Improving Your Success Ratio in New Sales Hires

The Challenge in Hiring New Sales People

Over the last 20 years, I have hired a lot of salespeople and unfortunately, too few reached their sales goals or made it to their second anniversary of employment.  I take only small comfort in knowing that I am not alone and that many of my sales and business management counterparts have suffered from the same lack of hiring success. 

Is it unreasonable to expect the same level of success with sales hires as you normally do with other professional position?  My more recent experiences and results indicate that the answer is “No, it is not unreasonable, but the discipline of finding and qualifying those candidates takes process.”

Many have argued in the past that sales is an art, and successful sales people have intangible talents that are hard to identify and measure (unlike a .net or JAVA developer who can be quickly evaluated with a skills and technology assessment test, often taken from an online site).  I respond to those non-believers that like any other professional role, if the critical skills and experience required, as well as the hiring firm’s particular needs, are identified and used in an objective measurement of the candidate’s fit, success rates will certainly improve.

The details may vary from industry to industry but the process remains relatively simple and straightforward, requiring only discipline, commitment, and an understanding of what skills and experience the desired salesperson should possess. 

Consider the steps below, before you begin your next search or interview another sales candidate.

Improve Your Odds of Success – Create and Adhere to a Process

1)      Know what you want and what is important.  Create an “importance ranking” table to help you assess what skills and characteristics are most important for this position.

2)     Determine who will interview the candidates and at what stage of the process. Be consistent and use the same interviewers when at all possible.  It takes time but it is important, so make a commitment, get commitment from the team, and stick with it.

3)     In advance of the interview, give the candidate the same skills and experience criteria that you will be using during the interview process and the metrics or types of questions that you will be using to measure those skills and experiences during the interview.  Although some are troubled by sharing this information with the candidate in advance, remember this is not a “test”; it’s an interview to determine “fit”.   It’s ok to allow a candidate to prepare in advance.  You don’t expect or shouldn’t allow your sales team to “wing” sales calls, so you should similarly allow the candidate to prepare for this “sales call” by doing the proper research and making sure that their “product” matches your needs.  As an additional benefit, the process may allow you to assess the candidate’s ability to prepare, research, and align solutions to needs.

4)     Review each interview and score each candidate immediately following the interview.  Avoid putting this off until later; you will lose the subtle and important details of the interview.  Record the candidate’s answers to questions from your notes and score those answers.  Note those scores against the importance ranking for the skills and characteristics to create an overall non-subjective scoring of the candidate’s overall fit.

5)     Whether you are using an internal search organization or an external search firm, ensure that the organization is provided with the same information and documents that you will be using to prep the candidates and measure their fit.  Often the search organization is provided more general information that leads to candidate misalignment and can waste the interview team’s valuable cycles.  Provide feedback to the team and share the post-interview candidate scoring so that your search organization can continue to improve their process and pinpoint the right candidates.

Take the “Gut Feel” Out of the Hiring Decision

As described above, take the time to identify the skills and characteristics that you believe give the candidate the greatest chance for success, both within your organization and in the marketplace with your target customers. Validate these skills within the organization and outside the sales organization.  Rank the importance of each of the skills to ensure that candidates that best fit your organization and market score the highest.  If you have to have a “je ne sais quoi” category for that “it feels right” impression, include it, but quantify it’s weighting on the decision and don’t let it become the overriding factor.   

Test the criteria against your most successful salespeople to make sure the criteria are grounded in reality. Use these criteria to measure each and every candidate consistently and equally. 

The skills and experience that are most important to you may vary considerably from others, but I will suggest a few that seem to cross markets, products and services.  These skills can normally be grouped in terms of sales skills, client or account management skills, and expertise in the market and product or services that you sell. 

They normally can be  categorized by qualitative soft skills and quantitative experience and measurable performance metrics.  I won’t debate the categorization but would definitely debate with your team the important measures and their rank order of importance. 

Here’s a common list to get the thought processes going:

Qualitative Measures

o   Company Fit – Can embrace the company philosophy and mission; has the right personality and mindset to work effectively within the organization within the corporate mores.

o   Sales skills – Presents well, can effectively articulate a message or support a position, both in spoken and written form.

o   Personality – Can rebound from setbacks or pursuit losses.

o   Listening / Responding – Able to listen and process client information and determine proper course of action in real time, can adapt sales plan based on the dynamic environment of the client.

o   Time management – Can accomplish the daily tasks that are needed without interfering with the overall goals of selling.  Can evaluate the relative importance and potential return of multiple client opportunities and prioritize appropriately.

