A Foolproof Hiring System for Salespeople?

8 Mar

foolproof

Salespeople are great at interviewing. I, too, have been fooled by someone who looks good on paper, tests well, writes well and is personable. They look great and are hired… but fail.

Over the last nine years, our success rate at Blue Octopus is over 90%. That’s pretty darn good – actually amazing (if I can pat myself on the back), in comparison to most companies hiring salespeople in any B2B industry. But no matter what, we can all make mistakes and our new hires can fail.

Bad hires cost company time and money, hurt internal morale and sometimes damage your external reputation. The most expensive can be the average hires and the marginal performers that hang around for 2-3 years and never really make the company money. Here is an out of the normal paradigm idea…

Need to hire 1-2 salespeople? Hire 8!

  • Start interviewing. Upfront, tell every candidate about the entire process below in the first interview. In order to run the experiment with integrity, make sure that candidates will not be surprised along the way.
  • Hire 8 salespeople that you believe will succeed and pay them a $50K base + commission.
  • Fire 2 of the salespeople after 3 months and give the remaining 6 a $5K raise.
  • Fire 2 more after 6-9 months and raise the other 4 salaries an additional $5K.
  • At 12 months, you have 4 left standing; fire 2-3 of them and you are left with 1-2 high-performing champions.
  • Don’t bother creating new goals for them in their second year. They were fighting for survival in Year 1, so they have already defined their lofty goals for Year 2.
  • Give them another raise and let them run.

Of course, you were measuring their activity, results and ROI throughout the year. My last bullet above assumes that they are in the neighborhood of 2-3X ROI (gross margin / cost). If they are under 2X, then the experiment potentially failed (but I attribute that to poor hiring, sloppy on boarding and bad training – feel free to challenge my stupid idea).

The experiment cost: $378,128 + commission paid. Here’s my rough math:

  • 1Q, $125K ($50K/4 = $12,500 * 1.25 benefits+ = $15,625 * 8)
  • 2Q, $103,128 ($55K/4 = $13,750 * 1.25 = $17,188 * 6)
  • 3Q & 4Q, $150K ($60K/4 = $15,000 * 1.25 = $18,750 * 4)

I made some assumptions, but my little experiment will probably cost you about $500K (when commissions are included) in order to identify a star.

A lot of businesses would pay $500K for one guaranteed salesperson. If all of the salespeople brought in $1 million in margin over the course of the year, you certainly made money.

And I think every business would pay that if they found two strong salespeople producing 3x in year two.

Crazy idea? If the team is given good training and has a hands-on manager, it’s a hiring system that could work.

Forward never straight~ DREW
It’s time to grow faster.

If interested in a free copy of my eBook, Sales Neutrinos, please let me know. My next book for sales management is coming soon…

3 Responses to “A Foolproof Hiring System for Salespeople?”

  1. groupv3 March 8, 2018 at 7:34 pm #

    Hi Drew,

    This is a very interesting system, and I think it can make sense as a hiring strategy for salespeople.

    Here are several things I would caution against, however.

    First, once you start treating salespeople like a commodity who can be tossed aside without regard, or as locked in a Darwinian struggle where only the fittest survive, you may actually be missing other factors for why salespeople are not performing; factors such as the salespeople’s utter disregard, dislike, or pure disgust for a management team that would actually treat them like that, or, and just as concerning, that it may be that the product or service is not saleable due to issues like quality etc.

    Second, those salespeople who through tooth and claw successfully rise above and become the last “man” standing, so to speak, probably do so because they are either desperate, stupid, or share that management team’s disregard for or lack of empathy of other people. And this begs a further question: Do you really want salespeople with sociopathic tendencies to represent your business to prospective and current clients?

    Paul Loobeek

    Paul, here is an article I’m putting in my newsletter next week…

    I’ve seen many examples of salespeople and even teams that have achieved and ROI of 4X (gross margin / cost). In some industries, it is easier, but I’m a strong believer that most salespeople can reach that production level by year 2. I’m assuming that your B2B product(s) or service(s) cost more than a $1,000 – and assuming that your GM is more than 20%. If you fit that criteria, it’s time to focus on ROI and 4X.

