March 11, 2019 Real Costs of Bad Sales Hire

Bad sales hires cost companies lots of money but sunk hiring cost isn't the only loss companies suffer-the costs add up in a number of ways.

March 11, 2019

Sales hiring decisions can either make or break your company’s reputation and performance. While a right sales hire can help your business sustain growth and improve performance; bad sales hire can cause problems that can be detrimental to your business. In a survey conducted by CareerBuilder, 27 percent of the US companies said that one bad hire costs them more than $50,000. While sunk hiring costs is the direct result of bad sales hire, wrong sales hiring decisions represent a lot more than one-time sunk hiring costs. Here are some additional costs that result due to bad sales hiring decisions:

Low morale and reduced performance

Bad sales hires cause employee morale to plummet, resulting in reduced ability to comply with timelines, maintain standards and achieve goals.

In a survey conducted by Mindflash, 36% of the employers reported that bad hires affected their employee morale negatively. It usually happens because high performing employees feel frustrated when they see more time and resources being devoted to manage poor performers as opposed to mentoring the ones with good potential. Underperforming employees can also be detrimental to company’s culture as they lower the bar, and can cause even the high performers to disengage.

Loss of precious resources

Bad sales hires force you to start the long and tedious recruitment cycle again and spend more time, money and effort in the process.

Hiring a new employee is a significant investment of valuable resources. From sourcing to interviewing and negotiating – the entire process takes time. A significant time is spent on training, guidance and performance correction as well. Apart from the time, the common costs of hiring a person includes – paid job ads, third party recruitment costs, background checks, travel expenses and a lot more depending on the recruitment process. Additionally, terminating an underperforming employee means paying severance costs, compensation, legal fees etc – leading to extra financial burden.

Loss of employee productivity

As your other employees try to make up for the shortcomings of the underperforming employees, while managing their own tasks, they get too exhausted from taking on additional work. This results in reduced productivity of the high performing employees. It may also lead to other problems, such as – resentment among employees, disengagement and poor morale. As per CareerBuilder’s survey, 58% of the respondents reported loss in employee productivity due to their bad hiring decisions.

Loss of good employees

Generally the employees don’t mind taking on additional work while helping a new employee adjust to their organization. But, when they have to consistently make up for someone else’s shortcomings, it leads to resentment and some employees might start looking elsewhere for better job opportunities.

Damage to brand reputation

When you have wrong people representing your brand, your brand’s reputation becomes tarnished. It not just significantly reduces sales and patronage; but also leads to loss of opportunities and credibility in the market. As a result, the brand may be forced to invest more money to revamp their image and repair the bad reputation.

Lost clients

Bad sales hires put no efforts in creating ongoing relationships with the customers, leading to loss of new clients & future revenue system.

Also, when a sales person quits, there’s always a risk of them walking away with your clients. As a result of direct loss of clients, you experience a sales slump.

The costs are compounded

When companies make a poor hiring decision, all the costs are all compounded because they are forced to incur them again in order to replace the bad hire. As per a Harvard Business Review Article, the cost of replacing a telesales employee can range from $75,000 to $90,000; while for higher sales position, it can go upto $300,000.

Wrap up

The longer you allow a bad performer to play with your company’s reputation, the worse effect they’ll have on your bottom line results. The costs of bad hires can stretch into millions within just a few months of their hire causing your company significant damages. With stakes like that, it is important for your organization to learn from your previous mistakes and implement sustainable changes that will ultimately help you get your sales recruitment process right.

About the Author:
Payal is a Content Consultant at Enuke Software, a pioneering Blockchain and healthcare App Development Company in the USA. Payal is passionate about the start-up ecosystem, Crypto world, entrepreneurship, latest tech innovations, and all that makes this digital world. You can contact her at payal.goyal@enukesoftware.com.

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