Hiring Salespeople and the
Economics of Failure

An AMG Executive Briefing
The Economics
of Failure
Sizing up the overall problem
The Economics
of Failure
Sizing up the overall problem
Identifying existing and potential
problems
The Economics
of Failure
Sizing up the overall problem
Identifying existing and potential
problems
Reversing bad hiring pr...
The Economics
of Failure
One-to-many: A “purposeful primer”
The Economics
of Failure
One-to-many: A “purposeful primer”
Many-to-many: Stay posted online, join in
the conversation
The Economics
of Failure
One-to-many: A “purposeful primer”
Many-to-many: Stay posted online, join in
online
the conversat...
Bad Recruiting Practices:
Sizing up the problem
Systematically winging it

Bad Recruiting Practices:
Sizing up the problem
Failing to benchmark

Bad Recruiting Practices:
Sizing up the problem
Not hiring to profile

Bad Recruiting Practices:
Sizing up the problem
Wrong time, wrong place

Bad Recruiting Practices:
Sizing up the problem
Recruiting bad apples

Bad Recruiting Practices:
Sizing up the problem
Getting to grips with costs

Bad Recruiting Practices:
Sizing up the problem
The cost of acquisition

Bad Recruiting Practices:
Sizing up the problem
The cost of turnover

Bad Recruiting Practices:
Sizing up the problem
Cost of mediocre performance

Bad Recruiting Practices:
Sizing up the problem
Hidden costs

Bad Recruiting Practices:
Sizing up the problem
What’s acceptable to you?

Bad Recruiting Practices:
Sizing up the problem
Method one:
Number crunching

Bad Recruiting Practices:
Sizing up the problem
Method two: Utility analysis

Bad Recruiting Practices:
Sizing up the problem
METHOD ONE:
Number Crunching

Did you find and
download the
spreadsheet:
Calculating The
Cost of Bad Hires?
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of salespeople
hired in the last
12-months?
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of salespeople
hired in the last
12-months?
18
RECRUITMENT and
DEVELOPMENT
COSTS

The number of
salespeople fired
or who quit in the
last 12-months?
RECRUITMENT and
DEVELOPMENT
COSTS

The number of
salespeople fired
or who quit in the
last 12-months?
06
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of candidates
interviewed for
each position?
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of candidates
interviewed for
each position?
03
RECRUITMENT and
DEVELOPMENT
COSTS

Approximate
number of hours
interviewing each
candidate?
RECRUITMENT and
DEVELOPMENT
COSTS

Approximate
number of hours
interviewing each
candidate?
02
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of times each
candidate was
interviewed?
RECRUITMENT and
DEVELOPMENT
COSTS

The number
of times each
candidate was
interviewed?
03
RECRUITMENT and
DEVELOPMENT
COSTS

How many hours
invested coaching
each person?
RECRUITMENT and
DEVELOPMENT
COSTS

How many hours
invested coaching
each person?
40
RECRUITMENT and
DEVELOPMENT
COSTS

Any fee paid for
each position?
RECRUITMENT and
DEVELOPMENT
COSTS

Any fee paid for
each position?

$12,500.00
RECRUITMENT and
DEVELOPMENT
COSTS

Cost of advertising
each position?
RECRUITMENT and
DEVELOPMENT
COSTS

Cost of advertising
each position?

$0.00
RECRUITMENT and
DEVELOPMENT
COSTS

The value of an
hour of your time?
RECRUITMENT and
DEVELOPMENT
COSTS

The value of an
hour of your time?

$85.00
RECRUITMENT and
DEVELOPMENT
COSTS

Fees paid for
training each
salesperson?
RECRUITMENT and
DEVELOPMENT
COSTS

Fees paid for
training each
salesperson?
$2,700.00
RECRUITMENT and
DEVELOPMENT
COSTS

Average yearly
base salary paid to
each salesperson?
RECRUITMENT and
DEVELOPMENT
COSTS

Average yearly
base salary paid to
each salesperson?
$85,700.00
RECRUITMENT and
DEVELOPMENT
COSTS

Average number
of months worked
before being fired
or quit?
RECRUITMENT and
DEVELOPMENT
COSTS

Average number
of months worked
before being fired
or quit?
09
PERFORMANCE
of KEEPERS

Average annual
revenue per sale
or customer?
PERFORMANCE
of KEEPERS

Average annual
revenue per sale
or customer?
$26,700.00
PERFORMANCE
of KEEPERS

Number of sales
or customers per
month?
PERFORMANCE
of KEEPERS

Number of sales
or customers per
month?
04
PERFORMANCE
of KEEPERS

What is the gross
margin on sales?
PERFORMANCE
of KEEPERS

What is the gross
margin on sales?

30%
PERFORMANCE
of LOSERS

Average annual
revenue per sale
or customer?
PERFORMANCE
of LOSERS

Average annual
revenue per sale
or customer?
$26,700.00
PERFORMANCE
of LOSERS

Number of sales
or customers per
month?
PERFORMANCE
of LOSERS

Number of sales
or customers per
month?
01
PERFORMANCE
of LOSERS

What is the gross
margin on sales?
PERFORMANCE
of LOSERS

What is the gross
margin on sales?

