The costs of hiring the wrong salesperson stack up. Combinations of time, money and resources are invested with little or no return on the employer’s investment.
Few people would argue otherwise. In fact, according to Undercover Recruiter article, the average bottom-line cost of a bad hire is $840,000 over 2 1/2 years. Hiring the wrong salesperson is even more costly than most positions.
No list of hiring mistakes would be complete without mentioning the immeasurable costs of turnover, missed sales goals, lower revenues, lost opportunities and poor customer satisfaction.
However, there are lesser-known costs associated with poor hiring, such as these four very expensive, hidden and nonrecoverable costs associated with putting the wrong salesperson on your payroll.
< HIGHER TRAINING COST
Organizations that hire inexperienced salespeople must train every new hire on the art of selling as well as the ins and outs of a business and industry.
In addition, an inexperienced professional might lack essential business acumen to be effective as a salesperson. This is true for transactional and consultative sales.
While the long-term return on investment of training is unequivocally positive, the initial investment is high. Unfortunately, when a new hire is terminated or quits, those tremendous training costs are flushed down the drain.
To avoid the loss, many organizations foolishly delay training until a new hire proves himself.
“Why train some millennial newbie when all she does is rush to my competitor after I invest all my money?” many managers ask.
That, though, is a retention and employee engagement problem, especially if the new hire benefits from the training.
Training is a worthwhile investment for the right people, but huge hiring costs can never be recouped from a bad hire.
A positive ROI on training begins with effective screening and selection.
< HIGHER COST
OF CUSTOMER ACQUISITION
Acquiring a first-time customer costs four to 30 times more than the cost to get him to buy your product or service a second time.
What does this have to do with hiring the right salesperson?
Customers won’t build a relationship with an unknowledgeable, unskilled or unlikable salesperson. If a good salesperson leaves your company, it is likely she will move to a direct competitor and her customers will follow.
A salesperson with the right attitude, skill set and shared values will perform better, sell more and stay longer with your company.
< LOSS OF INTELLECTUAL PROPERTY
The costs associated with the loss of intellectual property likely are the most troubling and expensive.
Surprisingly, these costs are the most ignored. In fact, most managers don’t even consider IP loss costs when calculating the value of a hiring mistake.
In addition to product knowledge, a salesperson who leaves takes with him competitive intelligence. Like a quarterback who can anticipate every move of his former team’s defense, a salesperson can outmaneuver his former employer’s sales strategies and tactics.
This is not just the salesperson walking away with proprietary trade secrets. Intellectual property also includes customers whose loyalty belongs to the salesperson, not the company.
You might be protected by a noncompete agreement, but legal fees and the ill will often do not justify the loss.
The loss of IP is intangible, too. Every time a salesperson leaves, a little bit of knowledge and expertise leaves with them.
< DAMAGED COMPANY BRAND
Hiring mistakes reflect badly on a company’s image. Customers expect you to put your best foot forward, and hiring the wrong salesperson can cause customers to lose confidence in your products or services.
Lots of hiring mistakes mean lots of unhappy customers, and this will leave them questioning how much you and your company really care.
It takes time for a customer to “train” a salesperson, or teach him what kind of service and value it expects.
Selling is a two-way partnership between customer and salesperson. It takes time to build synergies until the relationship is firing on all cylinders. When half of a partnership is always in transition or not performing up to par, the partnership suffers.
Customers consider your first hiring mistake an accident. They might suspect the second mistake to be a pattern. A third mistake makes it clear you don’t know how to hire and are a bad businessperson or, even worse, don’t care.
At that point, why not just call and introduce your customers to your competitor?
Ira S. Wolfe of Wind Gap is president of Lehigh Valley-based Success Performance Solutions and author of the new book “Recruiting in the Age of Googlization,” available on amazon.com. He can be reached at firstname.lastname@example.org.