Making the wrong sales hiring decision has an enormous negative impact on a business’ finances. Often overlooked, but closely related, is the larger impact it has on a sales team’s morale.
The cost of a bad hire
SAP recently rounded up a series of statistics on the impact of a bad hire. Citing research from Mindflash and CareerBuilder, the articles show that 41% of survey respondents reported a bad hire cost them $25,000, while 25% said a bad hire in the previous year cost them $50,000.
Breaking down costs even further, Mariah Deleon, vice president of people at Glassdoor, notes in a recent Entrepreneur article that a bad hire costs employers dearly when it comes to productivity. Deleon shares a statistic from Robert Half International that shows 11% of companies reported a bad hire resulted in fewer sales.
Quantifying the cost of a bad hire in terms of time, the Robert Half study revealed that supervisors spend 17% of their time managing poorly performing employees.
In one of our previous articles, What is The Cost of a Bad Saes Hire, we calculated that a bad sales hire costs the typical sales department upwards of $690,000. Read the article to find out how we calculated this loss and you’ll get a better idea of the value of a good sales person and just how much a bad hire can detract from your year.
Measuring the cost of a bad hire in terms of time and money is one thing – but the ramifications of the bad hire extend much further…..the dark cloud that a bad employee brings into the office can impact the mood of the whole sales team. Deleon refers to the Robert Half study to note that 95% of financial executives surveyed “said that making a bad hire at least somewhat effects the morale of the team, and 35 percent said a poor hire greatly influences employee morale.”
Poor morale is an especially damaging drain on a sales team. It’s easy to see how a bad hire can creep into each aspect of your sales team and begin eroding team spirit – from a new sales manager who hosts horrible meetings, a top morale buster according to Soma, to a prima donna who arrives with the wrong set of expectations.
SAP points out that an underperforming employee places a burden on the remainder of the team, creating a situation where “good workers end up getting saddled with additional workload [which] eventually wears down the team spirit as the group is overburdened carrying a non-contributing member.” Underperforming sales team members are burning more than time – they’re also churning through good leads, converting far fewer than they should, and alienating potential customers. If other sales team members are burdened with trying to compensate for their underperforming team member, you’re creating even more potential loss.
Losing time and money is a bad situation, but gaining a cadre of now-unhappy sales team members is even worse. It’s natural to want to foster a bad hire into a better performer, and while there is such a thing as a rocky start, sometimes you just have to admit that the hire wasn’t a good one.
“Hire slowly, fire fast”
How to handle a bad decision
There are red flags to look for in a bad hire both in terms of results and attitude. Consistent inability to hunt and close new business, inconsistent use of your CRM, not giving the required hours or activity levels, poor planning, tardiness, no sense of urgency, not optimistic, lacking resilience after losing deals, interaction issues with other staff, and failure to embrace the sales strategy despite undergoing standardized training, all signal that a hire doesn’t belong on your sales team. Within 3 months you should know you hired the wrong person, and it’s important to remove them from your team before all of these bad qualities start taking a toll on other team members.
Fast action is warranted when you consider the ripple effect a bad employee can have on your sales team as well as your customer and vendor relationships. Consider indirect costs incurred by lost sales, or compensating for errors the employee made. In the worst-case scenario, there could be litigation costs initiated by the employee or by customers or vendors who interacted with the employee. As these problems multiply, the entire team – including management – feels the impact.
Making a better hire the next time
A structured and rigorous interview and assessment process mitigates hiring risk. A consistent hiring process for each and every candidate offers an “apples to apples” comparison, and allows you to determine with the highest degree of certitude who the best hire is. Multiple interviews involving all stakeholders in the hiring decision, combined with third-party psychometric and behavorial testing, and extensive background research should be used for each candidate.
Careful planning, strategic thinking, and adopting a disciplined sales hiring process can help you make better decisions in the long run and avoid the pitfalls that a bad sales hire can have on your team’s morale.
For more comprehensive insights on how to make the right sales hiring decision for your organization, get instant access to our eBook “Make the Right Sales Hire Every Time.”
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
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