Flop Myopia
Dr. Dave Barnett
It may sound like a ë50s dance craze, but flop myopia is the short-sighted condition that blinds sales managers and recruiters to the real costs of hiring a dud, a sales washout. Do you know what it really costs you to make a hiring mistake on your sales team?
If you want to run a self-diagnosis on your own hiring and recruitment efforts, here are some of the telltale signs of flop myopia:
1. Decreasing profit margins and increasing turnover. 2. More and more time spent trying to understand and motivate the sales team.
3. Salespeople making more excuses than sales calls.
4. Resistance to investing in sales selection tests and other objective performance measurements.
5. An almost mystical insistence on making hiring decisions by gut feel.
The presence of one of these symptoms doesn't necessarily indicate a blind spot in your recruitment efforts. But two or more in combination should definitely not be ignored. Here's a simple two step prescription just in case you might be suffering from flop myopia.
Step 1: Calculate the Costs
The cure for flop myopia begins with calculating the actual dollars and cents lost in a bad hiring decision. This involves looking at three outlays.
First, add up all the actual hard costs of the hiring process. Here are just a few examples:
*The price of running ads in the local paper. *Printing brochures, fliers, and other recruitment pieces (don't forget the cost of developing and printing employee applications, etc.).
*Running credit checks or department of motor vehicle reports (this step can save recruiters a lot of grief later on).
*Expenses for travel, meals, or renting meeting facilities (when necessary).
*The value of the recruiter(s) time in preparation as well as the actual interview process. Too many entrepreneurs undervalue their time. This item is probably the most precious commodity you lose when hiring the loser.
*Contractor or employee set-up costs (drawing up the contract, entering worker information into the payroll system, or updating computer programs, complying with local, state, federal regulations, etc.).
Second, total all training costs. The days are long gone when you could realistically expect to discover a top performer by presenting your new hire with a story of "unlimited opportunity," give the salesperson a presentation book, some order forms, and a hearty "go get ëem Tiger." Our education system is not turning out the work force that existed even a few short years ago. Training is fast becoming a necessity in a workplace where many high school graduates can barely read. Many sales recruiters tell me they cannot assume that job candidates have been raised with basic values of honesty, hard work, and courtesy.
Most companies are spending more today on training than ever before. Training costs include:
*The price of training materials (whether pre-packaged workshops or home-grown materials). *The cost of samples.
*Presentation books and other sales aids.
*Expenses for travel, meals, or renting training facilities (when necessary).
*The value of the trainer's time.
The third area to calculate is lost opportunity costs. Hiring a flop not only runs up the cost of hiring and training, but deprives you of income you might have realized by hiring a top performer.
Here's a simple formula to figure lost opportunity costs. Take the income of your top producer, or better yet, your competitor's top producer. Next, subtract the average income generated by your bad hire. Now, multiply that figure by the number of bad hires and you begin to see just how costly flop myopia may be.
The costs grow exponentially when the wrong sales manager or recruiter is hired.
Depending on your business, you may also have to calculate into your lost opportunity costs the value of lost customers and reduced goodwill. Word gets around. If you get a reputation for high turnover or low morale, you compound the problem by making it even more difficult to attract top quality candidates.
Step 2: Minimize the Loss
Calculating the cost of a bad hire is the first step to improving your ROI (return on investment). But it's not enough to know the facts. You must act on those facts in ways that improve your bottom line.
Curing flop myopia requires you to develop a hiring strategy. You need a plan that improves your chances of recruiting top performers, minimizes your losses, and enables you to regain control of the growth variables for businesses like yours.
Your hiring strategy should address these three initial factors:
1. Determine the key behavioral variables to success in your business. Beware of thinking only in psychological terms. You may be quick to describe your ideal candidate as someone with "drive," "determination," and "enthusiasm." But these are highly subjective terms, difficult if not impossible to be quantified, measured, and therefore duplicated. If you recruit primarily by gut-feel, you will likely end up with a sales team with lots of emotional ups and downs, and very little consistent productivity. 2. Invest in the tools which help you uncover and evaluate those behaviors. Our company works with clients around the world to help identify these key behaviors and prescribes assessments to measure them. But the value of any assessment can only be established in light of what it costs to make a hiring mistake. Spending $100 for a test seemed extravagant to one flop myopic until he discovered it was costing him over $80,000 to make a hiring mistake.
3. Look for qualified candidates where you are most likely to find them. Running an ad for a salesperson in the newspaper may get you lots of resumes. That's fine if you're in the resume collecting business. This usually only runs up the cost without necessarily guaranteeing you a pool of qualified candidates. One enterprising manager I know answers the employment ads of her competitors. She not only gets the low-down on what the competition is up to, but she has the opportunity to meet some exceptional, experienced producers.
"They start out selling me," she laughs, "but more than once, they've come to work for me."
You've probably heard the saying, "Freedom isn't free." Well, neither is stupidityóor hiring the wrong salesperson.