21%
What if you decreased your
sales staff turnover by 30%?
Decreased costs…

$385,452
Flipside…
Before

Turnover %

After

33%

23%

…Upside
Flipside…
Before

Turnover %
Cost of recruiting

After

33%

23%

$1,175,040

$822,528

…Upside
Flipside…
Before

Turnover %
Cost of recruiting
Development costs

After

33%

23%

$1,175,040

$822,528

$109,800

$76,86...
Flipside…
Before

Turnover %
Cost of recruiting
Development costs

After

33%

23%

$1,175,040

$822,528

$109,800

$76,86...
What’s your number?

#DIV/0!
NO CRYSTAL BALLS
Without accurate
data your analysis
will produce fuzzy
readings at best.
Where are you
getting your
data ...
METHOD TWO:
Utility Analysis

Using statistics to
calculate standard
deviations of
performance
A Step-by-Step Approach
1: Rank order, from top to
bottom
1: Rank order, from top to
bottom
2: Tier production levels
1: Rank order, from top to
bottom
2: Tier production levels

3: Assign salespeople to
their appropriate level
1: Rank order, from top to
bottom
2: Tier production levels

3: Assign salespeople to
their appropriate level
4: Establish...
1: Rank order, from top to
bottom
2: Tier production levels

3: Assign salespeople to
their appropriate level
4: Establish...
Rank from top to bottom
A typical sales team?
Mary

$1,000,000

Sarah

$500,000

Matt

$900,000

Ester

$400,000

Mark

$800,000

David

$300,000
...
Tier production levels
Add production from all
salespeople and divide by three.
This yields three break-points that
allow us to divide our salesp...
Mary

$1,000,000

Sarah

$500,000

Matt

$900,000

Ester

$400,000

Mark

$800,000

David

$300,000

Luke

$700,000

Sam

...
Add production from all
salespeople and divide by three.
This yields three break-points that
allow us to divide our salesp...
Assign salespeople to
their appropriate level
Mary

$1,000,000

Matt

$900,000

Top-tier

$1,900,000
Mary

$1,000,000

Matt

$900,000

Top-tier

$1,900,00

Mark

$800,000

Luke

$700,000

John

$600,000

Mid-tier

$2,100,00...
Mary

$1,000,000
Sarah
Ester

Mark
Luke
John
Mid-tier

$300,000

Sam

Top-tier

$400,000

David

Matt

$500,000

$200,000
...
Establish averages for
each production level
Divide production [within each tier] by
the number of people in that level.
This yields the average production per
salespe...
Divide production [within each tier] by
the number of people in that level.
This yields the average production per
salespe...
Divide production [within each tier] by
the number of people in that level.
This yields the average production per
salespe...
Divide production [within each tier] by
the number of people in that level.
This yields the average production per
salespe...
Analyze and work
the numbers
Calculate the average production
difference between a mid-tier
salesperson and a bottom-tier
salesperson.
Calculate the average production
difference between a mid-tier
salesperson and a bottom-tier
salesperson.
Using a mid-tier...
Calculate the average production
difference between a mid-tier
salesperson and a bottom-tier
salesperson.
Using a mid-tier...
Multiply this figure by the number of
salespeople in the bottom tier.
This represents the total sales lost each
year by th...
Multiply this figure by the number of
salespeople in the bottom tier.
This represents the total sales lost each
year by th...
Most people don’t
realize recruiting costs
are more than the
cost of acquisition or
cost of turnover; they
are also deeply...
Most people don’t
realize recruiting costs
are more than the
cost of acquisition or
cost of turnover; they
are also deeply...
More Number
Crunching
Does anyone
know what the
actual cost of
making a bad hire
really is, huh?
Who is measuring
what, ex...
More Number
Crunching
Does anyone
know what the
actual cost of
making a bad hire
really is, huh?
Who is measuring
what, ex...
Calculating hidden costs
Administrative costs:
Discipline and termination
Separation processing
Administrative costs:
Discipline and termination
Separation processing

Vacancy costs:
Open territories
Unsold inventory
Administrative costs:
Discipline and termination
Separation processing

Vacancy costs:
Open territories
Unsold inventory

...
Administrative costs:
Discipline and termination
Separation processing

Vacancy costs:
Management time:
Hand-holding
Less ...
Administrative costs:
Discipline and termination
Separation processing

Team Morale:
Lower achievements
Resentment
Anxiety...
Administrative costs:
Discipline and termination
Separation processing

Team Morale:
Lower achievements
Resentment
Anxiety...
Administrative costs:
Discipline and termination
Separation processing

Team Morale:
Lower achievements
Resentment
Anxiety...
Administrative costs:
Discipline and termination
Separation processing

Team Morale:
Lower achievements
Resentment
Anxiety...
Administrative costs:

Competitive advantage:

