Volume 1, Issue 1
September 1st, 2000

We write the articles, and our writers are talented recruiters, project managers and teachers. We hope you enjoy the 'zine, and share your comments with us. If we get enough response, we may open a chat room to keep the dialogue going between issues.

Our Premiere Issue Includes:

• The Problem of "Just-In-Time" Recruiting
• What's the Real Cost of a Bad Salesperson?
• E-Commerce: What are you buying, anyway?

Thanks for visiting; Don't forget to check back here for Issue #2 in January!

The Problem of "Just-In-Time" Recruiting

Recruiters can fall prey to a short-term focus when
dealing with their internal clients. They do so at their peril...

This Job Would be Great if it Wasn't for the Customers...

You've been here before. A job req. for a territory software sales manager lands on your desk. The position's vacant because the incumbent, who's been on a performance plan for eight months, didn't deliver and got fired yesterday. Or, maybe you're part of a shiny new start-up and the position's never been filled. Either way, your response is pretty cut and dried. Post the position on your web site. Visit the Internet job sites. Call an agency or two. Shake the employee referral tree. Wait for the resumes to come in.

My boss call this "Binge & Purge" recruiting. I call it reactive hiring. By any name, it just doesn't work anymore.

For starters, a rising tide lifts all boats. If you're expanding, or building, or replenishing your sales force, so are your competitors. Comp plans are up throughout the industry and the top performers aren't hanging around the Monster Board.

Meanwhile, prospects aren't being qualified. Customers are noticing that it's been a while since they've seen anybody from your sales organization. Your quarterly numbers are looking as reasonable as two subcontinental neighbors with nuclear weapons. And the Wall Street analysts who track your company aren't Cub fans, so "Wait 'til next year" won't keep your stock valuation afloat.

Today, a headhunter sent you a resume for a guy who they think can sell your enterprise supply chain management solution because he's been blowing out his number at Peterbilt. And you're getting desperate enough that this seems logical to you.

Just in time became too damn late.

Consequences of Reactive Hiring

We haven't even started talking about the real problems of IT sales recruiting yet. All we're talking about here is the administrative side of the question. And as aggravating as that is, it's nothing compared to the real, cascading process killers in "JIT" recruiting.

Like most killers, the real bugbears in the process are slow and silent. You may not even notice them until it's too late. And in most "new economy" companies, too late means out of business.

Sales managers (and heads of other organizations that need to move at lightspeed) are opting out of traditional recruiting practices. Think about the kinds of postings you encounter on recruiter message boards. Many of you out there are frustrated by your internal clients. Guess what? They're frustrated with you, too.

So what can you do if this is the world you live in? Here are a few suggestions.

Do Your Homework:

Don't expect your internal customers to articulate what they need and when they need it. In fact, don't enter into dialogues with hiring managers expecting them to know your language. Invent new ways to comunicate by observing the tools of survival in their organizations, and finding new, shared ways of talking about them.

Aggressively pursue information and understanding. Get to know the current top performers in your sales organization. Find out what makes them tick. Learn how they navigate the corporate culture to produce results. Then find out how they navigate the cultures of their prospects. Try going on a sales call or two.

Then, when you receive a job req. you're in position to call the manager and communicate in shorthand. Archetypal sales profiles can help, but there's not a sales manager out there who wouldn't welcome a recruiter who asks questions like, "Do you want someone more like Andy or more like Judith?" or "Do you see the new hire as a rule-breaker or a rapport builder?" instead of "Are you looking for more of a Hunter or a Farmer?"

You might just earn so much trust that your candidate recommendations become automatic hires. How's that for empowerment?

Learn Your Industry:

Knowing your trade gets you credibility within your organization. Knowing the company's trade gets you credibility and access throughout the company and makes you a better interviewer. Learning the key technologies used in your products and the skills that implement them helps you mine the Internet more effectively. And that lets you locate the real plums of the information age: cool, talented people that aren't out there posting their resumes to every Tom.com, Dick.org and Harry.net. Find 'em and hire 'em.

Look for the Hidden Order of Things:

If you're reading this, you're probably HR. So you've got easier access to personnel and historical data than any other department. Leverage it.

Look for trends. Scope out hire & fire statistics by manager. Is there a average number of fires per year you can use for planning? Is sales hiring or firing seasonal in your organization? Does it follow some other cycle? The emergence of credible competitors, perhaps? What about voluntary attrition? Toward whom is your talent flowing, and why?

What were recently dismissed sales reps earning, not earning, doing or not doing when they got canned? Are there any current sales reps on that same bubble?

