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Mar 20, 2007

Firms Need To Invest More In Recruitment And Training Of Sales Professionals, According To DePaul Sales Management Study

Firms are not adequately investing in sales force recruiting, hiring and training, according to a national survey of sales management practices at a broad range of companies conducted by DePaul University’s Sales Leadership Program.

Although the majority of firms surveyed said their businesses depend heavily on sales or marketing, the research found that most firms spend little time interviewing sales candidates and firms could not quantify the cost of hiring them. In addition, less than half of the 302 businesses surveyed provide formal training for sales people and most relied on traditional compensation practices that could adversely affect customer relations.

“This survey shows why companies are finding it difficult to hire and keep the best sales professionals,” said David Hoffmeister, director of DePaul’s Sales Leadership Program, who worked for more than 30 years as a consumer goods sales executive before joining academia. “Companies slashed their recruiting and training budgets in the 1980s and ‘90s to cut costs, and now they are not spending enough time and money to find and train good sales people. Given the fact that many veteran sales professionals are Baby Boomers who will be retiring soon, firms that want to stay competitive should start making greater investments in hiring, recruiting and training their sales forces.”

Most of the firms in the survey use the traditional base salary plus commission formula for compensation, but Hoffmeister suggested that they should consider alternatives because it could undermine relations with today’s savvier customer.

“Customers are unhappy with sales people who are motivated by commissions to sell to them rather than serve them,” he explained. “Firms need to think about reshaping their compensation practices so that sales people are rewarded for partnering with customers rather than for sales volume alone.”

The survey results are the first released by DePaul’s Sales Leadership Program, which plans to conduct biannual research to track sales industry trends. Launched in 2003, DePaul’s initiative is the largest sales management education program in the nation. About 150 DePaul students graduate from the program each year and more than 500 students take undergraduate or graduate sales management courses annually at DePaul. The program is supported by leading firms, including 3M, AC Nielsen, Kellogg’s, Target Corp., CareerBuilder.com, State Farm Insurance, International Truck and Engine Corp. and JPMorgan Chase & Co.

“Our intention is to track sales organization behaviors over time to provide our program partners and the industry at large with insights into current practices involving recruiting, hiring, training, compensating and motivating sales people.” Hoffmeister said. “We also will use the information to maintain a relevant and practical curriculum that prepares our students to work as sales leaders.”

Findings of the survey include:

Recruiting:

  • Firms now demand well-educated candidates with advanced degrees and sales education.

  • Firms do not spend enough time in the interview and screening process.

  • Selection continues to be incorrectly based mostly on personality traits.

  • Only one-third of firms know cost of hire.

    Selection, hiring and training:

  • Only 43 percent of firms have formal training programs.

  • Training is dominated by short, on-the-job sessions at smaller firms.

  • Firms invest between $35,000 and $100,000 in training new hires before the businesses break even.

  • With firms’ training resources limited, little training is done in consultative selling skills.

    Motivation and compensation:

  • The majority of firms use base salary plus commission, although finance and insurance firms focus on straight commission.

  • Large firms more frequently use special bonuses and trips as incentives.

  • Large firms provide more equipment/fringe benefits, including wireless devices such as Blackberries.

    Management and performance:

  • Large firms involve sales managers in goal-setting.

  • Compensation increases steeply as performance improves.

  • Firms are slow to accept new technology to drive performance.

  • Firms continue to be tied to asset-heavy, in-house customer relationship management systems.

  • Annual turnover is 13.5 percent in large firms and most firms underestimate turnover costs.

  • Only 36 percent of firms provide leadership training, only 22 percent of firms utilize talent identification systems and only 19 percent of firms “match” talented people to jobs.

    The inaugural survey, conducted online, posed 50 questions about company profiles; recruiting techniques and practices; selection, training and hiring practices; motivation techniques and compensation; and management performance measures. The survey pool included more than 3,000 companies, of which 302 completed the survey, a representative sample. The participating organizations included retail, manufacturing, finance/insurance, professional services, wholesalers and real estate firms. Business revenue of the firms ranged from under $10 million to more than $1 billion. Average employee headcount was 3,216 and average sales employee workforce was 860. Fifty-five percent of the participants said their firms’ success depended on sales and another 20 percent said it depended on marketing.

    Editors’ Note: For interviews about the survey or program, contact Hoffmeister at 312/933-7430 or dhoffme1@depaul.edu, or Daniel P. Strunk, DePaul marketing executive-in-residence: 312/362-8646 or dstrunk@depaul.edu.

    TO VIEW THE FULL SURVEY REPORT, CLICK HERE.