Discipline and termination
Separation processing

Lower ROI per salesperson...
Identifying existing and
potential problems
Top-down and bottom-up

Identifying existing and
potential problems
Questions of perspective

Identifying existing and
potential problems
Organizational dynamics

Identifying existing and
potential problems
Managing crunches, crises
and complexities

Identifying existing and
potential problems
Talent management

Identifying existing and
potential problems
Process improvement

Identifying existing and
potential problems
Benchmarking, audits and
assessments

Identifying existing and
potential problems
Sizing up the organization
1: Understanding the
dynamics of change
1: Understanding the
dynamics of change
2: Flat world attitudes
1: Understanding the
dynamics of change
2: Flat world attitudes

3: Establishing a new
model
1: Understanding the
dynamics of change
2: Flat world attitudes

3: Establishing a new
model
4: Aligning the sales
organiz...
1: Understanding the
dynamics of change
2: Flat world attitudes

3: Establishing a new
model
4: Aligning the sales
organiz...
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

What is “talent?”
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Look at the
recruiting process:
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Look at the
recruiting process:
What works?
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Look at the
recruiting process:
What works?
What doesn’t
work?
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Look at the
recruiting process:
What works?
What doesn’t
work?
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Workforce
planning
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Profiling
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Employment
branding
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Sourcing
strategies
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Screening and
assessment
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Selection
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Onboarding
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Engagement
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Performance
management
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Training and
development
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Retention
ARE YOU A
TALENT-CENTRIC
ORGANIZATION?

Developing a
working model
and systematic
approach…
Succession
planning
Assessing who’s who
and who’s up for change
TALKING THE TALK

WALKING THE WALK
TALKING THE TALK

The Unfaithful

WALKING THE WALK
TALKING THE TALK

Heretics

The Unfaithful

WALKING THE WALK
TALKING THE TALK

Heretics

The Unfaithful

Good Soldiers

WALKING THE WALK
TALKING THE TALK

Heretics

Champions

The Unfaithful

Good Soldiers

WALKING THE WALK
WHO IS
YOUR BEST
RECRUITER?
Fill in the
blank…
WHO IS
YOUR BEST
RECRUITER?
Fill in the
blank…
Unfaithful?
WHO IS
YOUR BEST
RECRUITER?
Fill in the
blank…
A heretic?
WHO IS
YOUR BEST
RECRUITER?
Fill in the
blank…
Good
soldier?
WHO IS
YOUR BEST
RECRUITER?
Fill in the
blank…
A champion?
A sales manager’s role

[Why recruiting is a stretch]
Grunt work
Bad economics
Core competencies
Unbundle it
Strategic versus
tactical
Are your sales managers
up to the job?
1. A systematic,
integrated and
routine approach?
1. A systematic,
integrated and
routine approach?
2. Growing the sales
team, raising
the bar?
1. A systematic,
integrated and
routine approach?
2. Growing the sales
team, raising
the bar?
3. Part of the talent
manage...
Standard deviations…
…digging deeper
Uncovering underlying problems…

…digging deeper
Uncovering underlying problems…
Why do underperformers
underperform?

…digging deeper
Uncovering underlying problems…
Why do underperformers
underperform?

Is it a motivation problem?

…digging deeper
Uncovering underlying problems…
Why do underperformers
underperform?

Is it a motivation problem?
Are core behaviors, atti...
Uncovering underlying problems…
Why do underperformers
underperform?

Is it a motivation problem?
Are core behaviors, atti...
Rooting out problems
Investigate
Investigate
Competencies
Investigate
Competencies
Measurable, observable
Investigate
Competencies
Measurable, observable
Relate to job performance
Measuring applicants
Measuring applicants
Tests and simulations
Measuring applicants
Tests and simulations
Behavioral interviewing
Measuring applicants
Tests and simulations
Behavioral interviewing
Targeted Selection
Reversing bad hiring processes and
implementing good ones
Chunking the problem

Reversing bad hiring processes and
implementing good ones
Jumping the tracks

Reversing bad hiring processes and
implementing good ones
Start with the end in mind

Reversing bad hiring processes and
implementing good ones
What next?

Reversing bad hiring processes and
implementing good ones
CALCULATING THE
COST OF HIRING
MISTAKES

If time is money,
the typical
interview is a
waste of both…
CALCULATING THE
COST OF HIRING
MISTAKES

If time is money,
the typical
interview is a
waste of both…
Poor predictor of
per...
CALCULATING THE
COST OF HIRING
MISTAKES

If time is money,
the typical
interview is a
waste of both…
Who is selling who
wh...
CALCULATING THE
COST OF HIRING
MISTAKES

If time is money,
the typical
interview is a
waste of both…
What gets
measured an...
CALCULATING THE
COST OF HIRING
MISTAKES

Using top
producers as a
model misses
the mark…
CALCULATING THE
COST OF HIRING
MISTAKES

Using top
producers as a
model misses
the mark…
Measuring the
difference
CALCULATING THE
COST OF HIRING
MISTAKES

