Let’s talk about one of sales’ dirty little secrets: the high failure rate of sales leaders.
Hiring either your first Vice President (VP) of Sales or finding the right sales leader to take your team to the next major revenue milestone will have a big impact on your company. But when the average tenure of sales leaders is 18-19 months, that means you’re barely getting them ramped up and performing before you need to start the process over, looking for the next “right person for the job.”
It costs companies millions (even tens of millions). It’s far beyond the cost of spending time finding and interviewing candidates. Sales leaders that fail increase selling costs, add up in missed quotas, have ripple effects that impact the morale and culture of your organization and keep your company from building on success.
If you have a sales leadership problem, you aren’t alone. 26% of companies say their most important hire this year is their next sales leader. The sad truth is that current trends in sales leadership failure mean that many of those same companies will have to prioritize sales hires again the next year.
So what’s happening? Why do so many sales leaders fail?
The Cost of a Failed Sales Leadership Hire
First, let’s look at some numbers that underscore why failure in sales leadership is such a huge problem for every company.
- A bad hire in sales leadership can cost your company $3.5 million. That’s just in one year. Think about the ripple effects that happen if morale on your team dips, or reps leave with the leader, or prospects and customers fall away, or if your pipeline isn’t full.
- A bad sales leadership hire leads to higher churn across your sales team. With just a five percent increase in sales rep attrition, selling costs go up 4-6% and reduce total revenue attainment by 2-3% overall. For companies that are operating in a low growth or on low margins, this can really dramatically affect revenue plans.
- Good sales leaders have 29% higher revenue performance, 47% higher employee satisfaction, and 16% higher customer satisfaction than bad sales leaders.
So where does that leave your organization?
46% of new sales hires (both leaders and reps) fail within the first year. Even though many companies recognize sales leaders have an outsized impact on their company, they’re still consistently hiring the wrong person for the job.
Here are some reasons why companies fail in finding the right sales leaders:
- Overlooking the context of past performance and relying on surface-level interview questions that can’t provide that context
- Misaligned expectations for how sales skills will translate to leadership skills
- Too much emphasis on industry experience
- Under-developed hiring processes that don’t support company goals
- Insufficient understanding of how the new hire will impact company culture
Want examples? Here are some real-world stories about why sales leaders failed.
Past performance doesn’t always cross over.
A startup wanted to reach $100 million in sales. As they began looking for a sales leader, they heavily weighted industry experience and to look for leaders who had worked for big companies leading large sales organizations.
This sales leader burned out in less than a year. Looking at it now, it’s not hard to see why this process didn’t work.
Sales leaders from large companies have a lot of support and established processes; bringing someone in who has experience with those processes can make it difficult to establish a culture fit. Sales leaders with big company experience are used to a well-defined tech stack; playbooks that need to be refined (not built from scratch); a generous budget for new tools or training; building compensation plans from the ground up, etc. They’re not ready for the scrappy start up role.
Sales reps may not make good sales leaders.
One company decided to promote a consistently high-performing rep to lead their sales organization. This rep had shown extreme skill in building pipeline and closing deals, and the company expected them to train the sales team to perform like they had.
Within a few months it was clear it wasn’t working.
Promoting a sales rep to a leadership position as a reward for good performance can be successful, often though it fails.
The attributes needed to be a good salesperson don’t always translate to a successful sales leader. Reps are focused on a single quota, often on a single vertical or geographic location. Translating the skills needed to be successful in one area to a whole team isn’t easy. Plus, sales reps are not always prepared to make the transition to spending the majority of their time managing the sales process or setting the right culture for engagement and performance.
So, how do you fix it?
Training and development are important tools, but they can only get you so far if you made the wrong hire in the first place. A good way to avoid making bad sales hires is to fix your sales hiring process.
Take Steps to Get Sales Leadership Right
Getting the right sales leader in place will have impacts on your organization far beyond the first year of their hire. You’ll see the benefits — or the negative impacts — on your bottom line for a long time, so making sure you have the tools in place to get the hire right is critical for the success of your company.
Using a tool like Yardstick can ensure your team has the framework in place to get sales hires right the first time. Yardstick helps you define and establish the right steps and processes through every stage of the hiring process, from creating a solid job description, to tools to help develop the right interview questions, and even how to make collaborating internally on candidate feedback more successful.
Yardstick will help your team build a hiring process that will ensure you’re finding and interviewing the candidates that will best align with finding the sales leader that will help you reach your goals.
Ready to get started? Talk with us today.