    Calculating Return on Investment (ROI) for Salespeople:
    Total Margin (Not Sales!) / Salary + Commission + Benefits

    When you simplify it, salespeople only do three positive and/or negative things for your company:

    1. Make you money or cost you money.
    2. Boost or hurt the company and team morale.
    3. Externally, they improve or negatively affect your company’s reputation.

    They’re Just a Number?

    I hate to turn salespeople into numbers and that isn’t where I start; especially in the interview and training process. Your sales force is much more than salesperson #12 that sits in the 34th cubicle on the 5th floor producing 3X.

    If you’ve read my previous material in my newsletter, blogs or book, Sales Neutrinos, you realize that I put a lot of emphasis on the qualitative side of appropriately managing and motivating employees. Every salesperson is a unique human being and you should usually be helping them, not beating them up over their ROI. If you hired well, assume they are another important future 4X producer on your team. Then do everything in your power to get them there (or fall short at 3X).

    Managing salespeople is actually a lot easier than we make it. They are working for you to help sell more goods or services. Long term, it’s about measuring their production. If they aren’t delivering a strong return, then they aren’t making a lot in commissions… and they probably aren’t happy either.

    Hire, train and manage them well. In terms of numbers, concentrate on ROI before you worry about all the rest of the metrics. Everything else is secondary.

    Hope this explains my full position~ Drew

    • Drew Schmitz March 8, 2018 at 10:55 pm #

      Paul,

      Thanks for your response… I’m always willing to debate a point. I think I made it very clear that salespeople ARE NOT just a number. They aren’t a commodity. Sales leaders and their companies are obligated to on board, train, listen to and motivate their employees. The hiring process is critical… and year one is a loss for most sales positions. The important of them being a good teammate is as important as their competitive nature.

      That said, salespeople are obligated to close deals and not make themselves expendable. Sales is a tough business and not for the faint of heart. I would argue that half of people in sales, shouldn’t be in sales because they don’t have the personality, the competitive nature and get literally “joy” from closing deals. I think way too many people are in sales only to make money and they punish themselves working in the wrong role.

      So the idea that we are “locked in a Darwinian struggle” or creating “sociopaths” seems a bit ridiculous to me. Salespeople have a choice of being in sales – and working for a particular company and manager. If you aren’t producing in year 2, then you can be let go. If you are on your second or third sales job and still not finding success, then you need to pursue a different career.

      I don’t mean to be argumentative, but again, I don’t believe salespeople are an ROI measurement first. But they have to be measured.
      ~Drew

  2. Paul Loobeek March 10, 2018 at 1:30 pm #

    Drew,

    No one denies your right to defend your “Foolproof Hiring System” when its criticised; no one denies your right to philosophize about what constitutes the nature of a true salesperson; and who should be one and who should not be one and why.

    No one denies your assertion that a salesperson is required to close deals, and, if they are not doing so consistently after 2 years, that they should probably be let go.

    However, when your “Foolproof Hiring System” for hiring 8 salespeople to get to a couple of surviving salespeople includes firing some after only 3 months (not 2 years); and firing more after only 6-9 months (not 2 years) and etc., then some readers may deny (as I do) that your rebuttal to my criticism was actually on point.

    Moreover, if you don’t immediately sense that your “Foolproof System” treats salespeople like they are lab rats in an experiment, then let’s agree to disagree since we share no agreed understanding of what we’re discussing.

    I myself am only referring to what I perceive to be an unfair experiment (and unethical) experiment at the expense of salespeople. If any of your clients decide to try your “Foolproof Hiring System for Hiring Salespeople” approach, I fear that they will not disclose the “weeding” process, and thus increase its abusiveness. On the other hand, if they do disclose the process to applicants, then I fear that only desperate salespeople will move forward with it. And treating desperate salespeople in this fashion can lead to poor individual decision making on their part.

    In sum, I urge you to reconsider this hiring system, not because I’m being belligerent, but because I’m concerned. I believe your system can eventually add value for your clients, but it’s not quite there ethically. And It shouldn’t be instigated until it is.

    With utmost respect for you, your accomplishments, and your abilities,

    Kind regards,
    Paul Loobeek

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