Betting the Odds
"The race may not be to the swift, nor the victory to the
strong, but that's how you bet."
-- Damon Runyon
Attracting the best people is hardly a new idea. The greatest generals, coaches, and sales managers seem instinctively to understand the importance of attracting the best possible recruits. Casey Stengel, the legendary baseball manager of both the New York Yankees and Mets, often remarked that the easiest way to win a ballgame was to make sure the players on your bus were better than the players on the opponent's bus. Mr. Stengel won quite a few World Series championships putting that notion into practice.
Most of the best sales managers express a similar sentiment. But for many organizations, hiring the best people seems easier said than done. Our research into sales force effectiveness shows that a great deal of the improvement that most sales organizations can make comes directly from better selection. In some organizations, we find that as many as seven out of 10 sales representatives lack the threshold talents to be consistently successful in their jobs.
Even among the best organizations we studied, it was not unusual to find 35% consistently in the bottom half of the rankings. For the most part, these are individuals who should never have been hired the first place. From day one, they were a poor fit with the organization. By "poor fit," we mean they had little in common with the organization's best producers, and consequently had little chance of ever achieving real success.
Why is it so hard to hire great salespeople? When we ask sales managers this very question, we get a variety of answers. "Our company will not pay what it takes to hire really good performers," one manager told us. Another manager said, "We hire entry-level salespeople right out of college, so we expect that many of them will fail within the first two years." A third manager said, "Right now we're not a growth industry, so it's hard to attract ambitious individuals who want to get ahead." Many organizations see sales as an entry-level position for future executives and managers, so they look for qualities, traits, and backgrounds that might have little to do with bringing in business.
Yet, there was one manager who felt that hiring really good individuals was no problem whatsoever. "We have a great company, and we have a great future, so we can pretty much choose the pick of the litter." However, when we took a close look at this particular litter, we found that a little over 25% of his company's sales force did not have the talents we normally see in top-producing representatives. When we examined their actual productivity, we found that this sales force still had a significant percentage of underperformers. If you can hire anyone you want, we asked, why on earth did you hire these people? (OK, we phrased that question a little more diplomatically).
Our premise here is simple. No company or manager deliberately sets out to hire sales reps that will perform poorly. Yet, in most of the companies we have researched, we find that one-third to two-thirds of their sales representatives are underperforming. The reason managers hire these individuals is that managers are unable to discern during the hiring process which candidates are likely to be stars, average performers, or abject failures.
One of our clients put this premise to the test. Every time a sales manager hired a new salesperson, the managers were required to predict how well the new recruit would perform. Based in their evaluation, they ranked the new recruits as an "A," "B" or "C" candidate. Each candidate's new sales results were tabulated at 6 months, 12 months, and 18 months. At the end of the first six-month interval, the A candidates slightly outperformed the other two groups. By the 12- and 18- month intervals, this difference disappeared, and there was no statistically significant difference between the A, B, or C groups.
During the same time frame, Gallup was also asked to evaluate and rank the same incoming recruits. We ranked people as recommended (As), conditionally recommended (Bs) and not recommended (Cs). Based on these groupings, results were also tabulated at 6 months 12 months, and 18 months. At all three time frames, Gallup observed significant differences among the groups, and those differences became more apparent during the second and third time periods. At the end of 18 months, the group we identified as A candidates averaged new sales of $218K. The group of B candidates averaged $167K in new sales, and the C group averaged $74K in new sales.
Why was Gallup able to predict a candidate's success more accurately than the managers who interviewed these candidates face-to-face? The reason is simple: Gallup used very different criteria and very different information. The managers essentially evaluated candidates based on their resumes. They looked carefully at each candidate's previous experience, their track record, their educational background, and each candidate's "chemistry."
Gallup has evaluated hundreds of thousands of sales candidates, and we have found that though these factors should be considered in the hiring process, they have little value in predicting whether a sales candidate will succeed. Instead, Gallup carefully evaluates the best performers within an existing sales force. From this process, we distill a series of highly predictive questions -- questions that the most-productive representatives answer differently than the least-productive members of the sales force. Next, we evaluate a new candidate's answers to these very same questions. Based on how closely a candidate's answers match the answers from the best-performing reps, Gallup can predict a candidate's likely success and provide that information to the hiring manager to assist the hiring decision.
What are the implications of these results? Although most managers recognize that hiring the best people is important, they do not have tools available to help them make effective choices. Instead, they rely on traditional criteria that have little predictive value. It's no wonder that even in good sales forces, we find that so many "C" candidates get hired.
This information raised another set of questions for this company's managers. If they could not tell the difference between an A candidate and a C candidate during the hiring process, how many A candidates were they turning away? During the course of 12 months, Gallup interviewed 52 candidates who had at least one interview with the company, but were not offered a job. We found 11 individuals, or 21% of those we interviewed, met the criteria for being recommended. In other words, not only were managers hiring C candidates, but also they were letting A candidates slip through their fingers.
It's sometimes hard for sales managers to accept this feedback. They have been wrongly told that good sales managers have excellent "judgment" when it comes to hiring people and that somehow they should be able to tell the difference between good performers and poor performers during the interview process. Many managers we have talked to have been sent to classes to learn how to conduct interviews more effectively. However, if managers are asking the wrong questions and looking for the wrong information, it's hard to end up with the right decision.
In almost every other management area, people understand that good decisions stem from good information. It's a lot easier to exercise good judgment when you have good information. And by good, we mean accurate and relevant.
Yet most of the information collected during a traditional hiring process has little relevance to success on the job. Often, managers end up hiring people who are simply good at being interviewed. The best managers we talk to candidly admit that they have made many hiring mistakes during the course of their career. They're not bad managers; they're just making decisions based on bad or irrelevant information.
Determining how closely at candidate's talents match your best performers' talents is extremely difficult to do in a traditional hiring process. In order to be successful, Gallup finds it is necessary to develop a unique set of questions for each sales force. Each candidate's answers to those questions are carefully reviewed and evaluated. This process yields more relevant information and accurate results, and our conclusions have a greater predictive value.
When companies begin hiring candidates based on sales talent, they often find there is a more readily available pool of candidates than they had imagined. This candidate pool includes the 21% of eligible candidates most sales forces interview but let slip through their fingers. Hiring talent is also not more expensive. In today's environment, organizations pay a premium for experience, but often don't get their money's worth. Hiring for talent versus experience, on the other hand, is not only more cost-effective, but it nets a better employee.
No selection system is perfect, but improving your selection remains the single biggest opportunity to improve the quality your sales force. When it comes to outstanding sales performance, talent matters. From our perspective, it's the only way to bet.