Firing employees is an unpleasant but sometimes necessary part of owning a business. The duty is particularly distressing when the employee hasn’t broken company policy or committed wrongdoing apart from simply not being good at his or her job. This situation often arises with sales employees. When salespeople are dedicated to their job, do everything asked of them, put forth maximum effort but can’t seem to close enough sales to be a profitable hire, their boss faces the tough task of deciding when to let them go. If you ever find yourself in this position as a business owner, the following signs signal that it’s time to remove an unproductive sales employee from your payroll.
Not Meeting Quota
Companies evaluate sales employee job performance using quotas. These are set to ensure salespeople are making the company more than they’re costing it. Say a salesperson earns a flat salary of $5,000 per month, and his or her employer wishes to earn a two-to-one return on the hire. The employer then sets the employee’s sales quota at $10,000 per month in margin, the rationale being that anything below this amount makes the company’s investment in the salesperson not worthwhile. The quota system, while cold and impersonal, is an objective and data-driven method to measure salespeople, and it is highly effective. A salesperson who fails to meet his or her quota for several consecutive months probably isn’t cut out for the job, and should be replaced by someone who can meet the minimum standards.
Lagging Behind Peers
If your company has multiple salespeople performing the same job, ranking their productivity against one another lets you see where you’re getting the best, and worst, return. A ranking system can be an alternative to the quota system or used in conjunction with it. If one of your sales employees consistently ranks in the bottom quartile, meaning 75% or more of his or her peers outsells him or her, it might be time to evaluate whether that salesperson should remain employed. While in charge at General Electric, Jack Welch pioneered the technique of continually replacing the bottom 10% of his workforce, his logic being it creates a progressively better and more productive staff as the bar gets higher and higher.
Costing You Money
When a salesperson’s numbers are so low that he or she is costing the company money by remaining employed, the salesperson needs to be terminated or transferred to a nonsales role immediately. No matter how much you like the person or how hard the person tries, it is simply poor business strategy to knowingly lose money every month when an easy solution to the problem exists. If you want to soften the blow of the firing, present the employee with a glowing letter of recommendation at the exit interview to use on his or her job search. But to run a successful business, you have to cut ties with workers who are clear and obvious budget drains. Firing an employee is never fun, but neither is losing money because you have an unproductive worker on your payroll. By using data and analytics, you can determine when it is the right time to terminate a nonperforming sales employee.