Employee Assessments: How They Can Save Your Organization Millions of Dollars

Calculator and MoneyIn troubled economic times like these, most organizations are engaged in some form or “belt-tightening,” cutting down on capital expenditures, laying off workers or freezing salaries, even cutting back on office supplies, travel, or training.

But rarely do they conduct any sort of employee assessments to find ways to boost revenue…or at least stop the hemorrhaging a bad hire creates. Let’s face it…no manager worth their salt would knowingly hire a poor producer – but once the facts are in, they find themselves subject to the 80/20 rule – spending 80 per cent of their time trying to improve the performance of 20 percent of their workforce.

And most educated leaders readily accept the idea that bad hires cost money – but rarely conduct the talent assessments that would prevent a bad hiring decision in the first place.

In this article, I’ll show you exactly HOW to calculate the actual costs of poor performance — how you can recoup millions of dollars in heretofore “hidden” waste and add it directly to your bottom line.

In addition to the costs of recruiting and hiring talent (which some estimates say can be in excess of $250,000), a simple “utility analysis” will show you how to use basic arithmetic to calculate…in dollars and cents…how much your poor performers are bleeding your company dry. This example uses a sales force of 10 seasoned sales professionals.

Here’s your team, ranked in order by their annual sales figures:

Salesperson

Annual Sales (in dollars)

Mike

1,000,000

Carol

900,000

Lee

800,000

Vera

700,000

Shawn

600,000

Joelle

500,000

Terri

400,000

Ian

300,000

Jason

200,000

Stacy

100,000

Your task is to create three production levels – high, medium and low. Those levels are determined by adding the total production (in our case, $5,500,000) and dividing by 3. The result of that calculation means each sales production level is $1,800,00.

Next, assign each salesperson to a production level. Your results, in this example, would be:

  • Top Level: Mike and Carol (total production: $1,900,000)
  • Mid-Level: Lee, Vera, Shawn (total production: $2,100,000)
  • Bottom Level: Joelle, Terri, Ian, Jason and Stacy (total production: $1,500,000)

Now determine the average production per salesperson, per level. You’ll do that by dividing the total production in each level by the number of salespeople in that level. Your results should be:

  • Top Level: $1,900,000 divided by 2 (Mike and Carol) means your top producers are generating an average of $950,000 per year.
  • Mid-Level: $2,100,000 divided by 3 (Lee, Vera and Shawn) leads to an average mid-level production of $700,000 per year.
  • Bottom Level: $1,500,000 divided by 5 (Joelle, Terri, Ian, Jason, and Stacy) means an average bottom-level sales production of $300,000 per year.

Now you’ll need to find the average production difference between your mid-level salespeople and your bottom-level salespeople. (Comparing your bottom level producers with the mid-level producers will provide you a conservative estimate of dollars lost)

Simple arithmetic shows that $700,000 minus $300,000 is $400,000 – this $400,000 is what ONE of your low-level performers costs your organization each year.

Here’s where it gets interesting. Multiply that figure ($400,000) by the number of salespeople in that level (5).

In this example, poor sales performance is costing your organization $2,000,000 per year

So What’s it REALLY costing your organization?

Especially if you add in the costs of training, management, motivation and incentives – for which there is little real proof that these initiatives consistently transform low-producers into high performers – poor performance and the lack of accurate talent assessment before making any hiring decisions is costing you plenty.

rd&partners does not want that to happen to you.

In fact, we’re so committed to helping you make the best hiring decisions possible, we provide our clients the Salesmax tool to help you with talent assessment.

Salesmax is validated to predict high performance for those in a consultative sales role, and will generate two reports: a Selection Report and a Development Report.

The Selection Report helps you make a more informed hiring decision by finding the candidates with the greatest potential of sales success, by providing you with a probability score of the candidates’ success.

In addition, it creates interview questions based on the candidate’s assessment score – questions your candidate has not heard before (and therefore won’t give a well-rehearsed answer to!) In addition to candidate-specific interview questions, it also generates specific questions to ask references of that candidate.

I can guarantee you that not many assessment tools offer that sort of depth and flexibility.

The Developmental Report is designed for a salesperson once they are onboard (or for the current sales team as a developmental initiative).

It provides management with a talent assessment tool to get new sales representatives off to a great start. The report highlights development needs based on assessment scores, and generates development suggestions and recommends books, CD’s and seminars helpful to ongoing success.

Both reports can be accessed IMMEDIATELY online and are available in several languages, allowing you to administer them to prospective sales candidates from anywhere in the world before you ever invest a dollar in flying your candidates to your headquarters for an interview they may or may not pass.

By visiting our talent and employee assessment page, you can immediately gain access to sample reports and see for yourself the depth and breadth of these reports that are proven and validated to increase the success rate of hiring the very best and most talented sales personnel.

(This article is adapted from Sales Assessment: What Can I Say After I Say I’m Sorry?, originally published November, 2010, by Dr. Wendell Williams.)

Image Courtesy of Arvind Balaraman
Image Courtesy of Scott Chan

About The Author:

Rob Denker is the Managing Principal of rd&partners. He helps leaders consistently see tangible, real-world benefits by making behavioral changes that are directly linked to the organization’s strategic initiatives, and their own effectiveness as a leader. Connect with Rob and rd&partners on LinkedIn.

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