4. The Economics
of Failure
Sizing up the overall problem
Identifying existing and potential
problems
Reversing bad hiring processes and
implementing good ones
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…
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
70. 1: Rank order, from top to
bottom
2: Tier production levels
71. 1: Rank order, from top to
bottom
2: Tier production levels
3: Assign salespeople to
their appropriate level
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. 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
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
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.”
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.
85. Divide production [within each tier] by
the number of people in that level.
This yields the average production per
salesperson by tier.
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. 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. 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
90. Calculate the average production
difference between a mid-tier
salesperson and a bottom-tier
salesperson.
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. 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. 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. 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. 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. 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.
102. Administrative costs:
Discipline and termination
Separation processing
Vacancy costs:
Open territories
Unsold inventory
Replacement costs:
Recruiting and related
Management time
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. 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. 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. 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. 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. 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
121. 1: Understanding the
dynamics of change
2: Flat world attitudes
3: Establishing a new
model
4: Aligning the sales
organization with goals
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
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. 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
214. 1: Get real about the costs
and consequences
2: Step back and evaluate
your options
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. 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. 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