What a Bad Sales Hire Can Cost You

It’s a struggle all companies face. Every year, bad sales hires cost companies millions and no company is immune. A widely referenced study by CareerBuilder suggests that 27% of U.S. employers responding to a survey estimate a bad sales hire costs them more than $50,000. Finding the right people is a challenge but finding the right sales professionals can make or break an organization quickly.

Although it is probably the most important business area that exists in companies around the world, the sales profession is also one of the least studied areas at colleges and universities. Many schools that excel at marketing do not offer sales courses as part of their curriculum. So is it any wonder that there can be some confusion when it comes to finding the most optimized way of hiring, onboarding, coaching, developing, and retaining salespeople? Even the most committed talent management strategies can fail and companies find themselves paying dearly. Sadly it is generally reported that the cost of recruiting, onboarding, and training a salesperson equates to once or even twice their annual salary.

Too often I see salespeople that rotate in and out before they can produce results for a variety of reasons. Some companies view sales people as commodities and churn through them quickly. Some sales professionals exit on their own if they sense poor leadership or sales management, little potential or uncover a landscape that wasn’t what was promised in the interview. The Harvard Business Review points out that as much as 80% of employee turnover is due to bad hiring decisions. Varying sales tenure numbers out there range from 18 to 24 months. That isn’t much time for an organization to reap their ROI.

So how much will it cost your firm for your next bad sales hire? One simple formula goes like this. Have your sales managers take current sales performers and divide them into three groups. If your top sales reps average a million in annual sales, your average reps bring in 750,000, and your lower performers come in at $350,000 then you can see the problem. Every time you hire a poor performer it’s costing you $400,000 annually in lost sales alone.

In addition to the lost margins analysis above, there are other costs involved in a poor sales hire. Focus beyond the one-time fixed cost to see the real damage. While the financial impact is quantifiable, the morale and productivity impacts are just as detrimental. A Society for Human Resources Management  (SHRM) study says hard and soft costs of a bad sales hire can be up to five times a bad hire’s annual salary. Ouch!

A poor sales hire will damage your future revenue stream. Wasted leads because they weren’t worked, lost and frustrated customers, low employee morale, decreased productivity, and a damaged employer brand will haunt you. See more about

Why CEOs Need to Prioritize Their Employer Brand. A bad hire will result in a loss of morale from your employees who feel frustrated that poor performance is tolerated and that a manager’s time is being devoted to managing a poor performer as opposed to mentoring the rest of the team. These poor performers will affect individual and team goal standards and your organizations will suffer greatly if you let them lower the bar.

What is the damage potential of your customers? If a bad hire isn’t providing the same level of service in their given territory as your higher performers you have a problem but may never really understand the extent. Chances are that your disappointed customers or prospects will just move on.

The longer that you let a bad hire fester, the worse effect they will have on bottom line results. The opportunity cost can stretch into the millions of dollars within the first few months of their hire depending upon what you are selling. With stakes like that, listening to experts that advise you to have processes in place that can identify good hires and recognize poor performers makes a lot of sense. Go beyond the keywords and the ATS resume robots and focus on the skill sets the salesperson brings to the table. Recognize that a candidate’s skill set isn’t limited to functional abilities. Discover their collaboration and leadership abilities. Look at the sales professional in front of you today and the ever-evolving sales leader of tomorrow.

Recruiting Decisions Affect your Employer Brand. You cannot afford to skimp on implementing a world-class recruiting process that minimizes poor hires before they cost you hundreds of thousands of dollars. Hire hard to hire right the first time.

At Lucas Select, based in Raleigh, NC, we are passionate about technology startups and about sales and marketing as professions and have built extensive national networks of top-performing executives and managers. Unlike typical staffing agencies and headhunters, our recruiting services ensure that your company maintains a sustained growth model that is supported by strong sales management, talent recruitment at scale balanced by on-going people development while aligning with your Company’s core values.