Effective salesforce is key to success

Recruitment expenses are typically predicted to cost approximately half an annual salary per new salesperson. When training costs are added, this could amount to tens of thousands of pounds per employee.

Yet according to a sales director for a £350-million company, who was one of 444 respondents to a Raconteur study on sales hiring practices: “Getting a good sales person is far harder than getting a new customer… It is by far and away the most important aspect of my job.”

Recruiting the right person into a sales role has a critical impact on the overall success of a business. Conversely getting the wrong person can have disastrous effects. It is statistically proven that hiring the wrong person not only reduces revenue potential and profitability, but causes dissatisfaction throughout the rest of the workforce and increases staff turnover.

However, even when the best people are recruited, evidence suggests it is these top-performing employees who will be most prone to move on to greener pastures.

The most popular and also most effective means of gaining new high-quality salespeople is through personal recommendation

In the Raconteur report Building an Effective Salesforce 2012, Dr Iain Davies, with foreword and commentary by Professor Lynette Ryals of Cranfield School of Management, reveals insightful new research.

Due to its commercial sensitivity, there has been little publically available data on sales hiring practices and it is this lack of reliable information that drives us to explore such a business-critical area. What we uncover is fundamental reading for all sale managers and directors.

Let’s start with some good news. Some 67 per cent of the UK companies studied are preparing to grow their salesforce in the next year. After a few slow years, most sectors, except energy, mining and utilities, and automotive, are expecting to grow their salesforce by 10 per cent or more in the next 12 months, with an average growth of 21 per cent.

However, with 43 per cent of respondents already identifying a significant lack of suitable candidates and a further 30 per cent struggling to acquire the services of the best candidates, good quality salespeople are already thin on the ground. So how are companies trying to attract new people into sales careers?

The most popular and also most effective means of gaining new high-quality salespeople is through personal recommendation. In fact the interpersonal approaches of personal recommendation, internal waiting lists and people met through networking events are perceived as first, second and third most effective at gaining good applicants. Whereas print media social networks, such as LinkedIn and online job boards, are considered the least effective means of sourcing candidates, despite their broad popularity.

Unlike closely associated jobs, such as marketing, sales jobs are unpopular with new graduates. We therefore see a relatively low level of usage of graduate job fairs or recruitment networking events. In the current economic climate this is perhaps disappointing with nearly 19 per cent of graduates unemployed and a further 36 per cent in low-skill jobs, according to The Graduates in the Labour Market 2012 report published by the Office for National Statistics (ONS). This means there is a wide selection pool of young, intelligent and enthusiastic people out there eager to start out on a new career, but they are not choosing sales.

Part of this is a complete misunderstanding of what a sales role is in a modern company. Students still have outmoded perceptions of sales based on the media’s preoccupation with a 1950s used car salesman stereotype of uneducated ne’er do wells, rather than the modern project managing team leader. In their minds sales is Derrick Trotter (Only Fools and Horses) and Old Gill (The Simpsons), not marketing’s Don Draper (Mad Men). Yet for those of us with an eye for sales – Mad Men tells us more about selling than marketing. Project teams, building relationships, listening to customers, understanding points of pain, creating a solid value proposition, objection handling, building trust – this is sales.

Even if this stereotype could be changed, 55 per cent of companies believe graduates are not leaving university with the relevant skills to move directly into customer-facing roles. This is further complicated by the 70 per cent that feel their companies do not train the salesforce sufficiently; therefore leaving the companies reliant on candidates walking through the door readymade and the selection panel choosing the “right” person, first time – every time. How companies select the “right” candidate is therefore critical.

The one area of sales hiring which has received a high standard of academic inquiry is the effectiveness of selection procedures on predicting overall sales performance. Table 1 shows a summary of the measured effectiveness of differing selection methods on sales performance from industrial psychology.

Table 1

We identify four distinct approaches used by companies to select sales employees. It is particularly noticeable that overall confidence in selection procedures is significantly higher in the two groups of companies that do testing against those that do not.

However, our sample companies perceive competency interviews and hypothetical (case studies) interviews as the most effective methods of selection, with cognitive ability testing considered the second least effective.

Part of this perception could be the lack of companies engaging in cognitive ability testing (only 60 per cent of companies) or a lack of training in selection methodology (less than 25 per cent of companies).

More likely is the urban myth that IQ is irrelevant to sales success. It is true that a candidate’s number of years in education has about the same predictive power on sales success as someone’s handwriting. This is completely true: Schmidt and Hunter tested the predictive power of both graphology and years of education on sales success, and they were broadly similar – and irrelevant. But the ability to work under pressure, create solutions on the fly and handle objections are incredibly important capabilities in sales success, many of which are exposed under test conditions.

Once companies have selected their new salespeople, however, holding on to the best performers is not always easy. We actually find overall sales staff turnover rates to be much lower than expected at around 16 per cent. They are slightly elevated compared to the UK average for all job types of 14.3 per cent, but dramatically lower than the 22.5 per cent seen in the 1990s.

There is a propensity for better performers to be the most likely to move on and, unfortunately, there does not appear to be any easy solution to keeping them, with increased compensation being rarely effective once someone has decided to move on.

Measures can be taken to prevent people from wanting to move on such as providing stronger leadership, advancing peoples careers more quickly, offering more/better training and better work-life balance.

But there is an overarching perception within sales companies that employee churn is not a negative thing. Although high sales staff turnover is perceived a significant barrier to improved revenue performance, it is not something managers are worried about. It’s part of the job.

The complete 36-page analysis of this study is available for purchase at £479+VAT; please email research@raconteurmedia.co.uk  or call us on 020 3428 5230.

Recruitment expenses are typically predicted to cost approximately half an annual salary per new salesperson. When training costs are added, this could amount to tens of thousands of pounds per employee.

Table 1