- Andrew Dugdale and Nick de Cent
Sales talent: the final profit frontier – part 2
Updated: Jul 5, 2020
The cost of hiring sales executives is high but mis-hiring is greater
Managing sales talent effectively through robust hiring and development processes is only half the story; we need to align these daily processes with company strategy… and we should be developing sales talent far earlier.
Hiring and developing salespeople is costly – there is absolutely no doubt about that. According to a recent blog by Chally Group , while a low level of turnover may have a beneficial refresh effect, high levels of churn are negative, “costing the organization considerable time and money to hire and train new personnel”.
In the Unites States, Chally estimates the direct replacement costs for a telesales employee to be in the range $75,000-$90,000, while top sales positions can cost a company as much as $300,000. In addition, many sales positions are specifically compensated for sales results, which means that a company pays an opportunity cost (in terms of lost sales and lost customers) while the replacement is being trained.
This problem is compounded because, for sales positions, there is no easily identified resource pool. “Statistically, more than 50% of college graduates in the United States, regardless of their major, are likely to become salespeople. However, of the over 4,000 colleges in this country, only a few dozen have sales programmes or offer sales courses,” Chally reports.
Cost of strategy execution
Writing in Harvard Business Review in January this year,2 Frank V Cespedes and Christopher Wallace echo the point: US companies spend over $900 billion on their sales forces – three times more than they spend on all ad media. “Sales is, by far, the most expensive part of strategy execution for most firms.”
Yet, on average, companies deliver only 50-60% of the financial performance that their strategies and sales forecasts have promised; more than half of executives (56%) say that their biggest challenge is ensuring that their daily decisions about strategy and resource allocation are in alignment with their companies’ strategies.
So, not only is hiring, developing and managing salespeople a costly exercise, getting it wrong can be a very expensive mistake. The gaps between the perceptions, attitudes and information flows between executives and sales reps are part of the problem. Cespedes and Wallace contend that hiring the right candidates plays into this, “especially as new buying processes, driven by online technologies, reshape selling tasks”.
The authors declare: “If information isn’t flowing between senior execs and front-line customer-contact people, leaders won’t be able to keep up with the new skills and sales tasks they should be hiring for.” ... [download full article here]
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