In the UK, 27% of companies say a bad hire costs more than £50,000, with the impact of a wrong decision seeping into everything from overall employee productivity through to lost sales revenue.
Yet despite this financial risk, a recent report from the Recruitment & Employment Confederation reveals that UK businesses are failing to find the right person for two out of five roles.
When it comes time to replace or recruit for a new role, some sales managers baulk at the cost of recruitment. But in truth, the recruitment fee is a drop in the ocean compared to the cost of hiring the wrong sales person. The true price of a bad hire goes far beyond recruitment – here’s why.
Upfront costs hit hard
The cost of any hire starts with the obvious advertising and hiring fees, but also includes time invested in interviewing and selecting candidates. Every hour you spend searching for the right person is an hour away from your core sales role, which is potentially an hour of lost revenue. According to a 2014 Oxford Economics report, businesses spend an average of £5,433 on logistical costs associated with hiring, which can quickly add up if you are having to constantly recruit to replace poor performers.
After the logistical costs comes the investment you must make after selecting your hire. Salary, training expenses, laptop and phone can all seem like a hefty initial outlay, but pale in comparison to the hidden cost of hiring the wrong sales person.
Time is money
As touched on above, time is a significant factor in any recruitment process. This is particularly true of sales, where any time a sales person isn’t covering territory can be detrimental to the overall business.
The burden of time in the recruitment process was a constant theme throughout our recent Quarterly Sales Dinner. Consider the opportunity cost of not having an effective salesperson on territory during the time it takes to train your new hire up effectively – and then consider the impact if this new sales person doesn’t end up being a good fit. One of our guests told us it can take them up to a year to break even on a hire, and even longer to see a return on investment. This shows just how important it is to get the hire right first time.
The pressures of time are echoed in the Oxford Economics report, which found that workers take an average of 28 weeks to reach optimum productivity. The report suggests that this has an associated cost of just over £25,000 per employee, making it the most significant cost factor when recruiting. Add in the cost of your own time to set up briefs and advertising, sift through CVs and conduct interviews and meetings, and you’re looking at an investment of tens of thousands of pounds. All the more reason to get it right first time.
Productivity loss comes with a cost
A sales person who doesn’t hit target, isn’t motivated or doesn’t fit in with the company culture can impact your business in many unexpected ways, one of which is in your team morale. According to CareerBuilder, nearly a quarter of UK businesses report a loss in overall productivity as a result of making a bad hire.
Sales people who struggle to meet target and require additional support often lead to their team members picking up the slack, which can result in resentment and disruption. If it comes time to terminate the bad hire, your remaining sales people may question why the person was let go, how it affects their workload and what impact it will have on their own performance and place in the business. As many sales targets are team-based, the impact of having someone who consistently fails to reach their numbers can be devastating not only to your business bottom line, but also the morale of their fellow team members.
In line with this, more than a fifth of UK businesses who responded to the CareerBuilder survey reported a negative impact on team morale as a result of hiring the wrong person, which could potentially lead to some of your more valued sales people thinking about leaving themselves.
Clients at risk
The loss of clients is almost impossible to avoid in the sales industry, but it can cut particularly close to home when that loss is triggered by a departing sales person. Half of all employees admit to taking corporate data when they leave a job, according to Symantec, and in sales this data is particularly precious.
Each time a sales person is let go or quits, you run the risk of them taking clients with them. From this, you may experience a sales slump as a direct result of the lost clients. A poor hire can also risk accounts and clients while they’re on the job, by not closing deals, not following up on leads, or simply not being up to the task.
How to get it right
The cost of hiring the wrong sales person couldn’t be clearer – so how do you get it right?
Start by taking inspiration from your current sales superstars and identifying the exact skills and behaviours you’re looking for. At our Sales Dinner, one of our guests recommended focusing on what you want to achieve over the next 12 months, as opposed to relying too much on the experience a sales person has.
The interview stage is crucial, and according to the Recruitment & Employment Confederation, four in ten business founders think their own interview techniques need improvement. Identify early warning signs you missed in previous bad hires, and keep a list of key interview questions you need to be asking each potential sales person. Research by Leadership IQ has found that 82% of interviewers say subtle clues had been given towards negative work habits and tendencies during the interview process, so trust your instincts and look out for emotional intelligence and teamwork indicators, as well as the core skills and experience required for the role. Once you have made a decision to hire a new sales person, make training an absolute priority – someone who seemed good initially can fail to reach their potential without the proper training, while someone slightly less experienced may thrive with the right support. Tailored training programmes can help to get this right.
Finally, avoid hiring mistakes by using the right resources to make the best hires. At BMS, we specialise in sales and know how important it is to find someone who’s a perfect fit for your team. Contact us here to start a conversation about how we can help.
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