Using top
producers as a
model misses
the mark…
True or False:
All salespeople
ha...
CALCULATING THE
COST OF HIRING
MISTAKES

Measuring the
wrong stuff…
CALCULATING THE
COST OF HIRING
MISTAKES

Measuring the
wrong stuff…
Personality
CALCULATING THE
COST OF HIRING
MISTAKES

Measuring the
wrong stuff…
Aptitude
CALCULATING THE
COST OF HIRING
MISTAKES

Measuring the
wrong stuff…
Experience
CALCULATING THE
COST OF HIRING
MISTAKES

Measuring the
wrong stuff…
Validated skillsbased and job
related testing
CALCULATING THE
COST OF HIRING
MISTAKES

Getting used
to it…
CALCULATING THE
COST OF HIRING
MISTAKES

Getting used
to it…
Analyzing poor
performance
CALCULATING THE
COST OF HIRING
MISTAKES

Getting used
to it…
Retention
problems
CALCULATING THE
COST OF HIRING
MISTAKES

Getting used
to it…
Understanding
why people leave
Baselines and benchmarks
Profiling
Job profiling
Profiling
Job profiling
Candidate profiling
Profiling
Job profiling
Candidate profiling
Performance profiling
Profiling
Job profiling
Candidate profiling
Performance profiling
Fit
Assessments
Talent management audits
Assessments
Talent management audits
Sales management evaluation
Assessments
Talent management audits
Sales management evaluation
Statistically validated screening
Assessments
Talent management audits
Sales management evaluation
Statistically validated screening
Sales- and job-specific...
Accelerate ramp-up

Performance Management
Accelerate ramp-up
Minimize deviations

Performance Management
Accelerate ramp-up
Minimize deviations
Effective management

Performance Management
Accelerate ramp-up
Minimize deviations
Effective management
Growing the organization

Performance Management
What next?
1: Get real about the costs
and consequences
1: Get real about the costs
and consequences
2: Step back and evaluate
your options
1: Get real about the costs
and consequences
2: Step back and evaluate
your options
3: Take a leadership role
and get invo...
1: Get real about the costs
and consequences
2: Step back and evaluate
your options
3: Take a leadership role
and get invo...
1: Get real about the costs
and consequences
2: Step back and evaluate
your options
3: Take a leadership role
and get invo...
Thank you!

http://amgadvisors.net/events
(561) 283-4744 | info@amgadvisors.net
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Hiring Salespeople and the Economics of Failure

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Hiring Salespeople and the Economics of Failure

