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5 Unforeseen Financial Pitfalls of Making the Wrong Sales Hire
If you’re reading this, my guess is that you’ve already made the wrong sales hire (now or in the past) or you’re trying to prevent yourself from making a bad hiring decision. Regardless of what brought you here—welcome. This post will outline the painful cost of making a bad sales hire, and help to safeguard yourself from a hiring disaster in the future.
Why You Might Be Making the Wrong Sales Hire
Simply put, the recruitment and selection process can be tricky. This is increasingly so when it comes to sales recruiting, as your sales team is instrumental to your company’s success.
When it’s done well, companies can focus their time and energy on growth. Done poorly, however, and the company is sent reeling, trying to address the consequences of a bad sales hire.
So, how do you avoid this occurrence, especially with all of the modern information on said topic?
(Seriously, a simple Google search for “Cost of Making the Wrong Sales Hire” results in about 587,000 URLs.)
Not to mention, if you receive bad advice, you might end up carrying out that bad advice repeatedly, all the while expecting the positive predefined result. Einstein’s definition of insanity is especially true in this scenario.
Well, I’ll save you the pain and headache. After 20 years in sales, recruiting, and HRTech, I understand the pitfalls of making the wrong hire, and I know how to prevent them in the first place, too.
If you want in on the details, read on:
1) Loss of Time
Getting your hands on a new employee is a significant investment of time. From figuring out what you really need to evangelizing the role to sourcing to interviewing and negotiating, every step of the process takes time – especially when properly executed.
So, what happens when you invest the time and the person is clearly not the right fit?
At that point, the time you spent acquiring and considering this salesperson is a sunk cost—and a significant one, at that.
If your company has 249 employees or less, it will take just under 20 days for you to interview and identify a new hire. If you’re a larger company with 1,000 to 9,999 employees, hiring will take 26 days on average.
This is what makes the further loss an insult to injury.
While the employee is at your company, your leadership team will lose time training them, and your experienced employees will lose time trying to fix their mistakes and shortcomings.
After a bad sales hire, 36% of their respondents reported a negative impact on employee morale along with a 22% negative impact on client solutions.
Think about it from a leadership perspective, that same study indicates a 41% loss in worker productivity, that’s a lot of unexpected management time that could’ve been avoided in the first place.
At the end of the whole ordeal, your company—from executive leadership to your sales floor— will spend significantly more time trying to solve the additional problems the employee creates than on the productive tasks at hand to make it truly “rain”.
2) Loss of Money
Although it’s cliché, the phrase “time is money” is spot on, here.
On the low end of the cost spectrum, it’s estimated that losing an employee costs the same amount of six to nine months of that employee’s salary.
From all of my research and firsthand accounts of the damage that can be done, this is a conservative estimate.
If a 50K loss has you panicked, the unfortunate reality is that losing a sales hire can cost much more.
Real Life Example:
I recently had a client that was in desperate need of help. Sadly, they were in quite a predicament. Their dilemma? They brought on two of the wrong senior-level sales people that produced ZERO amongst many other issues.
In less than a year, a bad sales hire cost their business $3MM! Yikes…
3) Loss of Productivity
As your army of top performers spend more time trying to negate the damage of the bad sales hire, their numbers can suffer tremendously.
With everyone in damage control mode, your employees will be doing less of what they should to support your bottom line—further increasing the situation’s financial burden.
Remember the painful $3mm loss I mentioned earlier?
Well, unfortunately, that financial cost wasn’t the only damage the company suffered. When their two senior-level sales executives failed to deliver, their sales pipeline turned into a communication vacuum, of sorts.
Without the proper people in place, the company had to pull other individuals from their roles to provide coverage. As these employees tried to keep sales up and manage their old tasks, they were stretched too thin.
After 9 long months of pain, the company was able to cut ties with their “mis-hires.”
Post-Mortem – It took a few additional months to determine what they needed from their lessons learned, a month to engage with yours truly and then 45 additional days to make their hire.
Overall it had set them back 3 quarters worth of anticipated productivity and results. Try explaining that to your board…
In both instances, the outcome isn’t what it should be.
4) Impacting the Client
When many look at trust in relation to a bad sales hire, they look at employee trust. If your leadership team brings someone on that isn’t a good fit, other members of your sales force might lose confidence in your ability to hire successfully—and understandably so.
What’s often overlooked, though, is the impact this has on the client experience and their trust.
Here’s an example: A growing company wanted their sales people to have an individual book of business that generated a steady stream of sales within the first 90 days with a growth plan over the course of the next 18 months post-sale.
In their pitches, every salesperson committed to proactive communication to stay ahead of any potential roadblocks, clearly illustrating a rock-solid implementation plan, and specific milestone/checkpoints to ensure results.
Unfortunately, the company hired the wrong people for the job. The sales people they hired had no experience creating ongoing relationships with their customers.
They were all very successful in short-term/transactional sales, but when it came to nurturing a relationship to truly “land and expand”, the majority struggled and then some.
Needless to say, turnover skyrocketed, and as the company scrambled to fill the roles and keep up, their customers had no clue who to contact amongst many other issues.
As you might have guessed, this company lost many high-profile clients because they over-promised and under-delivered. Ouch!
5) Decline In Employee Morale
One of the most important things a company can possess is genuine brand equity—internally and externally. Although many factors can influence your brand’s image, one surefire way to create chaos is with a revolving door of salespeople.
Internally, a bad hire influences brand equity negatively because it leads employees to question where the company is going and the perceived value of the sales organization.
Well-suited employees often have a lot of common ground that creates cohesion producing a well-oiled sales machine. When a new employee is added to the mix and negatively sticks out like a sore thumb, other employees might feel that your organization is moving in a different direction—one that they might not fit into.
Additionally, if your former employees take to a review site to outline their negative experience, candidates will read and heed their review—potentially leading your next best salesperson to turn down the job with your company. Fact, bad news travels fast.
News of bad experience reaches more than twice as many ears as praise for good experience.
3 Takeaways to Avoid a Bad Sales Hire:
- Focus on what you want. After hearing about all of the financial downsides of a bad hire, your first reaction might be fear. There’s so much that can go wrong in the hiring process, but if you only focus on the negative, you’re never going to recruit the salespeople you need to succeed.
Understand what makes a salesperson succeed at your specific company, and then recruit someone off that baseline. Scorecards are your friends along with a well-established repeatable and measurable hiring process.
- Spend time training and coaching. All too often, companies write off a high turnover rate, but this shouldn’t be the case. A lot of the time, employees become bad hires because they are not onboarded, trained, or coached properly; they don’t understand how to have success in the role, so they become upset and unsuccessful.
Here, the best offense is a good defense. If you don’t want to lose employees and experience all of the financial losses associated, take the time to set them up for success. It’ll cost you up front, but the long-term savings will be worth it.
- Keep everyone up-to-date. We live in a dynamic world, but we don’t always cater to the ever-changing nature of our lives. Companies are often busy trying to navigate the current market overall and competing priorities, so taking the time to disseminate the details to their sales team often falls to the wayside. Proactive communication and open dialogue is your friend, take the time to do this and you’ll reap the rewards.
So, now that you know what can go wrong with a bad sales hire and how to avoid it, how will you move forward? Don’t do the same thing over and over again and expect a different result—begin to implement sustainable changes that will ultimately create a world-class sales organization.
Also published on Medium.