Tips on Hiring Sales Personnel: Contractor's Corner
By Dave Stafford
The path to success for any company, including those in the commercial flooring business, rests on one basic premise: selling what you have to offer. An integral part of this simple equation is finding, hiring and training sales personnel. Should I hire someone green in sales and train them in my business or choose an experienced salesperson?
CREATE A JOB DESCRIPTION
I’ve hired both types of individuals, and the best approach is to first define your need, specifically. Put it in writing. Does it sound stilted or vague? Start with the title of the position, what you expect to pay, the educational requirements, specific skills, key attributes and description of duties. This exercise will force you to think and, if you do it right, will result in a valuable template for any position in your company. Once you have a succinct, accurate outline of the job position, I would also suggest condensing it into a one-page job description.
Next, set a hiring protocol that includes an application, personal profile, skills assessment, references and background testing. Follow this the same way each time to validate results. The goal is to rule out those applicants for cause. What you are looking for is the optimum match for the position you’ve so carefully defined. Do not take shortcuts, for they will come back to bite you.
What is the current market rate of compensation for this position? Ask around, talk with your contacts and look at the comp levels in employment ads, trade publications and recruitment sites like CareerBuilder. You should end up with a range of what the position is worth. To that, add for fringe benefits. This will get you in the ballpark of what the position will cost for a trainee or an experienced candidate. Does this fit your budget or do you need to add money? Once you have this, you’re well on the way to deciding how to fill the position.
Compensation plans and templates are worth the time. You may think, “I’ll save some money by putting them on a draw against commission, and they can pay me back, which will reduce my hiring cost.” The fallacy of this approach is that going in the hole on the draw seems to increase exponentially. It may be months before any commissions are actually due to be paid, and that nice commission is swallowed up by paying the arrears. The salesman becomes depressed, thinking, “I’m never going to get that extra check.” So, to escape, he leaves the company to start anew without that negative balance to hamper his life.
My own experience over the years is that it is much better to construct a compensation plan composed of four items: salary, expenses, commission or bonus incentive, and fringe benefits. This will force you to come to terms with your actual costs for all sales, support and installation personnel. You may have quite a surprise when you see the total yearly cost. Figure everything into your total annual projection for each position. Now, you’ll be able to prepare a fill-in-the-blanks template for each position and have a good way to negotiate a salary or compensation adjustments with existing personnel. I’d suggest you use a template comp plan for all, except temporary personnel. This will keep you from overpaying or underpaying personnel (and thereby losing them to your competitors).
Sales volume and profit targets will start from where you’d like to be or from what you’d like to see from current personnel. You need to be realistic. What is the historical sales growth rate over the last five years? Break this down for the various experience levels over as long a time as you can to get an annual average. You should end up with what you could reasonably expect from personnel within each commercial segment, such as healthcare, educational, property management, government and the like.
While you’re doing this, look at the profitability of that segment and its average. Now determine where you have the highest return for each sales dollar. Where does it make sense to plug in a new hire, and what will that new hire cost? Does it still make sense to hire? A critical point: how much have I paid out in compensation costs for each gross profit dollar from sales? Most companies range from 25% to 33%. If you are hiring right, have a good comp template and personnel that have been around for a while, then you should be closer to 30%. As you construct comp templates, just remember it is really tough to backtrack and cut commission levels; it is much better to gradually reduce salary and adjust their commission levels up rather than the reverse.
The highest payout on gross profit dollars should be where the salesperson is taking maximum risk. If an experienced person asks for a small draw against commission, no salary and limited expense reimbursement, then you should be at the high end of gross profit dollar sharing. I found that when such a person was successful, it could be a win-win for all. They had to sell profitable business to eat well.
Most personnel will be better off and your cost will be contained with some base salary, capped expense level and smaller share of the gross profit dollar. I’ve been burned by ignoring reality and hoping for a turnaround that never happened.
GREEN OR EXPERIENCED?
Hiring the green trainee for commercial sales will require considerable investment, and even if you do a great job of selection, you may only be right 25% of the time. A green newbie hire will almost always have to be on a fixed salary, expense reimbursement and perhaps some bonus incentive. It is rare to find anyone willing to start out on a draw against commission without some guarantee. For someone who doesn’t have any background in flooring or is in a crossover category (former installer or retail sales), it will not be a quick turn. You’ll be paying salary and expenses out for an extended period, likely a year or more, before any profit can be realized on your investment. For this reason, your lower initial cost for a trainee may not be realistic.