  1. 1. Hiring Salespeople and the Economics of Failure An AMG Executive Briefing
  2. 2. The Economics of Failure Sizing up the overall problem
  3. 3. The Economics of Failure Sizing up the overall problem Identifying existing and potential problems
  4. 4. The Economics of Failure Sizing up the overall problem Identifying existing and potential problems Reversing bad hiring processes and implementing good ones
  5. 5. The Economics of Failure One-to-many: A “purposeful primer”
  6. 6. The Economics of Failure One-to-many: A “purposeful primer” Many-to-many: Stay posted online, join in the conversation
  7. 7. The Economics of Failure One-to-many: A “purposeful primer” Many-to-many: Stay posted online, join in online the conversation One-to-one: Follow-up, follow-through and making sense of it all…
  8. 8. Bad Recruiting Practices: Sizing up the problem
  9. 9. Systematically winging it Bad Recruiting Practices: Sizing up the problem
  10. 10. Failing to benchmark Bad Recruiting Practices: Sizing up the problem
  11. 11. Not hiring to profile Bad Recruiting Practices: Sizing up the problem
  12. 12. Wrong time, wrong place Bad Recruiting Practices: Sizing up the problem
  13. 13. Recruiting bad apples Bad Recruiting Practices: Sizing up the problem
  14. 14. Getting to grips with costs Bad Recruiting Practices: Sizing up the problem
  15. 15. The cost of acquisition Bad Recruiting Practices: Sizing up the problem
  16. 16. The cost of turnover Bad Recruiting Practices: Sizing up the problem
  17. 17. Cost of mediocre performance Bad Recruiting Practices: Sizing up the problem
  18. 18. Hidden costs Bad Recruiting Practices: Sizing up the problem
  19. 19. What’s acceptable to you? Bad Recruiting Practices: Sizing up the problem
  20. 20. Method one: Number crunching Bad Recruiting Practices: Sizing up the problem
  21. 21. Method two: Utility analysis Bad Recruiting Practices: Sizing up the problem
  22. 22. METHOD ONE: Number Crunching Did you find and download the spreadsheet: Calculating The Cost of Bad Hires?
  23. 23. RECRUITMENT and DEVELOPMENT COSTS The number of salespeople hired in the last 12-months?
  24. 24. RECRUITMENT and DEVELOPMENT COSTS The number of salespeople hired in the last 12-months? 18
  25. 25. RECRUITMENT and DEVELOPMENT COSTS The number of salespeople fired or who quit in the last 12-months?
  26. 26. RECRUITMENT and DEVELOPMENT COSTS The number of salespeople fired or who quit in the last 12-months? 06
  27. 27. RECRUITMENT and DEVELOPMENT COSTS The number of candidates interviewed for each position?
  28. 28. RECRUITMENT and DEVELOPMENT COSTS The number of candidates interviewed for each position? 03
  29. 29. RECRUITMENT and DEVELOPMENT COSTS Approximate number of hours interviewing each candidate?
  30. 30. RECRUITMENT and DEVELOPMENT COSTS Approximate number of hours interviewing each candidate? 02
  31. 31. RECRUITMENT and DEVELOPMENT COSTS The number of times each candidate was interviewed?
  32. 32. RECRUITMENT and DEVELOPMENT COSTS The number of times each candidate was interviewed? 03
  33. 33. RECRUITMENT and DEVELOPMENT COSTS How many hours invested coaching each person?
  34. 34. RECRUITMENT and DEVELOPMENT COSTS How many hours invested coaching each person? 40
  35. 35. RECRUITMENT and DEVELOPMENT COSTS Any fee paid for each position?
  36. 36. RECRUITMENT and DEVELOPMENT COSTS Any fee paid for each position? $12,500.00
  37. 37. RECRUITMENT and DEVELOPMENT COSTS Cost of advertising each position?
  38. 38. RECRUITMENT and DEVELOPMENT COSTS Cost of advertising each position? $0.00
  39. 39. RECRUITMENT and DEVELOPMENT COSTS The value of an hour of your time?
  40. 40. RECRUITMENT and DEVELOPMENT COSTS The value of an hour of your time? $85.00
  41. 41. RECRUITMENT and DEVELOPMENT COSTS Fees paid for training each salesperson?
  42. 42. RECRUITMENT and DEVELOPMENT COSTS Fees paid for training each salesperson? $2,700.00
  43. 43. RECRUITMENT and DEVELOPMENT COSTS Average yearly base salary paid to each salesperson?
  44. 44. RECRUITMENT and DEVELOPMENT COSTS Average yearly base salary paid to each salesperson? $85,700.00
  45. 45. RECRUITMENT and DEVELOPMENT COSTS Average number of months worked before being fired or quit?
  46. 46. RECRUITMENT and DEVELOPMENT COSTS Average number of months worked before being fired or quit? 09
  47. 47. PERFORMANCE of KEEPERS Average annual revenue per sale or customer?
  48. 48. PERFORMANCE of KEEPERS Average annual revenue per sale or customer? $26,700.00
  49. 49. PERFORMANCE of KEEPERS Number of sales or customers per month?
  50. 50. PERFORMANCE of KEEPERS Number of sales or customers per month? 04
  51. 51. PERFORMANCE of KEEPERS What is the gross margin on sales?
  52. 52. PERFORMANCE of KEEPERS What is the gross margin on sales? 30%
  53. 53. PERFORMANCE of LOSERS Average annual revenue per sale or customer?
  54. 54. PERFORMANCE of LOSERS Average annual revenue per sale or customer? $26,700.00
  55. 55. PERFORMANCE of LOSERS Number of sales or customers per month?
  56. 56. PERFORMANCE of LOSERS Number of sales or customers per month? 01
  57. 57. PERFORMANCE of LOSERS What is the gross margin on sales?
  58. 58. PERFORMANCE of LOSERS What is the gross margin on sales? 21%
  59. 59. What if you decreased your sales staff turnover by 30%?
  60. 60. Decreased costs… $385,452
  61. 61. Flipside… Before Turnover % After 33% 23% …Upside
  62. 62. Flipside… Before Turnover % Cost of recruiting After 33% 23% $1,175,040 $822,528 …Upside
  63. 63. Flipside… Before Turnover % Cost of recruiting Development costs After 33% 23% $1,175,040 $822,528 $109,800 $76,860 …Upside
  64. 64. Flipside… Before Turnover % Cost of recruiting Development costs After 33% 23% $1,175,040 $822,528 $109,800 $76,860 The cost of bad hires $1,284,840 $899,388 …Upside
