The Real Cost Of Bad Sales Hiring

How much does bad sales hiring cost your organization?

If you have to think about it, then it's probably costing you more than you think! Now, how's that for a reality check to start an article?

Organizations are seeing hiring costs trend upwards while rep effectiveness and efficiency are trending downwards since the start of 2020. These types of changes will have consequences on your bottom line.

Before we can encourage you to look at a solution like Uvaro, which trains and graduates only top-quality sales reps. We would like to illuminate the true cost of a bad sales hire at your organization.

That way, when we start sharing the quality, effectiveness, and results you can expect from Uvaro graduates, you can't afford NOT to hire them!

How do you measure the cost of bad hiring?

While there are many approaches to calculating the cost of a bad hire, here are the four most common:

1 - Cost of Hiring Time

Calculated as: Total Hours Spent Screening & Interviewing × Average Hourly Wage

The industry average hiring process includes 27.5 Hours of Screening and 45.0 Hours of interviewing. If the average wage of your hiring team is $40/hr, that’s $2,900 per hire.

2 - Cost of Lost Productivity

Calculated as Total Training & Coaching Hours × Average Hourly Wage

This approach can be more complicated, as some training is delivered one-to-one, other training is delivered one-to-many, and coaching is often ad-hoc and difficult to track. The industry average is $3,318 per hire.

3 - Cost of Recruitment Marketing

Calculated as: Total Recruiting Spend ÷ Total Number of Hires

You can calculate your Total Recruiting Spend by adding up recruiting salaries, referral bonuses, job postings and advertising, job fairs and events, and recruiting technology. Last year, the industry average hit $4,000 per hire.

4 - Contingent Recruiting Fees

Depending on the agency, contingency fees can range anywhere from 10% to 30% of the employee's annual salary. For an average sales role, that means an incremental cost of $7,900 to $23,700, or a midway point of $15,800 per hire.

If you wanted to be thorough, you could even add these all together for a comprehensive cost to hire of $26,018

*And this doesn’t even account for the cost of botched leads or reputational risk* 😱

The hidden cost: missed sales

Because sales is a revenue driver, the real cost of bad sales hiring is the sales you’ve missed by having the wrong person in the seat.

The average sales rep only ever achieves 58% of quota, and if you account for time to hire and time to ramp, it’s much worse. In their first year, in a do-it-yourself hiring program, the average rep will only close 31% of the full quota.

A simple approach may be to compare this attainment against a theoretical ideal; a more realistic exercise is to compare this average attainment to the attainment from recognized sales training programs.

Using data from Uvaro, we can see that better-trained reps grow faster and higher. Uvaro grads ramp 80% faster, and will and are 2x as likely to exceed quota. Together, this translates into 146% more sales in year one, when compared to someone hired through a do-it-yourself recruiting process.

This 146% translated into an average sales miss of $349K - 13x the cost of all other approaches combined.

What does this mean to you?

Here are some sample calculations - depending on your annual sales rep quota, this is the money your company is leaving on the table by just being average” (as compared to working with Uvaro grads)

Where do you fall on this chart?

Conclusion

Knowing the cost of your hiring practices is good business, but the wisest sales leaders focus on the costs associated with lost revenue, which drive 13x the costs enterprises typically track. By prioritizing the recovery of that lost revenue and hiring better, sales leaders can turn hiring from cost centers into profit centers and gain $350k more revenue.

About Uvaro

Uvaro is on a mission to help the world’s professionals lead more fulfilling careers, from their first job to their last. Learn more about how Uvaro helps businesses by connecting them with fully trained and pre-vetted sales talent at uvaro.com/talent.

Sources

• First in HR: Know Your Numbers in Hiring. Recruiter box. Retrieved from https://recruiterbox.com/blog/first-in-hr-know-your-numbers-in-hiring
  
• 29 Astonishing Interview Statistics. What to Become. Retrieved from https://whattobecome.com/blog/interview-statistics/
  
• Mueller, A. (2021, July 24). The Cost of Hiring a New Employee. Investopedia. Retrieved from https://www.investopedia.com/financial-edge/0711/the-cost-of-hiring-a-new-employee.aspx
  
• SAAS AE Report. The Bridge Group. Retrieved from https://blog.bridgegroupinc.com/hubfs/resources/SaaS_AE_Metrics.pdf
  
• Glassdoor, HR and Recruiting Stats for 2019