The cost of a mishire is seldom an item on your balance sheet. When you take into consideration advertising, basic training, the time of the trainer, the expenses attendant to the trainee’s early development, the cost of developing prospects, and the administrative support which attends these costs, the investment in the recruit becomes sizable.
A sales force may be subject to turnover due to the retirement, burn-out, or relocation of salespeople. While that is a given, a large majority of salespeople “turn-over” because they were a mishire. A home improvement sales force operates in a complicated environment with the need to sell customers on a short cycle. In-home selling requires that a salesperson competes with others selling what is often perceived as the same product or service at lower prices. So how do you grow a sales organization while reducing mishires?
Let’s take a look at the 12 Immutable Laws for Hiring Salespeople.
- Hiring the right salesperson takes twice the time you expected and much more time than you have.
- Self-starters — seldom do.
- After numerous interviews or few applicants, less qualified candidates look better
- The ideal candidate — usually isn’t.
- The majority of resumes received seldom match the job description in your ad. The best resumes are frequently a product of creative writing and vivid imagination.
- The best candidate for your job is probably already working for someone else.
- “What ever happened to what’s-his-name?” is the sequel to last year’s great hiring story.
- The true cost of “mishires” doesn’t show up on your P&L.
- Your “gut feelings” work best when they indicate it’s time for lunch, and seldom when it comes to choosing the best candidate.
- Unless the interviewer has been trained in the recruiting process – mishires become the rule rather than the exception.
- Poor performers seem to surface soon after the draw or training guarantee expires.
- A candidate’s true behavior is usually masked during an interview and can be discovered either by a behavioral profile or by disappointment after training has been completed.
Eliminating mishires is next to impossible, but you can reduce them significantly by following a sound, structured hiring system.
We recently met with a client who was producing more business than he ever had. Revenue was up nearly 6% over last year (and they are not a small company). Nevertheless, profitability was down.
Now if this was a function of increased marketing spending then that would be one thing, but upon examining the operating statements from the last 5 years we saw a disturbing trend. Every year since 2006, revenue had increased and profitability had decreased. Worse, no one in the business seemed to know why.
They had not made any radical changes in their business model, and marketing expenses had remained relatively consistent. So what was happening?
We asked the client whether or not he knew the number of salespeople that had left the company over the previous calendar year. He said he did not. It was of no surprise to find out that turnover was through the roof.
I should point out this is not an attempt to denigrate our client. The situation that is being presented is not an isolated incident; in fact, there are more companies that we work with who do not have a handle on their operating statements than there are that do.
Because sales were increasing, and marketing costs were stagnant, the client figured that there was nothing wrong with turnover among his sales force. To a certain extent he was right. Some turnover is healthy, because it weeds out non-producers and keeps people focused. However, too much turnover will lead to exorbitant costs that in many cases are hard to track when you are calculating your year-end operating statement.
Let me ask you a question: do you know the average cost of a mishire? This relatively standard projection catches a lot of companies off guard.
The simple fact of the matter is that while the science of selling can be taught, not everyone can exceed in it. This is where behavioral profiling becomes useful.
The profile does a better job than any hiring assessment we have found at matching someone to a job and predicting future success. In our 40+ years of using the DISC Classic behavioral profile, we have found their to be a 80-85% success rate in determining an individual’s behavioral style.
Behavior is neither right nor wrong, it just is – - and every behavioral type has a specific match when it comes to a job role. The question is whether or not it is the job you are hiring for.
Or, you can choose to go by intuition, and experience has taught us that even the best HR personnel can make significant hiring errors – - and these errors can lead to exorbitant turnover costs.
For more information on behavioral profiling, you can contact Brian Nelson at email@example.com or call our office at (703) 591-2940.
The continuing review of the Home Improvement Summit next brings us to what may currently be the biggest opportunity for remodelers and general contractors. Green remodeling is taking the industry by storm as consumers are focusing more on conservation, both for environmental reasons and monetary ones.
One of the proponents of this movement within the industry is Terry Ferraro, who is the President and CEO of Pro Materials Direct, a distributor of specialty products to home improvement companies. They currently serve over 40% of Replacement Contractors’ (magazine) top 100. Since 1975, when he first joined Alside, he has dedicated his career to the industry. His distribution company, American Wholesale Supply, has branches in 7 southeastern states. He is a founder and director of EBank, a founder of Magnolia Windows and Gutter Protection Products of America.
Terry terms these as “Greenovation” jobs, and he believes that they are rapidly becoming the most profitable jobs for many home improvement companies.
In the surveys that his company conducted, nearly half of all the green specialists said that their green business was doing better than their traditional remodeling work.
One way that many remodelers are finding success is through weatherization programs that help homeowners lower their heating costs.
NARI recommends making energy efficient upgrades as a way to prepare for the season, and many remodelers are also offering winterization programs to help them reduce energy costs.
Terry gave a sampling of companies from within the industry that are having success with green remodeling and I will share a few here:
“Our Home Energy Makeover Sales have the highest closing percentage of any product that we sell. They have the highest gross profit. Almost 80% of the jobs are paid by cash or credit card. They have the lowest cancelation rate. Over 90% of all Makeover jobs are installed and there is little or no service after completion.”
- Scott Alsup, Sales Manager, Taylor Construction, Atlanta, GA
“We had a kitchen lead the other night and we were the homeowner’s 5th estimate. Our salesperson left with an $8,200 home energy makeover sale. Two days later we ran a front door replacement lead and sold a $7,500 eShield Attic Insulation job.”
- Randy Hamilton, President, Erie Construction
“We started running eShield Home Energy Makeover leads about 6 weeks ago and only handed out 10 demonstration kits to our sales force. Within 2 weeks all 77 salespeople wanted to run those leads.”
- Mel Feinberg, President, FHA Home Improvement, Hollywood, FL”
In addition to home energy makeovers, real time energy tracking will be the energy buzz words over the next 24 months.
Feel free to contact Terry Ferraro directly with any questions regarding this blog posting.