launches, products changing, or the company moving to services environment.
- Wrong metrics and goals: For example, valuing cost per hire vs. quality of talent and timeliness of hires.
- Blindness toward nontraditional candidates and candidate sources. There are many new sources, but if you are using legacy processes you won’t find many people.
- Inadequate prescreening and evaluations for large candidate pools. Many employers are not strong on how to evaluate talent.
- Treating all searches as equally important.
- Lack of planning, which leads to reactive search and desperation hires.
A lot of companies that used to use search firms have taken that role in-house, but they just don’t have the competencies and skills to do it well.
HR often falls short because they aren’t conversant in language of sales business, but salespeople fall short because they aren’t familiar with hiring policies and they don’t know what they are looking for.
In tomorrow’s Advisor, DiMisa shows how often the problem with turnover isn’t pay but arises in the recruiting and onboarding processes, plus we introduce PayScale, Inc.’s free guide to compensation plans, Bring Back the Sizzle: PayScale’s Guide to Comp Plans That Get Workers Fired Up (In a Good Way).