There is considerable debate amongst today’s sales experts about what a sales manager should measure. Many argue that you should never measure sales activity such as the # of calls, or the # of emails generated by your sales team. You simply need to focus on the business results such as revenue, profitability or market share. Others suggest that you should only measure outcomes or objectives. You know the things that activity leads to such as meetings or demos. While yet another group states that you should only measure the “things” you can directly impact (i.e. activity).
I honestly don’t know for certain.
But here is what I do know. Many sales organizations today are, in effect measuring nothing at all. I have anecdotal data as to why. It looks something like this.
- “We don’t know what to measure.”
- “We don’t know how to measure salespeople.”
- “We don’t have the time to design tools to measure salespeople.”
- “Our salespeople only want to be measured on their quota – otherwise they feel micromanaged.”
- “We do measure the sales team – we look at the sales they generated at the end of the year.”
While I hear these types of responses quite frequently and I am hence, not surprised, it does often leave me a bit baffled. Particularly when I learn more about how they are measuring other aspects of their business using tools such as a balanced scorecard, KPIs and various flavors of dashboards. Even the smallest companies I come across are measuring at least some aspects of their business.
Generally speaking, there are at least 3 types of broad metrics that a sales manager can ultimately measure.
- Business achievements – As mentioned above, these are broad business objectives such as total revenue generated, the profit of the business, market share, etc. These are metrics that the sales organization in general has only a limited ability to impact as they are an organizational effort. In addition, these tend to be lagging indicators that are results of many diverse activities and outcomes that culminate in these achievements.
- Outcomes – Outcomes are items such as growth in a new vertical market, selling into a specific client or growth in the sales pipeline. A sales organization has more influence on outcomes (sometimes significantly) but it doesn’t fully control them. As an example, selling into a specific client or set of clients can be influenced by the salesperson, but is also highly dependent on the buyer.
- Activity – Activity is fully controlled by the salesperson. Activities can include, # of contacts, % of the time the salesperson completes pre-call planning, time spent prospecting, etc. These items are clearly measurable and can be completed by the salesperson because they have full control over their activity.
In my experience, well run sales organizations tend to measure all 3 categories, however, not in equal measure. Some sales organizations lean heavily in one direction and subsequently have a great deal or very little influence over what they can control.
The important point is that you choose to measure something. Don’t get caught up in the scenario where you have the intention to measure your performance, but because everyone can’t agree on what that measurement should be you don’t even begin.
My suggestion is to first focus on the areas that you can easily measure and that clearly lead to at least some of your desired outcomes. For example, if you don’t know how many client contacts (activity) it requires to get one meeting (outcome) you almost certainly should be measuring that at first, simply to understand how activity leads to outcomes. This will likely vary by salesperson as well. But if you begin to measure activity you can begin to make assumptions around average activity and outcomes both high and low.
The hardest part of any journey is often getting started. I can assure you that when you begin to measure your sales performance you won’t get it right the first time. You will need to continually evaluate and adjust what you measure and reward. By starting with a manageable set of metrics you can hone your processes and begin to recognize trends or the lack thereof in the data. You can use your metrics to share with the organization what good looks like and what has worked in the past. Just start small, experiment and adjust as necessary and you will be on the path to both understanding and facilitating a more successful sales organization.