You can get away with hiring green if you have developed an in-house training program. Many cooperatives like Starnet Worldwide or associations such as the Floor Covering Installation Contractors Association offer valuable programs and outside resources to their members for help in this area. Each training program can be tweaked to highlight beginner, intermediate or advanced level candidates. All new hires should have some training, since familiarization with company procedures and core values is necessary.
There is much to be gained by all with a mentoring program where experienced, trustworthy commercial team members sharpen their own skills and offer a show-and-tell approach to the new hire. When a skilled salesperson demonstrates his prowess in front of the client, it can be more effective than a classroom setting with a manager.
When you have an immediate need, you’ll likely want to hire someone experienced in flooring sales from your own geographic region. Valuable resource may include well-connected mill reps and your own sales team, who can ask questions that would be awkward for you. You can offer a recruiting bonus or some other monetary incentive. You’d be surprised how cost effective a $500 honorarium can be! Run an ad in your local newspaper (print and online) or in a leading trade publication.
If you haven’t gotten the results you’d hoped, then you may want to go with a fee paid recruiter or headhunter specializing in commercial sales within the general area of flooring and commercial interiors. When looking for one, ask around for recommendations. You will have to sign an agreement for a specific period of time, pay a fee (or fees) and then detail exactly what attributes you’re after in this person. There are a variety of creative ways to pay headhunters: a retainer, monthly fees for an ongoing search, a percentage of first-year salary/bonus/commission, or a negotiated flat rate for the position. I’d be wary of any large, up-front payments. Any contract should allow for a 30 to 60 day employment window before fees are paid, perhaps a six-month guarantee stipulating that should you terminate the hire, you’ll get a free do-over from the recruiter.
If you have an urgent requirement or have just parted ways with an employee with a block of business to handle, you may find the headhunter route cheaper in the long run. Most specialists keep an open file of resumes with people that are looking for a change under the right circumstances. It is especially important to go this direction if you are after an experienced manager or upper echelon executive. You have little chance of doing this yourself without spending a lot of time and money.
Working with the right recruiter can produce a highly qualified pool of applicants more quickly than about any other method. You cannot appreciate their value until you’ve advertised a position, received 150 resumes, read each one and found fewer than 5% worthy of a personal interview. You also may be presented with applicants that have less experience than you’d hoped, but otherwise are a good fit. You are paying that headhunter for his expertise, time and interview skills. As one said to me, “I’ve got a tough job because my products can talk back, so I have to know what I’m selling.”
USE STOP-LOSS POINTS TO AVOID BIG LOSSES
The risk with both green and experienced personnel hires is finding out if the new employee is incompatible with company values or just cannot seem to perform the job itself. Just as many use stop losses when buying stocks, a similar feature should be in place before you hire for a position. This will force a logical approach with short, intermediate and long-term goals for the new hire. If the relationship is destined to fail, you need to know it as soon as possible so as to cut your losses. You should have some idea within 30 days if the new hire is going to be a disaster; within 90 days, you should have enough performance data to make a decision. For both your sakes, it should not stretch out beyond six months.
Having this hiring plan in writing is also a great defense again a litigious person who claims improper or illegal hiring practices. You do not want to be seen as acting in an arbitrary or capricious manner. A hiring plan sets out exactly what performance is expected, how it’s measured, within what time frame it’s measured, and remedial steps to be taken. Nothing beats taking the time to create a short written review of progress and discussing this with the individual.
An outside consultant in human resources can be invaluable. They can assist in structuring the hiring and training process to avoid legal hassles, especially if it comes time for a termination. The amount of money paid for their expertise can be miniscule compared with legal bills if you are sued for biased hiring practices or wrongful termination. If you have measureable criteria, then most of the drama or the begging, screaming and tears can be avoided. Both sides will know that the placement isn’t working.
Hire from a position of strength. Know your actual costs. Detail what you expect by providing written goals. Train, then review performance. Follow your stop-loss points. With this approach, you can successfully hire either green or experienced personnel.
Copyright 2014 Floor Focus