Have you got a sales manager who only hires mirror images of himself? One who hires to get her headcount bonus and then fires those newbies in short order?

There are a million questions you can ask to build a framework of understanding. Ask them. Don't fight your customers. Use their tendencies like a good coach would, to frame your own strategy.

But beware. You may find evidence of inappropriate, even illegal, biases in employee hiring or dismissal. You might need a bit of courage to investigate and deal with these if they come up. As always, there are easier ways to make money, but you picked this one. And remember, always stay within applicable laws when looking for information.

Recruit Perpetually:

Don't handicap yourself and your company by reactive recruiting. The probability of you hiring the perfect sales rep is inversely proportional to the size of your candidate pipeline and directly proportional to the frequency of your sampling. Recruiting only to meet published quotas deprives you of taking a look at all the talent that floats through the marketplace during down periods.

Exploit every source of information. Ask your own sales people who they respect, and who they have lost sales to. Visit trade shows and watch the people, not the products.

Ask the candidates you interview who else is courting them. What kind of offers are they getting? Was there anyone on the interviewing team they were particularly impressed with?

One prominent recruiting director suggests clandestinely sponsoring free lunch drawings at restaurants near your competor's offices. Twenty bucks per site per week, and you get brandy snifters full of business cards. Cute idea. The cost per lead can't be beat.

And don't be afraid to talk to great performers when you don't have an open req. Be upfront, ask if they'd be interested in the future, and sell your company. Think like a salesman and create demand. Keep them in mind for future opportunities and for networking.

Don't Fight Your Culture:

One of the quickest ways to lose credibility with your customers is to present candidates whose weltanschauung doesn't jibe with the sales organization that a manager has built. This is one way that an overreliance on experience can trip you up without you ever knowing why.

Rob Goffee and Gareth Jones, in their book The Character of a Corporation, define four major categories of corporate culture: Networked, Fragmented, Communal and Mercenary. No value judgment is intended, and each major type can be either positive or negative for a company.

It's a useful taxonomy that you should learn and think about. Where does your organization fit?

Some of the very best IT sales organizations we've worked with have been solidly mercenary. On the other hand, some have been communal. One of the dominant players in apps software is fragmented. There are many kinds of prospects, and so there is more than one way to achieve sales excellence. But congruence within an organization can be critical.

So, a great salesman from a communal background might not get on with your gang of mercenary swashbucklers. Don't force the fit.

What Else Is There?

It's our intention that this article turn into a living document that incorporates our current take on best practices and the input of our readers. This was installment number one. January will bring a new chapter. I hope you'll join us in defining great methods for future installments. Let's define recruiting excellence together.

Got a question or a comment? Contact the author here.

What's the Real Cost of a Bad Salesperson?

The short answer is "Much more than you'd expect."
For the long answer, read on.

It's Eleven PM on the Last Night of the Sales Quarter. Do You Know Where Your Money Is?

Businessmen often correlate the losses associated with bad hiring decisions to a "Cost-per-Hire" figure provided by Human Resources. But that measure can be highly artificial, and accounts for only a few direct costs associated with the hiring cycle, like agency fees, referral bonuses, etc. The true picture is much more encompassing and much, much worse, especially when high-impact employees like salespeople are the issue.

Cost-per-Hire: A Soft Measurement

The problem with Cost-per-Hire (CPH) as a measure of true cost is that it just isn't accurate. Typically, CPH includes costs like advertising, placement fees and employee referral program costs. Seldom does a company's CPH figure include time spent by management and sales peers on interviewing and interaction with in-house recruiters, overhead (e.g., HR salaries) associated with a particular hire, or a host of other direct costs. And no one ever calculates and includes the "Loss-per-Hire" that accrues as a factor of position "churn" until Mr. or Ms. Right is found for a critical sales position.

If not Cost-per-Hire, What?

Before we suggest an alternate plan, let's first get a real handle on what CPH claims to account for. What exactly does a bad hire cost?

We have examined a number of methods for accounting for true costs. Here are three that can get you closer to the real impact of a poor sales hire.

The Market Value Model

The Market Value Model is a quick calculation to assess the damage produced by a poor sales hire, or the benefit of a strong sales hire. We're talking about direct impact to your company's market valuation. If you're part of a pre-IPO corporation, the combined effect of your salespeople could add up to billions of dollars, plus or minus.

Here's the formula:

Individual Quota Responsibility x (P/E Ratio)

This is a significant, if not all-encompassing way to look at the direct effect your sales hiring practices have on the real value of your company.