 Quantitative Measures

o   Performance – Typical deal size, annual sales level and performance to goal.

o   Market Knowledge – Demonstration of experience and expertise in the market/territory.

o   Understands Sales Cycle – Experienced and knowledgeable selling to the type of customer, market, and transaction type.

o   Relevant Client Base – Has sold to the target client base previously or can quickly construct a target list that aligns with your company’s capabilities and strategic goals.

o   Readiness – Not limited by non-compete agreements, can show current activity in the market with proven success, and understands your business and capabilities to reduce transition time.

Weight the relative importance of each of these categories (or the four or five most important) for your organization or for the position in particular such as: Company Fit- 35%, Market Knowledge 25%, Readiness- 25%, Past Performance- 15% and apply these factors to the scores for the qualitative and quantitative measures and sum the total to achieve an objective score for each candidate.

Expect a Return on Your Investment

Yes, this may take the magic out of your sales recruitment process, it may take longer to find your next salesperson, and you may reject many more candidates than accept for formal interviews, annoying your recruitment organization and making it seem like you are making no progress towards your next sales hire. 

But would you place a faulty cornerstone on the skyscraper you are building, just so you could get started with the construction?  Probably not.  And hiring a salesperson with the unsupported hope that he or she will be successful could lead to the same unpleasant re-work a few months into the future. 

With the average salesperson taking 6 to 9 months or more to become effective and begin to offset their costs, consider the time you will spend in the process of on-boarding and training that sales person to be successful in your organization, the cost of salary, draws and travel expenses associated with that on-boarding period, and the opportunity costs associated with missing that next big sales opportunity or losing that key client.

Make the investment in your hiring process and earn the return that has all too often escaped us in the past.

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Understanding the Costs of Acquiring and Retaining Your Customers

I recently wrote about knowing when to exit a customer relationship (When It’s Time to Fire Your Client), when the terms for doing business are no longer equitable for both parties.  Neither the concept nor the practice is new but the process for doing it effectively, requires some skill.  At the same time, when considering customer relationships, it is important to understand the differences between the costs of acquiring and the costs of retaining your customers.

There are many articles and studies on the subject, including one that I find exceptionally useful (“Manage Marketing by the Customer Equity Test”, Blattberg and Deighton, Harvard Business Review), but the basic premise of most is that “it is harder and more expensive to acquire a new customer than retain an existing one.”

The costs of acquiring and retaining customers may vary widely within an industry or market segment but when you consider that corporations such as McDonald’s report that their repeat business from certain heavy use customer segments comprise more that 75% of their sales, the cost of replacing a lost customer versus maintaining that customer needs to be well understood.  This importance is further emphasized when you consider that many organizations use the “equity” that they have created in their customer relationships to fund their new customer acquisition programs. 

Sure, we all know that existing revenue streams via sales activities are the major source of funds for marketing activities in established companies.  But how many companies measure the equity of a given customer in that manner?  Understanding who are the highest value customers and creating plans to keep them suddenly becomes the basis for business decision making.

So what do you do?  Put a program in place in your organization to begin to measure the costs associated with acquiring and retaining your customer base. 

Start with the Acquisition / Retention exercise.

1)      Begin with your existing customer base for the previous 12 months, or whatever time period is appropriate in your business. 

2)     Quantify the number and value of the customers that were acquired versus retained during that period.  Your CRM, Weekly Sales “Wins” reports, and Monthly Billings or Invoicing reports should get you there quickly.  The ratio of these numbers may also give you a quick understanding (and possibly heart palpitations) of importance and impact of your new and existing customer base, to your business’ revenue streams.  But don’t stop yet, you only have part of the picture.  You need to also understand the costs associated with both groups of customers.

3)     This step is often the hardest part, which may be telling.  It’s time to quantify the costs associated with the acquisition and retention process.  Consider all marketing costs, sales costs, support costs and any other cost that is directly related to those activities.  Where you draw the line on costs should be a cognitive and honest approach to what you really spend on the activities.  But don’t take the easy route and avoid the less than obvious costs.  The hidden costs of acquisition and retention are often significant and erroneously understated.

4)     Now construct your acquisition / retention investment return matrix.  You can keep it simple with simple acquisition- retention ratios and related revenue-cost ratios or make it complicated with net present value and internal rate of return calculations.  Much of the decision is based on the “revenue and spend” timeframes and your level of sophistication.  In any case, you have now constructed an information system that will aid in your assessment of your true costs and returns for acquiring and retaining customers and most importantly allow you to make intelligent decisions related to individual clients or groups of clients and the equity that they bring to your company. 

5)     Perform the analysis. 

