A reader writes, "Many of my fellow business owners ask sales candidates to take a pre-employment assessment at some point during the interview process. My research indicates these tools range in price from $90 to $300 per assessment. If I assess 5 candidates, I'm spending $450 to $1500 dollars. How do I justify this expenditure?"
The time and money involved in hiring a salesperson seems daunting. Add to that the cost of a high-quality assessment and the expenses continue to increase. Let's look at the cost of a bad hire who stays with your organization for one year. Does money spent up front on assessments make sense?
This is a no-brainer as far as I'm concerned. You can look at it a couple of different ways.
First, let's say you pay reps $150,000 per year in salary, commission, bonus, and benefits. And in that first year you pay 20% to a recruiter for sourcing a candidate for you. That's $180,000 first-year expense for you. The $1,500 assessment cost represents less than 1% of the costs of that salesperson for their first year, and greatly reduces your business risk in hiring them.
Here's another way to look at it. Let's say that your salesperson's quota for their first year is $1.5 million. If they perform at 100% of plan, that's all well and good. But let's say you hire someone who has one area of weakness that's readily diagnosed by an assessment but undetectable by you. The cost of the assessments, $1,500 / $1,500,000 represents 0.1% of the salesperson's annual quota. Put another way, if the assessment identifies only a single area that will help a salesperson close just 0.1% more business against their quota, the assessment pays for itself. And in my experience the issues typically found are much more significant than that.
The Diagnostic Benefit
Let's take an example of a new hire. Out of the gate, the new salesperson starts off strong, easily setting up meetings with decision makers. She keeps good records, uses your CRM system as well as or better than any tenured rep, with up-to-date notes and reports done correctly and turned in on time.
Mid-way through the year, you realize she struggles with getting decision-makers to agree to second meetings or product demonstrations. This translates into lighter sales forecast and not very many closed sales. Though the rep regularly calls on her current accounts, she loses business to the competition.
A reliable assessment might have told you this candidate excelled at setting up appointments. Once in front of decision-makers, however, she shies away from asking strong questions. This rep tried to move the sale along on the strength of her personality instead of relying on a strong methodology.
That same inability to ask questions hurts her with current customers as well. She isn't able to uncover new opportunities -- leaving room for the competition to make inroads.
Managers often have a fixed idea of who they'd like to hire for an open position. Seeing assessment results occasionally causes them to change their mind. The manager in this scenario wanted to (and did) hire a traditional salesperson. But he'd long been considering hiring a business development rep as well -- someone who would speak to and set appointments with decision-makers for other outside salespeople.
Since he'd never come across a qualified candidate, he stopped pursuing that approach. But based on an assessment, although he might have passed on this rep for the territory position, he might have had some interest in them for the business development position instead.
That scenario would be a win for both parties. The manager offers this candidate a position she's more suited for, and he unexpectedly fills a position.
The Wrong Hire
When a sales hire doesn't work out, your company loses ground with current customers and cedes brand new deals to the competition. Compared to the real costs of an underperforming salesperson, a reputable assessment is a drop in the bucket.