The Analytic Model

A second method of calculating the real impact, positive or negative, of a poor sales hire is the Selection Strategies Analytic Model. This attempts to attach a real dollar figure to every possible interaction of the salesperson with the company, including post-hire expenses that CPH typically considers, if at all, as outside its scope.

The checklist below will show you what we mean. You might want to print it for future use.

And remember, the costs below are double-whammies. They represent dollars-over-time, money both spent unproductively, and money unavailable for use by a productive hire.

Cost Analysis Worksheet: Sales Recruiting & Hiring

MAJOR COST CATEGORIES	CATEGORY	SUBCATEGORY	ACTUAL COST
DIRECT
	Direct Compensation
	Employer-Paid Taxes
	Employer-Paid Insurance
	Real-Property (SQ FT)
	Home Office Costs
	Transportation Allowance
	Automobile
	Other Direct Costs:	Reimbursable Expenses
		Capital Equipment
		Expendable Supplies
		Telecommunications
		Maintenance Costs
		Travel
	Nonproductive Time
	Severance Payment
	Cost of Litigation
	Cost of Government Appeals
DIRECT COST SUBTOTAL:
ADMINISTRATIVE
	Advertising/Listing (1)
	Retained Recruiters
	Referral Fees/Bonuses (2)
	Other Lead Generation Costs
	Admin Staff Support (3)
	Tuition Reimbursements
	Training (or retraining) Costs
	Other Remedial Programs
	Dismissal Costs (4)
	Cost of Money (5)
ADMINISTRATIVE COST SUBTOTAL:
OPERATIONAL
	Pre-Sales Time Consumed Unprofitably
	Pre-Sales Time Paid for but not Activated (6)
	Other Sales Support Staff Time Consumed Unprofitably
OPERATIONAL COST SUBTOTAL:
MANAGEMENT
	Time Spent on Recruiting (7)
	Time Spent on Mentoring
	Time Spent on Counseling (8)
	Distraction from Other Sales Opportunities (9)
	Time Involved in Termination of Employee
	Time Involved in Replacement of Employee (10)
MANAGEMENT COST SUBTOTAL:
OPPORTUNITY COSTS (Pick One)
	Model 1 (Reasonable Risk) Add up the value of all sales opportunities in which the poor hire participated and had a direct impact upon, that the company had a reasonable chance of winning. Subtract the sales that the poor hire received credit for. The remainder is the measurable opportunity cost.
	Model 2 (Sales Benchmark) More straightforward but not necessarily more accurate. Simply use your group's best salesperson as a benchmark. The delta between the benchmark and the poor hire's performance is the measurable opportunity cost.
OPPORTUNITY COST SUBTOTAL
SUMMARY OF COSTS - GRAND TOTAL:

Thus armed with real cost data, you can finally get at the measurable damage that poor sales hires wreak on your business.

The ROI Model

Here's a simple ROI calculation for your salespeople:

ROI = (Value of Contribution - Sum of All Costs) x 100
Sum of All Costs

The sum of all costs is defined in the checklist above. It includes all hiring costs, plus compensation, plus costs of maintenance for the poor hire, plus replacement costs.

Have We Got It All Now?

After all the enumeration we've gone through, have we accounted for all the costs associated with hiring a poor salesperson? No, we unfortunately have not. To quote Dr. Deming (quoting Dr. Lloyd Nelson), "The most important figures needed for management of any organization are unknown and unknowable." And while that opinion may raise eyebrows in the OLAP-obsessed business software world, it remains true in open systems. Variance and dependency don't make the world predictable, they muddy it up even more.

Just take a moment to ask some basic questions like "What's the multiplying cost of a lost deal?" Or conversely, "What's the value of word of mouth from a satisfied customer that the competition sold out from under us?" Things can get scary pretty fast.

This is just an attempt to get a clearer picture of the costs associated with, and the value lost through the hiring of a poor or inappropriate salesperson. The truly unique aspect of poor sales hiring is its' potential for immediate impact on your topline, market valuation, and future success. The costs we've outlined here are still just the tip of the iceberg.

Is There An Answer?

We have a couple of suggestions to help you get on track.

First, and especially in sales recruiting, shift your organization's focus from Cost-per-Hire to Value-per-Hire. The quickest and best way to do this is to change your incentive structure for HR, recruiting and management headcount. Though there might be some grumbling, your organization will change to accommodate its performance metrics. And, ultimately, sales is about generating cash, not conserving it. Emphasize the greater value produced by top salespeople, despite the initial investment in sourcing, courting, and hiring them. When providing incentives to management, don't settle for simple headcount bonuses that encourage hiring just to put bodies behind desks; the short- and long-term damage that this behavior can produce is severe. Instead, base bonuses upon new-hire productivity and contributions to topline growth.