  1. What is the ratio of new customers to retained customers for the period of interest?     
  2. What was the cost for each dollar of revenue for your new and retained customers?   
  3. Did it cost more to acquire or retain your customers?  Do the results match your expectation? If not, why? 
  4. If your retention costs are greater per revenue dollar than your acquisition costs, can you afford to keep those clients or does this highlight a different problem?
  5. If your retention costs are lower per revenue dollar than your acquisition cost but the relative ratios are close to being equal, what can you do to increase the “equity” (improve the revenue/cost ratio) created by your retained customer? Additional on sales programs? Value added services? Cross-selling of products and services?
  6. Do you have customers or groups of customers that have significantly different retention costs than others?  Can you find common threads in those groups?  Can you take proactive actions to improve as mentioned n #6 below?
  7. Do you have newly acquired customers that don’t translate well when they are retained?  What has changed?

6)     Baseline your results and monitor your performance moving forward. 

  1. Measure the effectiveness of your marketing and support activities against your baseline. 
  2. Keep a close eye on the ratio of acquisition to retention.  High acquisition may feel good but low retention means churn and ineffective use of the available spend. 
  3. Use the results to dig deeper into customer sentiments and habits and attack those areas that lead to unattractive ratios.

With a deeper understanding of the acquisition and retention dynamics of your target customer marketplace, you now have the tools to make better decisions about your marketing programs, investment levels, and the relative value of your target and existing customers.  Armed with those tools you can maximize your investment dollars and their return.

I am interested in your feedback and experiences as you implement these programs in your organization and will collect and publish your responses in a future article.

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The Cold Truth About Cold Calling

OK, can I see a show of hands of all salespeople who find cold calling personally enriching? Yes, there are always one or two out there who love pounding the phones and have the skin of an armadillo when it … Continue reading

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When It’s Time to Fire Your Client

How many times have you returned from a client meeting and thought or said “Those guys are killing us…”?  Forget about the reasonable expectation for continuous improvement or driving costs out of the delivery model, I am talking about a client who just keeps asking for more than was agreed to in the written contract or even reasonably expected as part of normal business.

So what do you do?  Sometimes you have to say to the client, “You’re Fired!”.  Maybe not in that self-satisfying way that guarantees you’ve killed the relationship, any future relationship, and opportunities to leverage that client for business elsewhere, but in a more reasonable “let’s sit across the table and talk about how we’ve grown apart” way.

Yes, it is often a scary proposition and has both relationship and financial implications (see my upcoming post Understanding the Cost of Acquiring and Retaining Your Customers) but history has proven that death, by massive hemorrhage or a thousand small cuts, nonetheless is  death.  Fortunately, the latter can be a painful and drawn out process or one that can be avoided if the signs are recognized and acted upon accordingly.

Afraid to act?  Consider the penalties for inaction.

1) You find a way to meet the client needs but seriously jeopardize your profit margins and find yourself having to make up for the shortfall elsewhere.

2) Although you find a way to deliver to the short-term needs, you can’t maintain that level of service and ultimately find your client unhappy.

3) In order to meet the growing demand, you are now using your best resources to provide services to the client, hurting margins, sacrificing other opportunities, or penalizing other more strategic clients.

4) You are setting a precedent that becomes hard to break with that client and could snowball with future business.

5) Your own employees begin to feel the weight of the client demands and can show their dissatisfaction in their level of service or by seeking other opportunities.

6) You are not giving the client a chance to respond to the problem which may not be apparent to them and are also not giving yourself the chance to find a more equitable position either now or in the future.

So how do we extricate ourselves from this dilemma without destroying all the goodness (assuming there is some) that has been created?  Honesty.  No not in-your-face “you’re killing us” honesty but “honey, does this dress make me look fat?” honesty.

The process normally works best if your service or delivery has not already taken a turn south and the client is already growing impatient, but in either case, some tactful planning and execution can extricate you from the situation.  In many cases, the individual or individuals who purchased the product or services is not the person stretching the levels of service. I have found that conversations that start in one of these ways can often get you to the desired goal without too much collateral damage.

Dear client,

1)  It seems that your needs have grown beyond what we have originally discussed or priced….

2) As you know, we always preach the meaning and intent of a contract or statement of work above the literal terms, but…we are drifting so far from the literal terms that we may not be able to provide the service that you deserve…

3) We are both in business, you to serve your clients and us to serve you and our other clients. However, if we can’t deliver our products or services in a profitable way, we won’t be around to serve you in the future.  We believe that we have a good relationship and have done a good job to date, in meeting your needs, but…..

All of these conversations normally conclude in two ways: 1) we adjust the contract to reflect the current needs, or 2) we mutually agree that we can no longer provide the level of service that they expect and deserve, and we should find a way to bring it to a close before either party is permanently scarred.

So the next time you find yourself in a situation where you have done what was promised or should be reasonably expected and still find yourself losing ground, consider taking a proactive stance and address the issue before your relationship or reputation is damaged beyond repair.

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