Let me start by asking you a quick question: what is the purpose of measuring sales performance?
Think this through for a moment and jot your answer down before continuing…
I asked this very question in a keynote I was delivering recently to over 1,000 sales leaders. There were 5 answers to choose from.
75% of them answered with “To see how well we are doing”
Now, whilst this is true, in my opinion it’s not THE purpose of measuring sales performance.
For me, the purpose of measuring sales performance is to improve it.
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Many organisations use performance management as a way to reward or punish sales people, others use it to impose strict guidelines as to what the sales person should and should not be going. Others use the system as a catalyst for beating their sales teams over the head with a stick for not making quota and others use them for just keeping score.
We work with hundreds of different organisations each year. Most of them have CRM dashboards lit up so colourful that they looks like a firework display! Some have enough data and information on them to rival Google.
But data and information is one thing. After all, keeping score is the easy part.
It’s how you use that data to improve your sales team’s performance that should be the real reason of why you are bothering to do all of this in the first place.
Let’s take a quick look at some common performance KPI’s and what they should mean and what they don’t tell you.
“My pipeline is full”
Good for you!
But how effective are you in converting leads to opportunities?
Is your pipeline full of “deadwood”?
How are you qualifying?
Are you qualifying hard enough or are you massaging the figures.
Do you keep deals in your pipeline for too long?
“I’ve been out and about all week with lots of client meetings”
The dashboard shows lots and lots of meetings.
So you’re very busy but were those meetings effective?
Were your meetings at the start of the week better than those at the end?
Did you follow your sales process?
How many qualified buyers did you really meet?
Did you qualify any out?
All of these factors will not show on a report.
“It takes me 83 days to close a deal”
The time it takes you to close a deal is called your “sales velocity”
But so what, it’s just another number if you don’t put it into context because based on your skills and experience is this in line with what it should be?
Are all of your deals lumped into this metric?
What if you sell a whole range of different products and solutions all with different lag times?
This will distort the figures.
It’s important to measure the velocity of each deal against what the expectation should be against that particular product or service and bearing in mind the experience and skill of the sales person.
Only then will a figure of “83 days” make any sense at all.
Sales target vs actual
“I’ve achieved my target five months straight”
On the face of it everything looks great and it is because this sales person has made their quota 5 months running.
What the figures won’t tell you at this level is that this persons closing ratio is one of the lowest in the company at 21%.
To make quota they have to hustle like crazy to create a pipeline so large that they can sustain a 21% closing average to make their number.
So the questions we have around this are now:
- Is this sales person shooting fish in a barrel and is quickly running through presentations hoping that 21% will stick?
- What are they doing differently in a sales meeting to the sales person with the best closing ratio of 44%?
- Are they creating a lot of meetings with non-qualified buyers and hence their ratio is artificially low?
On the face of it I know many sales leaders who would leave this sales person alone. After all, they are making target right?
If your mindset towards sales measurements is one of keeping score and policing then a lot of money will be left on the table if no action is taken and the figures are not analysed further.
On the other hand if your approach towards sales measurements are all about improving sales then there is a great deal of upside leverage that can be made with the sales person that we have used in this example.
What is your current attitude and philosophy towards measuring performance?
A simple shift in focus from measuring results to driving better results can have massive impacts on the morale, approach and above all else the sales performance of your people.