Sales people an enigma, wrapped in a mystery...get a good one and they transform the business, get a bad one and the effects are horrendous. Missed revenue, management time in performance managing them out and all the "mood hoovering"* they can do whilst they live their miserable existence in your salesforce.
Chemistry of course don't stand for all this nonsense, oh no, we know what makes great sales people and the likes of LexisNexis, C&W, Nokia, Lexmark, PepsiCo, Vega, The CarbonNeutral Company, Yell and HP are all now in on the secret.
It goes something like this, most (if not all) recruitment practices are 25% accurate in predicting the future performance of sales people. Don't think this is true? OK, let's try this, go and ask a Sales Director who has say, 100 sales people, how many he considers to be great, just the kind of individuals who he/she would hire again in a heartbeat. If he/she can write down 25 names I would be amazed, it's never happened. The answer is always a "handful", maybe 10, possibly 15...the conclusion therefore is only 10-15% of their hires are "A" Class. The reason is, the hiring process never selected for "A" Class! You can not hit a target that doesn't exist!
What's the business impact of 25% accurate recruitment. Well, it's staggering, whether you believe the CIPD and the cost of mishiring is 4-6% of base salary, or you believe Brad Smart (author of Topgrading) and it's 14-15% of base salary.
Here comes the formula:
Let's take our Sales Director with 100 people, who has an annual attrition of 20% (bit high but not untypical). So to keep still, they must hire 20 sales people a year.
So here we go:
20 Hires per year @ £40,000 basic salary = £800,000 salary costs (you would usually add 1/3rd for overheads but let's be generous and say these sales people are low maintenance).
Only 25% of the 20 sales people however are "A" Players, the rest are mishires
So 20 x 75% = 15 mishires (they're gutted)
And £800,000 x 75% = £600,000 of salaries have been spent on mishires!
However it's worse, because the cost of a mishire is anything from 4-15% x basic salary due to the mistakes, failures, initial hiring cost, missed opportunities, disruption and severance etc. Let's pick a middling estimate at 9 x.
So £600,000 x 9 = £5,400,000!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Now let's look at 75% accurate recruiting, what if only 25% of the hires were mishires, what do the numbers look like?
75% of their 20 sales people are "A" Players. (they feel great)
So 20 x 25% = 5 mishires (they're still annoyed, they're a perfectionist)
And £800,000 x 25% = £200,000 of salaries have been spent on mishires!
The total cost of mishires is therefore: £200,000 x 9 = £1,800,000
The cost benefit of 75% accurate hiring to this Sales Director is £3,600,000.
And that's only the Opex benefit, by hiring great sales people every time, you will drive performance and the impact on revenue will be tremendous. Just think if you, as a Sales Director, had 75% of your sales people firing on all cylinders, how much better would your numbers be?
The truth is 75% accurate hiring in a sales environment will drive down Operating Costs and increase Revenue, it's not rocket science but it might be Chemistry :-)
R
*Mood Hoover - someone who quite literally sucks the energy out of any living object. The employee above who, it is always raining and whilst clearly labels their Milk in the fridge, finds the bottle emptied by "cool" Bob in sales.
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