Sales Hiring: Why You Can’t Afford to Make a Bad Hire

Finding good salespeople is challenging. Annual surveys conducted by ManPowerGroup from 2006 to 2012 have consistently found sales to be one of the hardest jobs to fill. But what does that actually mean for your bottom line? Let’s take a look at the numbers.

The problem of turnover in sales is significant. According to the 2011-2012 Sales Effectiveness Survey conducted by DePaul University, turnover in sales has been increasing over the years and in 2011, the turnover rate for salespeople was 28%. Research by the Center for American Progress found that, on average, the cost to replace an employee was approximately 20% of his or her annual income. Based on this research, the costs of turnover are summarized below.

The direct costs:

  1. Separation costs like exit interviews and severance pay.
  2. Replacement costs such as advertising, recruiting fees, and screening and interviewing applicants.
  3. Training costs such as onboarding and on-the-job training.

The indirect or hidden costs:

  1. Lost productivity associated with the departing employee’s last days on the job, the vacancy itself, and reduced company morale.
  2. Costs associated with the new employee learning the job (e.g., errors).
  3. Losses in time in territory, clients, and institutional knowledge.

average-cost-of-turnoverDePaul University’s Sales Effectiveness Survey found the average cost of turnover for a single sales rep to be a stunning $114,957: $29,159 in acquisition costs, $36,290 in training costs to break-even in their territory, and $49,508 in replacement costs including lost time in territory.

This survey also found the average time to replace a sales rep was a little over 6 months. When you think of how many potential sales dollars are lost in that time, not to mention the potentially irreversible damage to, and loss of, client relationships, the cost of a single sales turnover is extra painful.

Turnover, especially voluntary turnover (i.e., quitting), often needs to be addressed by changes in workplace policies. However, a large part of the turnover puzzle is making sure you’re hiring the right salespeople in the first place.

And what does the “right” salesperson look like?

An employee whose abilities and needs not only fit the job demands and requirements, but whose personality and values align with the organization’s culture and values (Kristof-Brown, Zimmerman,& Johnson, 2005).

Read my blog series on company fit here.

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Ji-A Min

Ji-A Min

Head Data Scientist at Ideal
Ji-A Min is the Head Data Scientist at Ideal. With a Master’s in Industrial-Organizational Psychology, Ji-A promotes best practices in data-based recruitment. She writes about research and trends in talent acquisition, recruitment tech, and people analytics.
Ji-A Min