  65. 65. What’s your number? #DIV/0!
  66. 66. NO CRYSTAL BALLS Without accurate data your analysis will produce fuzzy readings at best. Where are you getting your data from? Can you trust it?
  67. 67. METHOD TWO: Utility Analysis Using statistics to calculate standard deviations of performance
  68. 68. A Step-by-Step Approach
  69. 69. 1: Rank order, from top to bottom
  70. 70. 1: Rank order, from top to bottom 2: Tier production levels
  71. 71. 1: Rank order, from top to bottom 2: Tier production levels 3: Assign salespeople to their appropriate level
  72. 72. 1: Rank order, from top to bottom 2: Tier production levels 3: Assign salespeople to their appropriate level 4: Establish averages for each production level
  73. 73. 1: Rank order, from top to bottom 2: Tier production levels 3: Assign salespeople to their appropriate level 4: Establish averages for each production level 5: Analyze and work the numbers
  74. 74. Rank from top to bottom
  75. 75. A typical sales team? Mary $1,000,000 Sarah $500,000 Matt $900,000 Ester $400,000 Mark $800,000 David $300,000 Luke $700,000 Sam $200,000 John $600,000 Martha $100,000
  76. 76. Tier production levels
  77. 77. Add production from all salespeople and divide by three. This yields three break-points that allow us to divide our salespeople into meaningful production levels, or “tiers.”
  78. 78. Mary $1,000,000 Sarah $500,000 Matt $900,000 Ester $400,000 Mark $800,000 David $300,000 Luke $700,000 Sam $200,000 John $600,000 Martha $100,000 Total sales $5,500,000
  79. 79. Add production from all salespeople and divide by three. This yields three break-points that allow us to divide our salespeople into meaningful production levels, or “tiers.” Total sales of $5,500,000 divided by 3 equals approximately $1,800,000 per sales tier.
  80. 80. Assign salespeople to their appropriate level
  81. 81. Mary $1,000,000 Matt $900,000 Top-tier $1,900,000
  82. 82. Mary $1,000,000 Matt $900,000 Top-tier $1,900,00 Mark $800,000 Luke $700,000 John $600,000 Mid-tier $2,100,000
  83. 83. Mary $1,000,000 Sarah Ester Mark Luke John Mid-tier $300,000 Sam Top-tier $400,000 David Matt $500,000 $200,000 Martha $100,000 $900,000 $1,900,000 $800,000 $700,000 $600,000 $2,100,000 Bottom-tier $1,500,000
  84. 84. Establish averages for each production level
  85. 85. Divide production [within each tier] by the number of people in that level. This yields the average production per salesperson by tier.
  86. 86. Divide production [within each tier] by the number of people in that level. This yields the average production per salesperson by tier. Mary + Matt = $1,900,000 / 2 = $950,000 average top-tier production
  87. 87. Divide production [within each tier] by the number of people in that level. This yields the average production per salesperson by tier. Mark + Luke + John = $2,100,000 / 3 = $700,000 average mid-tier production
  88. 88. Divide production [within each tier] by the number of people in that level. This yields the average production per salesperson by tier. Sarah + Ester + David + Sam + Martha = $1,500,000 / 5 = $300,000 average bottom-tier production
  89. 89. Analyze and work the numbers
  90. 90. Calculate the average production difference between a mid-tier salesperson and a bottom-tier salesperson.
  91. 91. Calculate the average production difference between a mid-tier salesperson and a bottom-tier salesperson. Using a mid-tier sales “target” provides a conservative estimate of lost production.
  92. 92. Calculate the average production difference between a mid-tier salesperson and a bottom-tier salesperson. Using a mid-tier sales “target” provides a conservative estimate of lost production. $700,000 average mid-tier – $300,000 average bottom-tier = $400,000 average production lost per bottom-tier salesperson.
  93. 93. Multiply this figure by the number of salespeople in the bottom tier. This represents the total sales lost each year by the bottom-tier salespeople.
  94. 94. Multiply this figure by the number of salespeople in the bottom tier. This represents the total sales lost each year by the bottom-tier salespeople. $400,000 x 5 = $2,000,000/year
  95. 95. Most people don’t realize recruiting costs are more than the cost of acquisition or cost of turnover; they are also deeply hidden in the cost of variable productivity. From the largest organization to the smallest, bad hiring practices tend to secretly cripple organizations.
  96. 96. Most people don’t realize recruiting costs are more than the cost of acquisition or cost of turnover; they are also deeply hidden in the cost of variable productivity. From the largest organization to the smallest, bad hiring practices tend to secretly cripple organizations.
  97. 97. More Number Crunching Does anyone know what the actual cost of making a bad hire really is, huh? Who is measuring what, exactly?
  98. 98. More Number Crunching Does anyone know what the actual cost of making a bad hire really is, huh? Who is measuring what, exactly?
  99. 99. Calculating hidden costs
  100. 100. Administrative costs: Discipline and termination Separation processing
  101. 101. Administrative costs: Discipline and termination Separation processing Vacancy costs: Open territories Unsold inventory
  102. 102. Administrative costs: Discipline and termination Separation processing Vacancy costs: Open territories Unsold inventory Replacement costs: Recruiting and related Management time
  103. 103. Administrative costs: Discipline and termination Separation processing Vacancy costs: Management time: Hand-holding Less time for sales management Open territories Unsold inventory Replacement costs: Recruiting and related Management time