Second, understand the league you're playing in and recruit accordingly. Recruit perpetually so that you'll always be aware of the current talent on the street. Pay agencies to send you their first-tier candidates.

And finally, continue to ask HR to track hiring costs, but use the data to develop a ratio of cost-to-productivity for new sales hires. Because ultimately, you should care less about the price of acquisition than about realized value.

Got a question or a comment? Contact the author here.

Explanation of Footnotes In the Cost Analysis Worksheet:

(1)  This category is intended to capture advertising, listing, and on-line posting costs for both the poor hire and for the replacement employee.

(2)  This category is intended to capture contingency fees, referral fees and bonuses for both the poor hire and for the replacement employee, payable either to third-party recruiters or to internal staff (e.g., employee referral programs).

(3)  This category is intended to capture administrative staff support to the poor hire (e.g. payroll processing, benefits, clerical, travel support, etc.).

(4)  This category is intended to capture all costs associated with terminating the poor hire (e.g., staff time, paperwork processing, routine legal costs [if any] outprocessing, outplacement services, COBRA or other continuing benefits, etc.).

(5)  Emerging technology companies often rely upon external capital to fund their initial R&D and market presence. This category is intended to capture, in monetary terms, the cost of external capital used to finance the poor hire, either as cash interest or equity within the company.

(6)  Defined as the cash value of non-mission related time spent by pre-sales staff either waiting on assignments, or allocated time spent waiting on the poor hire.

(7)  This category is intended to capture the value of management time spent on recruiting the poor hire, to include administrative support to recruiters in defining the position, interviewing, entertainment, etc.

(8)  This category is intended to capture the value of management time spent on performancecounseling and development and monitoring of performance plans for the poor hire.

(9)  This category is intended to capture the value of management time spent on secondary organizational objectives (e.g., pressure to meet quota, to deal with sub-par performers, etc.) directly or indirectly caused by the poor hire.

(10)  This category is intended to capture the value of management time spent on replacement of the poor hire, to include administrative support to recruiters in defining the position, interviewing, entertainment, etc.

E-Commerce: What are You Buying, Anyway?

You can do amazing things on the Internet nowadays. George and I were discussing the good old days; him debugging SPSS routines by looking at hard copies of reports as a graduate student, and me going to the computer center at 3 AM to get enough time on Plato to do class assignments.

I think the laptop I'm writing this on, twenty-four years later, has more oomph than all that ancient hardware. Still, all the work that ARPA and Bolt, Beranek and Newman started back then has created an amazing array of choices for computer users who can barely use a mouse and have no idea what a command line interface looked like.

By and large, this is a good thing. People who prefer face-to-face interaction with their fellow men and merchants are still cruising community centers and shopping malls. The shyer set now gets to sit at home and talk about everything from sex to semiotics with disembodied avatars near and far. At theend of the day, the Internet serves humanity more than it detracts from it.

Which gets me back to my topic. We have HTML, DHTML, XML, ODBC and JDBC databases, the Common Gateway Interface, Perl scripts, Java, Active Server Pages and Merchant Accounts. All of which help users to exchange information, transact business and otherwise zip through a richer, cooler cyberspace. A beautiful thing if you're selling easily demonstrated, configured or mass-produced commodities.

But you'll notice that we're not doing that here at Selection Strategies.Over the next several months, we'll be web-enabling a variety of personality assessment, interview creation tools and training courses that are currently provided to our clients in print, CD-ROM and through traditional teaching methods and practicums. This will be a gain for them, and for any of you who opt to join our family of clients. We hope that many of you will find what we do valuable to your hiring efforts.

However, you won't find a "One from Column A, one from Column B" approach at our web site anytime soon. What we tried to provide at our web site is a thorough introduction to what we do andhow we do it, together with endorsements from several clients to assure you that we do what we do very well.

We still want to meet and speak with every one of you who wants to explore a relationship with us. That means your e-mails get you a phone call from myself, or George, or Sara. We'll discuss your needs, and how we can meet them, and our fees for the services we provide.

Until we can think of a better way to configure and export the complex mix of selection skills, training, decision support and process consulting here at SSI, we'll stick with the human touch.

Thanks for reviewing our magazine. I hope to hear from you soon.

Got a question or a comment? Contact the author here.