  104. 104. Administrative costs: Discipline and termination Separation processing Team Morale: Lower achievements Resentment Anxiety Vacancy costs: Management time: Hand-holding Less time for sales management Open territories Unsold inventory Replacement costs: Recruiting and related Management time
  105. 105. Administrative costs: Discipline and termination Separation processing Team Morale: Lower achievements Resentment Anxiety Vacancy costs: Training costs: Open territories Unsold inventory Onboarding Time to ramp-up Management time: Hand-holding Less time for sales management Replacement costs: Recruiting and related Management time
  106. 106. Administrative costs: Discipline and termination Separation processing Team Morale: Lower achievements Resentment Anxiety Training costs: Onboarding Time to ramp-up Lost opportunity: Missed deals Lost business Vacancy costs: Management time: Open territories Unsold inventory Hand-holding Less time for sales management Replacement costs: Recruiting and related Management time
  107. 107. Administrative costs: Discipline and termination Separation processing Team Morale: Lower achievements Resentment Anxiety Training costs: Lost opportunity: Missed deals Lost business Vacancy costs: Management time: Open territories Unsold inventory Onboarding Time to ramp-up Customer costs: Complaints and poor service Lost referral business Brand erosion Hand-holding Less time for sales management Replacement costs: Recruiting and related Management time
  108. 108. Administrative costs: Competitive advantage: Discipline and termination Separation processing Lower ROI per salesperson Lower margin on sales Proprietary stuff Team Morale: Lower achievements Resentment Anxiety Training costs: Lost opportunity: Missed deals Lost business Vacancy costs: Management time: Open territories Unsold inventory Onboarding Time to ramp-up Customer costs: Complaints and poor service Lost referral business Brand erosion Hand-holding Less time for sales management Replacement costs: Recruiting and related Management time
  109. 109. Identifying existing and potential problems
  110. 110. Top-down and bottom-up Identifying existing and potential problems
  111. 111. Questions of perspective Identifying existing and potential problems
  112. 112. Organizational dynamics Identifying existing and potential problems
  113. 113. Managing crunches, crises and complexities Identifying existing and potential problems
  114. 114. Talent management Identifying existing and potential problems
  115. 115. Process improvement Identifying existing and potential problems
  116. 116. Benchmarking, audits and assessments Identifying existing and potential problems
  117. 117. Sizing up the organization
  118. 118. 1: Understanding the dynamics of change
  119. 119. 1: Understanding the dynamics of change 2: Flat world attitudes
  120. 120. 1: Understanding the dynamics of change 2: Flat world attitudes 3: Establishing a new model
  121. 121. 1: Understanding the dynamics of change 2: Flat world attitudes 3: Establishing a new model 4: Aligning the sales organization with goals
  122. 122. 1: Understanding the dynamics of change 2: Flat world attitudes 3: Establishing a new model 4: Aligning the sales organization with goals 5: Separating the heretics from the faithful
  123. 123. ARE YOU A TALENT-CENTRIC ORGANIZATION? What is “talent?”
  124. 124. ARE YOU A TALENT-CENTRIC ORGANIZATION? Look at the recruiting process:
  125. 125. ARE YOU A TALENT-CENTRIC ORGANIZATION? Look at the recruiting process: What works?
  126. 126. ARE YOU A TALENT-CENTRIC ORGANIZATION? Look at the recruiting process: What works? What doesn’t work?
  127. 127. ARE YOU A TALENT-CENTRIC ORGANIZATION? Look at the recruiting process: What works? What doesn’t work?
  128. 128. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach…
  129. 129. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Workforce planning
  130. 130. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Profiling
  131. 131. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Employment branding
  132. 132. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Sourcing strategies
  133. 133. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Screening and assessment
  134. 134. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Selection
  135. 135. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Onboarding
  136. 136. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Engagement
  137. 137. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Performance management
  138. 138. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Training and development
  139. 139. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Retention
  140. 140. ARE YOU A TALENT-CENTRIC ORGANIZATION? Developing a working model and systematic approach… Succession planning
  141. 141. Assessing who’s who and who’s up for change
  142. 142. TALKING THE TALK WALKING THE WALK
  143. 143. TALKING THE TALK The Unfaithful WALKING THE WALK
  144. 144. TALKING THE TALK Heretics The Unfaithful WALKING THE WALK
  145. 145. TALKING THE TALK Heretics The Unfaithful Good Soldiers WALKING THE WALK
  146. 146. TALKING THE TALK Heretics Champions The Unfaithful Good Soldiers WALKING THE WALK
  147. 147. WHO IS YOUR BEST RECRUITER? Fill in the blank…
  148. 148. WHO IS YOUR BEST RECRUITER? Fill in the blank… Unfaithful?
  149. 149. WHO IS YOUR BEST RECRUITER? Fill in the blank… A heretic?
  150. 150. WHO IS YOUR BEST RECRUITER? Fill in the blank… Good soldier?
  151. 151. WHO IS YOUR BEST RECRUITER? Fill in the blank… A champion?
  152. 152. A sales manager’s role [Why recruiting is a stretch]
  153. 153. Grunt work
  154. 154. Bad economics
  155. 155. Core competencies
  156. 156. Unbundle it
  157. 157. Strategic versus tactical
  158. 158. Are your sales managers up to the job?
  159. 159. 1. A systematic, integrated and routine approach?
  160. 160. 1. A systematic, integrated and routine approach? 2. Growing the sales team, raising the bar?
  161. 161. 1. A systematic, integrated and routine approach? 2. Growing the sales team, raising the bar? 3. Part of the talent management continuum?
  162. 162. Standard deviations…
  163. 163. …digging deeper
  164. 164. Uncovering underlying problems… …digging deeper
  165. 165. Uncovering underlying problems… Why do underperformers underperform? …digging deeper
  166. 166. Uncovering underlying problems… Why do underperformers underperform? Is it a motivation problem? …digging deeper
  167. 167. Uncovering underlying problems… Why do underperformers underperform? Is it a motivation problem? Are core behaviors, attitudes and techniques out of synch? …digging deeper
  168. 168. Uncovering underlying problems… Why do underperformers underperform? Is it a motivation problem? Are core behaviors, attitudes and techniques out of synch? Are the problems situational? …digging deeper
  169. 169. Rooting out problems
  170. 170. Investigate
  171. 171. Investigate Competencies
  172. 172. Investigate Competencies Measurable, observable
  173. 173. Investigate Competencies Measurable, observable Relate to job performance
  174. 174. Measuring applicants
  175. 175. Measuring applicants Tests and simulations
  176. 176. Measuring applicants Tests and simulations Behavioral interviewing
  177. 177. Measuring applicants Tests and simulations Behavioral interviewing Targeted Selection
  178. 178. Reversing bad hiring processes and implementing good ones
  179. 179. Chunking the problem Reversing bad hiring processes and implementing good ones
  180. 180. Jumping the tracks Reversing bad hiring processes and implementing good ones
  181. 181. Start with the end in mind Reversing bad hiring processes and implementing good ones
  182. 182. What next? Reversing bad hiring processes and implementing good ones
  183. 183. CALCULATING THE COST OF HIRING MISTAKES If time is money, the typical interview is a waste of both…
  184. 184. CALCULATING THE COST OF HIRING MISTAKES If time is money, the typical interview is a waste of both… Poor predictor of performance
  185. 185. CALCULATING THE COST OF HIRING MISTAKES If time is money, the typical interview is a waste of both… Who is selling who what?
  186. 186. CALCULATING THE COST OF HIRING MISTAKES If time is money, the typical interview is a waste of both… What gets measured and how?
  187. 187. CALCULATING THE COST OF HIRING MISTAKES Using top producers as a model misses the mark…
  188. 188. CALCULATING THE COST OF HIRING MISTAKES Using top producers as a model misses the mark… Measuring the difference
  189. 189. CALCULATING THE COST OF HIRING MISTAKES Using top producers as a model misses the mark… True or False: All salespeople have big heads?
  190. 190. CALCULATING THE COST OF HIRING MISTAKES Measuring the wrong stuff…
  191. 191. CALCULATING THE COST OF HIRING MISTAKES Measuring the wrong stuff… Personality
  192. 192. CALCULATING THE COST OF HIRING MISTAKES Measuring the wrong stuff… Aptitude
  193. 193. CALCULATING THE COST OF HIRING MISTAKES Measuring the wrong stuff… Experience
  194. 194. CALCULATING THE COST OF HIRING MISTAKES Measuring the wrong stuff… Validated skillsbased and job related testing
  195. 195. CALCULATING THE COST OF HIRING MISTAKES Getting used to it…
  196. 196. CALCULATING THE COST OF HIRING MISTAKES Getting used to it… Analyzing poor performance
  197. 197. CALCULATING THE COST OF HIRING MISTAKES Getting used to it… Retention problems
  198. 198. CALCULATING THE COST OF HIRING MISTAKES Getting used to it… Understanding why people leave
  199. 199. Baselines and benchmarks
  200. 200. Profiling Job profiling
  201. 201. Profiling Job profiling Candidate profiling
  202. 202. Profiling Job profiling Candidate profiling Performance profiling
  203. 203. Profiling Job profiling Candidate profiling Performance profiling Fit
  204. 204. Assessments Talent management audits
  205. 205. Assessments Talent management audits Sales management evaluation
  206. 206. Assessments Talent management audits Sales management evaluation Statistically validated screening
  207. 207. Assessments Talent management audits Sales management evaluation Statistically validated screening Sales- and job-specific assessments
  208. 208. Accelerate ramp-up Performance Management
  209. 209. Accelerate ramp-up Minimize deviations Performance Management
  210. 210. Accelerate ramp-up Minimize deviations Effective management Performance Management
  211. 211. Accelerate ramp-up Minimize deviations Effective management Growing the organization Performance Management
  212. 212. What next?
  213. 213. 1: Get real about the costs and consequences
  214. 214. 1: Get real about the costs and consequences 2: Step back and evaluate your options
  215. 215. 1: Get real about the costs and consequences 2: Step back and evaluate your options 3: Take a leadership role and get involved
  216. 216. 1: Get real about the costs and consequences 2: Step back and evaluate your options 3: Take a leadership role and get involved 4: Systematically apply best practices
  217. 217. 1: Get real about the costs and consequences 2: Step back and evaluate your options 3: Take a leadership role and get involved 4: Systematically apply best practices 5: Repeat
  218. 218. Thank you! http://amgadvisors.net/events (561) 283-4744 | info@amgadvisors.net
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